1. BULK WATER TARIFFS OF BUSHBUCKRIDGE WATER Presented By: Ms. TP Nyakane Maluka - Chairperson Mr. MA Letswalo- Acting Chief Executive

2. Introduction  Established in 1997 by the Minister of Water Affairs and Forestry in accordance with the Water Services Act.  Mandated to provide water services to other water service institutions.  Area of operation include the BLM and part of the Nsikazi area in MLM.  Legislative imperatives include corporate governance, PFMA, MFMA, WSA, NWA. AreaMl/dayPopulation BLM Area (10 WTW)60.61m MLM Area 80700 BLM: 60.6 l/ca. day MLM: 114.3 l/ca. day

3. SERVICE AREA

4. INPUT COST OF BULK WATER RAW WATER CHARGES COST OF RAW WATER SUPPLIED FROM DWAF DIRECT STAFF & LABOUR COST ALL DIRECT COST OF STAFF WHO ARE RESPONSIBLE FOR O&M OF SCHEMES & PLANT DIRECT ELECTRICITY & ENERGY COST ESKOM CHARGES FOR BOTH CAPACITY & USAGE FOR PUMPING, PURIFICATION & PLANT LIGHTING CHEMICALS FULL COST OF CHEMICALS USED FOR DOZING OF WATER MAINTENANCE COST OF ROUTINE MAINTENANCE OF PLANT & EQUIPMENT

5. NORMS FOR BULK POTABLE WATER TARIFFS  Water boards May set a single tariff for its whole supply area. May set a single tariff for its whole supply area. May set a separate tariff for each scheme or each water treatment plant – motivated by differentials in the cost of supplying to different customers. May set a separate tariff for each scheme or each water treatment plant – motivated by differentials in the cost of supplying to different customers. The subsidization or cross subsidization of free basic water is a municipal concern and not within the capability of water boards. The subsidization or cross subsidization of free basic water is a municipal concern and not within the capability of water boards. Tariff increases may be smoothed out over time to take into consideration projected future infrastructure development costs. Tariff increases may be smoothed out over time to take into consideration projected future infrastructure development costs.

6. INPUT COST OF BULK WATER REFURBISHMENT COST OF SUBSTANTIAL REPAIR OR REPLACEMENT OF PLANT & EQUIPMENT WHICH DOES NOT FORM PART OF ROUTINE MAINTENANCE OVERHEAD ALLOCATION PORTION OF HEAD OFFICE AND OTHER INDIRECT COSTS ALLOCATED TO EACH SCHEME The following financial assumptions were considered: ASSUMPTION ActualEstimatedBudgetProjected 07/0808/0909/1010/1111/1212/1313/14 CPIX5.5%10.1% 10.5%10.9%11.3%11.5% Salaries and wages5.7%7.5%13.5%18.4% 18.5% Interest rate12..5%15.0%10.5%11.2%12.5%13.9%14.3% Energy cost5.1%8.6%20.2%26.1%29.1%32.6%33.1%

7. TARRIF STRUCTURE Cost structure Keys = VC: Variable cost = FC: Fixed cost = FC: Fixed cost 30 100 000m3/year Amount% Amount p/m Raw Water (vc) 4 040 925 4.81 336 744 Electricity (vc) 5 600 000 6.67 466 667 Maintenance (vc) 6 600 000 7.86 550 000 Chemicals (vc) 8 750 000 10.42 729 167 Refurbishment (vc) 5 450 000 6.49 454 167 Capex (vc) 7 950 000 9.47 662 500 Salaries (fc) 29 900 000 35.60 2 491 667 Administration cost (fc) 15 700 000 18.69 1 308 333 TOTAL 83 990 925 100 6 999 244

8. TARRIF APPORTIONMENT  Variable Cost ComponentR1.40 (Raw water, Electricity, Chemicals, Maintenance)  Fixed Cost ComponentR1.74 (Salaries and Admin Cost) Proposed tariff for 2009/2010R3.07 Proposed tariff for 2009/2010R3.07 NB* = Proposed tariff review, due to upgrading of certain water works Average for year ending 30 June EstimateBudgetProjected 08/0909/1010/1111/1212/1313/14 Bulk Water Tariff DWAF0.141.341.411.481.551.63 Bulk Potable Water Tariff BWB2.943.073.69* 3.87* 4.06* 4.27

9. TARRIF STRUCTURE  Total water consumption is based on an average water loss of 9%  Total water consumption represent the total bulk potable water to be supplied to the municipality M3/yearM3/day Total Water Consumption 27 391 000 75 044

10. PROJECTED TARIFF 2007/0 8 2008/092009/10 % increase 4.1%5.9%4.4% Raw Water (R/kl) 0.951.011.34 Bulk Potable Water (R/kl) 2.782.943.07  For the period July 2009 to June 2010 an increase of 4.4% is proposed.  This increase is below the current inflation rate.  The below inflation increase is influenced by current cost recovery and the poor service area of our customer.

11. COMMENTS FROM STAKEHOLDERS  SALGA Suggested increase seems unsustainable. Suggested increase seems unsustainable. Staff and admin cost are high Staff and admin cost are high Operational cost and capital programmes likely to be hampered by below inflation increase Operational cost and capital programmes likely to be hampered by below inflation increase

12. COMMENTS FROM STAKEHOLDERS  NATIONAL TREASURY Proposed tariff increase is well below inflation outlook – not sufficient to recoup cost. Proposed tariff increase is well below inflation outlook – not sufficient to recoup cost. Poor cost recovery. Poor cost recovery. Review tariff during the year, further increase of 2% to ensure viability. (Supported by DWEA) Review tariff during the year, further increase of 2% to ensure viability. (Supported by DWEA)

13. COMMENTS FROM STAKEHOLDERS  BUSHBUCKRIDGE LOCAL MUNICIPALITY Basis of tariff calculation is fair and acceptable. Basis of tariff calculation is fair and acceptable. Total water consumption is fairly acceptable. Total water consumption is fairly acceptable. Variable and fixed cost cannot comment due to lack of audited financial statements Variable and fixed cost cannot comment due to lack of audited financial statements

14. CHALLENGES  Poor cost recovery by municipality which impacts on the water board’s cash flow.  Lack of bulk infrastructure: Inyaka Water Works has a design capacity of 50 m/l per day but only 25 m/l is produced. Inyaka Water Works has a design capacity of 50 m/l per day but only 25 m/l is produced.  Operation of small schemes: Provision of bulk infrastructure will result in the small schemes being shut down. Provision of bulk infrastructure will result in the small schemes being shut down. Operational cost will be centralised in one big scheme which will result in the review of the current tariff i.e. lower tariff. Operational cost will be centralised in one big scheme which will result in the review of the current tariff i.e. lower tariff.  Impact to the municipality: Poor recovery of cost from the consumers  Raw Water Tariff The matter still outstanding between SAAWU and DWEA on raw water tariff

15. CONCLUSIONRecommendation - BW recommends the tariff increase by 4.42 % - BW recommends the tariff increase by 4.42 % - Review of the raw water tariff - Review of the raw water tariff Tariff will be reviewed during the second quarter (2009/10) Tariff will be reviewed during the second quarter (2009/10) - Electricity increase & inflation

16. THANK YOU