1. PROPOSED BULK WATER TARIFFS for 2010/11 BUSHBUCKRIDGE WATER Presented By: Mr. P Ngomana- Chairperson Mr. Mapholoba A Letswalo- Acting Chief Executive

2. 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

3. 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 08/0909/1010/1111/1212/1313/1414/15 CPIX10.3%6.9%6.0%5.7%5.2%5.0% Salaries and wages12.5%10.9%10.0%9.5% 9.0% Interest rate13.4%10.3%10.0%10.5% 11.0%11.5% Energy cost27.5%31.3%24.8%25.1%25.9%33.1%

4. 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) 4 435 269 4.68 369 606 Electricity (vc) 6 790 804 7.16 565 900 Maintenance (vc) 9 902 114 10.45 825 176 Chemicals (vc) 8 850 000 9.34 737 500 Refurbishment (vc) 5 556 875 5.86 463 073 Capex (vc) 10 950 000 11.55 912 500 Salaries (fc) 32 950 228 34.30 2 709 102 Administration cost (fc) 15 795 599 16.66 1 316 300 TOTAL 94 789 889 100 7 899 157

5. TARRIF APPORTIONMENT  Variable Cost ComponentR1.69 (Raw water, Electricity, Chemicals, Maintenance)  Fixed Cost ComponentR1.76 (Salaries and Admin Cost) Proposed tariff for 2010/2011R3.45 Proposed tariff for 2010/2011R3.45 NB* = Proposed tariff review, due to upgrading of certain water works Average for year ending 30 June ActualBudgetProjected 09/1010/1111/1212/1313/1414/15 Bulk Water Tariff DWA1.341.481.551.481.63 Bulk Potable Water Tariff BWB3.073.45* 3.87* 4.06* 4.27* 4.54

6. 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 27 456 429 75 223

7. PROJECTED TARIFF 2008/092009/102010/112011/12 % increase 5.9%4.3%12.46%6.5% Raw Water (R/kl) 1.011.341.501.60 Bulk Potable Water (R/kl) 2.943.073.453.87  For the period July 2010 to June 2011 an increase of 12.46% is proposed.  This increase is above the current inflation rate.  The view of Bushbuckridge Water was to have a below inflation rate increase due to current cost recovery and the poor service area of our customer. But upon receiving comments from stakeholder the above inflation rate increase was considered.

8. COMMENTS FROM STAKEHOLDERS  SALGA The capital expenditure is significant in amount; The capital expenditure is significant in amount; The tariff is lower than the sector average increase; The tariff is lower than the sector average increase;  NATIONAL TREASURY Proposed tariff increase will lead to a better cost recovery. Proposed tariff increase will lead to a better cost recovery. The proposed tariff will result in the organisation being financial viability The proposed tariff will result in the organisation being financial viability  BUSHBUCKRIDGE LOCAL MUNICIPALITY We have not received any comments from Bushbuckridge Local Municipality. They did not comment on the initial tariff submitted and no comments have been received on the revised tariff. We have not received any comments from Bushbuckridge Local Municipality. They did not comment on the initial tariff submitted and no comments have been received on the revised tariff.

9. 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 ( to be commissioned to 75 M/L) per day but only 30 m/l is produced. Inyaka Water Works has a design capacity of 50 m/l ( to be commissioned to 75 M/L) per day but only 30 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

10. CONCLUSIONRecommendation - BW recommends the tariff increase by 12.46 % - BW recommends the tariff increase by 12.46 %

11. THANK YOU