BUSHBUCKRIDGE WATER PRESENTATION OF THE 2006/7 ANNUAL REPORT MAY 7, 2008 PARLIAMENT IN CAPE TOWN

1. BUSHBUCKRIDGE WATER PRESENTATION OF THE 2006/7 ANNUAL REPORTMAY 7, 2008 PARLIAMENT IN CAPE TOWN Presented By: Rev. RM. Ngomane (Deputy Chairperson) Mr. RS. Matsebula (Chief Executive)

2. Structure of the Presentation • Introduction • Strategic Objectives • Composition of the Board • Board Committees • The business Environment • Progress on Legal Matters • Major Institutional Challenges • Major Institutional Achievements • Report of the Independent Auditor • Report by the CE • Debt Recovery • Subsequent Developments • Conclusion • Acknowledgement

3. Acronyms • DWAF: Department of Water Affairs and Forestry. • CFO: Chief Financial Officer • CCMA: Commission for conciliation and mediation • BW: Bushbuckridge Water • NWA: National Water Act • SALGA: South African Local Government Association • WSA: Water Service Authority • BDM: Bohlabela District Municipality • LM: Local Municipality • MLM: Mbombela Local Municipality • BLM: Bushbuckridge Local Municipality • SAAWU: South African Association of Water Utilities. • SLA: Service Level Agreement

4. 1. Introduction • Apology for the chairperson, Ms Patience Nyakane – Maluka; • was involved in a car accident last year. • Is hospitalized hence she could not come to do this presentation. • 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 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.

5. 2. Strategic Objectives • BW’s Objectives are underpinned by those of DWAF; • Providing sustainable water and sanitation Services. • Pro-actively engaging in water resource management. • Providing support services to clients. • Exploring and exploiting strategic ways for organizational financial sustainability and business development activities. • Continuously participating in community development through corporate social responsibility.

6. 3. Composition of the Board • The term of the current board of directors is from March 1, 2006 – February 28, 2010. • Mr. B. Qokose resigned due to him migrating to Gauteng Province. • The board comprises 8 members, namely • Ms. TP. Nyakane – Maluka (Chairperson) • Mr. R. Ngomane (Deputy Chairperson) • Mr. C. Phiri • Mr. BL. Mavuso • Ms. N. Kubayi • Mr. N. Nxumalo • Mr. M. Makhweyane • Ms. B. Ngobeni

7. 4. Board Committees • The Board utilizes the following committees; • Executive Committee: Ms. TP. Nyakane - Maluka • HR Committee: Ms. B. Ngobeni • Audit Committee: Mr. S. Ndlovu • Remunerations Committee: Ms. TP. Nyakane - Maluka • Technical Committee: Mr. M. Makhweyane • Business Dev. & Compliance Committee: Ms. N. Kubayi • Finance and Tender Committee: Mr. C. Phiri

8. 5. The Business Environment • BW operates in rural areas, characterized with high poverty and unemployment levels. • Unstable socio-political environment; • Change of Water services Authority • Institutional set-up; • WSA: Mbombela and Bushbuckridge LM’s • DWAF Regional • Inkomati Catchment Management Agency

9. 6. Progress on Legal Matters • The criminal and civil cases against the then chief executive and acting CFO, SG. Nkuna and H. Maluleke respectively are not concluded yet. • The CCMA hearing for H. Maluleke is not concluded as yet (May 26, 2008). • An agreement was reached with MLM to settle the legal battle outside court. BW continued to provide bulk water services to the Municipality.

10. 7. Major Institutional Challenges • Poor cost recovery from BLM • Credit control was implemented, but was mitigated through a court order. • Allegations of poor water quality in MLM were disputed. • Drought continued to impact on production in MLM and BLM areas.

11. 7. Major Institutional Challenges (Cont.) • Reluctance by WSA’s to sign long term SLA’s due to; • Disputed volumes supplied by BW. • Uncompleted Section 78 processes. • The existence of BW in the future. • Involvement of WSA’s in the governance of the board. • High level of debt by Bohlabela District Municipality and BLM as a result of disestablishment and the above issues respectively.

12. 8. Major Institutional Achievements • Signing of interim Service Level Agreement with BLM. • Appointment of the CFO & Director for Water Services. • Repositioning of head quarters close to the capital town of the Province. • Improved relations with customers with the assistance of SALGA-Mpumalanga. • Supported the ICMA in their activities and the formulation of the Catchment Management Strategy.

13. 8. Major Institutional Achievements (Cont.) • The Board reviewed and approved these policies; • Procurement Policy • Delegation of authority • Fraud prevention Policy and Plan. • Improved interaction and compliance reporting to the executive authority, National Treasury and the Auditor General.

14. 9. Report of the Independent Auditors • Financial statements were qualified on the basis of insufficient financial commitment by the client (BLM) for bulk water services. (i.e. R12m against a bill of R68.7m). • Emphasis of matter focused on the; • transfer of assets from DWAF to BW which did not take place since 1999/2000, • recovery of R644 651 as recommended by the forensic auditors (03/04). This is dealt with on progress on legal issues

15. 9. Report of the Independent Auditors (Cont.) • Other Matters related to; • No debtors write-off policy: • The policy is in a developmental stage. • No internal audit unit: • The unit was established after appointment of the internal auditor.

16. 9. Report of the Independent Auditors (Cont.) • Inefficient internal control environment and safe keeping of files: • The internal auditor has done the risk profiling and recommended improvement regarding this matter. • Information in the files will be verified and all files will be kept in a fireproof room and safes.

17. 9. Report of the Independent Auditors (Cont.) • Performance could not be audited against predetermined objectives; • The business plan contains the key performance targets of the entity. • Performance is reported through out the annual report. • We agreed with the auditor to streamline our strategic plan document/ business plan with the annual report this will make it easy to assess performance of BW. THANK YOU

18. Report by The Chief executive • Area of Operation • Corporate Services • Water Services 3.1 State of Water Resources. 3.2 Average Daily Production. 3.3 Annual Abstraction and Production. 3.4 Engineering Services. 3.5 Water Quality Assurance 3.6 Major Infrastructure Development. 4. Financial Performance. 5. Major Achievements.

19. 1. Area of Operation • Service area comprise mainly of rural villages and townships with huge service backlogs. • Bushbuckridge LM Area; • 750 000 People. • 70% Infrastructure Coverage. • Mbombela LM Area (Nsikazi); • 550 000 People. • 95 %Infrastructure Coverage. • Supply exceeds demand at both Local Municipalities. (System overload).

20. 2. Corporate Services • BWB employs 251 people; • 35 % in the Mbombela LM area and 65 % in the Bushbuckridge LM area. • Employees are represented by NEHAWU, PSA and SAMWU. • Employment Equity; • 33 % & 14 % representation of women at top management and middle management respectively. • Employee verification was done and all 251 employees were accounted for successfully.

21. 2. Corporate Services (Cont.) • Staff Turn Over: • 7 workers passed away, 3 relieved of their duties, 3 resigned from works, 9 new appointments made. • Compliance to OHSA: • With assistance from Magalies Water, BW has conducted workshops to establish systems and programs. • The workplace skills plan was submitted to the ESETA, focusing mainly on process operators, ABET, Health and safety, HIV/AIDS awareness and counseling.

22. 2. Corporate Services (Cont.) • Good customer services results in improved quality of service in a sustainable manner. • BW employs the following systems; • A customer care line (086 012 1297), SMS system mainly in the MLM area to report pipe bursts, lack of water and water quality problems. • Community Awareness programs conducted; • “Water Journey” workshops at 15 schools. • Water for health and economic development competition. • Visits to WTWs by student doctors, nurses and schools. • Sponsored and participated during the water week and arbor week celebrations.

23. 2. Corporate Services (Cont.) • Expansion of business to other WSA’s was done to; • Extend services to municipalities who are struggling with provision of water services. • Improve regional planning for infrastructure and services. • Create a platform for cross subsidization of tariffs for bulk water services. • There is a general demand for efficient/effective management of water services in the Province.

24. 3. Water Services • Responsible for; • Infrastructure planning: To meet current and future demand. • Abstraction: Pumping from rivers and dams. • Purification: Chemicals used to clarify water. • Distribution to reservoirs: Water pumped to distribution reservoirs and rationed in MLM. • Water quality monitoring: Rivers, dams, wtw and taps.

25. 3.1. State of Water Resources • Klein Sand river: Not strong, acceptable quality. • Sand river: Very low in winter, acceptable quality. • Mutlumuvi river: Extremely low in winter, poor quality. • Sabie river: Strong, unstable quality due to pollution. • Crocodile river: Low in winter, acceptable quality. • Acornhoek dam: Low in winter, poor quality. • Edinburgh dam: Low in winter, very poor quality. • Inyaka dam: Very strong, fair quality.

26. 3.2. Average Daily Production

27. 3.3. Annual Abstraction & Production

28. 3.4. Annual Abstraction & Production

29. 3.5. Water Quality Assurance • The program caters for testing from source through to tap. • Planned monthly samples: 3/day at works, 2/month for the rest. • Ad-hoc samples are collected as and when required to investigate specific pollutants (manganese, coliform). • Compliances with SANS 241 of 2005: • 97% for both physical and chemical characteristics • 99% for bacteriological characteristics.

30. 3.5. Water Quality Assurance (Cont.) • Poor compliance of effluent from Kabokweni ponds due to overloading. • Neither Cholera nor Typhoid were identified in the drinking water. • Analytical results are published on the web based DWAF System. • No outbreak of waterborne diseases reported in our area of supply.

31. 3.6. Major Infrastructure Development • The responsibility to plan and develop infrastructure is still with both Water Service Authorities through the WSDP’s and IDP’s. • BW’s projects are aimed at improving efficiency and service coverage; • Refurbishment of; Edinburgh wtw, Hoxane wtw, Mpumalanga PS, Kanyamazane lagoons. • Installation of Mag flow billing meters in MLM. • Construction of Mshadza package plant.

32. 3.6. Major Infrastructure Development (Cont.) • The following projects are aimed at reducing the water supply backlog; • Inyaka Phase 2 : from 25 to 50 Ml/d (BLM & DWAF) • Hoxane WTW: from 26 to 53 Ml/d (BLM, MLM & DWAF). • Bulk pipelines from Inyaka to Acornhoek, to Mariti, to MP Streem. (BLM & DWAF). • Kabokweni Sewage Works (MLM and DWAF).

33. 4. Financial Performance • BW is expected to be financially sustainable • Sources of Revenue; • BLM area • Sales @ R2.67/kl amounted to R60.3million. • A 26% increase from 05/06 • MLM area: • Income for services amounted to R19 million. • A 22% increase from 05/06

34. 4. Financial Performance (Cont.) • Cost Recovery; • BLM area: • 39 % inclusive of the DORA allocation via DWAF. • MLM area: • 92 % recovery from MLM. • 3 % outstanding for O & M • 5 % outstanding for Kabokweni Ponds. • Total Debt = R 90 million • BDM = R 26.5 million • BLM = R 62 million • MLM & DWAF = R 1.6 million • Doubtful Dept = R 38 million

35. 5. Major Achievements • Compliance to the SANS (quality), MFMA (tariff), corporate governance (and reporting). • Application of BBBEE improved to 23%. • 30 % increase in production as compared to previous year. • Improved customer services (customer care line). • Sustained service delivery against all odds. • THANK YOU

36. 1. Debt Recovery Attempts • BDM debt; • Meetings were held with the BDM disestablishment committee, DPLG, provincial treasury, BLM and DWAF. • Neither BLM nor EDM is accepting responsibility for the debt. • BLM debt; • Credit control measures were applied. • BLM responded with a court order, but paid a portion while awaiting a resolution on billing metering to inform the new SLA.

37. 2. Subsequent Developments • Internal Audit: • Appointment of Internal Auditor was concluded in 07/08 financial year. • Relationship with clients • The meetings we held with BLM politicians and later with municipal and DWAF officials have improved institutional relations. • Service Level Agreements: • The interim SLA with BLM was extended with a flat rate of R2.5m/month until new billing meters are commissioned.

38. 2. Subsequent Developments (Cont.) • Energy cost increase/s • The timing of processes for approving water tariffs do not tie well with those of Eskom. • Energy cost increases are bound to have a huge impact on our product cost beyond our approved tariff. • Disestablishment of BW • A directive from the minister was received. • BW was invited to a hearing that was chaired by the MEC for Local Government and Housing. • These uncertainties have a visible impact to the business environment, labour and the services.

39. 3. Conclusion • All spheres of government are duty bound to implement national priorities in a manner, which is efficient, effective, equitable and sustainable. • It will take a strong deal of cooperation by all stakeholders for SA to meet all targets. • BW pledges to cooperate with all institutions in achieving the Water for All targets in the province.

40. 4. Acknowledgement • The clients; • MLM • BLM • SALGA - Mpumalanga • DWAF: The Executive Authority. • SAAWU and member utilities. • The Accounting Authority: Board of Directors. • Organized Labour: NEHAWU, PSA, SAMWU. • Management and Staff.

41. THANK YOU