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BOTSHELO WATER

Presentation by Solomon Mathebula, Acting CEO, on Botshelo Water's core business and strategic objectives in providing water services to two District Municipalities in the North West Province.

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BOTSHELO WATER

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  1. BOTSHELO WATER National Parliamentary ~ Portfolio Committee on Water and Environmental Affairs Sophia Lebeko-Ratlhakgane Chairperson Presentation by Solomon Mathebula Acting Chief Executive April 2013

  2. INTRODUCTION Botshelo Water Board is a public entity established by the Department of Water Affairs in terms of the Water Services Affairs Act, 108 of 1997. 2

  3. VISION &MISSION VISION “Your preferred partner in water services provision.” MISSION “To provide water services towards improving the quality of life of communities.” 3

  4. STRATEGIC OBJECTIVES CORE BUSINESS 4

  5. CORE BUSINESS CORE BUSINESS Botshelo Water (BW) is a Water Board (Water Service Provider) as defined by the Water Services Act,108 of 1997 5

  6. CORE BUSINESS SERVICE AREA • Comprises of two District Municipalities in the North West Province; • NgakaModiriMolema DM (Mafikeng, Ditsobotla Local Municipalities & NgakaModiriMolema DM {West ) • Dr Ruth Segomotsi DM (Kagisano Molopo Local Municipality) • Total service area - 50 000 km2 • Total population - about 900 000 people. 6

  7. CORE BUSINESS SERVICE AREA 7

  8. CORE BUSINESS NATURE OF BUSINESS • Bulk potable water services (Primary activities - Section 29) in the NMMDM area; about 60 Ml/d; Mafikeng, Ditsobotla Local Municipalities and NgakaModiri Municipality (West). • Retail water services (Secondary activities - Section 30 activities) in NMMDM and Dr. Ruth Segomotsi DM. • Operation and Maintenance of boreholes (455), windmills and pipelines (Secondary activities) in both Districts • Operations and Maintenance of the TSWASA scheme: Supplies raw water from the Molatedi Dam (in SA) to Gaborone (Botswana) and the Derdepoort Irrigation farmers (in SA). 8

  9. CORE BUSINESS SALIENT FEATURES OF THE BUSINESS • Do not own the Water Infrastructure i.e. Plants and boreholes. • Infrastructure refurbishment programmes are undertaken by DWA and the District Municipalities. • Rural and indigent customers. • Funding Model: WSP does not receive funding ito DORA. • Operate and Maintain – Business Model not financially viable (spends and claims later for the expenditure). • Infrastructure not sufficient to meet demand. 9

  10. ANNUAL REPORT FOR 2011/12 PERFORMANCE SNAPSHOT CORE BUSINESS • Financial Performance • Performance Snapshots • Tariff Negotiation • Financial Planning • External Audit Opinion • Top Risk • Turnaround Strategy • Conclusion 10

  11. Statement of Financial Performance • Retail debtors removed from the records as per contract. • Achieved over R63m compared to R56m in revenue • Gross margin decreased from 48% to 44% due to increase on raw water year on year. • Raw Water increased by 37%, energy costs increased by over 24% and increase in bad debts by more than 110%.

  12. Statement of Financial Position • After de-recognition of the Retail Services and write off of bad debts, Botshelo Water’ s assets exceed its liabilities by R20.4 million as at 30 June 2012. • A letter of support was received from the Executive Authority to address the going concern issue. DWA • The poor financial position is worsened by the fact that BW do not own the water infrastructure. • The Accounting Authority gave a directive for the disposal of non-core assets (BW houses – R9m).

  13. Statement of Financial Position • After de-recognition of the Retail Services and write off of bad debts, Botshelo Water’ s assets exceed its liabilities by R20.4 million as at 30 June 2012. • A letter of support was received from the Executive Authority to address the going concern issue. DWA. • An amount of R31m was received on the 7 March 2013. • The poor financial position is worsened by the fact that BW do not own the water infrastructure. • The Accounting Authority gave a directive for the disposal of non-core assets (BW houses – R9m).

  14. Statement of Financial Position • After de-recognition of the Retail Services and write off of bad debts, Botshelo Water’ s assets exceed its liabilities by R20.4 million as at 30 June 2012. • A letter of support was received from the Executive Authority to address the going concern issue. • The poor financial position is worsened by the fact that BW do not own the water infrastructure. • The Accounting Authority gave a directive for the disposal of non-core assets (BW houses – R9m).

  15. PERFORMANCE SNAPSHOT

  16. PERFORMANCE SNAPSHOT

  17. PERFORMANCE SNAPSHOT

  18. CORE BUSINESS PERFORMANCE SNAPSHOT 18

  19. CORE BUSINESS 2011/12 TARIFF NEGOTIATIONS • Botshelo Water has over the past 5 years followed the process outlined prescribed in Section 42 of the MFMA • The process of tariff consultation has been challenged due to non-committal by customers resulting in poor attendance to these meetings. • Common submissions include ‘non-affordability’ of our selling prices due to the expensive raw water component. • Amidst all the challenges, a tariff increase of 11,3% was approved for 2011/12 financial year. 19

  20. CORE BUSINESS PROPOSED 2013/14 TARIFF • Similarly the tariff negotiation for the 2013/14 financial year was not attended by key stakeholders including SALGA. The negotiation continued and comments were received from SALGA. • Recommended tariff for the 2013/14 is R5.66, the proposed tariff upon latest electricity tariff announcement by NERSA which represents 12.5% increase, and Ditsobotla Local Municipalities R2.59. representing 8% increase. • Botshelo Water is not on the Time of Use charge with ESKOM which matter was being investigated in order to achieve efficiencies on energy by pumping off peak. 20

  21. CORE BUSINESS Financial Planning Assumptions 21

  22. CORE BUSINESS TARRIF FOR THE NEXT 3 YEARS AND PERFORMANCE 22

  23. IMPACT OF THE TARRIF STATEMENT OF PERFORMANCE 30 JUNE 2012 CORE BUSINESS 23

  24. CORE BUSINESS AUDIT • The financial statements were prepared on the basis of incomplete records, more reliance being placed on third party confirmations. We further confirm that the annual financial statements for the year under review we prepared on manual records and outside a formal accounting package following unreliable data migration from one financial system to the other. • No audit adjustments were done to the originally submitted annual financial Report following audit completion timelines. • These basis were agreed upon with the Auditor General at our meeting on the 12 December 2012. 24

  25. CORE BUSINESS EXTERNAL AUDIT OPINION SNAPSHOT Disclaimer audit opinion 25

  26. CORE BUSINESS EXTERNAL AUDIT OPINION SNAPSHOT 26

  27. CORE BUSINESS EXTERNA AUDIT OPINION SNAPSHOT 27

  28. CORE BUSINESS TOP RISKS 28

  29. CORE BUSINESS TOP RISKS 29

  30. CORE BUSINESS TOP RISKS 30

  31. CORE BUSINESS TOP RISKS 31

  32. CORE BUSINESS TOP RISKS 32

  33. CORE BUSINESS TOP RISKS 33

  34. CORE BUSINESS TOP RISKS 34

  35. CORE BUSINESS TOP RISKS 35

  36. CORE BUSINESS THE TURNAROUND STRATEGY • The following are Key Turn Around Points 36

  37. CORE BUSINESS THE TURNAROUND STRATEGY 37

  38. CORE BUSINESS THE TURNAROUND STRATEGY • The following are Key Turn Around Points 38

  39. CORE BUSINESS THE TURNAROUND STRATEGY 39

  40. CORE BUSINESS CREDIT MANAGEMENT TASK TEAM A Credit Management Committee was formed on the 14 June 2012. The task team is chaired by DWA provincial. The municipalities are not committed to this process. DWA was considering to disband the task team as it is not yielding the results. 40

  41. CORE BUSINESS DEBTORS AGE ANALYSIS 41

  42. CORE BUSINESS DEBTORS AGE ANALYSIS 42

  43. CORE BUSINESS END OF SLIDE THANK YOU 43

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