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PRESENTATION TO PCWEA 18 APRIL 2013

PRESENTATION TO PCWEA 18 APRIL 2013. Presenters: Adv. G Khoza Mr. NA Mashele . OVERVIEW. 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.

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PRESENTATION TO PCWEA 18 APRIL 2013

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  1. PRESENTATION TO PCWEA18 APRIL 2013 Presenters: Adv. G Khoza Mr. NA Mashele

  2. OVERVIEW • 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. • Currently operates in the Bushbuckridge Local Municipality and part of the Mbombela Local Municipality in Nsikazi area within the Ehlanzeni District Municipality. • Area Ml/day Population • Bushbuckridge Local Municipality Area (BLM) (8 PWTW) 96 454 817 • Two Plants owned by DWA and Six plants owned by BLM • Mbombela Local Municipality Area (MLM) (6 PWTW) 71 568 647 • BOARD OF DIRECTOR • The term of the current board of directors is from February 1, 2010 – March 31, 2014.

  3. TURN AROUND STRATEGY PROGRESS

  4. Debt owed by WSAs to BW • Bushbuckridge Local Municipality • R240,2 mil – June 2012 No interests included) • Escalated by R31,8 mil since June 2011 and R40.8 mil since July 2010 to June 2011 • BLM signed acknowledgement of debt of R190 mil and agreed to be pay R95 mil on instalments • Instalments of R5 mil per month ring-fenced debt starting January 2012 • Only R13,8 mil of R30 mil historic debt paid - (2011/12 ) • Additional R25 mil paid in December 2012 towards historical debt (2012/13) • Payment of R6.3 mil towards the current invoice – per agreement • The 2013/14 municipal budget is equated to the proposed tariff • Credit control measures put in place including appointment Debt collectors • Disestablished Bohlabela District municipality • R26,4 mil – From July 2006 to June 2012 (No interests included) • Debt collectors appointed to collect this debt • Mbombela Local Municipality • R14 mil – June 2012 • Debt settled in full (late payment)

  5. Capital Infrastructure Projects • BULK INFRASTRUCTURE DEVELOPMENT PLAN • A 20 years Capital Infrastructure Plan being compiled, to be completed June 2013 • Challenges faced due to short term contracts with WSAs. • COGTA-MP & DWA -MP • BW entered into agreement to implement projects on behalf of Cogta-MP and DWA – MP for R23 mil and R3.5 mil respectively • Projects completed in record time • 5% PIA fees • DWA-MP • RRU agreement for R18 mil over a period of three years • 7.5% PIA fees • Infrastructure assessment (refurbishment and new plants) in municipalities – MP • Completed in record time

  6. Supply Contracts • BLM • A three years Bulk supply contract signed and to be reviewed in 2014 • A possible extension to a longer period • A committee of officials established to jointly manage the contract • MLM • Parties to agree on Key deliverables before end of financial year • A draft contract offer made by MLM, being discussed by BW • To be finalised April 2014 for implementation by July 2013

  7. Metering/Illegal connections • METERING • Bulk pipeline assessment for none revenue water completed November 12 • 24 new metering points identified • Rand Water appointed as implementing agent by DWA • Funding is through DWA to Rand Water ( R18 million) • The project will be completed in September 2013 • ILLEGAL CONNECTIONS • The study Identified the existing illegal connections • Agreement is concluded with BLM to address illegal connection and metering points • BLM to fund the metering/formalization of illegal connections • The project will be completed in September 2013 • OTHER PROJECTS FUNDED THROUGH DWA GRANT • Telemetry and Scada system • Blue Drop certification • Refurbishment and pumps replacement • The projects will be completed in February 2014

  8. ANNUAL FINANCIAL STATEMENTS

  9. 8% Growth in revenue to R131.5 million 11% Increase in EBITDA to R22.8 million 1% reduction of direct operating cost 7% increase of the tariff to 3.70 46% recovery of the historic debt of R30 million as per agreement 2011/12 Annual Financial Statement 87% recovery of invoiced amount in Mbombela Local Municipality - 60% recovery of the invoice in Bushbuckridge Local Municipality

  10. 2011/12 Annual Financial Statement Continues…………. • In order to ensure that sufficient cash is collected to cover its budgeted expenses, the board will • Increase the minimum monthly payments owing by BLM from R6.3 million to R8.5 million. • Reduce the water pressure to the BLM when the municipality fails to pay agreed amounts. • Employ the services of debt collectors in order to recover the amounts outstanding by the BLM.

  11. AUDIT REPORT

  12. 2011/12 Independent auditors’ report • Independent Auditor’s Report • BW Audited by Independent Auditors : KPMG Inc • BW received an UNQUALIFIED AUDIT opinion with emphasis of matter • Emphasis of Matter • The net loss of R49.9 million for the year ended 30 June 2012 – Going concern • Report on other Legal and regulatory requirements • Predetermined objectives • - Performance information – No material findings • Compliancewith Laws and regulations • - Non compliance with Sec 51(1)(a) of the PFMA – Material misstatement that was corrected – R1.9 million • Internal Controls • - Accounting Authority did not review and monitor compliance with applicable laws and regulations

  13. PERFORMANCE AGAINST PRE-DETERMINED OBJECTIVES

  14. 2011/12 Annual Performance Results • Provide bulk water and sanitation services • 1.1 Reliability of supply • - Increase the volumes of water supplied by 1.66% • -Managed to achieved average unaccounted for water of 6.2% • 1.2 Water quality • - Compliance to SANS 0241 • -No out break of water-borne diseases reported • 2. Entrench sound financial management and corporate governance • 2.1. Financial Management • - Increased revenue by 8% in BLM • - 60% recovery of revenue on invoices in BLM~ based on flat rate payment agreement • -87% recovery of revenue on invoices in MLM • -46% recovery of R30 million historic debt per contract • - Unqualified audit report • 2.2. Corporate governance • - 87% attendance of planned Board and Board committee meetings • - 100% board performance assessment • Optimize stakeholder interaction and engagement • 3.1 Stakeholder relations • -Improve stakeholder relations engagements • 3.2. Business Development • -SLA signed with BLM

  15. 2010/11 Annual Performance Results…. 4. Optimise human capital investment 4.1. Human resources - 1.5% staff leaving the institution - 29% implementation of Employment Equity plans 5. Acquire, develop and manage infrastructure 5.1. Project management - 100% implementation of DWA and CoGTA infrastructure projects - 71 temporary jobs created

  16. CAPITAL INFRASTRUCTURE EXPENDITURE

  17. 2011/12 Capital Infrastructure Expenditure • Grant funding from Cogta-MP and DWA • 100% of projects completed within schedule: • 71 no. of temporary jobs created through these projects

  18. 2011/12/13 Capital Infrastructure Expenditure • Grant funding for RRU/ACIP programme • 95% of projects completed within schedule: • 72 no. of jobs created through these projects

  19. ANALYSIS OF 2011/12 BUDGET ANALYSIS

  20. 2011/12 Budget Analysis Revenue discounted = R2 million Provision for doubtful debt = R81 million – Budget = R36 million

  21. 2013/14 Tariff Structure

  22. 2013/14 TARIFF STRUCTURE • Consideration of Eskom Increases • No material impact on the tariff • Initial BW estimates was 16% • 9.6% increases was effected but no material changes • Complied with Regulatory frameworks • Water Services Act, 108 of 1997 s10 Norms and standards for tariffs • Municipal Finance Management Act No. 56 of 2003Section 42 • Comments from Stakeholders • Bushbuckridge Local Municipality – Accepted the 12.5% increase • National Treasury – Commented on 12.5% increase; Raised concerns on debt recovery • SALGA – Commented on 12.5% increase; • Mbombela Local Municipality Tariff • Charging rates per management contract • Tariff based contract is being finalized with MLM • Charge within BLM rate for the first year of the contract

  23. 2013/14 TARIFF STRUCTURE Continues

  24. 2013/14 TARIFF STRUCTURE Continues Final Tariff after consideration of Eskom 12% increase • COST DRIVERS • Energy • Chemical cost • Labour cost • Refurbishment • Maintenance Propose 12%

  25. 2013/14 Key Strategic Focus for 2013/14

  26. Strategy Alignment to Government Priorities

  27. 2013/14 Key Strategic Focus • Goal 1: To provide water services • Water volumes (Production, Distribution) • Increase production by 5% • Manage water losses below 10% • Abstraction licenses • Water quality • Improve on blue drop status 80% • 100% compliance with SANS 241 and ISO 9001 • Goal 2: To provide water supply infrastructure services • Infrastructure Installations • 100% completion of the infrastructure projects ( upgrading & Construction of pipelines) • Minimum 70% of planned temporary job creation as per project • 100% implementation of infrastructure maintenance plans

  28. 2013/14 Key Strategic Focus Cont.…….. • Goal 3: To optimise stakeholder interaction • Education / awareness creation (Campaigns, Events, Information sharing, Outreach programmes) • Education / awareness creation programmes conducted • Stakeholder relations management (Advocacy, Knowledge sharing, Stakeholder establishment maintenance) • Stakeholder forums / working groups / service delivery partnerships • Goal 4: To ensure business development (existing and new business) • Product / service development • Alternative service delivery mechanisms (Private partnerships) • Market development • New market opportunities (PIA, Service areas)

  29. 2013/14 Key Strategic Focus Cont.…….. • Goal 5: To promote effective water resource management • Environmental management • 80% of planned environmental management programmes achieved • Goal 6: To ensure internal business excellence • Business management / leadership • 100% Compliance to materiality and significance framework • 100% Corporate governance issues detected versus corrected • 70% Board performance rating • Human resource management • <3% Staff turnover • 35% Employment equity targets planned versus achieved • Financial management • 40% of historic debt to be recovered • 80% BBBEE discretional use • Unqualified audit opinion • Information / communication technology management (ICT) • 55% ICT master plan implementation progress

  30. Challenges • Continually deteriorating financial condition of BLM impacting on financial viability of BW. • Escalating debt for Bushbuckridge local municipality • The ability of BW to continue operating as a Going Concern • Backlog in refurbishment and maintenance due to cash flow constraints • Existing short term contracts with WSAs which impact on long term planning and capital investment • Finalization of the transfer of assets • Uncertainty due to re-alignment process • Board vacancies hampers smooth operations of Board committees • Ageing infrastructure

  31. Thank you

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