MAGALIES WATER 2004/5 FINANCIAL AND CORPORATE PERFORMANCE

1. MAGALIES WATER 2004/5 FINANCIAL AND CORPORATE PERFORMANCE Presentation to Parliament 24 March 2006

2. TABLE OF CONTENTS • Introduction • Vision and Mission • Area of Supply and Operations • Current Activities and Projects • Major Achievements in 2004/5 • Mechanisms to achieve and strengthen service delivery • Strategic Challenges faced by the Board and plans to overcome them

3. TABLE OF CONTENTS • Future Planning and the Strategic Plan of Magalies Water for 2005/6 and going forward • Implications of the President’s 2005/6 State of the Nation address on Magalies Water’s service delivery • Financial Performance

4. MAGALIES WATER VISION The VISION of Magalies Water is to “TO BE THE LEADING PROVIDER OF QUALITY WATER SERVICES” 35 Years of Existence

5. AREA OF SUPPLY AND OPERATIONS Magalies Water has been a provider of high quality water for over 35 years and continues to maintain this standard. This was achieved as a result of well established relationships with our Stakeholders as well as Benchmarking our services with international standards and players.

6. AREA OF SUPPLY AND OPERATIONS • North West Province • Limpopo Province • Gauteng Province • 34 000 km² in three provinces

7. MAGALIES WATER AREA OF SUPPLY AREA OF SUPPLY Limpopo NorthWest Gauteng

8. MUNICIPAL DEMOGRAPHICS TABLE 1:

9. TOTAL NUMBER OF CONSUMERS FOR THE 5 LARGEST MUNICIPALITIES TABLE 2:

10. KEY SERVICE AGREEMENTS MUNICIPALITIES • Thabazimbi Local Municipality • Modimolle Local Municipality • Bela-Bela Local Municipality • Rustenburg Local Municipality • Nokeng Tsa Taemane Local Municipality • Moses Kotane Local Municipality • Madibeng Local Municipality • Moretele Local Municipality • City of Tshwane Metro - Temba and Hammanskraal areas (Bulk and Retail Services) OTHER CONSUMERS • Amandelbult Platinum Mine • Swartklip Platinum Mine • Rhino Andalusite Mine • Bafokeng Rasimone Platinum Mine • Premier Mine • Royal Bafokeng Administration • Northam Platinum Mine

11. KEY SERVICE AGREEMENTS …. • Rand Water • Sun City Hotel • Carousel Hotel • Pretoria Portland Cement (PPC) • Zonderwater Correctional Services • Baviaanspoort Correctional Service • Agricultural Research Institute • Hydrological Research Institute

12. OPERATIONAL PERFORMANCE AND ACTIVITIES/PROJECTS

13. ACTIVITIES/PROJECTS • Magalies Water subscribes to the views of DWAF that water is a scarce commodity in South Africa and that the construction of expensive new schemes can be eliminated or at least be postponed through the implementation of water conservation and demand management measures. Water conservation and demand management measures implemented by Magalies Water include the following: • Setting of maximum allocations for higher classes of consumers. • Communicating with consumers to make them aware of the need to restrict water consumption. • Actively monitoring and controlling water-network losses and UFW.

14. ACTIVITIES/PROJECTS (Cont…) • During the year under review, Magalies Water has contained water tariff increases between 0% - 6.8% within previously set targets without compromising thefinancial sustainability of the organisation. • Despite challenges faced due to external factors such as deteriorating raw water quality and drought, operational costs are being contained and attempts are made to manage increases in the future. • Time frames on an annual basis are currently established in order to assess the implementation of the strategies as well as evaluate progress on the set goals.

15. ACTIVITIES/PROJECTS (cont..) • The Magalies Water Board has established a Central Laboratory Facility with a view to provide quality monitoring of potable water to all municipalities in its service area. It also has the capability for the monitoring of sanitation plants; • The Board has entered into partnerships with a number of municipalities for the operation of bulk potable water and sewage plants. • The abovementioned efforts are viewed against the background of the Constitutional obligation of WSA’s to provide water services; requirements of the MFMA. Table 3 Below– Outlines current Sanitation Projects

16. TABLE 3 SANITATION PROJECTS 2005-2010 Approximately 400 000 consumers are currently served through the Sanitation System

17. COMMUNITY WATER SUPPLY & SANITATION PROGRAMME & PROJECTS • Magalies Water has assisted Municipalities with the implementation of its refurbishment projects – transfer of assets. Project at Danhouse, Sespond and One-and-Ten villages in Moretele was successfully implemented during March 2005. • Other projects include the following: • A number of projects were implemented in 2005 co-operation with both Local- & District Municipalities. Subject to funding, these projects will be carried forward to subsequent years: • Basic sanitation: Ratjiepane, Moretele R2.0 mil • Basic sanitation: Mabeskraal Moses Kotane R3.5 mil • Basic sanitation: Boitekong Rustenburg R1.5 mil • Basic Water: Disteneng Moretele R1.26 mil • Basic Water: Cyferskuil Moretele R0.3 mil • Basic Water: Tweelaagte Moses Kotane R1.4 mil • Basic water: Bapong Moses Kotane R1.2 mil • Source Augmentation: Derby Kgetleng River R2.02 mil • Installation of connections: Jericho Madibeng R1.6 mil TOTAL = R14.78 Mill

18. COMMUNITY UPLIFTMENT PROJECTS 2005/6 TOTAL = R39.8 mill

19. INFRASTRUCTURE • Excess of 1 500 km pipelines (including reticulation) • 40 reservoirs with a total storage capacity in excess of 250Ml • Capital Infrastructure investment of +/- R800 million over the past 5 years • Capital Infrastructure expenditure approved in 2004/5 = R69 million • R149, 5 Mill to be spent over the next 5 years on pipeline and Infrastructure maintenance

20. MAJOR ACHIEVEMENTS IN 2004/5

21. MAJOR ACHIEVEMENTS IN 2004/5 • Implementation of Future Corporate Strategy that focused on:(a) Appointment of New BEE Suppliers and Professional Service Providers (b) Management Transformation - 50% of Executives are Currently HDI • Implementation of New Organisational Structure • ISO 14001 Accreditation in 2005 • Balance Sheet improvement (Long term loan reduction of R107 mill) • Asset Management Improvement Plan (AMIP) • PMR Diamond Award (For Public Sector Entity Service Delivery) - 2005 • Twinning Agreement with Nkana Water in Zambia

22. MAJOR ACHIEVEMENTS IN 2004/5 • Successful participation in the R550 million RTWST project in 2005 • Successful participation in the R250 million RWST project in 2005 • Successful attainment of gender balance in Magalies Water • Unqualified financial report by Independent Auditor (Never qualified by the Auditor in 35 years) • Successful Involvement in the Water Loss Program in City of Tshwane Metro

23. MAJOR ACHIEVEMENTS IN 2004/5 • Implementation of balanced tariff increases ranging between 0% - 6.8% • Signed MoU with Rand Water and Ikangala Water to service the WH Region of Bronkhorstspruit • Successfully established a Central Laboratory Facility thru purchasing the Rustenburg LM Lab for +/- R1mill • As implementing agent, successfully implemented DWAF projects to the value of R15 mill

24. MAJOR ACHIEVEMENTS IN 2004/5 • Appointment as implementing agent for municipalities in establishing basic water services • Successful disbursement of the donation of R18 million which was made available to 4 Key Municipalities for Water Services Projects directed to Water Services Projects • Gold Award under Public Sector at Rustenburg Show and Exhibition

25. MECHANISMS TO STRENGTHEN SERVICE DELIVERY

26. MECHANISMS TO STRENGTHEN SERVICE DELIVERY • Partnering with other Water Boards or Water Utilities on Joint Ventures to identify the most effective Sanitation Models and Processes. This means Joint Task Teams would be established to conduct research and publish information regularly on findings. • Progressive cost reduction in operational expenses and settlement of long term debt, and passing benefits of economies to consumers • Vigorously pursuing relationships with WSA’s and fostering appointment as implementing agentin establishing basic water services inclusive of basic sanitation services;

27. MECHANISMS TO STRENGTHEN SERVICE DELIVERY • Assisting WSA’s in “Project Consolidate”initiatives through partnerships and secondment of selected personnel; • Utilisation of Water Forums and Other Stakeholder Relationship Managementinitiatives to address their concerns; • Acceleration of transformation and Equity / gender balance internally thereby boosting morale among staff • Deliberate encouragement and prodding of staff to further their education and learning – successful implementation of ABET (Out of 71 registered candidates, 47 were successful in various Levels of ABET Qualifications) • Increased Spend in Training and Development

28. STRATEGIC CHALLENGES FACED BY MAGALIES WATER AND PLANS TO OVERCOME THEM

29. STRATEGIC CHALLENGES FACED BY MW • Obtaining Support from DWAF regarding the above average / Inflation raw water tariff increases whilst the Water Board is expected to increase tariffs in line with Inflation targets • Need for the improvement of the fast deteriorating raw water quality in such catchments areas as the Hartebeestpoort and Roodeplaat dams • Finalisation of the WSA/WSP Service Level Agreements • Reduction of UFW in areas of operation • Managing the uncertainty created by the Institutional Reform process

30. STRATEGIC CHALLENGES FACED BY MW • Accelerating assistance offered to Municipalities to deal with “Project Consolidate” challenges • The Need to align and meet the challenges posed by the President in his 2006 State of the Nation address regarding water • Continuously ensuring that the quality of potable water produced and delivered remain quality consistent • Successfully managing the impact of HIV/AIDS at Magalies Water (Negotiating with ABSA for an Employee Support Program to assist MW in managing Voluntary disclosure) • Accelerating access of Sanitation to all consumers in MW areas of operation

31. STRATEGIC CHALLENGES FACED BY MW • Accelerating Transformation efforts to balance gender at all levels of management, as well as Disability • Maintaining and Improving employee and Customer satisfaction • Ensuring that the Business Development Division becomes fully functional and focused • Reduction of Operational Expenses • Maintaining tariff increases at inflation targeted levels

32. DEALING WITH STRATEGIC CHALLENGES • Efforts and Discussions already pursued with DWAF to limit future tariff increases to Inflation levels – a study already completed and submitted to DWAF to highlight this anomaly • Raw Water Deterioration – A study has been initiated and discussions currently pursued with DWAF to assist in the management of the Raw water relevant catchments • Finalisation of WSA/WSP Agreements – Draft Agreements have already been compiled and submitted to all affected WSA’s to finalise the contracts • UFW / Water Loss Management - Further projects such as the STIP Project in CTMM need to be initiated. Already other projects in Moses Kotane are being implemented

33. DEALING WITH STRATEGIC CHALLENGES • Institutional Reforms – continuous communication and information dissemination is currently performed and staff are regularly updated • Project Consolidate (PC) Assistance – Target teams and proposal development as well as laboratory services, among others are being undertaken to assist WSA’s in their efforts to deal with PC challenges • Quality Standards - The establishment of a Centralised Laboratory facility was primarily aimed at accelerating the testing of raw, potable and sewage water to ensure quality products • Sanitation access - MW as an Implementing agent is already engaged with DWAF and affected WSA’s to accelerate basic and advanced sanitation provisioning to affected communities

34. DEALING WITH STRATEGIC CHALLENGES • Customer Satisfaction – Surveys (both independent and MW driven) have been identified as the key to determination of customer satisfaction – the 2005 PMR Award for Service excellence is just but one driver • Employee Satisfaction – a Performance Management System has been introduced to reward key performers and to develop inadequate performers (Board members also trained) • The Training and Development spend has also been systematically increase to encourage personal development of staff • Reduction of Operational Expenses – Service providers and suppliers to MW are being systemically informed that MW would not accept increases above inflation – This is assisting tremendously in efforts to reduce OPEX

35. DEALING WITH STRATEGIC CHALLENGES • Reduction in OPEX – consolidation of business processes has been undertaken through the restructuring of the Organisational Structure in order to further reduce OPEX. • HIV/AIDS Management – Voluntary campaigns have been undertaken to date, including participation in national campaigns such as HIV/AIDS Week, World Aids day, etc • MW does not provide ARV’s nor is there a budget allocated for each beneficiary treatment. Plans are being made to establish a mobile clinic

36. FUTURE PLANNING FOR 2005/6 AND GOING FORWARD…

37. FUTURE PLANNING FOR 2005/6 AND GOING FORWARD… • Consolidating the new Organisational Structure and “milking” the benefits of consolidation to pass these to our consumers • Capacitating the Business Development Divisionso that it identifies viable projects and becomes profitable • Strengthening Magalies Water Capabilities in the Bulk Sanitation business • Preparing Strategic Plans for bulk supply in support of the municipalities WSDP’s especially in cases where the WSDP’s have not been completed; • Participating in the process of establishing WSDP’s of municipalities;

38. FUTURE PLANNING FOR 2005/6 AND GOING FORWARD… • Preparing Business Plans for extension of water services reticulation within villages; • Establishing community liaison committees in order to create relationships and to compile information on the most needy communities. • Aggressively pursuing the establishment of bulk water supply and O&M contracts with municipalities; • Pro-actively investigating the establishment of operating rules for raw water sources;

39. FUTURE PLANNING FOR 2005/6 AND GOING FORWARD… • Maintaining Water Forums with Municipalities and all Stakeholders in an effort to support them in their role as WSA’s; • Transfer of knowledge to Municipal Officials in an effort to equip them for their task as WSA’s; and to assist with “Project Consolidate” • Allocating Fundingin order to conduct research on Water Conservation, Sanitation, establishment of Infra-structure to forward plan. • Establishing Organisation wide EWRM Models and Risk Scenarios in order to manage uncertainty

40. BEE PROCUREMENT

41. BEE PROCUREMENT • The BEE spend between 2003 – 2005 is as follows:

42. IMPLICATIONS OF STATE OF NATION ADDRESS ON MW SERVICE DELIVERY

43. IMPLICATIONS OF STATE OF NATION ADDRESS • Through our Implementing Agency status for the WSA’s, MW facilitates the eradication and acceleration of access to Sanitation to meet the 2007 ASGISA goals • Transfer of skills to Local Government – via the Rustenburg Infrastructure Management Project – to accelerate Project Consolidate deliverables • Working with Provincial Government in attaining the goals of the Provincial Growth & Development Strategy (PGDS) – Member of Infrastructure and Construction Working Group • Together with WSA’s, MW will put additional Infrastructure Development plans forward to access part of the R372billion

44. IMPLICATIONS OF STATE OF NATION ADDRESS • MW has already invested more than R800 million for Infrastructure refurbishments in the last 5yrs, with plans for a further R150million in the next 5yrs • Several proposals are at different stages of completion to assist WSA’s in O&M programs as part of infrastructure projects management • MW Board already consist of 50% women at Board level in line with the ASGISA goals of placing women at decision making levels of public service • Learnerships are being accelerated to advance youth training and development

45. IMPLICATIONS OF STATE OF NATION ADDRESS • Raising capital through the Board’s balance sheet for infrastructure development on behalf of Stakeholders • MW’s BEE and SMME development initiatives have ensured that in 2004 procurement from these entities was already at 44.1% = (R51 million), of total procurement • Adoption of community agencies and centers by MW ensures that community development is accelerated • All Infrastructure programs, Basic water provision, sanitation, etc are all channelled at alignment with NEPAD goals

46. FINANCIAL PERFORMANCE

47. SUMMARY: BUSINESS PERFORMANCE INDICATORS

48. BUSINESS PERFORMANCE INDICATORS

49. FINANCIAL PERFORMANCE

50. FINANCIAL OVERVIEW Consolidated Balance Sheet - Magalies Water R255,8 million currently in the Investment Account