PRESENTATION TO PCWEA – 17 APRIL 2013

1. PRESENTATION TO PCWEA – 17 APRIL 2013

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(Census 2011) • Two Plants owned by DWA and Six plants owned by BLM • Mbombela Local Municipality Area (MLM) (6 PWTW) 71 568 647(Census 2011) • ( MLM) (1WWTW) 3.5 • All Plants owned by MLM • BOARD OF DIRECTOR • The term of the current board of directors is from February 1, 2010 – March 31, 2014.

3. ACHIEVEMENTS FROM TURN AROUND STRATEGY

4. Debt owed by WSAs to BW • Bushbuckridge Local Municipality • R240,2 mil – June 2012 • Escalated by R31,8 mil since June 2011 and R72 mil since June 2010 • 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 to date • Additional R25 mil paid in December 2012 towards historical debt • 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) • R18 million grant from DWA

5. Supply Contracts • BLM • A three years Bulk supply contract be signed and to be reviewed in 2014 • A possible extension to a five year contract • 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 • DWA – Institutional Oversight consulted during the formulation of the draft contract

6. Capital Infrastructure Projects • A 20 years Capital Infrastructure Plan being compiled, to be completed June 2013 • Challenges faced due to short term contracts with WSAs. • Cogta-MP • BW entered into agreement to implement projects on behalf of Cogta-MP to the • value of R23 mil • Projects completed as agreed with Cogta-MP and the receiving municipalities • 5% agency fee was paid to BW for implementation of the projects • DWA-MP • BW entered signed agreement to implement projects on behalf of DWA-MP to the • value of R4,5 mil • Projects completed as agreed with DWA-MP and the receiving municipalities • 5% agency fee to be paid to BW for implementation of the projects • A water purification package plant was implemented in Albert Luthuli LM(Carolina Town) to the value of R1,1 mil under the Rapid Response project.

7. Metering/Illegal connections • Metering • BW completed a study with the intention to address metering challenges in BLM • Study recommends the establishment of 20 new metering points • DWA approved R2,5 million grant to address the new metering points • Rand Water appointed as implementing agent to install new meters • A steering committee comprising of BW, Rand Water and BLM established to oversee the implementation of this project • Illegal connections • The study Identified the existing illegal connections • The report discussed with BLM and decision to be taken on which illegal connections to formalized or removed • BLM to fund the metering/formalization of illegal connections • Other projects funded through DWA grant • Telemetry and Scada system • Blue Drop certification • Refurbishment and pumps replacement • A total of R18 millions already transferred

8. ANNUAL FINANCIAL STATEMENTS

9. 2011/12 Annual Financial Statement 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 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 STRATEGIC OBJECTIVES

14. 2010/11 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 • - 98% compliance to SANS 0241 for potable water due to old infrastructure • -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 • 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-

16. CAPITAL INFRASTRUCTURE EXPENDITURE

17. 2011/12 Capital Infrastructure Expenditure • Grant funding from Cogta-MP and DWA • 95% of projects completed within schedule:

18. 2013/14 Tariff Structure

19. 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 concerned 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

20. 2013/14 TARIFF STRUCTURE Continues

21. 2013/14 TARIFF STRUCTURE Continues Final Tariff after consideration of Eskom 9.6% increase Propose 12%

22. Bushbuckridge Water Strategic Plan (TO FOLLOW)

23. Challenges • Board vacancies hampers smooth operations of Board committees • Deteriorating financial condition of BLM impacting on financial viability of BW. • Escalating debt for Bushbuckridge local municipality • Failure to attract suitably qualified personnel to fill vacancies. • Inability to meet CSI project targets due to cash flow constraints • Backlog in refurbishment and maintenance due to cash floe constraints

24. Thank you