PORTFOLIO COMMITTEE PRESENTATION

PRESENTED TO:PRESENTED TO:ParliamentParliament17 – 18 April 201317 – 18 April 2013

PRESENTED BY:PRESENTED BY:Ms N R Mlonzi (Board Chairman)Ms N R Mlonzi (Board Chairman)

Mr M Msiwa (Chief Executive )Mr M Msiwa (Chief Executive )

Contents

1. Feedback from Previous Year Portfolio Committee Presentation

2. 2011 / 2012 Annual Report

3. Strategic Direction

4. Performance Targets

5. Budgets - 2012/ 2013 - 2013/2014

6. Tariff

7. Annual Work Program

8. Implementation of PAJA and PAIA

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20 April 2012 Portfolio Committee Areas for Improvement Feedback

1. All Water Boards to clearly show Bonus and Salaries of CEO and SNR Managers separately

2. Amatola Water Secondary Business is greater than its Primary and AW should relook at this

3. Currently Amatola Water is running at a deficit and steps need to be taken to turn this around

4. DWA and National Treasury to assist AW to turnaround if necessary

5. Secondary Business Debtors Days need to be reduced

6. Board member must be present

These items will be all be covered during the presentation

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AW Bulk Service Delivery

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2011 / 2012 Annual Report

• 3 Blue Drop Awards received and improved blue drop scores on all plants

• Retention of OHSAS 18001 accreditation

• Revenue R423 mil and 30 835 megalitre for financial year

• Implementation of financial ring-fencing of Sec 29 and Sec 30 activities

• Significant reductions in costs as part of financial turnaround

• 2010/2011 financial figures were restated with a deficit of R40 million not R15 million as initially reported

• A reduced deficit of R8 million was made in the 2011/2012 financial year

• Amatola Water received an qualified audit report in 2011/12. The qualification was for Irregular expenditure , the auditors did not get reasonable assurance in respect of completeness of the irregular expenditure 5

DebtsSignificant improvement in liquidity hence:Payments to DWA•Amatola Water is paying all current Debt to DWA•Agreement busy being finalised to pay historical debt of about R45 million. There is disagreement on the application of the Raw Water Pricing Strategy relating to abstraction works.•Amatola Water has no loans

Amounts Owed to AW•Current debts being paid•Historically Section 30 debt (120days or greater) of R19 mil

• OR Tambo DM – R 4.2 Mil• Amathole DM – R10 Mill• Dpt Public works R4.8 mil

New Strategic DirectionNew focussed, sustainable Amatola Water delivering on its gazetted function and contributing to National Imperatives

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Strategic Plan• Recognizing that Amatola Water, established in 1998, is unlike other water

boards as its consumer base is rural communities not metro’s or industrial.• Amatola Water currently does not have consistent economies of scale and

serves in a province riddled with poverty, inequalities and sub standard performance of water services delivery

• Amatola Water in the past has got lured into doing increased section 30 activities trying to help municipalities in any way possible with water services provision. This is unsustainable, financially not viable and has led to loss of focus on its reason for establishment

• As an entity of the state Amatola Water needs to clearly understand why it was formed and its part in the Government service delivery, that as it performs well it will contribute to overall Government effectiveness.

• As a state entity, the new strategy developed is a 20 year strategy aligned with national imperatives such as those included in the National Development Plan and Institutional Realignment and Reform.

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Water Boards Water Services Authorities (WSAs)

FIELD (B)FIELD (A)

Department: Water Affairs

Amatola Water Understood MandateIs detailed planning from source to tap making sure that there are no bottle necks

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Advisory

Operating contracts

Management contracts

Leases

Concessions

BOT

Full ownership

Length of contract period

Leve

l of r

isk ta

king

by

wat

er b

oard

Implementing Agent

Primary activitySecondary (A)

activitySecondary (B)

activity

Strategic Product Is detailed planning from source to tap making sure that there are no bottle necks

Source: DWA 2012: Water Boards reform - Overview Report 10

Strategic PlanAmatola Water understands its role in contributing to the NDP decent standard of living through the provision of bulk water services in the Eastern Cape. It will do this by:

•Focusing on Sec 29 Activities: Amatola Water has set a target in 5 years to have a 70/30 split between Sec 29 and Sec 30 Activities and by 20 years a 90/10 split.

•Contributing to a decent standard of living in its area by adopting a design standard of 750l per household per day supporting social and economic development in rural communities that it serves

•Upgrading its works, were appropriate to meet this standard in collaboration with DWA and WSAs

•A significant focus on governance and adoption and implementation of King III principles

•Sec 30 activities must be ring-fenced, profitable and surpluses used to augment sec 29 infrastructure

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VISION AND MISSION

Vision: “To be the dominant Bulk Water Service Provider in the Eastern Cape”. Mission: “Amatola Water provides sustainable bulk, quality, clean water to Water Service Authorities enhancing equitable access of water services to all”

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SELECTED PERFORMANCE TARGETSItem 5 Year Target 20 Year Goal

Sec 29 / 30 split 70/30 90/10

Water Sold 150 mg l per day 350 mg l per day

Total Water loss 8% 6%

Schemes Capable Providing 750 l/h/d

5 AW Owned Schemes All Aw Owned Schemes and80 % of EC households @ 750 l per household per day

Stakeholder Relations Active participation in EC Water Master Plan

Common vision about water services delivery

Governance 100% Compliance to KING III

Continued Good Governance

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2012/13 To Date

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For the financial 2012 / 2013, From July 2012 to February 2013 Amatola Water has made a surplus of R10 million, a significant turnaround from the past.

Income &Expenditure

Actual February 2013

BudgetFebruary 2013

Actual - YTDR

Budget -YTDR

Variance R

Primary Revenue - Raw water (894,435) (1,012,226) (7,472,809) (8,097,808) (15,570,617)Primary Revenue - Treated water (14,088,830) (14,388,160) (122,496,322) (115,666,469) 6,829,853 Section 30 (8,151,830) (14,948,419) (75,572,636) (120,586,160) (45,013,525) Total Income (23,135,095) (30,348,805) (205,541,767) (244,350,437) (38,808,670)

Chemicals 772,593 2,970,271 10,276,618 15,161,665 4,885,047 Diesel - 82,530 752,413 1,021,790 269,376 Electricity 1,898,980 2,250,315 16,914,601 18,002,517 1,087,917 Water: Bulk Purchases 4,769,937 4,378,455 37,126,889 35,027,640 (2,099,249) Water: Research Levy 139,383 117,059 1,172,243 936,472 (235,771) Direct Salaries 7,175,813 7,345,492 57,370,194 58,763,939 1,393,745 Cost of Goods Sold 14,756,707 17,144,122 123,612,957 128,914,023 5,301,065

Gross (Surplus)/Deficit (8,378,388) (13,204,683) (81,928,810) (115,436,415) (33,507,605) Gross Surplus Percentage 59.47% 91.77% 66.88% 99.80% -490.61%

Indirect Salaries 3,313,624 3,895,001 26,793,329 31,529,647 4,736,318 Repairs and Maintenance 1,599,711 5,890,861 19,722,916 35,627,639 15,904,723 Depreciation 1,454,980 1,675,369 11,737,108 13,402,954 1,665,846 General Expenses 1,798,920 4,363,868 15,670,724 28,203,167 12,532,443 Enviromental Management - 833 20,223 50,608 30,386

Net (Surplus)/Deficit (211,153) 2,621,249 (7,984,511) (6,622,399) 1,362,112

Financing Income (281,590) (194,159) (2,298,918) (1,553,270) 745,648 Financing Expense 8,447 15,367 84,997 122,937 37,941

(Surplus)/Deficit for period (484,296) 2,442,457 (10,198,432) (8,052,732) 2,145,700

AMATOLA WATER BOARD

Consolidated Income Statement for the period ended 28 February 2013

2014 BUDGET

For the 2013/14 budget ; these are the key areas:•Improved Efficiency•Increasing Primary Revenue and reduction in Secondary

Items of income and expenditure

2013/2014 2014/2015 2015/2016

Rands Rands RandsPrimary Revenue (212 254 570) (251 704 008) (304 180 755) Primary Revenue - ROU - (3 358 946) (10 734 028) Secondary revenue (324 699 209) (261 974 134) (199 249 059) Sundry Income (5 353 107) (5 642 377) (6 062 751) Total revenue (542 306 886) (522 679 466) (520 226 593)

Electricity 27 172 740 29 536 383 32 542 877 Chemical 11 947 246 13 721 151 15 760 087 Depreciation 18 073 012 18 976 662 19 925 495 Diesel 8 774 9 283 9 821 Direct Salaries 84 719 523 91 242 173 98 175 823 Secondary Costs 244 742 545 203 052 828 169 956 329 Water: Bulk Purchases 58 739 025 62 145 888 65 750 350 Water: Research Levy 1 835 633 1 942 100 2 054 741 Direct costs 447 238 497 420 626 468 404 175 523

Gross profit (95 068 389) (102 052 997) (116 051 071)

General and admin expenses 36 405 082 38 956 979 43 620 893 Indirect Salaries 43 713 240 47 079 159 50 657 175 Repairs and maintenance 17 919 545 17 771 618 18 511 518 Indirect costs 98 037 866 103 807 756 112 789 587

Interest expense 38 736 41 024 43 292 Interest income (3 793 214) (4 013 221) (4 245 988) Net finance income (3 754 479) (3 972 197) (4 202 696)

Net (surplus)/loss for the year (785 001) (2 217 438) (7 464 180)

BUDGET PROPOSAL CONSOLIDATED BUDGET

MEDIUM TERM EXPENDITURE FRAMEWORK PERIOD1 July 2013 - 30 June 2016

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Initial Tariff 2013/ 2014

Customer NdlambeScheme Nahoon Laing Sandile Sandile Laign Peddie Other Albany Coast R/m³ (Initial Proposed Tariff) 5.951 6.068 6.635 6.632 6.065 6.903 6.982 9.037% Increase in tariff 9.85% 9.85% 9.85% 9.80% 9.80% 9.80% 9.80% 6.00%

Buffalo City ADM

Average Tariff Increase 9.34%

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Reduced Tariff (Eskom) 2013/ 2014

Average saving in cents of 5.3

Reduction in average tariff increase from 9.34% to 9.27%

Full reduction / saving past onto WSA’s

Electricity 9.677% of total tariff

Customer NdlambeScheme Nahoon Laing Sandile Sandile Laign Peddie Other Albany Coast Reduction in Tariff (Eskom) 0.046 0.047 0.051 0.051 0.047 0.053 0.054 0.070R/m³ (Revised Tariff) 5.905 6.021 6.584 6.581 6.018 6.850 6.928 8.967% Increase in tariff (Revised) 9.77% 9.77% 9.77% 9.72% 9.72% 9.72% 9.72% 5.95%

Buffalo City ADM

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Work & Capex Program

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Amathole District Municipality Upgrade• To implement its strategy and perform its mandated roll Amatola Water

together with its partners Amatole District Municipality and DWA will be expanding capacity and water service delivery within the ADM region

• In support of the turn around strategy, National Treasury and DWA has enabled this capex program over the next 5 years implemented closely with the ADM, the WSA, and DWA.

• 4151 new households connected (Backlog)

• 63510 households upgraded from 25l per person a day to 750 l per household standard with related socio economic benefits

• Increased Sec 29 activities for AW aligned with new strategy

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Municipality System Current Capacity Additional Capacity Future Capacity

Ngqushwa LM/BCMM

Peddie 6.5 Ml/day 6.5 Ml/day 13.0 Ml/day

Ngqushwa LM Sandile 18.0 Ml/day 22.0 Ml/day 40.0 Ml/dayBCMM Nahoon 33.7 Ml/day 7.0 Ml/day 40.7 Ml/dayNkonkobe LM Binfield 4.8 Ml/day 5.2 Ml/day 10.0 Ml/dayNkonkobe LM Debe Nek 1.5 Ml/day 3.5 Ml/day 5.0 Ml/dayAmahlati LM Masincedane 4.6 Ml/day 2.0 Ml/day 6.6 Ml/day

69.1 Ml/day 46.2 Ml/day 115.3 Ml/day

PIA WorkKing Sabata Dalindyebo Presidential Intervention:• Supporting Rural Livelihoods– Current allocation R595

mil from RBIG and projected to R1.2 billion. To supply 50km radius of Mthatha ( KSD, Mhlontlo & Nyandeni LM’s)

• Upgrade infrastructure to provide capacity to meet NDP vision of running water in every household (particular rural focus) & upgrade Mthatha and Mqanduli sewage systems

• Development of a sustainability plan for infrastucture

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KSD Presidential Intervention

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Eradicating Backlogs• R681 million PIA contracts (ORTDM, JQDM, ADM,

Ndlambe, Ikwezi, Koukamma, SRVM, Kouga LM’s)

• 70 156 people to be supplied over MTEF

Job Creation (MTEF)• PIA Contracts – 8551 temporary jobs

• Bulk Infrastructure upgrade – 19 permanent jobs

Blue Drop Certification• ISO 17025 laboratory in 2013/14

Annual Work Programme (cont.)

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Implementaton of PAJA & PAIA

• Amatola Water currently implements and complies to these on a ad-hoc basis as needed

• When the Board’s financial position has improved further, this approach will be reviewed

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Summary

• Amatola Water current financial position is stabilizing

• Its future strategic direction is a focus on Sec 29 activities which it wants to grow to be 90% of its business in 20 years

• Its focus is on supporting a decent standard of living as per the NDP of the rural people in the province that it serves by improved standards of water services

• This will be accomplished by working closely with its partners in service delivery DWA and the relevant WSA’s

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THANK YOU

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