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Table of Contents

Abbreviations & Acronyms ______________________________________________________

PART A: GENERAL INFORMATION ______________________________________________

1. Foreword by the Minister ____________________________________________________ 1

2. Organisational Profile ______________________________________________________ 2

3. Bloem Water Activities ______________________________________________________ 3

4. Legislative and Other Mandates ______________________________________________ 5

5. Foreword by the Chairperson ________________________________________________ 6

6. The Board _______________________________________________________________ 7

7. Chief Executive’s Overview __________________________________________________ 11

8. Statement of Responsibility and Confirmation of accuracy for the Annual Report ________ 13

9. Executive Management _____________________________________________________ 14

10. Strategic Overview ________________________________________________________ 15

11. Organisational Structure ____________________________________________________ 16

PART B: PERFORMANCE INFORMATION ________________________________________ 17

1. Auditor-General’s report on Predetermined Objectives _____________________________ 18

2. Situational Analysis ________________________________________________________ 18

2.1. Service Delivery Environment _____________________________________________ 18

2.2. Organisational Environment ______________________________________________ 20

2.3. Key Policy Developments ________________________________________________ 20

2.4. Strategic Outcome Oriented Goals _________________________________________ 21

3. Performance against Pre-determined Objectives _________________________________ 25

4. Operations and Projects Performance _________________________________________ 30

4.2. Water Quality _________________________________________________________ 30

4.3. Water Losses _________________________________________________________ 31

4.4. Raw Water Quality _____________________________________________________ 31

4.5. Maintenance of Infrastructure _____________________________________________ 32

4.6. Pipeline Reaction Team/Workshop _________________________________________ 32

4.7. System Automation _____________________________________________________ 32

5. Infrastructure Development __________________________________________________ 33

5.1. Completed Projects _____________________________________________________ 33

5.2. Key Infrastructure Projects _______________________________________________ 35

5.3. The Department of Water and Sanitation Projects _____________________________ 37

6. Financial Performance _____________________________________________________ 38

6.1. Bulk Water Sales Analysis _______________________________________________ 38

6.2. Bulk Water Tariff _______________________________________________________ 39

6.3. Cash Flow Analysis _____________________________________________________ 39

6.4. Funding Requirements __________________________________________________ 39

7. Revenue Collection ________________________________________________________ 40

PART C: CORPORATE GOVERNANCE ___________________________________________ 41

1. Introduction ______________________________________________________________ 42

2. Parliament and Portfolio Committees __________________________________________ 42

3. Executive Authority ________________________________________________________ 42

4. The Board _______________________________________________________________ 42

5. Board Committees _________________________________________________________ 45

6. Risk Management _________________________________________________________ 49

7. Compliance with laws and regulations _________________________________________ 52

8. Fraud and Corruption ______________________________________________________ 52

9. Minimising conflict of interest ________________________________________________ 52

10. Code of Conduct __________________________________________________________ 52

11. Safety, Health, Environment & Quality _________________________________________ 53

12. Company Secretary ________________________________________________________ 53

13. Information and Communication Technology Governance __________________________ 53

14. Corporate Social Responsibility ______________________________________________ 54

15. Stakeholder Relationships ___________________________________________________ 56

16. Audit Committee Report ____________________________________________________ 58

PART D: HUMAN RESOURCE MANAGEMENT ____________________________________ 60

1. Introduction ______________________________________________________________ 61

2. Human Resource Oversight Statistics __________________________________________ 65

PART E: FINANCIAL INFORMATION _____________________________________________ 68

Statement of responsibilities and approval _________________________________________ 72

Report of the Auditor General to Parliament on Bloem Water ___________________________ 73

Statement of financial position ___________________________________________________ 78

Statement of comprehensive income _____________________________________________ 79

Statement of changes in equity __________________________________________________ 80

Statement of cash flows _______________________________________________________ 81

Notes to the financial statements ________________________________________________ 82

Detailed statement of comprehensive income _______________________________________ 126

Abbreviations & Acronyms

AGSA Auditor-General of South Africa

BW Bloem Water

BBBEE Broad Based Black Economic Empowerment

CEO Chief Executive Officer

CFO Chief Financial Officer

PFMA Public Finance Management Act

TR Treasury Regulations

WTW Water Treatment Works

PCP Pre-stressed Concrete Pipeline

DWS Department of Water and Sanitation

DHS Department of Human Settlement

SOP Standard Operating Procedures

HCD Human Capital Development

ABET Adult Basic Education and Training

IWA International Water Association

ICT Information and Communication Technology

WRC Water Research Council

WSP Water Safety Plan

IoDSA Institute of Directors in Southern Africa

SANS South African National Standards

ACIP Accelerated Community Infrastructure Programme

MIW Municipal Water Infrastructure Grant

RBIG Regional Bulk Infrastructure Grant

MIG Municipal Infrastructure Grant

MFMA Municipal Financial Management Act

WSA Water Services Authority

NT National Treasury

EWSETA Energy and Water Sector Education and Training Authority

PART A:

GENERAL INFORMATION

1Bloem Water Annual Report 2016/17Bloem Water Annual Report 2016/17

1. Foreword by the Minister

Part of the Government’s drive on radical economic transformation is addressing the inequalities of the past.

The Department of Water and Sanitation undertakes to implement infrastructure development and

refurbishment programmes aligned to the National Development Plan, the

State of the Nation Address, and Sustainable Development Goal Six that seeks to ensure access to water and sanitation for all.

In eradicating poverty and inequality and addressing economic transformation, the Department has allocated a significant portion of its budget to enable development and expansion of water infrastructure in the country through various programmes in public entities. These water and sanitation programmes in the provincial and local spheres of government, which include among others, the Accelerated Community Infrastructure Programme (ACIP), the Municipal Water Infrastructure Grant (MWI), the Regional Bulk Infrastructure Grant (RBIG), the Municipal Infrastructure Grant (MIG) and others.

These are the initiatives established to participate in achieving the National Development Plan target of job creation through participation in the Expanded Public Works Programme (EPWP) and the Community Works Programme (CWP) that ensures capacity building and critical skills development.

The impact of climate change and global warming has had a devastating impact on the country.

The country has continued to experience its worst drought in the past 30 years and Free State has been one of the worst affected provinces. In addressing the challenges brought by climate change, the Department continues to investigate climate change mitigation and adaptive strategies amongst others: water conservation, water demand management, and water reuse. The Presidential Programme of War on Leaks has had a positive impact on the reduction of water losses.

Through the intervention of the Department, water restrictions continued to be implemented throughout the Mangaung Metropolitan Municipality and surrounding local municipalities, as on average, dam levels have remained below 50%.

During the year under review, Parliament under the auspices of the National Council of Provinces, as part of its oversight role, visited Bloem Water’s areas of supply. The Xhariep District Municipality came out as a key area of concern with regard to water service delivery. In order to attend to the concerns, the NCOP initiated a Stakeholder Forum to resolve the concerns.

The Department acknowledges, Bloem Water for the critical role they play in the improvement of health and hygiene in schools, promoting awareness on Water and Sanitation issues locally and ensuring continuous learning amongst communities.

I wish to thank the Board, for the excellent oversight role, they have continued to play to ensure that the entity continues to achieve its goals as set out in the Shareholder’s Compact.

_____________________ Ms. Nomvula Mokonyane Minister of Water and Sanitation

Ms. Nomvula Mokonyane Minister of Water and Sanitation

2Bloem Water Annual Report 2016/17

Bloem Water Annual Report 2015/16 Page 1

2. Organisational Profile Bloem Water was established as “Bloem Area Water” by the then Department of Water Affairs in 1991 to operate the Caledon/ Bloemfontein Government Water Scheme and supply water to the Municipal areas of Bloemfontein, Bainsvlei, Bloemspruit, Botshabelo and Dewetsdorp. The name was officially gazetted and changed to Bloem Water. Bloem Water operates and accounts for its activities in accordance with the Water Services Act, Act 108 of 1997, and the Public Finance Management Act (PFMA), Act No. 1 of 1999, as amended. The entity is listed as a Schedule 3B National Government Business Enterprise that reports to the Minister of Water and Sanitation as the Executive Authority, through the Board as the Accounting Authority.

In 1995, areas of service were extended to include towns in the Southern Free State: Bethulie and Philippolis followed by Thaba ‘Nchu district, a former homeland with 42 rural villages, located 65 km east of Bloemfontein and lastly Excelsior, located in the Eastern Free State.

Bloem Water has been in existence for more than two decades and having celebrated its 25th anniversary it continues to service a population in excess of 1.2 million. It operates in areas spanning three Water Service Authorities (Municipalities): Mangaung Metropolitan Municipality, Mantsopa Local Municipality, and Kopanong Local Municipality. The Organisation operates in three Regions, named after their source namely: Modder River, Caledon River and Orange River, with a total of seven water treatment works. The head office is located in Bloemfontein; Brandkop in the Caledon River Region houses the biggest reservoir of all its operations.

Telephone No.: (051) 403-0800

FAX NUMBER: (051) 422-5333

e-mail: [email protected]

website: www.bloemwater.co.za

External Auditors: Auditor-General SA

Bankers: First National Bank

Company Secretary: Ms. M Silevu

Registered Name: BLOEM WATER Registered No: PHYSICAL ADDRESS: 2Mzuzu Street Pellissier Bloemfontein POSTAL ADDRESS: P.O. Box 30121 9322 Bloemfontein Free State South Africa



3. Bloem Water Activities The primary activities of Bloem Water, as declared in section 29 of the Water Services Act, is to provide bulk water services to other water services institutions in its service area. In addition, section 30 of the Act, makes provision for Bloem Water to perform other activities (secondary), and provided these activities do not negatively impact the entity’s ability to perform its primary activities.

Other activities may include, but are not limited to:

a) providing management services, training and other support services to water services institutions, in order to promote co-operation in the provision of water services;

b) supplying untreated or non-potable water to end users who do not use the water for household purposes;

c) providing catchment management services to or on behalf of the responsible authorities;

d) with the approval of the water services authority having jurisdiction in the area— i) supplying water directly for industrial use; ii) accepting industrial effluent; and iii) acting as a water services provider to consumers;

e) providing water services in a joint venture with water services authorities; and f) performing water conservation functions.

Areas of Service



4. Legislative and Other Mandates

Bloem Water is a State-Owned Entity established in terms of Section 28(1) (a) of the Water Services Act No 108 of 1997 to provide water services to other water services institutions in its service area. As a Schedule 3B, a National Government Business Enterprise, Bloem Water operates in accordance with the Public Finance Management Act No 1 of 1999 as amended by Act 29 of 1999, National Treasury Regulations and the Municipal Finance Management Act, No 56 of 2003. The Organisation reports to the Minister of Water and Sanitation, as its Executive Authority. Bloem Water is subject to the following legislation:

The Constitution of South Africa; Water Services Act, Act No. 108 of 1997; National Water Act, Act No. 36 of 1998 the provisions of the Shareholder Compact; Public Finance Management Act (No.1 of 1999 as amended by Act 29 of 1999); National Treasury Regulations; Companies Act No. 71 of 2008; King IV Report on Corporate Governance; Protocol on Corporate Governance in the Public Sector; and all other applicable laws of the Republic of South Africa.



5. Foreword by the Chairperson

The 2016/2017 financial year saw Bloem Water continuing to take remarkable strides in making its vision a reality; thus “assuring sustainable provision of water services, for life”. Some of the meaningful achievements we celebrate include reliably

delivering quality water to all clients, the continued exemplary financial management, strong partnerships with stakeholders, especially evident in our uniqueness with twinning programmes as well as on-going innovative partnerships to improve access to water. These achievements are founded upon the implementation of Business Plan 2016-2021 which seeks to fulfil our broad outcomes for the entity. The continued exchange programmes, with specific reference to Northern Region Water Board in Malawi, have been one of the highlights of maintaining strategic relationships. This partnership underlines the commitment to build a long-term relationship by deepening ties and promoting congruence on issues of mutual interest beyond our borders in the water sector. Our activities remained closely aligned with the stated goals despite the impact of climate change, which continues to have extreme effects on our country, specifically the Free State Province, experiencing erratic rainfall patterns coupled with high temperatures. Bloem Water remained optimistic and strived for the best despite difficult times of continued non-payment by Municipalities, and water shortages that led to water restrictions due to drought, thus impacting on water sales.

Through the intervention of the Department of Water and Sanitation, water restrictions continued to be implemented throughout the Mangaung Metropolitan Municipality and surrounding local Municipalities. In addition to operating within the parameters outlined in the Water Services Act 108 of 1997, Bloem Water made certain that it operates within the Sustainable Development Goals. As Bloem Water marked its 25 years being in operation, it has acknowledged the intended strategic shift from the Shareholder in looking at consolidating three Water Boards to form a single Regional Water Utility. Being the Board’s responsibility to provide the strategic direction of the business, the 2016/2017 Strategic Plan Review Session ensured specific focus in understanding the nature of risks and opportunities that may exist. The Board takes pride in our state of readiness. All organizations are unique and have their own challenges. Bloem Water is no different. Through continuous engagements with the sector, the challenges affecting service delivery faced by the organization were addressed with the Board as a catalyst in order to ensure harmonious stakeholder relations. Finally, on behalf of the Board, I would like to thank the Chief Executive and her team as well as employees of Bloem Water for ensuring that the service delivery mandate continued to be achieved despite all challenges. ___________________ Mr. TB Phitsane Chairperson of the Board

Mr TB Phitsane Chairperson of the Board



6. The Board

Mr. TB Phitsane

Chairperson of the Board

Ms. P Matete

Deputy Chairperson of the Board

Mr. N Mokhesi

Dr. J Van der Merwe

Ms. MSS Maboe

Adv. LR Bomela

Dr. MJ Ellman

Ms. CM Phetwe

Mr. Z Mkiva



Board Members’ Profile APPOINTED: April 2014

Chairperson of the Board

Diploma in Education, BA Economics and MBA: University of the Free State, Executive Leadership: University of Stellenbosch, Human Resources Strategy in Singapore.

He is former Educator. A former Director: Human Resources Management, a former Deputy Secretary (Deputy CEO): Corporate Services and a former CEO of the Free State Legislature. Mr T.B Phitsane is a member of the Institute of Directors in Southern Africa, He is former member of the Permit Board of Transport, former member of PACC in the Free State, a former Chairperson of Sedibeng Water Board, a former Deputy Chair of Free State Development Corporation, a former member of PRASA Board of

Directors and a Chair of subcommittee of REMCO, a former member of the Sanlam Board of Trustees.

His core skills relate to varied knowledge of all scripts of laws in particular PFMA, MFMA, LRA, BCOEA, EECA and understanding of other relevant Laws and regulations with regard to Corporate Governance, Board Effectiveness, Public Administration and Governance, Service Delivery and Budget Implementation and Performance Management Systems, Policy Development and Analysis, Training and Development, Public Finance, Supply Chain and Asset Management. He is currently a renowned businessman directing multiple companies specialising in construction, property development and investment, farming both livestock and game.

APPOINTED: APRIL 2014

Deputy Chairperson of the Board BA Honours (Geography & Environmental Studies). Thesis pending for M.A. in Geography and Environmental Studies.

She is Head of Environmental Management at one of the leading infrastructure development companies. She headed an environmental department at steel and cement manufacturing companies.

She was a Regional Manager: Environmental Monitor during construction of the Lesotho Highlands Tunnel from Mohale Dam to Katse Dam and before that Matsoku Diversion and Weir. She is a trained NED, has had executive leadership training. She has over the past 15 years acquired vast experience in environmental law and governance and Executive Preparation Programme in mining and water law.

APPOINTED: APRIL 2014 Chairperson of the Audit Committee M Com Financial Management, B Com Hons, B. Compt. (Accounting & Auditing), BCom.

He is currently the Head of Department in Free State Department of Human Settlement. He started his career as a part-time teacher of Business Economics at the Mncube Senior Secondary School in Soweto.

He joined the Free State Development Corporation in 1986 as Senior Manager: Associate Companies and Joint Ventures. His private sector experience includes serving as Executive Director of Mphatlalatsane Geographical Solutions (Pty) Ltd and as an independent SMME Business Consultant.

He has also gained extensive experience of the financial environment in the local Government sector when he joined the Thabo Mofutsanyana District Municipality as Chief Financial Officer during 2002 and continued

to serve in that position until he joined the Maluti-a-Phofung Local Municipality as Chief Financial Officer in 2005. He was appointed as City Manager of the Maluti-a-Phofung Local Municipality in 2007 and in 2009; he joined Centlec as Chief Financial Officer. He joined the Department of Police, Roads and Transport in June 2010 as the Chief Financial Officer and also acted as Head of Department and Deputy Director General at various times.

Mr. TB Phitsane

Ms. P MATETE

Mr. N MOKHESI




BCom (Accounting and Auditing) from North West, Certified Fraud Examiner from University of Pretoria, Programme in Strategy Alignment from Stellenbosch University, BDFM Online Certificate on Legal, Ethics and Risk Management.

Process Monitor Manager at Momentum, Senior HR & Risk Manager at Transnet Pension Fund Administrators, Internal Auditor at Gobodo Corporate Governance Services and Khula Enterprise Finance Limited. Former member and Chairperson of board HR Committee at Brakpan Bus Company, and Disaster Relief Fund in the Department of Social Development Services.

Ms Phetwe consults in risk management frameworks. She is a member of the Audit Committee of the Department of Women in the Presidency, Audit Committee of West Rand District Municipality, and Chairperson of the Risk Management Committee for Randfontein Local Municipality. She is a member of other professional bodies; GARP, Institute of Internal Auditors South Africa, and Information Systems and Control Association (ISACA). She has served as a director on various other boards and board committees.

She served on the board of Brakpan Bus Company, where she was Chairperson of the Board HR Committee.

APPOINTED: APRIL 2014 Chairperson of the Capital Project and Fixed Asset Committee

BSc (Chem Eng) from University of Cape Town; MSc (Chem Eng) from University of Twente, Enschede, The Netherlands; PhD (Chem Eng) (cum laude) from Institute National Polytechnique de Lorraine, Nancy, France; MBA from Wits Business School, University of the Witwatersrand, Johannesburg; Project Finance Modelling, Euromoney, March 2013; Certificate in Sectional Title Bookkeeping (Paddocks/UCT, 2010); Certificate in Marketing & Customer Centricity, University of Johannesburg, 2007.

Managing Director: Thembalethu Engineering Services (Pty) Ltd, 2006 to present (project development and investment in the energy sector – electricity, renewables, gas, petroleum, etc.); Executive Director:

Siyadingana Consulting (Pty) Ltd, 2002 to present (management and technical consulting to the energy sector – electricity, gas, petroleum, renewables, etc.); Executive Director: Siyadingana Properties (Pty) Ltd, 2006 to present (investment in, and letting of, property).

Non-Executive Director: Rand Water, 2002 to 2014; Non-Executive Director: Rand Water Services (Pty) Ltd, 2005 to 2008; Non-Executive Director: SABS, 2009 to 2014; Non-Executive Director: International Electrotechnical Commission (IEC), Geneva, Switzerland, 1999 to 2006; General Manager – Market Operations and Monitoring: National Electricity Regulator, 1999 to 2003 (responsible for electricity industry pricing, long-term capacity planning (NIRP), ESI restructuring, electrotechnical standardization, etc.); Corporate Consultant and Integrated Electricity Planning (IEP) Facilitator: Eskom, 1996 to 1999 (responsible for long-term capacity planning (IEP); Manager Production Planning & Economics, later Manager Business Development (strategic planning & marketing): Mossgas, 1988 to 1993.

APPOINTED: APRIL 2014 BSc EDUCATION, MA (COUNSELING)

Ms Maboe’s experience ranges from Head of Department: Social Development, Municipal Manager to the Masilonyana Local Municipality, Communications Officer at Thabo Mofutsanyana District Municipality, Acting Registrar and Executive Director: Student Development and Support Service at University of the Free State(UFS) Qwaqwa Campus. She has a leadership qualification in Executive Municipal Management from the UFS, a MA Degree with a Major in Counselling from the University of Northern IOWA, USA and a BSc Ed Degree from the University of Bophuthatswana.

She is a Psychologist by profession and has served in numerous Boards including the Free State

Development Corporation (FDC) and Sedibeng Water. Ms Maboe has also served on many a forum such as a member of the Executive Committee Forum of African Women Educationist, SA (FAWESA), member

of the South Africa Association of Senior Student Affairs Professionals (SAASSAP) and member to the National Association of Student Development Practitioners (NASDEV). She is also a member of Southern African Fundraising Institute (SAIF).

Ms. CM Phetwe

Dr. MJ Ellman

Ms. MMM Maboe



APPOINTED: April 2014

BA Social Science) and Honours Development Studies from University of the Western Cape (UWC), Training in Communications: University of Cape Town, Centre for Arbitration, Conciliation, and Mediation, Finance Managers: UCT Graduate School of Business.

Zolani Mkiva is an international acclaimed heritage practitioner and cultural activist. He is a well-respected policy maker who employs indigenous knowledge systems in carrying out his role. Zolani was born and raised in Dutywa, a rural town of the Eastern Cape Province of South Africa. He comes from a family with a lineage of oral traditional poets and regiments of African Royalty. Mkiva is also an African renowned producer and director of artistic works that resonate with music, poetry and film. He has produced more than 20 music albums, including international singles for a myriad of countries, namely, Cuba, Cote D’Ivoire, Libya, Venezuela, Swaziland, and Colombia. Zolani Mkiva is an organic intellectual who has

authored and published books and papers. In 2008, he was appointed as a Government Advisor on Traditional Affairs, working closely with the National Minister responsible for Cooperative Governance and Traditional Affairs. During his tenure as Government Advisor he managed to turn around a number of areas in the traditional affairs landscape. He was very instrumental in the establishment of the new national department of Traditional Affairs, formulating its strategic plan and structure.

APPOINTED: APRIL 2014 BPROC, LLM, LLB Degree

Adv Bomela served his articles of clerkship with the Law Society School for Legal Practice, Schutz and De Jager and Lawyers for Human Rights (Karoo Mobile Law Clinic). He served as a Public Prosecutor with the Department of Justice and Constitutional Development and was appointed as an Assistant State Attorney and a Senior Assistant Attorney with the State Attorney, Bloemfontein and Bisho. He practiced in partnership as a Director in the Law firm du Toit Bomela and later practiced in his own account under the name and style Bomela’s. He later joined the Department of Health, Free State as a Director Legal Services. He left the department and became a Company Secretary for Centlec (SOC) Limited. While serving as such, he continued practicing for his own account. He has practiced as an Attorney for 14 years and he is currently with the Free State Society as a practicing Advocate. Adv Bomela is a former Non-Executive Director at Centlec (SOC) Limited, former member of the Free State Law Society Gender Committee, former Secretary (two terms) of the National Association of Democratic Lawyers, Free State, member of the Provincial Disciplinary Committee of the ANC PEC, Free State, member of Peace and Stability Committee of the ANC PEC, Free State, member of the Legal and Constitutional Affairs Committee of the ANC, Motheo Region. Adv Bomela’s current field of specialty is Corporate Governance, Labour Law, Administrative Law and the Law of Contracts. He is also an accredited Arbitrator, Mediator, Negotiator and Facilitator with the Arbitration Foundation of Southern Africa.


Chairperson of the Human Resource Committee

Specialises in Civil Engineering and water management. Senior Lecturer in Geohydrology: University of the Free State, Affiliated Researcher: Institution of Ground Water Studies, Member of WISA, Vice-Chairperson: Modder-Riet Catchment Management, Honorary Life Membership: Geological Society of South Africa. He conducted research at the University of Arizona, USA, specializing in Water Management And Engineering. He was Head of the Department of Civil Engineering at the Technikon of the Free State (now Central University of Technology), joined the Department of Water Affairs and Forestry in 1988 as Deputy Director, Water Quality and Geohydrology in the Free State Regional Office. He retired in 2008 as Deputy Director: Strategic Support from the Department of Water Affairs. He is an Affiliated Researcher at the

Institute of Ground Water Studies at the University of the Free State and is also a member of the Water Institute of Southern Africa as well as a member of the Ground Water Division of the Geological Society of South Africa. As one of the representatives of Bloem Water, he was elected as Vice-Chairperson of the Modder-Riet Catchment Management Forum (an Institutional Committee of the Department of Water Affairs).

Mr. Z Mkiva

Adv LR Bomela

Dr. J Van Der Merwe



7. Chief Executive’s Overview The year 2016/17 marks the 25th anniversary of existence of Bloem Water Board. The Organisation has been rendering bulk water services to most of the Municipalities in the southern region of the Free State, which currently make up a population of 1.2 million. This

has been a milestone towards achieving an important

objective of improved quality water supply. This report will therefore demonstrate progressive achievements by the Entity during the year under review, including the solutions to the challenges confronting the sector. The report is in accordance with the National Treasury format for State Entities. In the midst of on- going drought, water has regained its status of being a fundamental element of sustainable development in economic growth and social empowerment. Bloem Water has to date overcome a variety of water management challenges and therefore continued to reliably supply quality water to its clients. Efforts to manage water resources and render stable supply are critical; however, reliable supply can no longer be guaranteed in instances where there is continued non-payment. The year under review has seen minimal interruptions during scheduled winter maintenance. Water losses in treatment and distribution systems were below the recorded losses in the previous year which is in accordance with the national benchmark. The five (5) year CAPEX plan could not be fully implemented due to financial strain because of continued non-payment by major clients. Some important projects have however been completed. Included is the 15 km Rustfontein to Lesaka pipeline , which is in completion stage and aimed at augmenting water supply to Botshabelo, Thaba ‘Nchu rural and urban areas including Excelsior Town.

The historic pipe bursts of the main pipeline from Welbedacht to Bloemfontein have been resolved by the financial assistance from the Department of Water and Sanitation, thereby addressing the challenges of aged infrastructure. The project has commenced and is expected to be completed in 2019.

This year has seen the Entity rearranging itself by undertaking an Organisational Study with the objective to improve efficiencies. Performance targets were also reviewed for improved alignment with targets as set out in the Shareholders Compact. The entity has its own pension fund, which is a Defined Benefit Plan. It is valuated in terms of IAS 19 and is currently in a fully funded position.

A general financial review of Bloem Water reflects income instability in the current drought environment from a revenue and expenditure perspective. The impact of the restrictions and the related charges is negatively affecting the water value chain from source to tap. Bloem Water had to mitigate risks in relation to changes in operational and CAPEX requirements.

The non-payment by Municipalities resulted in various processes embarked on by Bloem Water. Intergovernmental processes were followed as well as the implementation of non-payment remedies as regulated by the Municipal Finance Management Act and the Water Services Act. Bloem Water however continues to engage its Municipal partners to ensure that water service delivery continues. Failure of the current Intergovernmental Relations interventions will result in serious negative impacts on the finances of the Organization.

Despite the above-mentioned challenges, Bloem Water is forever thriving to improve its performance. For the past five years in succession, the Organisation achieved unqualified audit reports. During the year under review, the organisation excelled to a clean audit.

Dr. L Moorosi Chief Executive



The operational expenditure budget was for the financial year and no rollovers were approved. Capital projects are usually multiyear in nature and critical ones are prioritised and funded accordingly. Bloem Water has a Supply Chain Management Policy in place and this is supported by Bid Committees including the Quotations Committee.

With regard to audits, reports reflected findings that were not material and Management always implements measures to rectify the deficiencies.

The Shareholders Compact is approved by the Minister and sets out the future requirements on all fronts. It is further monitored by the Department as monthly, quarterly and annual reporting is required. Further oversight monitoring is conducted by the Portfolio Committee on Water and Sanitation and Bloem Water is required to appear before the said Committee to report on its performance and progress.

In conclusion, my gratitude goes to the Board for unfailing leadership and direction during execution of the exciting task of “providing quality water for all” and to the Executive Management and all employees of the Organization. It took everyone to do their part for the objectives of Bloem Water to be achieved. I am also grateful to all stakeholders including the Department of Water and Sanitation and the Free State Government for continued support in complying with the mandate in accordance with the Water Services Act.

DR L MOOROSI CHIEF EXECUTIVE



The operational expenditure budget was for the financial year and no rollovers were approved. Capital projects are usually multiyear in nature and critical ones are prioritised and funded accordingly. Bloem Water has a Supply Chain Management Policy in place and this is supported by Bid Committees including the Quotations Committee.

With regard to audits, reports reflected findings that were not material and Management always implements measures to rectify the deficiencies.

The Shareholders Compact is approved by the Minister and sets out the future requirements on all fronts. It is further monitored by the Department as monthly, quarterly and annual reporting is required. Further oversight monitoring is conducted by the Portfolio Committee on Water and Sanitation and Bloem Water is required to appear before the said Committee to report on its performance and progress.

In conclusion, my gratitude goes to the Board for unfailing leadership and direction during execution of the exciting task of “providing quality water for all” and to the Executive Management and all employees of the Organization. It took everyone to do their part for the objectives of Bloem Water to be achieved. I am also grateful to all stakeholders including the Department of Water and Sanitation and the Free State Government for continued support in complying with the mandate in accordance with the Water Services Act.

DR L MOOROSI CHIEF EXECUTIVE


8. Statement of Responsibility and Confirmation of accuracy for the Annual Report

To the best of our knowledge and belief, we confirm the following: All information and amounts disclosed in this annual report are consistent with the Annual Financial Statements audited by the Auditor General of South Africa as our External Auditors. This Annual Report, covering the activities and results of Bloem Water for the period 1 July 2016 to 30 June 2017 is complete, accurate and free of any omissions. The Annual Report has been prepared in accordance with the guidelines on annual reports as issued by National Treasury and the requirements of the Public Finance Management Act (No 1 of 1999) (PFMA), as well as in accordance with the recommendations of the King lV Report on Corporate Governance. The Annual Financial Statements (Part E) have been prepared in accordance with the South African Statements of Generally Accepted Accounting Practice (SA GAAP) as at 1 April 2012 (including all amendments to May 2011) and the Public Finance Management Act of South Africa, Act No. 1 of 1999 (PFMA)_ applicable to the public entity. The Financial Statements are based on appropriate accounting policies consistently applied and supported by reasonable, prudent judgements and estimates. The Accounting Authority is responsible for the preparation of the Annual Financial Statements and for the judgements made in this information. The Accounting Authority is responsible for establishing, and implementing a system of internal controls that has been designed to provide reasonable assurance as to the integrity and reliability of the performance information, the human resources information and the Annual Financial Statements. The External Auditors are engaged to express an independent opinion on the Annual Financial Statements. In our opinion, this Annual Report fairly reflects the operations, the performance information, the human resources information and the financial affairs of the entity for the financial year ended 31 June 2017. This Annual Report was approved by the Board and signed on their behalf by the following authorized representatives of the Board.

Yours faithfully

__________________ Dr. L Moorosi Mr. TB Phitsane Chief Executive Officer Chairperson of the Board



9. Executive Management

Dr. L Moorosi Chief Executive

Mr. M Rapudungoane Executive: Operations & Maintenance

Mr. TS Ngubeni Executive: Projects and Engineering

Mr. OJ Stadler Chief Financial Officer

Ms. NA Motlhaolwa Acting Executive: Corporate Support

Ms. SL Meyer Executive: Human Resources

Ms. NP Maduba-Silevu Company Secretary



10. Strategic Overview Vision Assuring sustainable provision of water services, for life.

Mission To create a leading, value-driven, effective and responsive Institution using adaptive best practice methods in anticipating tomorrow’s challenges today.

Values Bloem Water commits itself to the following values that guide and direct all interactions with internal and external stakeholders:

Corporate Social Responsibility Governance Equality Responsiveness

Strategic Goals and Objectives • Develop, operate and maintain infrastructure to ensure sustainable water service delivery. • Manage financial affairs to meet current and future obligations. • Securing the supply and quality of raw water resources. • Achieving an aligned and efficient institution through optimization of all business processes and systems. • Engaging in strategic partnerships with all relevant stakeholders.

Bloem Water Strategies For the 2016/17 financial year, Bloem Water continued adopting the following strategies

1. Expand and grow the business in line with the Regional Water Utility approach implemented in the sector via DWS Institutional Reform and Realignment Project by expanding to areas not previously serviced within the Region.

2. Develop a sound long-term financing strategy, mindful of the growth strategy, which will incorporate aggressive pursuit and channelling of grant and other national funding for water infrastructure.

3. Develop and implement a strategic asset management strategy and infrastructure plan to improve decisions on asset investment, maintenance, disposal and replacement.

4. Implement a marketing plan that is fully integrated with a communication plan to create brand awareness, coordinate communication efforts and create competitive advantage.

5. Optimise skills and expertise to create an institution capable of attracting and retaining skilled people, with training and development programs based on skills gaps.

6. Stakeholder engagement is central to the organisation’s effectiveness. Improve stakeholder management and partnerships with all stakeholders within the value chain through benchmarking; knowledge sharing and skills transfer with its stakeholders.


Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

15

11.

Org

anis

atio

nal S

truc

ture

The

Boar

d

Chi

ef E

xecu

tive

Exec

utiv

e:

Ope

ratio

ns &

M

aint

enan

ce

Mai

nten

ance

Cal

edon

Riv

er

Reg

ion

Mod

der R

iver

R

egio

n

Pipe

line

Rea

ctio

n Te

am

Ora

nge

Riv

er

Reg

ion

Exec

utiv

e:

Engi

neer

ing

& Pr

ojec

ts

Engi

neer

ing

Proj

ects

Chi

ef F

inan

cial

O

ffice

r

Supp

l Cha

in

Man

agem

ent

Fina

ncia

l Ac

coun

ting

Flee

t & A

sset

M

anag

emen

t

Exec

utiv

e:

Cor

pora

te

Supp

ort

Com

mun

icat

ions

&

Mar

ketin

g

Info

rmat

ion

and

Com

mun

icat

ions

Te

chno

logy

Secu

rity

Man

agem

ent

Safe

ty, H

ealth

, En

viro

nmen

t &

Qua

lity

Adm

in a

nd

Faci

litie

s

Exec

utiv

e:

Hum

an

Res

ourc

e

Labo

ur

Rel

atio

ns

Hum

an

Res

ourc

e

Trai

ning

&

Dev

elop

men

t

Inte

rnal

Aud

itC

hief

Ris

k O

ffice

r

Offi

ce M

anag

er

Com

pany

Se

cret

ary

Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

14

10.

Stra

tegi

c O

verv

iew

Vi

sion

As

surin

g su

stai

nabl

e pr

ovis

ion

of w

ater

ser

vice

s, fo

r life

.

Mis

sion

To

cre

ate

a le

adin

g, v

alue

-driv

en, e

ffect

ive

and

resp

onsi

ve In

stitu

tion

usin

g ad

aptiv

e be

st p

ract

ice

met

hods

in

antic

ipat

ing

tom

orro

w’s

cha

lleng

es to

day.

Valu

es

Bloe

m W

ater

com

mits

itse

lf to

the

fol

low

ing

valu

es t

hat

guid

e an

d di

rect

all

inte

ract

ions

with

inte

rnal

and

ex

tern

al s

take

hold

ers:

C

orpo

rate

Soc

ial R

espo

nsib

ility

G

over

nanc

e

Equa

lity

R

espo

nsiv

enes

s

Stra

tegi

c G

oals

and

Obj

ectiv

es

• D

evel

op, o

pera

te a

nd m

aint

ain

infra

stru

ctur

e to

ens

ure

sust

aina

ble

wat

er s

ervi

ce d

eliv

ery.

•

Man

age

finan

cial

affa

irs to

mee

t cur

rent

and

futu

re o

blig

atio

ns.

• Se

curin

g th

e su

pply

and

qua

lity

of ra

w w

ater

reso

urce

s.

• Ac

hiev

ing

an a

ligne

d an

d ef

ficie

nt in

stitu

tion

thro

ugh

optim

izat

ion

of a

ll bu

sine

ss p

roce

sses

and

sys

tem

s.

• En

gagi

ng in

stra

tegi

c pa

rtner

ship

s w

ith a

ll re

leva

nt s

take

hold

ers.

Bl

oem

Wat

er S

trate

gies

Fo

r the

201

6/17

fina

ncia

l yea

r, Bl

oem

Wat

er c

ontin

ued

adop

ting

the

follo

win

g st

rate

gies

1. E

xpan

d an

d gr

ow th

e bu

sine

ss in

line

with

the

Reg

iona

l Wat

er U

tility

app

roac

h im

plem

ente

d in

the

sect

or

via

DW

S In

stitu

tiona

l Ref

orm

and

Rea

lignm

ent

Proj

ect

by e

xpan

ding

to

area

s no

t pr

evio

usly

ser

vice

d w

ithin

the

Reg

ion.

2. D

evel

op a

sou

nd l

ong-

term

fin

anci

ng s

trate

gy,

min

dful

of

the

grow

th s

trate

gy,

whi

ch w

ill in

corp

orat

e ag

gres

sive

pur

suit

and

chan

nellin

g of

gra

nt a

nd o

ther

nat

iona

l fun

ding

for w

ater

infra

stru

ctur

e.

3. D

evel

op a

nd i

mpl

emen

t a

stra

tegi

c as

set

man

agem

ent

stra

tegy

and

inf

rast

ruct

ure

plan

to

impr

ove

deci

sion

s on

ass

et in

vest

men

t, m

aint

enan

ce, d

ispo

sal a

nd re

plac

emen

t.

4. I

mpl

emen

t a m

arke

ting

plan

that

is fu

lly in

tegr

ated

with

a c

omm

unic

atio

n pl

an to

cre

ate

bran

d aw

aren

ess,

co

ordi

nate

com

mun

icat

ion

effo

rts a

nd c

reat

e co

mpe

titiv

e ad

vant

age.

5. O

ptim

ise

skills

and

exp

ertis

e to

cre

ate

an in

stitu

tion

capa

ble

of a

ttrac

ting

and

reta

inin

g sk

illed

peop

le, w

ith

train

ing

and

deve

lopm

ent p

rogr

ams

base

d on

ski

lls g

aps.

6. S

take

hold

er e

ngag

emen

t is

cent

ral t

o th

e or

gani

satio

n’s

effe

ctiv

enes

s. Im

prov

e st

akeh

olde

r man

agem

ent

and

partn

ersh

ips

with

all

stak

ehol

ders

with

in th

e va

lue

chai

n th

roug

h be

nchm

arki

ng; k

now

ledg

e sh

arin

g an

d sk

ills tr

ansf

er w

ith it

s st

akeh

olde

rs.



PART B: PERFORMANCE INFORMATION

PART B:

PERFORMANCE INFORMATION



1. Auditor-General’s report on Predetermined Objectives The Auditor General of South Africa currently performs the necessary audit procedures on the performance information to provide reasonable assurance in the form of an audit conclusion. The audit conclusion on the performance against predetermined objectives is included in the report to Management, with material findings being reported under the Predetermined Objectives heading in the Report on other legal and regulatory requirements section of the Auditor-General’s report on page 73.

2. Situational Analysis 2.1. Service Delivery Environment Bloem Water continued to meet its service delivery mandate of bulk quality water and registered no unplanned water interruptions exceeding 24 hours. Water losses in treatment and distribution systems were below the recorded losses in the previous year which in accordance with the national benchmark. During planned maintenance and emergencies, supply of water is ensured through water carting. Projects that were aimed to enhance and augment water delivery to communities were completed. The entity continues to play a critical role supporting local Municipalities with technical expertise and much needed intervention. Bloem Water was an Implementing Agent for various projects resulting in a growth in turnover in secondary activities. The organisation is complying with cost containment measures and has ensured continued payments to its creditors despite the challenge of non-payment by Municipalities. The drought: The on-going drought had a negative impact on the Dam levels where the majority of dams within our area of supply had a storage capacity below 50%. A water restriction of 30% has been imposed by the Department of Water and Sanitation since 2014 to curb the water usage to align supply and demand in the Mangaung Metro and the surrounding local Municipalities. The main affected area has been the Groothoek Dam, which reached a low level of 15% since the previous year and hence still rendering the Groothoek Water Treatment Works non-operational. This imposed a huge water demand on the nearby Rustfontein Dam, as more water had to be treated and pumped from Botshabelo to Thaba Nchu, which is entirely supported by Groothoek Dam. The most affected areas were the villages in the Northern and Southern parts of Thaba Nchu. The ground water exploration project was commissioned and commenced to drill new boreholes to augment the surface water in the Mangaung Metropolitan Municipality areas.



Ageing infrastructure The infrastructure of Bloem Water has reached its design life span. The challenge of the ageing infrastructure, particularly the main Welbedacht – Bloemfontein pre-stressed concrete pipeline (PCP) which has been in operation for the past 45 years poses a huge risk in terms of the structural integrity as the pipe is continually failing. The last section (33.7km) of the 102km pipeline has continued to have major failures in the past 5 years and even during the year under review, devastating effects on the water supply to the Mangaung Metropolitan Municipality were experienced. In mitigating against the failure there has been a launch of a Phase 1 project, through the assistance of the Department of Water and Sanitation, for the construction of a new 33.7km pipeline. The Project enables duplication of the system and ensures water supply interruption is minimised, with the plan to ensure the aged pipeline will in future be rehabilitated to increase its life span.

The Capital Infrastructure Programme compiled for the five-year period (2016-2021) is geared to address the water demand and water supply infrastructure challenges by implementing the new infrastructure capex and refurbishment projects to ensure the risk of infrastructure failure is reduced and addressed accordingly. The programme is aligned to the Greater Bloemfontein Reconciliation Strategy that seeks to address the short, medium and long term planning scenarios and intervention for water supply. Other measures to address ageing infrastructure include amongst others, the Annual Winter Maintenance Programme; preventative, scheduled, and reactive maintenance; and asset condition monitoring.

Non-Payment:

The entity has been experiencing a challenge of non-payment by respective Municipalities for services that have been rendered, thus putting a huge financial strain on the finances of Bloem Water. The Organisation has had to continue rendering the services under the most challenging circumstances as the implementation of key projects had to be deferred due to unsecured funding. The various intergovernmental relation measures that were followed to pursue the challenge of non-payment have not been successful. The non-payment is exacerbated by socio-economic factors such as unemployment and the lack of a tax base in some poor communities, which could not afford to pay the Municipalities for services rendered.



2.2. Organisational Environment The drought experienced in the service area had a serious impact on the availability of water resources, the distribution of the capacity and the water demand at the different distribution areas. The Department of Water and Sanitation issued water restriction notices and the Mangaung Metropolitan Municipality implemented water restrictions from December 2016.

Bloem Water followed the due tariff approval process for the 2016/17 financial year and the Minister of Water and Sanitation approved the tariffs for normal and drought components from 1 July 2016. The payment for water accounts deteriorated during the year as all municipalities failed to pay accounts by the due dates on a regular basis. This had a serious impact on the funding of the operations and capital projects. Bloem Water and its Board followed due processes in accordance with the Municipal Finance Management Act and the Water Services Act. There has been involvement of relevant Stakeholders and the Board met with the Councils of some of the Municipalities to resolve this matter.

Agreements were reached although municipalities did not comply with the conditions set in the agreements. Management keeps on engaging the Municipalities to pay and to stabilise the operational and financial environment.

The drought tariff is a small portion of the outstanding accounts, reflecting that the Municipalities have fallen in arrears on the normal billing and current accounts. Bloem Water had to revise its budgets to accommodate the impact of the non-payment on the financial position by reducing operational expenditure, and postponing and reprioritising projects. This also threatens the stability of Bloem Water and the water supply in the area.

Bloem Water was unable to meet some of the predetermined objectives planned for the 2016/17 financial year according to the Shareholder’s Compact and during the year implemented measures to mitigate those areas not met. Most of the objectives not met are directly linked to financial challenges experienced during the year. Intergovernmental relations initiatives are some of the measures applied to mitigate non-payment. Internal arrangements to address areas of underperformance included reprioritizing of projects, budget adjustments, appointing only key technical staff and deferring appointment of other positions.

2.3. Key Policy Developments The new Companies Act, 2008 (Act No. 71 of 2008) required a re-evaluation of the continued existence of statements of SA GAAP. This resulted in a decision during March 2012 to withdraw statements of SA GAAP for financial years commencing on or after 1 December 2012. The withdrawal of statements of SA GAAP has an impact on schedule 3B public entities (e.g. Bloem Water) that are required to apply the SA GAAP reporting framework. In the interim, the Accounting Standards Board (ASB) has approved that public entities that previously applied statements of SA GAAP should continue to apply statements of SA GAAP as at 1 April 2012, including amendments up to May 2011. Consequently, Bloem Water will continue to apply SA GAAP as at 1 April 2012 to the financial statements for the year ended 30 June 2017. During July 2015, a directive was issued by the ASB. The Board’s deliberations on this matter gave way to three consultations which resulted in the development of two Exposure Drafts on The Application of Standards of GRAP by Government Business Enterprises (Schedule 3B and 3D) (ED 124), and The Selection of an Appropriate Reporting Framework by Public Entities (ED 130), issued for comment in May 2014 and February



2015 respectively. The Directive is effective for financial years commencing on or after 1 April 2018 so as to provide entities sufficient time to prepare for any change in reporting framework, with earlier application permitted. Therefore the initial application is 1 April 2018, or earlier. The Directive is applied subsequently where entities believe that a significant change has occurred that leads them to conclude that they meet, or no longer meet, the criteria in the Directive. The Directive requires the conversion either to GRAP or IFRS based on specified criteria. In the event of a transition to IFRS, there are new or revised Accounting Standards and Interpretations in issue. These include the following Standards and Interpretations that are applicable to the business of the entity and will have an impact on future financial statements. These standards will be applicable to Bloem Water from 1 July 2018 as this will be the first financial year for Bloem Water commencing on or after 1 April 2018. Bloem Water monitors the progress and possible changes in accounting policies and disclosures. It is implemented by the required due dates.

2.4. Strategic Outcome Oriented Goals This Annual Report is directly aligned with the Performance Objectives (POs) contracted between the Board of Bloem Water and the Minister of Water and Sanitation as agreed in the Shareholders Compact for the 2016/17 financial year. The alignment of each of the POs with each of the five Strategic Objectives of Bloem Water was monitored and performance reported to the Department of Water and Sanitation on a quarterly basis. The key strategic objectives as set out below are linked with priorities of Government:

BLOEM WATER OBJECTIVES

MINISTERIAL OUTCOMES DEPARTMENT OF WATER AFFAIRS GOALS

Strategic Objective 1 Plan, develop, operate and maintain infrastructure to ensure sustainable water service delivery.

MO B Contribute to an efficient, competitive and response economic infrastructure network

MO A Environmental assets and natural resources that are well protected and continually enhanced

MO D Responsive, accountable, effective and efficient local government system

SO 1.1 Building skills pool and competencies

SO 2.1 Increased sustainability in water provision

SO 2.2 Enhanced provision of basic sanitation

SO 2.3 Equitable water allocation

SO 2.4 Improved water use efficiency

SO 3.1 Strategies for water and sanitation management

Strategic Objective 2 Manage financial affairs to meet current and future obligations



MO D Responsive, accountable, effective and efficient local government system

SO 1.2 Effective and efficient internal control environment



SO 3.2 Enhanced regulatory compliance

SO 3.4 Management of water and sanitation information



BLOEM WATER OBJECTIVES

MINISTERIAL OUTCOMES DEPARTMENT OF WATER AFFAIRS GOALS

Strategic Objective 3 Securing of supply and quality of raw water resources



MO F Create a better South Africa and contribute to a better and safer Africa and world

MO G Vibrant, equitable and sustainable rural communities







SO 3.3 Increased water ecosystem health

Strategic Objective 4 Achieving an aligned, effective and efficient institution through optimisation of all business processes and systems

MO E Decent employment through inclusive economic growth

MO F Create a better South Africa and contribute to a better and safer Africa and world

MO G Vibrant, equitable and sustainable rural communities

MO C Sustainable human settlements and improved quality of household life


SO 1.2 Effective and efficient internal control environment

SO 1.3 Implement Programs that create job opportunities






Strategic Objective 5 Engaging and strengthening strategic partnerships with all relevant stakeholders

MO E Decent employment through inclusive economic growth MO F Create a better South Africa and contribute to a better and safer Africa and world MO G Vibrant, equitable and sustainable rural communities



SO 3.1 Strategies for water and sanitation management


SO 3.3 Increased water ecosystem health

SO 3.4 Management of water and sanitation information


Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

22

Tab

le 1

: C

ontr

ibu

tio

ns

to t

he

Gov

ern

men

t O

utc

omes

No.

S

trat

egic

ou

tco

me

goa

ls

DW

S S

trat

egic

Ob

ject

ive

(fro

m 2

01

7/

18

to

20

19

/2

0 A

PP

Pla

n)

Ali

gn

ed

Blo

em

Wat

er

stra

teg

ic

obje

ctiv

e M

inis

teria

l O

utco

me

A

Envi

ronm

enta

l As

sets

an

d na

tura

l re

sour

ces

that

are

wel

l pr

otec

ted

and

cont

inua

lly e

nhan

ced

Goa

l 1

Enha

nced

and

pro

tect

ed w

ater

as

a re

sour

ce a

cros

s th

e va

lue

chai

n SO

1

Plan

, de

velo

p,

oper

ate

and

mai

ntai

n in

fras

truc

ture

to

en

sure

su

stai

nabl

e w

ater

se

rvic

e de

liver

y O

utpu

t 1

Enha

nced

qua

lity

and

quan

tity

of w

ater

re

sour

ces

SO 1

.1

W

ater

re

sour

ces

prot

ecte

d th

roug

h w

ater

su

pply

an

d sa

nita

tion

serv

ices

reg

ulat

ion,

com

plia

nce

mon

itorin

g an

d en

forc

emen

t SO

1.2

Enha

nced

man

agem

ent o

f wat

er a

nd s

anita

tion

info

rmat

ion

SO 1

.3

The

inte

grity

of f

resh

wat

er e

cosy

stem

s pr

otec

ted

SO 1

.4

Enha

nced

wat

er u

se e

ffici

ency

and

man

agem

ent

of w

ater

qu

antit

y

SO 1

.5

Fres

hwat

er e

cosy

stem

s pr

otec

ted

from

min

e w

ater

impa

cts

Min

iste

rial

Out

com

e B

C

ontr

ibut

ion

to a

n ef

ficie

nt, c

ompe

titiv

e an

d re

spon

sive

ec

onom

ic

infr

astr

uctu

re n

etw

ork

Goa

l 2

Equi

tabl

e ac

cess

to

re

liabl

e,

sust

aina

ble

and

acce

ptab

le w

ater

res

ourc

es a

nd w

ater

and

san

itatio

n se

rvic

es

SO 2

Man

age

finan

cial

affa

irs t

o m

eet

curre

nt a

nd fu

ture

obl

igat

ions

Out

put 2

En

surin

g th

e m

aint

enan

ce

and

supp

ly

avai

labi

lity

of o

ur b

ulk

wat

er in

frast

ruct

ure

SO 2

.1

A

coor

dina

ted

appr

oach

to

w

ater

an

d sa

nita

tion

infra

stru

ctur

e pl

anni

ng a

nd m

onito

ring

and

eval

uatio

n

SO 2

.2

Ta

rget

ed

and

alig

ned

plan

ning

fo

r ad

equa

te

wat

er

avai

labi

lity

and

the

enha

nced

pro

visi

on o

f wat

er s

uppl

y an

d sa

nita

tion

serv

ices

SO 2

.3

Ad

equa

te

wat

er

avai

labi

lity

and

enha

nced

pr

ovis

ion

of

sust

aina

ble

and

relia

ble

wat

er

supp

ly

and

sani

tatio

n se

rvic

es

SO 2

.4

Safe

, rel

iabl

e an

d su

stai

nabl

e w

ater

sup

ply

and

wat

er a

nd

sani

tatio

n se

rvic

es in

frast

ruct

ure

SO 2

.5

Enha

nced

pr

ovis

ion

of

sust

aina

ble

and

dign

ified

ba

sic

sani

tatio

n

Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

22

Tab

le 1

: C

ontr

ibu

tio

ns

to t

he

Gov

ern

men

t O

utc

omes

No.

S

trat

egic

ou

tco

me

goa

ls

DW

S S

trat

egic

Ob

ject

ive

(fro

m 2

01

7/

18

to

20

19

/2

0 A

PP

Pla

n)

Ali

gn

ed

Blo

em

Wat

er

stra

teg

ic

obje

ctiv

e M

inis

teria

l O

utco

me

A

Envi

ronm

enta

l As

sets

an

d na

tura

l re

sour

ces

that

are

wel

l pr

otec

ted

and

cont

inua

lly e

nhan

ced

Goa

l 1

Enha

nced

and

pro

tect

ed w

ater

as

a re

sour

ce a

cros

s th

e va

lue

chai

n SO

1

Plan

, de

velo

p,

oper

ate

and

mai

ntai

n in

fras

truc

ture

to

en

sure

su

stai

nabl

e w

ater

se

rvic

e de

liver

y O

utpu

t 1

Enha

nced

qua

lity

and

quan

tity

of w

ater

re

sour

ces

SO 1

.1

W

ater

re

sour

ces

prot

ecte

d th

roug

h w

ater

su

pply

an

d sa

nita

tion

serv

ices

reg

ulat

ion,

com

plia

nce

mon

itorin

g an

d en

forc

emen

t SO

1.2

Enha

nced

man

agem

ent o

f wat

er a

nd s

anita

tion

info

rmat

ion

SO 1

.3

The

inte

grity

of f

resh

wat

er e

cosy

stem

s pr

otec

ted

SO 1

.4

Enha

nced

wat

er u

se e

ffici

ency

and

man

agem

ent

of w

ater

qu

antit

y

SO 1

.5

Fres

hwat

er e

cosy

stem

s pr

otec

ted

from

min

e w

ater

impa

cts

Min

iste

rial

Out

com

e B

C

ontr

ibut

ion

to a

n ef

ficie

nt, c

ompe

titiv

e an

d re

spon

sive

ec

onom

ic

infr

astr

uctu

re n

etw

ork

Goa

l 2

Equi

tabl

e ac

cess

to

re

liabl

e,

sust

aina

ble

and

acce

ptab

le w

ater

res

ourc

es a

nd w

ater

and

san

itatio

n se

rvic

es

SO 2

Man

age

finan

cial

affa

irs t

o m

eet

curre

nt a

nd fu

ture

obl

igat

ions

Out

put 2

En

surin

g th

e m

aint

enan

ce

and

supp

ly

avai

labi

lity

of o

ur b

ulk

wat

er in

frast

ruct

ure

SO 2

.1

A

coor

dina

ted

appr

oach

to

w

ater

an

d sa

nita

tion

infra

stru

ctur

e pl

anni

ng a

nd m

onito

ring

and

eval

uatio

n

SO 2

.2

Ta

rget

ed

and

alig

ned

plan

ning

fo

r ad

equa

te

wat

er

avai

labi

lity

and

the

enha

nced

pro

visi

on o

f wat

er s

uppl

y an

d sa

nita

tion

serv

ices

SO 2

.3

Ad

equa

te

wat

er

avai

labi

lity

and

enha

nced

pr

ovis

ion

of

sust

aina

ble

and

relia

ble

wat

er

supp

ly

and

sani

tatio

n se

rvic

es

SO 2

.4

Safe

, rel

iabl

e an

d su

stai

nabl

e w

ater

sup

ply

and

wat

er a

nd

sani

tatio

n se

rvic

es in

frast

ruct

ure

SO 2

.5

Enha

nced

pr

ovis

ion

of

sust

aina

ble

and

dign

ified

ba

sic

sani

tatio

n


Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

22

Tab

le 1

: C

ontr

ibu

tio

ns

to t

he

Gov

ern

men

t O

utc

omes

No.

S

trat

egic

ou

tco

me

goa

ls

DW

S S

trat

egic

Ob

ject

ive

(fro

m 2

01

7/

18

to

20

19

/2

0 A

PP

Pla

n)

Ali

gn

ed

Blo

em

Wat

er

stra

teg

ic

obje

ctiv

e M

inis

teria

l O

utco

me

A

Envi

ronm

enta

l As

sets

an

d na

tura

l re

sour

ces

that

are

wel

l pr

otec

ted

and

cont

inua

lly e

nhan

ced

Goa

l 1

Enha

nced

and

pro

tect

ed w

ater

as

a re

sour

ce a

cros

s th

e va

lue

chai

n SO

1

Plan

, de

velo

p,

oper

ate

and

mai

ntai

n in

fras

truc

ture

to

en

sure

su

stai

nabl

e w

ater

se

rvic

e de

liver

y O

utpu

t 1

Enha

nced

qua

lity

and

quan

tity

of w

ater

re

sour

ces

SO 1

.1

W

ater

re

sour

ces

prot

ecte

d th

roug

h w

ater

su

pply

an

d sa

nita

tion

serv

ices

reg

ulat

ion,

com

plia

nce

mon

itorin

g an

d en

forc

emen

t SO

1.2

Enha

nced

man

agem

ent o

f wat

er a

nd s

anita

tion

info

rmat

ion

SO 1

.3

The

inte

grity

of f

resh

wat

er e

cosy

stem

s pr

otec

ted

SO 1

.4

Enha

nced

wat

er u

se e

ffici

ency

and

man

agem

ent

of w

ater

qu

antit

y

SO 1

.5

Fres

hwat

er e

cosy

stem

s pr

otec

ted

from

min

e w

ater

impa

cts

Min

iste

rial

Out

com

e B

C

ontr

ibut

ion

to a

n ef

ficie

nt, c

ompe

titiv

e an

d re

spon

sive

ec

onom

ic

infr

astr

uctu

re n

etw

ork

Goa

l 2

Equi

tabl

e ac

cess

to

re

liabl

e,

sust

aina

ble

and

acce

ptab

le w

ater

res

ourc

es a

nd w

ater

and

san

itatio

n se

rvic

es

SO 2

Man

age

finan

cial

affa

irs t

o m

eet

curre

nt a

nd fu

ture

obl

igat

ions

Out

put 2

En

surin

g th

e m

aint

enan

ce

and

supp

ly

avai

labi

lity

of o

ur b

ulk

wat

er in

frast

ruct

ure

SO 2

.1

A

coor

dina

ted

appr

oach

to

w

ater

an

d sa

nita

tion

infra

stru

ctur

e pl

anni

ng a

nd m

onito

ring

and

eval

uatio

n

SO 2

.2

Ta

rget

ed

and

alig

ned

plan

ning

fo

r ad

equa

te

wat

er

avai

labi

lity

and

the

enha

nced

pro

visi

on o

f wat

er s

uppl

y an

d sa

nita

tion

serv

ices

SO 2

.3

Ad

equa

te

wat

er

avai

labi

lity

and

enha

nced

pr

ovis

ion

of

sust

aina

ble

and

relia

ble

wat

er

supp

ly

and

sani

tatio

n se

rvic

es

SO 2

.4

Safe

, rel

iabl

e an

d su

stai

nabl

e w

ater

sup

ply

and

wat

er a

nd

sani

tatio

n se

rvic

es in

frast

ruct

ure

SO 2

.5

Enha

nced

pr

ovis

ion

of

sust

aina

ble

and

dign

ified

ba

sic

sani

tatio

n

Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

23

No.

S

trat

egic

ou

tco

me

goa

ls

DW

S S

trat

egic

Ob

ject

ive

(fro

m 2

01

7/

18

to

20

19

/2

0 A

PP

Pla

n)

Org

anis

atio

nal

ali

gn

men

t to

th

e st

rate

gic

ob

ject

ive

Min

iste

rial

Ou

tco

me

C

Su

stai

nab

le

hu

man

se

ttle

men

ts

and

im

pro

ved

q

ual

ity

of

ho

use

ho

ld li

fe

Go

al 3

A

n

enh

ance

d

con

trib

uti

on

to

so

cio

-eco

no

mic

d

evel

op

men

t an

d t

ran

sfor

mat

ion

by

the

sect

or

SO

3

S

ecu

rin

g

of

sup

ply

an

d

qu

alit

y of

ra

w

wat

er

reso

urc

es

SO

3.1

Equi

tabl

e w

ater

allo

catio

n an

d av

aila

bilit

y fo

r so

cio-

econ

omic

dev

elop

men

t

SO

3.2

Targ

eted

rur

al d

evel

opm

ent

initi

ativ

es t

hat

supp

ort

smal

lhol

der

farm

ers

SO

3.3

Targ

eted

pr

ocur

emen

t th

at

supp

orts

bl

ack

entr

epre

neur

s in

the

sec

tor

SO

3.4

Jo

b op

port

uniti

es

crea

ted

that

ex

pand

ec

onom

ic

oppo

rtun

ities

fo

r hi

stor

ical

ly

excl

uded

an

d vu

lner

able

gro

ups

Min

iste

rial

Ou

tco

me

D

Res

pon

sive

, ac

cou

nta

ble

, ef

fect

ive

and

ef

fici

ent

Loca

l G

ove

rnm

ent

Sys

tem

Go

al 4

A

n

effi

cien

t,

effe

ctiv

e an

d

dev

elo

pm

ent

ori

enta

ted

wat

er a

nd

san

itat

ion

sec

tor

SO

4

A

chie

vin

g

an

alig

ned

, ef

fect

ive

and

ef

fici

ent

Inst

itu

tion

th

rou

gh

op

tim

isat

ion

of

al

l b

usi

nes

s p

roce

sses

an

d

syst

ems

SO

4.1

An

enab

ling

envi

ronm

ent

for

the

man

agem

ent

of

wat

er r

esou

rces

and

the

pro

visi

on o

f ba

sic

wat

er

and

sani

tatio

n se

rvic

es

SO

4.2

Sou

nd g

over

nanc

e an

d ov

ersi

ght

of t

he D

WS P

ublic

En

titie

s SO

4.3

An

effic

ient

, ef

fect

ive

and

high

pe

rfor

min

g or

gani

satio

n

SO

4.4

Coo

rdin

ated

dev

elop

men

t of

the

ski

lls p

ool

acro

ss

the

sect

or

Min

iste

rial

Ou

tco

me

E D

ecen

t em

plo

ymen

t th

rou

gh

in

clu

sive

eco

no

mic

gro

wth

G

oal

5

So

un

d c

oop

erat

ive

go

vern

ance

an

d a

n a

ctiv

e an

d e

ng

aged

cit

izen

ry

SO

5

Eng

agin

g

and

st

ren

gth

enin

g

stra

teg

ic

par

tner

ship

s w

ith

al

l re

leva

nt

stak

ehol

der

s SO

5.1

Ta

rget

ed

and

sust

aine

d Afr

ican

an

d gl

obal

co

oper

atio

n in

sup

port

of

the

natio

nal

wat

er a

nd

sani

tatio

n ag

enda

SO

5.2

In

form

ed

and

empo

wer

ed

com

mun

ities

an

d re

spon

sive

go

vern

men

t se

curing

in

tegr

ated

an

d su

stai

nabl

e pa

rtne

rshi

ps

to

supp

ort

the

W&

S de

velo

pmen

t ag

enda

M

inis

teria

l O

utc

om

e F

Cre

ate

a b

ette

r S

ou

th A

fric

a an

d

con

trib

ute

to

a b

ette

r an

d s

afer

A

fric

a an

d w

orl

d

Op

erat

ion

s Fi

nan

ce

M

inis

teria

l O

utc

om

e G

V

ibra

nt,

eq

uit

able

an

d

sust

ain

able

ru

ral

com

mu

nit

ies

wit

h f

ood

sec

uri

ty f

or

all

Cu

sto

mer

Peo

ple


Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

24

3. P

erfo

rman

ce a

gain

st P

re-d

eter

min

ed O

bjec

tives

Pe

rform

ance

Obj

ectiv

e Al

ignm

ent

Out

com

e/ Im

pact

In

dica

tors

/ Ca

lcul

atio

n M

easu

re

Annu

al P

erfo

rman

ce T

arge

ts

Com

men

ts

(not

es)

Min

iste

rial

Out

com

es

DWS

Stra

tegi

c G

oals

WB

Stra

tegi

c O

bjec

tives

Targ

et

Actu

al

Targ

et m

et

(√)

not m

et(x

)

Org

anis

atio

nal E

ffici

ency

and

Effe

ctiv

enes

s

1 Bu

lk p

otab

le w

ater

qu

ality

com

plia

nce

MO

A

OP

1 T

(a) &

(c)

MO

B

OP

2 T

(a)

SO2.

5 SO

3.4

SO3

Wat

er q

ualit

y st

anda

rds

met

Te

st re

sults

, SAN

S 24

1 C

lass

1:

Cla

ss 2

:

% c

ompl

ianc

e 96

%

99%

Ove

rall

aver

age

√ Ac

hiev

ed

2 M

anag

e av

oida

ble

wat

er lo

sses

M

O A

O

P 1

T (a

) M

O B

O

P 2

T (a

)

SO2.

2 SO

2.5

SO2.

6 SO

2.7

SO1

Red

uced

avo

idab

le

wat

er lo

sses

in

treat

men

t and

di

strib

utio

n sy

stem

s

Avoi

dabl

e w

ater

lost

as

a p

erce

ntag

e of

w

ater

pro

duce

d

%

13%

O

vera

ll N

RW

11

.9%

O

vera

ll lo

sses

: 8.4

4%

√ Ac

hiev

ed

3 R

elia

bilit

y of

su

pply

M

O A

>G

OP

1 T

(a),

(b) &

(c

) O

P 2

T (a

)

SO1.

1 SO

1.2

SO1.

3

SO1

No

unpl

anne

d in

terru

ptio

ns to

bul

k su

pply

exc

eedi

ng

24 h

ours

Num

ber o

f day

s su

pply

inte

rrupt

ed a

s a

% o

f pos

sibl

e su

pply

day

s

%

2%

0%

√ Ac

hiev

ed

4 In

crea

sed

acce

ss

to S

ervi

ces

MO

C, B

&

D OP

1 T

(a),

(b) &

(c

) O

P 2

T (a

)

SO1.

2 SO

1.3

SO2.

6 SO

3.2

SO1

Con

tribu

tion

to

natio

nal o

bjec

tives

of

ext

endi

ng

serv

ices

Actu

al C

APEX

spe

nd

on e

xpan

sion

rela

ted

proj

ects

(ini

tiativ

es b

y th

e M

inis

ter)

as %

of

budg

et

%

75%

80

%

√ Ac

hiev

ed

Fina

ncia

l Per

form

ance

5 Fi

nanc

ial r

epor

ting

com

plia

nce

MO

A>G

SO

6.5

SO6.

6 SO

2 U

nqua

lifie

d au

dit

repo

rt An

nual

ext

erna

l aud

it U

nqua

lifie

d re

port

with

no

mat

ters

of

emph

asis

(Cle

an

Audi

t)

Unq

ualif

ied

repo

rt w

ith n

o m

atte

rs o

f em

phas

is

Unq

ualif

ied

√

Ach

ieve

d

6 Im

prov

e ke

y fin

anci

al ra

tios

MO

A, B

&

D SO

6.2

SO2

Impr

oved

via

bilit

y an

d su

stai

nabi

lity

Cur

rent

Rat

io

Rat

io

1.1

2.37

√

Ach

ieve

d

Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

22

Tab

le 1

: C

ontr

ibu

tio

ns

to t

he

Gov

ern

men

t O

utc

omes

No.

S

trat

egic

ou

tco

me

goa

ls

DW

S S

trat

egic

Ob

ject

ive

(fro

m 2

01

7/

18

to

20

19

/2

0 A

PP

Pla

n)

Ali

gn

ed

Blo

em

Wat

er

stra

teg

ic

obje

ctiv

e M

inis

teria

l O

utco

me

A

Envi

ronm

enta

l As

sets

an

d na

tura

l re

sour

ces

that

are

wel

l pr

otec

ted

and

cont

inua

lly e

nhan

ced

Goa

l 1

Enha

nced

and

pro

tect

ed w

ater

as

a re

sour

ce a

cros

s th

e va

lue

chai

n SO

1

Plan

, de

velo

p,

oper

ate

and

mai

ntai

n in

fras

truc

ture

to

en

sure

su

stai

nabl

e w

ater

se

rvic

e de

liver

y O

utpu

t 1

Enha

nced

qua

lity

and

quan

tity

of w

ater

re

sour

ces

SO 1

.1

W

ater

re

sour

ces

prot

ecte

d th

roug

h w

ater

su

pply

an

d sa

nita

tion

serv

ices

reg

ulat

ion,

com

plia

nce

mon

itorin

g an

d en

forc

emen

t SO

1.2

Enha

nced

man

agem

ent o

f wat

er a

nd s

anita

tion

info

rmat

ion

SO 1

.3

The

inte

grity

of f

resh

wat

er e

cosy

stem

s pr

otec

ted

SO 1

.4

Enha

nced

wat

er u

se e

ffici

ency

and

man

agem

ent

of w

ater

qu

antit

y

SO 1

.5

Fres

hwat

er e

cosy

stem

s pr

otec

ted

from

min

e w

ater

impa

cts

Min

iste

rial

Out

com

e B

C

ontr

ibut

ion

to a

n ef

ficie

nt, c

ompe

titiv

e an

d re

spon

sive

ec

onom

ic

infr

astr

uctu

re n

etw

ork

Goa

l 2

Equi

tabl

e ac

cess

to

re

liabl

e,

sust

aina

ble

and

acce

ptab

le w

ater

res

ourc

es a

nd w

ater

and

san

itatio

n se

rvic

es

SO 2

Man

age

finan

cial

affa

irs t

o m

eet

curre

nt a

nd fu

ture

obl

igat

ions

Out

put 2

En

surin

g th

e m

aint

enan

ce

and

supp

ly

avai

labi

lity

of o

ur b

ulk

wat

er in

frast

ruct

ure

SO 2

.1

A

coor

dina

ted

appr

oach

to

w

ater

an

d sa

nita

tion

infra

stru

ctur

e pl

anni

ng a

nd m

onito

ring

and

eval

uatio

n

SO 2

.2

Ta

rget

ed

and

alig

ned

plan

ning

fo

r ad

equa

te

wat

er

avai

labi

lity

and

the

enha

nced

pro

visi

on o

f wat

er s

uppl

y an

d sa

nita

tion

serv

ices

SO 2

.3

Ad

equa

te

wat

er

avai

labi

lity

and

enha

nced

pr

ovis

ion

of

sust

aina

ble

and

relia

ble

wat

er

supp

ly

and

sani

tatio

n se

rvic

es

SO 2

.4

Safe

, rel

iabl

e an

d su

stai

nabl

e w

ater

sup

ply

and

wat

er a

nd

sani

tatio

n se

rvic

es in

frast

ruct

ure

SO 2

.5

Enha

nced

pr

ovis

ion

of

sust

aina

ble

and

dign

ified

ba

sic

sani

tatio

n


Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

25

Perfo

rman

ce O

bjec

tive

Alig

nmen

t O

utco

me/

Impa

ct

Indi

cato

rs/

Calc

ulat

ion

Mea

sure

An

nual

Per

form

ance

Tar

gets

C

omm

ents

(n

otes

) M

inis

teria

l O

utco

mes

DW

S St

rate

gic

Goa

ls

WB

Stra

tegi

c O

bjec

tives

Targ

et

Actu

al

Targ

et m

et

(√)

not m

et(x

)

OP

1 T

(a),

(b) &

(c

) O

P 2

T (a

)

SO6.

6 G

ross

pro

fit

mar

gin

% (p

rimar

y ac

tivity

)

%

93.6

1%

96.8

2%

√ A

chie

ved

Gro

ss p

rofit

mar

gin

(sec

onda

ry a

ctiv

ity)

%

0%

35.8

6%

√ A

chie

ved

Net

pro

fit m

argi

n (p

rimar

y ac

tivity

) %

0.

05%

5.

59%

√

Ach

ieve

d

Net

pro

fit m

argi

n

(sec

onda

ry a

ctiv

ity)

%

0%

35.8

6%

√ A

chie

ved

Deb

t equ

ity

Rat

io

0.38

0.

28

√ A

chie

ved

R

etur

n on

Ass

ets

%

2.

65%

-0

.41%

X

1

MO

A, B

&

D OP

1 T

(a),

(b) &

(c

) O

P 2

T (a

)

SO6.

2 SO

6.6

SO2

D

ebto

rs d

ays

N

umbe

r 60

.46

111.

35

X

Rep

airs

and

m

aint

enan

ce a

s %

of

PPE

and

Inve

stm

ent

Prop

erty

(Car

ryin

g Va

lue)

%

1.78

%

1.48

%

X

Staf

f rem

uner

atio

n as

% o

f tot

al

oper

atin

g ex

pend

iture

%

29.9

8%

24.8

5%

√ Ac

hiev

ed

7 In

crea

se B

BBEE

ex

pend

iture

in

rela

tion

to

oper

atio

nal

proj

ects

MO

E

MO

G

SO2.

1 SO

2 Sp

end

incr

ease

d an

d in

crea

sed

new

en

trant

s aw

arde

d co

ntra

cts

in th

e fin

anci

al y

ear

Spen

d %

incr

ease

55

% (R

49.6

45

mil)

79

.9%

(R

72.1

49 m

il)

√

Achi

eved

New

ser

vice

pr

ovid

ers

awar

ded

wor

k

Num

ber

60

35

X 2

8 M

anag

e co

sts

with

in th

e ap

prov

ed b

udge

t

SO

2.1

SO2.

2 SO

2.3

SO2

Actu

al e

xpen

ditu

re

com

pare

d w

ith

budg

eted

ex

pend

iture

for t

he

quar

ter

Fina

ncia

l rep

orts

%

incr

ease

-1

0%

-10%

√

Achi

eved

Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

22

Tab

le 1

: C

ontr

ibu

tio

ns

to t

he

Gov

ern

men

t O

utc

omes

No.

S

trat

egic

ou

tco

me

goa

ls

DW

S S

trat

egic

Ob

ject

ive

(fro

m 2

01

7/

18

to

20

19

/2

0 A

PP

Pla

n)

Ali

gn

ed

Blo

em

Wat

er

stra

teg

ic

obje

ctiv

e M

inis

teria

l O

utco

me

A

Envi

ronm

enta

l As

sets

an

d na

tura

l re

sour

ces

that

are

wel

l pr

otec

ted

and

cont

inua

lly e

nhan

ced

Goa

l 1

Enha

nced

and

pro

tect

ed w

ater

as

a re

sour

ce a

cros

s th

e va

lue

chai

n SO

1

Plan

, de

velo

p,

oper

ate

and

mai

ntai

n in

fras

truc

ture

to

en

sure

su

stai

nabl

e w

ater

se

rvic

e de

liver

y O

utpu

t 1

Enha

nced

qua

lity

and

quan

tity

of w

ater

re

sour

ces

SO 1

.1

W

ater

re

sour

ces

prot

ecte

d th

roug

h w

ater

su

pply

an

d sa

nita

tion

serv

ices

reg

ulat

ion,

com

plia

nce

mon

itorin

g an

d en

forc

emen

t SO

1.2

Enha

nced

man

agem

ent o

f wat

er a

nd s

anita

tion

info

rmat

ion

SO 1

.3

The

inte

grity

of f

resh

wat

er e

cosy

stem

s pr

otec

ted

SO 1

.4

Enha

nced

wat

er u

se e

ffici

ency

and

man

agem

ent

of w

ater

qu

antit

y

SO 1

.5

Fres

hwat

er e

cosy

stem

s pr

otec

ted

from

min

e w

ater

impa

cts

Min

iste

rial

Out

com

e B

C

ontr

ibut

ion

to a

n ef

ficie

nt, c

ompe

titiv

e an

d re

spon

sive

ec

onom

ic

infr

astr

uctu

re n

etw

ork

Goa

l 2

Equi

tabl

e ac

cess

to

re

liabl

e,

sust

aina

ble

and

acce

ptab

le w

ater

res

ourc

es a

nd w

ater

and

san

itatio

n se

rvic

es

SO 2

Man

age

finan

cial

affa

irs t

o m

eet

curre

nt a

nd fu

ture

obl

igat

ions

Out

put 2

En

surin

g th

e m

aint

enan

ce

and

supp

ly

avai

labi

lity

of o

ur b

ulk

wat

er in

frast

ruct

ure

SO 2

.1

A

coor

dina

ted

appr

oach

to

w

ater

an

d sa

nita

tion

infra

stru

ctur

e pl

anni

ng a

nd m

onito

ring

and

eval

uatio

n

SO 2

.2

Ta

rget

ed

and

alig

ned

plan

ning

fo

r ad

equa

te

wat

er

avai

labi

lity

and

the

enha

nced

pro

visi

on o

f wat

er s

uppl

y an

d sa

nita

tion

serv

ices

SO 2

.3

Ad

equa

te

wat

er

avai

labi

lity

and

enha

nced

pr

ovis

ion

of

sust

aina

ble

and

relia

ble

wat

er

supp

ly

and

sani

tatio

n se

rvic

es

SO 2

.4

Safe

, rel

iabl

e an

d su

stai

nabl

e w

ater

sup

ply

and

wat

er a

nd

sani

tatio

n se

rvic

es in

frast

ruct

ure

SO 2

.5

Enha

nced

pr

ovis

ion

of

sust

aina

ble

and

dign

ified

ba

sic

sani

tatio

n


Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

26

Perfo

rman

ce O

bjec

tive

Alig

nmen

t O

utco

me/

Impa

ct

Indi

cato

rs/

Calc

ulat

ion

Mea

sure

An

nual

Per

form

ance

Tar

gets

C

omm

ents

(n

otes

) M

inis

teria

l O

utco

mes

DW

S St

rate

gic

Goa

ls

WB

Stra

tegi

c O

bjec

tives

Targ

et

Actu

al

Targ

et m

et

(√)

not m

et(x

)

9 C

apita

l Ex

pend

iture

Pr

ogra

m

MO

B &

D

OP

1 T

(a),

(b) &

(c

) O

P 2

T (a

)

SO1.

1 SO

1.2

SO1.

3 SO

2.2

SO4.

1

SO2

Infra

stru

ctur

e av

aila

ble

to m

eet

dem

ands

Ove

rall

proj

ect

expe

nditu

re w

ithin

R

targ

et

% v

aria

nce

20%

19

%

X 3

Ove

rall

proj

ect

com

plet

ion

date

s w

ithin

targ

ets

% v

aria

nce

20%

17

%

X

10

Enga

gem

ent i

n se

cond

ary

activ

ities

MO

A, D

, E

& G

SO

1.1

SO1.

2 SO

4.1

SO2

Gro

wth

in tu

rnov

er

from

sec

onda

ry

(oth

er a

ctiv

ities

)

% o

f tot

al tu

rnov

er

%

0.16

%

0.57

%

√ A

chie

ved

Cus

tom

er/ S

take

hold

er In

tera

ctio

n

11

Bulk

sup

ply

agre

emen

ts

conc

lude

d w

ith

mun

icip

aliti

es/

othe

r cus

tom

ers

MO

A, B

&

D OP

1 T

(a),

(b) &

(c

) O

P 2

T (a

)

SO1.

1 SO

1.2

SO1.

3 SO

3.1

SO4.

1

SO3

Stat

utor

y an

d Se

rvic

e Le

vel

Agre

emen

ts in

pl

ace

Mun

icip

aliti

es/ O

ther

C

usto

mer

s w

ith b

ulk

supp

ly a

gree

men

ts

%

100%

66

.67%

X

4

12

Impl

emen

tatio

n of

M

inis

teria

l di

rect

ives

N

ew M

inis

teria

l di

rect

ives

issu

ed

are

impl

emen

ted

on

time

Prog

ress

aga

inst

im

plem

enta

tion

plan

%

10

0%

15%

√

Achi

eved

13

Supp

ort R

ural

D

evel

opm

ent

To

tal N

umbe

r of

iden

tifie

d ru

ral

Mun

icip

aliti

es

supp

orte

d

Sign

ed c

ontra

cts,

M

OU

s et

c.

Num

ber

3 3

√ 3 M

unic

ipal

ities

su

ppor

ted

14

Achi

eve

stat

utor

y re

porti

ng

com

plia

nce

MO

A, B

&

D OP

1 T

(a),

(b) &

(c

) O

P 2

T (a

)

SO3.

1 SO

4 Al

l sta

tuto

ry re

ports

su

bmitt

ed o

n tim

e Su

bmis

sion

dat

es

met

%

10

0%

100%

√

Achi

eved

Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

22

Tab

le 1

: C

ontr

ibu

tio

ns

to t

he

Gov

ern

men

t O

utc

omes

No.

S

trat

egic

ou

tco

me

goa

ls

DW

S S

trat

egic

Ob

ject

ive

(fro

m 2

01

7/

18

to

20

19

/2

0 A

PP

Pla

n)

Ali

gn

ed

Blo

em

Wat

er

stra

teg

ic

obje

ctiv

e M

inis

teria

l O

utco

me

A

Envi

ronm

enta

l As

sets

an

d na

tura

l re

sour

ces

that

are

wel

l pr

otec

ted

and

cont

inua

lly e

nhan

ced

Goa

l 1

Enha

nced

and

pro

tect

ed w

ater

as

a re

sour

ce a

cros

s th

e va

lue

chai

n SO

1

Plan

, de

velo

p,

oper

ate

and

mai

ntai

n in

fras

truc

ture

to

en

sure

su

stai

nabl

e w

ater

se

rvic

e de

liver

y O

utpu

t 1

Enha

nced

qua

lity

and

quan

tity

of w

ater

re

sour

ces

SO 1

.1

W

ater

re

sour

ces

prot

ecte

d th

roug

h w

ater

su

pply

an

d sa

nita

tion

serv

ices

reg

ulat

ion,

com

plia

nce

mon

itorin

g an

d en

forc

emen

t SO

1.2

Enha

nced

man

agem

ent o

f wat

er a

nd s

anita

tion

info

rmat

ion

SO 1

.3

The

inte

grity

of f

resh

wat

er e

cosy

stem

s pr

otec

ted

SO 1

.4

Enha

nced

wat

er u

se e

ffici

ency

and

man

agem

ent

of w

ater

qu

antit

y

SO 1

.5

Fres

hwat

er e

cosy

stem

s pr

otec

ted

from

min

e w

ater

impa

cts

Min

iste

rial

Out

com

e B

C

ontr

ibut

ion

to a

n ef

ficie

nt, c

ompe

titiv

e an

d re

spon

sive

ec

onom

ic

infr

astr

uctu

re n

etw

ork

Goa

l 2

Equi

tabl

e ac

cess

to

re

liabl

e,

sust

aina

ble

and

acce

ptab

le w

ater

res

ourc

es a

nd w

ater

and

san

itatio

n se

rvic

es

SO 2

Man

age

finan

cial

affa

irs t

o m

eet

curre

nt a

nd fu

ture

obl

igat

ions

Out

put 2

En

surin

g th

e m

aint

enan

ce

and

supp

ly

avai

labi

lity

of o

ur b

ulk

wat

er in

frast

ruct

ure

SO 2

.1

A

coor

dina

ted

appr

oach

to

w

ater

an

d sa

nita

tion

infra

stru

ctur

e pl

anni

ng a

nd m

onito

ring

and

eval

uatio

n

SO 2

.2

Ta

rget

ed

and

alig

ned

plan

ning

fo

r ad

equa

te

wat

er

avai

labi

lity

and

the

enha

nced

pro

visi

on o

f wat

er s

uppl

y an

d sa

nita

tion

serv

ices

SO 2

.3

Ad

equa

te

wat

er

avai

labi

lity

and

enha

nced

pr

ovis

ion

of

sust

aina

ble

and

relia

ble

wat

er

supp

ly

and

sani

tatio

n se

rvic

es

SO 2

.4

Safe

, rel

iabl

e an

d su

stai

nabl

e w

ater

sup

ply

and

wat

er a

nd

sani

tatio

n se

rvic

es in

frast

ruct

ure

SO 2

.5

Enha

nced

pr

ovis

ion

of

sust

aina

ble

and

dign

ified

ba

sic

sani

tatio

n


Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

27

Perfo

rman

ce O

bjec

tive

Alig

nmen

t O

utco

me/

Impa

ct

Indi

cato

rs/

Calc

ulat

ion

Mea

sure

An

nual

Per

form

ance

Tar

gets

C

omm

ents

(n

otes

) M

inis

teria

l O

utco

mes

DW

S St

rate

gic

Goa

ls

WB

Stra

tegi

c O

bjec

tives

Targ

et

Actu

al

Targ

et m

et

(√)

not m

et(x

)

Org

anis

atio

nal C

apac

ity

15

Staf

f lev

els

MO

E

SO6.

1 SO

6.2

SO4

Opt

imal

sta

ff re

tent

ion

Staf

f tur

nove

r %

8

6.25

%

√ Ac

hiev

ed

16

Trai

ning

and

Ski

lls

Dev

elop

men

t M

O E

SO

6.1

SO6.

2 SO

6.3

SO4

Skills

and

cap

acity

bu

ildin

g Le

arne

rshi

ps

Num

ber

20

44

√ Ac

hiev

ed

Burs

arie

s em

ploy

ees

Num

ber

20

51

√ Ac

hiev

ed

Gra

duat

e Pr

ogra

mm

es

Num

ber

40

55

√ Ac

hiev

ed

17

Jobs

Cre

ated

M

O E

SO

6.1

SO6.

2 SO

6.4

SO4

Perm

anen

t and

co

ntra

ct (d

irect

) To

tal n

umbe

r N

umbe

r 35

9

X 5

Tem

pora

ry (i

ndire

ct)

Tota

l num

ber

Num

ber

450

354

X 6

Gen

eral

Per

form

ance

18

Bo

ard

Effe

ctiv

enes

s M

O A

>D

SO6.

5 SO

4 Im

prov

ed

perfo

rman

ce o

f fid

ucia

ry d

utie

s/

gove

rnan

ce

Boar

d M

embe

r at

tend

ance

of a

ll Bo

ard/

com

mitt

ee

mee

tings

%

85%

71

.5%

X

7

Dec

isio

n m

akin

g: %

nu

mbe

r res

olut

ions

ta

ken

by th

e bo

ard

vs. n

umbe

r of

reso

lutio

ns re

quire

d

%

100%

10

0%

√ Ac

hiev

ed

19

Effe

ctiv

e In

tern

al

Con

trols

and

Ris

k M

anag

emen

t

MO

D

SO6.

5 SO

6.6

SO4

Inte

rnal

aud

it fin

ding

s de

alt w

ith

Inte

rnal

aud

it re

ports

N

umbe

r of

repe

at fi

ndin

gs

10

0 √

Achi

eved

Num

ber o

f un

reso

lved

fin

ding

s

10

11

X

8

20

Goo

d G

over

nanc

e M

O A

>G

SO6.

5 SO

6.6

SO4

Impr

oved

con

trols

an

d ris

k m

itiga

tion

Brea

ches

of

mat

eria

lity

and

sign

ifica

nce

fram

ewor

k

Num

ber

0 0

√ Ac

hiev

ed

21

Cor

pora

te S

ocia

l R

espo

nsib

ility

Initi

ativ

es

MO

E

SO6.

1 SO

6.2

SO6.

4

SO5

Goo

d co

rpor

ate

citiz

ensh

ip

Num

ber o

f ini

tiativ

es

unde

rtake

n N

umbe

r 3

4 √

9

Bloe

m W

ater

Ann

ual R

epor

t 201

6/17

Page

22

Tab

le 1

: C

ontr

ibu

tio

ns

to t

he

Gov

ern

men

t O

utc

omes

No.

S

trat

egic

ou

tco

me

goa

ls

DW

S S

trat

egic

Ob

ject

ive

(fro

m 2

01

7/

18

to

20

19

/2

0 A

PP

Pla

n)

Ali

gn

ed

Blo

em

Wat

er

stra

teg

ic

obje

ctiv

e M

inis

teria

l O

utco

me

A

Envi

ronm

enta

l As

sets

an

d na

tura

l re

sour

ces

that

are

wel

l pr

otec

ted

and

cont

inua

lly e

nhan

ced

Goa

l 1

Enha

nced

and

pro

tect

ed w

ater

as

a re

sour

ce a

cros

s th

e va

lue

chai

n SO

1

Plan

, de

velo

p,

oper

ate

and

mai

ntai

n in

fras

truc

ture

to

en

sure

su

stai

nabl

e w

ater

se

rvic

e de

liver

y O

utpu

t 1

Enha

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A brief description of the reasons for the non-achievement of the target performance objectives is reflected below:

1. Most of the financial ratios were achieved; however ratios that are related to non-payment and climatic conditions could not be met. The non-achievement can mainly be attributed to non-payment by debtors and the impairment of trade receivables. The drought experienced across the country and particularly the Free State Province, negatively impacted on water sales volume demand and revenue collection as the Department of Water and Sanitation directed 30% restrictions for implementation by Municipalities. This was aggravated by non-payment by municipal clients during the financial year. The institution proactively revised the operations and maintenance and infrastructure budgets to maintain adequate liquidity levels. Projects were accordingly reprioritized and/or deferred.

2. Procurement was reduced in response to the current operational, drought and non-payment challenges to manage cash flow during the financial year. The reduction in the number of implementing agent projects allocated to Bloem Water resulted in a reduced number of new entrants sourced than planned for. The cost containment measures and the Treasury requirement that suppliers have to be registered on the central database further impacted on this target as new entrants should be registered before being utilised.

3. Water Boards in the Country including Bloem Water, are not funded by National Treasury or Central Government. Therefore, to enable operations it has to collect all its revenue from the services rendered. Both the project expenditure and the project completion targets were not met. Projects were reprioritized and some were deferred as a precautionary measure to manage cash flow given the current operational, drought and non-payment challenges. The lack of Capex funding has delayed the implementation of major expansion projects, with the exception of the one directive that was issued for the construction of the 33.7km pipeline. The re-prioritizing or deferring of projects accordingly affected achieving this target.

4. Service Level Agreements for Kopanong and Mantsopa Local Municipalities are in place. The extension of Mangaung Metropolitan Municipality to incorporate some other local municipalities (sections of the Naledi and Tswelopele Municipalities) in the service area delayed the revision of the service level agreement with Mangaung Metro.

5. Permanent positions were limited to critical technical vacancies only in line with the Ministerial directive on the approval of vacancies. The Board further deferred recruitment pending the outcome of the work-study process with the objective to improve efficiency and staff utilization. The organisational study was concluded and the organisational structure is currently being aligned with recommendations. Cost containment efforts resulted in recruitment delays.

6. The major Capex Projects were deferred due to lack of funding contributed to the reduction in the creation of indirect jobs. Permanent positions were limited to critical vacancies only in line with the Ministerial Directive on the approval of vacancies.

7. The Board continues to facilitate good oversight. Though the attendance is marginally lower than the target, often due to unforeseen circumstances, the Board is committed to improve attendance going forward.

8. The target on unresolved internal audit findings was not achieved. Despite a concerted effort to pursue the pending matters, it was not possible to resolve all during the period under review. Policies are drafted or reviewed and will be approved after due process was followed. Some of the findings, such as servitude registrations, spans over an extended period and will not be achieved in one



financial year. Management continues to attend to these and internal controls were tightened accordingly.

9. There was an overachievement on the target of CSR initiatives undertaken. During the year under review a number of schools were beneficiaries of the four programmes viz: toilet deep cleaning, plumbing services to water related infrastructure, the renovation of classrooms and the installation of health and hygiene equipment.

4. Operations and Projects Performance 4.2. Water Quality In order to make sure that our Customers and Water Services Authorities (WSA) are supplied with potable water, our regional treatment plants supply water whose quality is measured against SANS 241:2015. This standard specifies the quality of acceptable drinking water defined in terms of microbiological, physical, aesthetic and chemical determinants at the point of delivery. For the period under review, Bloem Water fully met the SANS 241:2015 requirements.

To ensure compliance to drinking water standards, Water Quality Monitoring Programmes were developed and implemented. Water is tested internally at plant level and externally at the Water Laboratory of the University of the Free State. Water is sampled at the source (before purification) as well as at the distribution points (after purification). Internally, at plant level the Monitoring Programme involves testing on a 2-hourly and 8-hourly basis. Externally bio-monitoring takes place quarterly and chemical and microbial monitoring takes place weekly, bi-monthly and monthly.

The Drinking Water Quality results for the 2016/17 financial year at the various schemes are uploaded on the DWS Blue Drop System and compliance per system is summarised above. Generally, Bloem Water produces and distributes excellent quality water beyond the target of 96%. Incidents of non-compliance are immediately identified through operational testing and monitoring, timeously resolved to ensure compliance to SANS 241:2015.

Water Treatment Works Treated Volume (m3)

Percent Compliance with SANS 241:2015

Microbiology Operational Chemical

Rustfontein 18 025 304 99.9 % 96.9 % 99.9 %

Groothoek Not Operational Not Operational Not Operational Not Operational

Welbedacht 49 863 159 99.2 % 95.7 % 99.9 %

Bethulie 987 501 99.9 % 97.8 % 99.9 %

Gariep 385 892 99.9 % 97.8 % 99.9 %

Philippolis 451 435 99.9 % 97.8 % 99.9 %

Jagersfontein 569 956 99.9 % 96.1% 99.9 %

Table 2: Water Quality Compliance SANS 241:2015



financial year. Management continues to attend to these and internal controls were tightened accordingly.

9. There was an overachievement on the target of CSR initiatives undertaken. During the year under review a number of schools were beneficiaries of the four programmes viz: toilet deep cleaning, plumbing services to water related infrastructure, the renovation of classrooms and the installation of health and hygiene equipment.

4. Operations and Projects Performance 4.2. Water Quality In order to make sure that our Customers and Water Services Authorities (WSA) are supplied with potable water, our regional treatment plants supply water whose quality is measured against SANS 241:2015. This standard specifies the quality of acceptable drinking water defined in terms of microbiological, physical, aesthetic and chemical determinants at the point of delivery. For the period under review, Bloem Water fully met the SANS 241:2015 requirements.

To ensure compliance to drinking water standards, Water Quality Monitoring Programmes were developed and implemented. Water is tested internally at plant level and externally at the Water Laboratory of the University of the Free State. Water is sampled at the source (before purification) as well as at the distribution points (after purification). Internally, at plant level the Monitoring Programme involves testing on a 2-hourly and 8-hourly basis. Externally bio-monitoring takes place quarterly and chemical and microbial monitoring takes place weekly, bi-monthly and monthly.

The Drinking Water Quality results for the 2016/17 financial year at the various schemes are uploaded on the DWS Blue Drop System and compliance per system is summarised above. Generally, Bloem Water produces and distributes excellent quality water beyond the target of 96%. Incidents of non-compliance are immediately identified through operational testing and monitoring, timeously resolved to ensure compliance to SANS 241:2015.

Water Treatment Works Treated Volume (m3)

Percent Compliance with SANS 241:2015

Microbiology Operational Chemical

Rustfontein 18 025 304 99.9 % 96.9 % 99.9 %

Groothoek Not Operational Not Operational Not Operational Not Operational

Welbedacht 49 863 159 99.2 % 95.7 % 99.9 %

Bethulie 987 501 99.9 % 97.8 % 99.9 %

Gariep 385 892 99.9 % 97.8 % 99.9 %

Philippolis 451 435 99.9 % 97.8 % 99.9 %

Jagersfontein 569 956 99.9 % 96.1% 99.9 %

Table 2: Water Quality Compliance SANS 241:2015


4.3. Water Losses Water losses are managed in all Bloem Water treatment works in an effort to reduce water losses including non-revenue water. All losses are determined via the water model to monitor and calculate water losses on a monthly basis. From a system input of 85 102 455 million m³ for the 2016/2017 financial year (as illustrated below), water losses amounted to 8.44% of which 2.33% were apparent losses and 6.11% real losses. A decrease of 0.73 % in water losses was seen in comparison to the previous year, which is still below the annual target of 13% agreed with the Shareholder.

Water Losses in m3 for the period: 2016/07/01 to 2017/06/30

System Input Authorised Consumption Billed Revenue Water

85,102,455

77,922,260 (91.56%)

74,921,307 (88.04%) 74,921,307 (88.04%)

Unbilled Non-Revenue Water

3,000,953 (3.85%) 9,966,975 (11.96%) Water Losses Apparent Losses

7,180,195 (8.44%)

1,983,351 (2.33%)

Real Losses

5,196,844 (6.11%)

4.4. Raw Water Quality Raw water quality in Bloem Water differs according to the source. The table below gives a list of systems and status of the quality of water according to the latest testing results. Bloem Water raw water quality supply has the following potential risks/challenges which are continuously monitored and proactively managed:

System Catchment Impoundment Raw Water Quality Description of Water Quality challenges

Welbedacht Caledon River Welbedacht

Dam

Average turbidity: 1000 NTU

May’16 – Sep’16: water appears yellowish-brown in colour and high algae content.Oct’16- Mar’17: too much silt in the water.

Knellpoort

Dam

No sampling On the dam

The water appears greenish, high algal content.

Bethulie Orange River N/A Good The quality is good, during the raining season the NTU rises.

Gariep Orange River Gariep Dam Average Turbidity: 50 NTU

The water appears slightly green

Philippolis Orange River N/A Good The quality is good, during the raining season the NTU rises.

Jagersfontein RietRivier Kalkfontein

dam

Average Turbidity: 22 NTU

The water appears light greenish in colour and at times milky with very low turbidity.

Rustfontein Modder River Rustfontein Dam

Average Turbidity 88 NTU

No water quality challenges.

Groethoek Kgabanyane River

Groothoek Not Operational Not Operational



4.5. Maintenance of Infrastructure Risk management is a key component of effective asset management and can be described as achieving the optimal balance between cost, risk and performance. Ageing water infrastructure, together with increased capital costs, energy costs, insufficient capital funds are major risks currently facing Bloem Water. The water supply system deterioration due to ageing is further exacerbated by expectations for growth that would further stress existing facilities. To deal with these issues Bloem Water has adopted a risk based maintenance management approach and has initiated a programme on asset condition assessment.

4.6. Pipeline Reaction Team/Workshop The Pipeline Reaction Team provides services to Bloem Water and its customers, through the workshop that includes infrastructure support and maintenance services. Since the establishment of the Pipeline Reaction Team, Bloem Water’s response to pipeline failures has improved immensely. The Pipeline Reaction Team does not only respond to pipeline incidents but plays a vital role in annual preventative winter maintenance thereby ensuring security of our strategic assets.

4.7. System Automation One of the strategic and business planning frameworks of Bloem Water is to implement an automation system to ensure early warning. The automation system used in the plants consists of field instruments, programmable logic controllers (PLCs), telemetry systems, and supervisory controller and data acquisition (SCADA) systems.



4.5. Maintenance of Infrastructure Risk management is a key component of effective asset management and can be described as achieving the optimal balance between cost, risk and performance. Ageing water infrastructure, together with increased capital costs, energy costs, insufficient capital funds are major risks currently facing Bloem Water. The water supply system deterioration due to ageing is further exacerbated by expectations for growth that would further stress existing facilities. To deal with these issues Bloem Water has adopted a risk based maintenance management approach and has initiated a programme on asset condition assessment.

4.6. Pipeline Reaction Team/Workshop The Pipeline Reaction Team provides services to Bloem Water and its customers, through the workshop that includes infrastructure support and maintenance services. Since the establishment of the Pipeline Reaction Team, Bloem Water’s response to pipeline failures has improved immensely. The Pipeline Reaction Team does not only respond to pipeline incidents but plays a vital role in annual preventative winter maintenance thereby ensuring security of our strategic assets.

4.7. System Automation One of the strategic and business planning frameworks of Bloem Water is to implement an automation system to ensure early warning. The automation system used in the plants consists of field instruments, programmable logic controllers (PLCs), telemetry systems, and supervisory controller and data acquisition (SCADA) systems.


5. Infrastructure Development The 2016/2017 Infrastructure Programme comprised of a total of twenty nine( 29) projects, split into Capex and Refurbishment Projects, with a total budget of R219 million.

Expenditure for 2015/2016 compared 2016/2017

5.1. Completed Projects

New Rustfontein to Botshabelo Pipeline

The 15km 700mm ductile iron Rustfontein to Lesaka pipeline, running parallel to the existing 600mm steel pipeline, is under construction and this pipeline is needed to augment supply to Lesaka Reservoir with a capacity of 52Ml/d, and thus transfer water to Thaba ‘Nchu Town and the rural and urban areas up to Excelsior Town. The construction is 100% complete and commissioning will take place in the new financial year. This project is aligned to the expansion of Rustfontein Water Treatment Works from 100 Ml/d by an additional 50Ml/day to ensure that more water will be treated and distributed in the Botshabelo and Thaba Nchu areas.

R 219 870 503,17

R 177 973 800,94

R 41 896 702,23

R 269 246 724,10

R 202 143 684,33

R 67 103 039,77

R 0,00

R 50 000 000,00

R 100 000 000,00

R 150 000 000,00

R 200 000 000,00

R 250 000 000,00

R 300 000 000,00Infrastructure Expenditure 2015-2017

2015/2016 2016/2017



Figure 2: Rustfontein to Botshabelo Pipeline

Modder River Houtnek Booster Pump Station

This project comprises of the construction of a 2Ml/d (mega litre per day) booster pump station to increase the flow and pressure of water from the main pipeline located south east of the village of Houtnek, in Thaba Nchu, into the Houtnek Reservoir. The construction of a booster pump station on the off-take from the main pipeline will increase inflow into the reservoir and ensure adequate pressure up to Excelsior Town. The project is currently practically complete. The project has resulted in increased water supply to the northern rural villages of Thaba Nchu.

OK Pump station

The installation of the pumps at OK Pump station has increased the supply of water to Motlatla Reservoir in Thaba Nchu. The overall benefit is increased water supply to the northern rural villages of Thaba Nchu in Mangaung Metropolitan Municipality and Excelsior Town in Mantsopa Local Municipality.



Figure 2: Rustfontein to Botshabelo Pipeline

Modder River Houtnek Booster Pump Station

This project comprises of the construction of a 2Ml/d (mega litre per day) booster pump station to increase the flow and pressure of water from the main pipeline located south east of the village of Houtnek, in Thaba Nchu, into the Houtnek Reservoir. The construction of a booster pump station on the off-take from the main pipeline will increase inflow into the reservoir and ensure adequate pressure up to Excelsior Town. The project is currently practically complete. The project has resulted in increased water supply to the northern rural villages of Thaba Nchu.

OK Pump station

The installation of the pumps at OK Pump station has increased the supply of water to Motlatla Reservoir in Thaba Nchu. The overall benefit is increased water supply to the northern rural villages of Thaba Nchu in Mangaung Metropolitan Municipality and Excelsior Town in Mantsopa Local Municipality.


The Wepener Booster Pump Station

Due to the water supply challenges in the then Naledi Local Municipality, this project has augmented the water supply in Wepener by constructing a booster pump to meet peak water demand in high lying areas and maintain equal distribution of pressure.

Refurbishment of Sluice Gates

The sluice gates at Welbedacht WTW has been leaking through and making it difficult to completely isolate the filters and therefore it was critical for the replacement of these sluice gate with stainless steel manufactured, corrosion free sluice gate for all the 8 sand filter inlets. This resulted in reduction in water losses at the works and increase filter run reducing the need for frequent backwashing.

5.2. Key Infrastructure Projects The following are prioritized projects from the Capex Programme for 2016 – 2021. The Projects are at different implementation stages.

No. Project Name Project Description

Estimate (R Mil)

Future Impact/ No. of people to be served

Status Start & Completion

1. Extend treatment capacity at Rustfontein

Increase WTW capacity from 100 Ml/day to 150 Ml/day

R 10 Mil (Secured) R 260 Mil (Not secured)

Mangaung Metro (Botshabelo , Thaba Nchu) ( 747 431)

Design completed Tender document development complete Need to secure funding for construction

Start: November 2014 (Designs ) Completion: October 2015 (Designs)

2. Pipeline from Lesaka Reservoir to OK/ Motlatla Reservoirs

10 km pipeline from Lesaka to Thaba Nchu

R 10 Mil Thaba Nchu Lesaka R 60 Mil (Not Secured)

Mangaung Metro Thaba Nchu (60 696)

Designs in Progress by PSP

Start: May 2017 Complete: November 2017



No. Project Name Project Description

Estimate (R Mil)

Future Impact/ No. of people to be served

Status Start & Completion

3. Xhariep to Knellpoort pipeline

180 km 600 mm diameter pipeline

R 10 Mil 600 mm diameter pipe R8 Billion for Construction (Not Secured)

Mangaung Metro Bloemfontein, Botshabelo, Thaba Nchu , Dewetsdorp, Wepener ( 747 431) Kopanong LM Bethulie, Springfontein, Gariep, Trompsburg, (49 171)

Pre-feasibility study complete( 2015) The Ministerial Directive received in February 2017 for detailed Feasibility (MOA drafted, Transfer of funds pending)

Start: April 2017

4. Bi directional pipeline between Welbedacht WTW and Knellpoort dam

Construction of 17 km, bi directional pipe line between Knellpoort Dam and Welbedacht WTW

R 5 Mil (Secured) R 255 Mil (Not Secured)

Mangaung Metro Bloemfontein, Botshabelo, Thaba Nchu , Dewetsdorp, Wepener ( 747 431) Kopanong LM Bethulie, Springfontein, Gariep, Trompsburg ( 49 171)

Designs under review Start: 09 September 2013 (Feasibility & Designs) Designs under review

5. Pipeline from Rustfontein WTW to Lesaka Reservoir

Construction of 15 km 700 mm diameter ductile iron

R 90 Mil Mangaung Metro Botshabelo, Thaba Nchu ( 747 431)

Construction 100% completed Pipe testing in progress

Start : 03 November 2014- February 2017 Completion: September 2017

6. Additional boreholes in Thana Nchu

Geophysical investigation underway for 13 villages in Thaba Nchu

R 10 Mil Mangaung Metro North and South of Thaba Nchu villages( 15174)

Geophysical investigation and drilling completed equipping underway

Start: August 2015 Completion : January 2018

7. Parallel Pipeline to PCP (Welbedacht to Bloemfontein pipeline)

33.7 km long, steel 1000 mm diameter pipeline from Brandkop to Leeuwkop Junction

R 60 Mil (Secured) R500 Mil ( to be funded by DWS , RBIG)

Mangaung Metro Bloemfontein ( 747 431)

Contractor Appointed Project funded by DWS , (RBIG )Regional Bulk Infrastructure Grant Construction in progress 09 May 2017,

Start: January 2017 (design & tender) Completion: Construction period 24 months

8. Booster pump station on the Excelsior pipeline

Houtneck booster pump station

R 6 Mil (Secured) Mangaung Metro Thaba Nchu and Mantsopa LM Excelsior & rural Villages ( 6339)

Project 100% completed

Start: contractor site handover 21January 2016 Completion: July 2016

9. Booster pump station on the Wepener pipeline

Increase pumping capacity at Wepener

R 15 Mil Mangaung Metro Wepener ( 9553)

Construction 100% completed

Start: contractor site handover 21January 2016 Completion: March 2017

10. Parallel Pipeline to Dewetsdorp

13 km UPVC 250 mm diameter pipeline from Booster Station to new reservoir at Dewetsdorp

R 20 Mil Mangaung Metro Dewetsdorp ( 9498)

Construction tender to be advertised

Start: August 2013 (Feasibility & Designs)



The Construction of the 33.7km Welbedacht Steel Pipeline The construction commenced in 2017 for the 33.7km, 1000mm diameter steel pipeline parallel to the existing 1.2 meter Welbedacht pre-stressed concrete pipeline (PCP) which has been in operation for the past 45 years. The project is funded by the Department of Water and Sanitation. It will serve to increase the water supply to the Mangaung Metropolitan Municipality and improve security of water supply. The construction is in progress.

5.3. The Department of Water and Sanitation Projects

Bloem Water was appointed for the following projects as implementing agent:

The Trompsburg Water Supply- Municipal Water Infrastructure Grant (MWIG)

This project located in the Xhariep District Municipality involves the construction of a 3Ml/d reservoir and the connecting pipelines. The project will increase the water storage capacity for the community of Trompsburg and assist the newly constructed regional Albert Nzula Hospital with water supply. The Construction of the 3Ml/day Reservoir is up to the Roof stage and with remaining connecting pipelines brings the project to 75% completion.



6. Financial Performance Bloem Water experienced declining financial results during the 2017 financial year in a challenging economic environment that was driven and aggravated by the prevailing drought. This had an impact on water capacity and water levels. Additional financial control measures were implemented to enhance and improve the efficient operating expenditure environment. National Treasury’s cost containment measures were adhered to and this supported the reduction in expenses. The non-payment by the Water Services Authorities had the biggest impact on the finances of the entity and its ability to operate optimally. Various reporting and legislative compliance processes were embarked upon in an effort to resolve non-payment. These processes involved liaison with the National and Provincial Treasury, Department of Water and Sanitation, COGTA and other related parties.

The direct operating cost drivers are water abstraction, energy, chemicals and staff costs. The water abstraction cost declined due to the lower demand as a result of the drought and water restrictions. The Groothoek dam abstraction could not be done due to the low level of water. The raw water charges are substantially higher that the other abstraction points, which contributed to the lower expenditure. The increase in energy cost was primarily due to the electricity tariff increases as well as the increased pumping requirements to alleviate the drought conditions. Chemical costs increased due to price increases but this was offset by the volumes of water demand and the quality of the raw water treated. Staff costs increased mainly due to the annual salary increases and some new appointments.

6.1. Bulk Water Sales Analysis The impact of the drought and the water restrictions resulted in the total volume of treated and raw water sold being below the budgeted volumes. Bloem Water’s major client is Mangaung Metropolitan Municipality (MMM) and the supply to the Municipality has the biggest impact on the budgeted volumes.

Quantity of Treated Water Sold (Kℓ) 2015/2016 2016/2017 Mangaung Metropolitan Municipality 63 292 266 60 430 097 Kopanong Local Municipality 5 246 648 4 648 497 Naledi Local Municipality 1 470 370 n/a Mantsopa Local Municipality 140 244 97 896 Other (Bulk) 1 967 186 1 678 718 TOTAL 72 116 714 66 855 208

Quantity of Untreated Water Sold (Kℓ) 2015/2016 2016/2017

Mangaung Metropolitan Municipality 7 871 519 8 065 174

Other 2 185 925

TOTAL 7 873 704 8 066 099



6. Financial Performance Bloem Water experienced declining financial results during the 2017 financial year in a challenging economic environment that was driven and aggravated by the prevailing drought. This had an impact on water capacity and water levels. Additional financial control measures were implemented to enhance and improve the efficient operating expenditure environment. National Treasury’s cost containment measures were adhered to and this supported the reduction in expenses. The non-payment by the Water Services Authorities had the biggest impact on the finances of the entity and its ability to operate optimally. Various reporting and legislative compliance processes were embarked upon in an effort to resolve non-payment. These processes involved liaison with the National and Provincial Treasury, Department of Water and Sanitation, COGTA and other related parties.

The direct operating cost drivers are water abstraction, energy, chemicals and staff costs. The water abstraction cost declined due to the lower demand as a result of the drought and water restrictions. The Groothoek dam abstraction could not be done due to the low level of water. The raw water charges are substantially higher that the other abstraction points, which contributed to the lower expenditure. The increase in energy cost was primarily due to the electricity tariff increases as well as the increased pumping requirements to alleviate the drought conditions. Chemical costs increased due to price increases but this was offset by the volumes of water demand and the quality of the raw water treated. Staff costs increased mainly due to the annual salary increases and some new appointments.

6.1. Bulk Water Sales Analysis The impact of the drought and the water restrictions resulted in the total volume of treated and raw water sold being below the budgeted volumes. Bloem Water’s major client is Mangaung Metropolitan Municipality (MMM) and the supply to the Municipality has the biggest impact on the budgeted volumes.

Quantity of Treated Water Sold (Kℓ) 2015/2016 2016/2017 Mangaung Metropolitan Municipality 63 292 266 60 430 097 Kopanong Local Municipality 5 246 648 4 648 497 Naledi Local Municipality 1 470 370 n/a Mantsopa Local Municipality 140 244 97 896 Other (Bulk) 1 967 186 1 678 718 TOTAL 72 116 714 66 855 208

Quantity of Untreated Water Sold (Kℓ) 2015/2016 2016/2017

Mangaung Metropolitan Municipality 7 871 519 8 065 174

Other 2 185 925

TOTAL 7 873 704 8 066 099


6.2. Bulk Water Tariff The average tariff increase for the year was 9% for both treated and raw water.

Normal Tariffs (excluding VAT)

Bulk consumers (Bloemfontein, Botshabelo, Bethulie, Dewetsdorp, Edenburg,

Excelsior, Fauresmith, Gariep, Jagersfontein, Phillippolis, Reddersburg,

Springfontein, Thaba Nchu, Trompsburg, Wepener and others)

Bulk Treated Water

Bulk Raw Water

Cents per Kℓ

686

504

Water research levy (Excluding VAT)

Drought Tariffs (excluding VAT)

Bulk consumers (Bloemfontein, Botshabelo, Bethulie, Dewetsdorp, Edenburg,

Excelsior, Fauresmith, Gariep, Jagersfontein, Phillippolis, Reddersburg,

Springfontein, Thaba Nchu, Trompsburg, Wepener and others)

Bulk Treated Water

Bulk Raw Water

Cents per Kℓ

75

53

6.3. Cash Flow Analysis Cash from operating activities is negatively affected by comprehensive loss, mainly due to non-payment by Municipalities and the Department of Water and Sanitation. Credit control processes are implemented to pursue the recovery of funds. Cash flow from financing activities is aligned to the approved capital borrowing plan, although some identified projects were deferred subject to the stabilising of the financial status of the entity. Future borrowings for expansion requirements will be considered when trading conditions normalize. Surplus cash is invested in line with the Board approved investment policy. These limited funds are earmarked for loan obligations and for future Infrastructure project requirements.

6.4. Funding Requirements The Department of Water and Sanitation compiled a Water Reconciliation Strategy Study for the large bulk water supply systems: Greater Bloemfontein Area, which informs the decisions for various parties for future development. Funding requirements are aligned to the study and the prioritised CAPEX needs analysis and approved borrowing limits. National Treasury approved borrowing limits for 5 years. The guidelines and ratios set by National Treasury and the Department of Water and Sanitation are affected and external funding can be sourced during the next few years within borrowing limit constraints. Any requirements beyond that will require grant funding or finance from the Department. The needs will have to be prioritised in line with the availability of financial resources. The decline in revenue and the increase in outstanding debtors are affecting the ability to fund projects. The future funding process will be considered when the situation stabilises, in line with the business plan.



7. Revenue Collection Bloem Water is concerned about the increase in outstanding debt and possible bad debt and has continued with Section 44 MFMA and Section 4(5) WSA processes. The Board and Management are continuing with negotiations in respect of the remaining arrear accounts. The outstanding accounts of major Municipalities deteriorated at year-end in comparison to the beginning of the year. Various sessions and several interactions took place where the National and Provincial offices of Treasury, Auditor- General, COGTA and the Department of Water and Sanitation participated. Several meetings took place between the Board and the Municipal Councils.

The Mangaung Metro Municipality in particular defaulted on payment in recent months. Several engagements followed after the Section 44 MFMA process was instituted. It was resolved that normal billing accounts be paid. Mangaung Metro Municipality disputed the implementation of the drought billing accounts. Bloem Water followed due MFMA process on outstanding payment, of which the drought component is a part. The National Treasury has directed the matter to the DWS Regulatory Department to attend to. The process is continuing and had not been resolved by year end. A payment plan was provided by the Municipality to pay the arrear accounts on the normal tariff. There has been no payment of the normal tariff current account since May 2017.

The Naledi Local Municipality was incorporated into the Mangaung Metropolitan which was subsequently engaged on the payment of the account as it is part of the outstanding accounts of the Metro.

The challenges that existed with Kopanong Local Municipality over the last few years were not resolved, although partial payments were received on recent accounts. A format of payment was agreed upon, for instance where the Municipality receives the equitable share or by a certain date. The Municipality made little effort to comply with these conditions and payment has mostly not been made in accordance with the Agreement. The Board of Bloem Water met with the Council of Kopanong Local Municipality and advised them that the Board will only be able to supply water in accordance with the payments made as received per town. This arrangement is an attempt to reduce irrecoverable costs and has been instituted over recent months .The outstanding amount is still not addressed and discussions are continuing.



7. Revenue Collection Bloem Water is concerned about the increase in outstanding debt and possible bad debt and has continued with Section 44 MFMA and Section 4(5) WSA processes. The Board and Management are continuing with negotiations in respect of the remaining arrear accounts. The outstanding accounts of major Municipalities deteriorated at year-end in comparison to the beginning of the year. Various sessions and several interactions took place where the National and Provincial offices of Treasury, Auditor- General, COGTA and the Department of Water and Sanitation participated. Several meetings took place between the Board and the Municipal Councils.

The Mangaung Metro Municipality in particular defaulted on payment in recent months. Several engagements followed after the Section 44 MFMA process was instituted. It was resolved that normal billing accounts be paid. Mangaung Metro Municipality disputed the implementation of the drought billing accounts. Bloem Water followed due MFMA process on outstanding payment, of which the drought component is a part. The National Treasury has directed the matter to the DWS Regulatory Department to attend to. The process is continuing and had not been resolved by year end. A payment plan was provided by the Municipality to pay the arrear accounts on the normal tariff. There has been no payment of the normal tariff current account since May 2017.

The Naledi Local Municipality was incorporated into the Mangaung Metropolitan which was subsequently engaged on the payment of the account as it is part of the outstanding accounts of the Metro.

The challenges that existed with Kopanong Local Municipality over the last few years were not resolved, although partial payments were received on recent accounts. A format of payment was agreed upon, for instance where the Municipality receives the equitable share or by a certain date. The Municipality made little effort to comply with these conditions and payment has mostly not been made in accordance with the Agreement. The Board of Bloem Water met with the Council of Kopanong Local Municipality and advised them that the Board will only be able to supply water in accordance with the payments made as received per town. This arrangement is an attempt to reduce irrecoverable costs and has been instituted over recent months .The outstanding amount is still not addressed and discussions are continuing.


PART C: CORPORATE GOVERNANCE

PART C:

CORPORATE

GOVERNANCE



1. Introduction The leadership of Bloem Water, which includes the Board and the Executive Management, maintains high levels of corporate governance practices in running the organisation. To the Organisation, good governance means accountability, transparency, inclusiveness and ethical conduct. Compliance incorporates all applicable legislation and standards. The Institution embraces a system of effective, efficient, economic and transparent systems of finances, risk management, internal control, procurement, provisioning and human resources in all its practices and transactions.

All quarterly PFMA and statutory compliance reports were timeously submitted to the Department of Water Affairs and Sanitation and National Treasury. Financial internal controls are functional and working effectively, as fruitless and wasteful expenditure is now detected and reported by the line managers prior of being detected by auditors. Internal Audit reviews concluded that Bloem Water is generally complying with statutory legislation, PFMA and King IV prescripts and requirements. Cases of non-compliance with PFMA noted by Auditors were isolated, not pervasive and not material in nature. Management took appropriate steps to address the weaknesses identified by Auditors to ensure complete compliance going forward. For the last five years in succession, the entity achieved unqualified audit reviews by the external auditors.

2. Parliament and Portfolio Committees During the year under review, the entity presented reports to the Portfolio Committee of Water and Sanitation on 10 March 2017 and the National Council of Provinces (NCOP). The key issues raised by the NCOP and the Portfolio Committee included debtors, projects, bucket eradication, tariff structure and approvals and audit outcomes.

3. Executive Authority Bloem Water submit monthly and quarterly performance reports to provide progress updates on the implementation of the Business Plan 2016-2021 to the Executive Authority, in compliance with the Framework for Strategic and Shareholder Compact. The entity’s Annual Report 2015-2016 was submitted to the Executive Authority, Parliament and National Treasury in accordance with Section 55(1) (d) of the PFMA. Bloem Water also submitted its tariff proposal to the Minister for approval and thereafter to the Portfolio Committee.

4. The Board The Board is the Accounting Authority of Bloem Water in terms of the PFMA (Act 1 of 1999 as amended) and is responsible for providing strategic direction and leadership, ensuring good corporate governance as referred to in Section 51 of the PFMA. The Board acts as the focal point and provides ethical leadership characterised by the principles of fairness, accountability, responsibility and transparency and ensures that it manages its relationship with management and stakeholders along sound corporate governance principles.



The Board has the responsibility to and may do all that is necessary or expedient to achieve its mandate which includes determining, in consultation with the Minister of Water and Sanitation, its own staff establishment and the terms and conditions of employment. The Board operates in terms of a mandate set out as per the Water Services Act, Act 108 of 1997 and various other legislation as well as the King IV Report on Corporate Governance. Key functions of the Board include, but are not limited to:

Determining the strategic direction of Bloem Water.

Approving and monitoring implementation of Strategic Plans and Programmes.

Monitoring the performance of Bloem Water from financial, human resources, environmental and technical performance perspective.

Annually reassessing the Board Committees’ mandate by reviewing each Committee’s Charter.

Annually reassessing the strategic direction of the entity by gauging progress in relation to the implementation plans following the set of strategic objectives defined by the Board.

Delegating to the Chief Executive and Executive Management, the authority to manage the Organisation in accordance with the delegated authorities approved.

Defining levels of materiality and evaluating as well as reporting on the reasons for issuing a going concern statement.

Further, the Board manages conflict of interest amongst the Board members in line with Principle 1(a) (ii) of the King IV Code, which stipulates, “the Board should avoid conflicts of interest”. Accordingly, “conflicts should be disclosed to the Board in full and at the earliest opportunity and then proactively managed”. The Board, through its Charters, ensured that each director adhered to the duties and responsibilities, including amongst others, the duty to act in good faith, to avoid conflicts of interest and to act in the best interests of the organisation. To this effect, all directors of the Board declared their interest in all meetings they attended in the year under review to ensure adherence to the Bloem Water Code of Ethics.

The Board Charter

The Board Charter sets out the Board’s roles and responsibilities, as well as the requirements for its composition and meeting procedures. The Charter details Board succession, the selection of Board members and their induction as well as the evaluation of the Board. The Charter, which is reviewed on an annual basis, guides the Board in executing its oversight function. The Charter requires that Directors exercise leadership, competence, integrity and sound judgment, accountability, responsibility and transparency throughout their term of office. The Board Charter was reviewed and approved by the Board for the 2016/17 Financial Year.

Composition of the Board

The Board of Directors of Bloem Water’s term of office commenced in April 2014 and will expire at the end of March 2018. The Board is constituted of 9 Non-Executive Directors and 1 Executive Director (the Chief Executive). The Board is comprised of specialists in various fields and representative of a balanced skills-base which includes finance, corporate governance, risk management, legal, human resources, water and energy. The table below indicates members of the Board and placement in Board Committees as at 30 June 2017.



Figure 3: Board Composition Name Designation Date of 1st

appointment Status Qualifications Area of

Expertise Board Directorships

Phitsane, TB

Chairperson 28/04/2009 Active BA Degree in Economics; MBA Strategic Management, Finance & Corporate Governance

PRASA

Matete, P Deputy Chairperson

01/04/2014 Active BA (Urban & Regional Planning) BA Hons (Environmental & Geography Studies) MA in Environmental & Geography Studies) Master of Public Administration

Technical; Management

Van der Merwe, J

NED 28/04/2009

Active BSc M.Sc. in Geology PhD in Geohydrology

Water Resource Management specializing in Groundwater

Maboe, MSS

NED 28/04/2009 Active MA Degree in Major Counselling BSc Ed Degree

Government Management

Mokhesi, N

NED 01/02/2005 Active BCom BCompt Hon BCom

Finance

Bomela, LR

NED 01/04/2014 Active BProc LLB LLM

Law & Practising Advocate

Phetwe, CM

NED 01/04/2014 Active Certificate in Strategic Alignment Advanced Certificate in Fraud examination BCom in Commerce Online Certificate on Ethics and Governance Certified Directorship (IoDSA)

Strategic and Risk Management Internal Auditing

National Disaster Relief Fund

Ellman, MJ

NED 01/04/2014 Active Master of Business Administration Doctorate of INPL MSc in Chemical Engineering BSc in Chemical Engineering Certificate in Marketing & Customer Centricity Project Finance Modeling Course

Chemical Engineer, Businessman

South African Bureau of Standards; Trans Caledon Tunnel Authority (TCTA)

Mkiva, Z NED 01/04/2014 Active BA Social Science Hons in Development Studies Arts & Culture administration Media & Research Training Executive Course for Finance Managers

Indigenous Knowledge Systems



5. Board Committees To enable the Board to properly discharge its onerous responsibilities and duties, certain responsibilities of the Board have been delegated to Board Committees. The creation of Committees does not reduce a Director’s overall responsibility and therefore all Committees report and make recommendations to the Board. All Board Committees are chaired by a Non-Executive Director. Furthermore, each Board Committee acts in accordance with its own respective Charter.

Committees of the Board assist the Board to efficiently advance the business of the Board. In tandem with the aforesaid, Committees are able to demonstrate that Director Responsibilities are being adequately and properly discharged. The Board has instituted the following committees:

The Human Resources and Corporate Support Committee – comprising of Directors suited to specialising in human resources, human capital as well as corporate social responsibilities.

The Finance Committee – comprising of Directors with expertise in the area of finance, audit and assets management and supply chain management.

The Audit Committee – comprising of Directors with expertise in finance, internal control and risk management.

The Chairpersons Committee – comprising of the Chairpersons to all the Board’s sub-Committees.

The Social & Ethics Committee – comprising of Directors with skills and expertise in legal as well as areas that ensure the Organisation’s compliance with social and ethical codes of best practice.

The Capital Projects & Fixed Assets Committee – comprising of Directors with expertise in capital appropriations and long term projects.

The Board of Trustees – an external body, independent of the Board, which meets on a regular basis to deal with Pension Fund matters in accordance with the Pension Fund rules and regulations as well as applicable legislation.


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Table 3: Board Meeting Attendance

Members 28/07/2016 23/09/2016 02/12/2016 26/01/2017 11/05/2017 23/06/2017

1. Mr TB Phitsane ≠ ≠

2. Ms. P Matete ≠ ≠

3. Dr J van der Merwe ≠

4. Mr N Mokhesi ≠ ≠

5. Ms MSS Maboe

6. Adv L Bomela ≠ ≠ ≠

7. Ms C Phetwe ≠

8. Mr Z Mkiva ≠

9. Dr MJ Ellman ≠ ≠

10. Dr L Moorosi

≠ Apology In Attendance

Human Resource and Corporate Support Committee The primary objective of the Committee is to develop and implement a competitive Human Resource Strategy and Plan to ensure that Bloem Water is able to attract, retain and develop the best possible skills to support business performance. For the year under review, the Committee reviewed and recommended Organisational Structure, reviewed Information and Communications Technology (ICT) Systems within Bloem Water and other activities related to the Corporate Support and Human Resources Departments. A summary of attendance by Committee members is given below.

Table 4: Human Resource and Corporate Support Committee

Finance Committee The Finance Committee assisted the Board in fulfilling its oversight role with regards to governance of financial management and financial accounting by reviewing quarterly, financial statements, investment management, and procurement processes through meetings which were held at least once a quarter. The Committee monitored and evaluated the effective and efficient functioning and operation of the Finance, Engineering and Projects and Operations and Maintenance Departments within Bloem Water. A table below summarises attendance by Committee members.

Table 5: Finance Committee Members 22/09/2016 09/02/2017 16/05/2017

1. Mr TB Phitsane ≠ 2. Mr N Mokhesi ≠ ≠ 3. Ms Maboe 4. Mr Z Mkiva 5. Dr L Moorosi


Members 17/08/2016 26/10/2016 15/02/2017 10/05/2017 1. Dr J van der Merwe 2. Dr MJ Ellman ≠ 3. Ms Maboe 4. Adv L Bomela ≠ 5. Dr L Moorosi ≠

≠Apology In Attendance


Audit Committee The purpose of the Audit Committee is to assist the Board in fulfilling its oversight responsibility for the integrated reporting process, the system of internal controls, the audit process, and Bloem Water’s process for monitoring compliance with laws, regulations, voluntary codes, best practices and the code of conduct. Bloem Water is pleased to present its report for the financial year ended 30 June 2017. The Audit Committee reports that it has complied with its responsibilities arising from the Public Finance Management Act and Treasury Regulations. The Audit Committee also reports that it has adopted appropriate formal terms of reference as its Audit Committee Charter, has regulated its affairs in compliance with this Charter and has discharged all its responsibilities as contained therein. A summary of attendance of Audit Committee meetings is given below.

Table 6: Audit Committee Attendance Members 22/09/2017 30/03/2017 08/06/2017

1. Mr N Mokhesi 2. Dr J van der Merwe ≠ ≠ 3. Ms CM Phetwe 4. Dr MJ Ellman ≠ ≠ 5. Dr L Moorosi


Chairpersons Committee The Chairpersons Committee is an overarching Committee established to ensure that all resolutions passed by the Board on which Bloem Water is expected to act upon, is undertaken in a prompt, efficient and cost-effective manner. The Chairpersons Committee does not duplicate or undertake any roles and responsibilities of other Board Committees and takes cognisance of all Board Committee Charters.

Table 9: Chairpersons Committee Attendance Members 10/11/2016

1. Mr T Phitsane 2. Dr J van der

Merwe

3. Dr M J Elman 4. Mr P Matete 5. Mr N Mokhesi 6. Dr L Moorosi


Social and Ethics Committee The primary function of the Committee is to assist the Board of Directors with the oversight and monitoring of social and ethical matters related to Bloem Water’s activities, the extent to which Organisational Values are implemented and the impacts on Organisational stakeholders (internal and external).

Table 7: Social and Ethics Committee

Members 19/08/2016 12/10/2016 16/03/2017 14/06/2017

1. Ms P Matete 2. Ms MSS Maboe 3. Ms CM Phetwe ≠ 4. Mr Z Mkiva ≠ 5. Adv L Bomela ≠ ≠ ≠ 6. Dr L Moorosi











Merwe





Members 19/08/2016 12/10/2016 16/03/2017 14/06/2017











Merwe





Members 19/08/2016 12/10/2016 16/03/2017 14/06/2017





Capital Projects & Fixed Assets Committee The purpose of the Capital Projects & Fixed Assets Committee is to assist the Board in discharging its duties in creating long and short-term plans. The Committee aims at ensuring that the funding sources are in place to carry out these plans and assist the Board with capital expenditure programme related decisions within its delegated authority.

Table 8: Capital Projects & Fixed Assets Committee Attendance Members 25/08/2016 19/10/2016 22/02/2017 24/05/2017

1. Dr MJ Ellman 2. Dr J van der

Merwe

3. Adv L Bomela ≠ ≠ ≠ ≠ 4. Mr Z Mkiva ≠ ≠ 5. Dr L Moorosi


6. Risk Management The Audit Committee is mandated to monitor the effectiveness of the risk management process and systems of internal controls and is supported in this regard by the Executive Risk Management Committee. Risk Management Structure Bloem Water implements centralized and decentralized structures that are managed by a dedicated risk function and the Chief Risk Officer supported by Risk Champions and Co-ordinators at operational level as well the Audit Committee at Board level. The following risk management and governance structure have been implemented to ensure the effective and efficient management of risk within Bloem Water.

The Board

Audit Committee Social & Ethics Committee

Executive Risk Management Committee

Risk Management Function

Chief Risk Officer



The Board of Bloem Water exercises oversight of risk management with a focus on the most significant risks facing the Organisation, including strategic, operational, financial, legal and compliance risks. Annually, key risks are identified by management and the Board and are prioritised for close monitoring and mitigation in the new financial year. Risk Management is a standing agenda item for Board and Management Committee meetings. The Audit Committee discusses with management the risk assessment and risk management practices and, when reviewing and approving the annual audit plan for the internal audit functions, prioritizes audit focus areas based on their potential risk. Risk Management Processes Bloem Water has adopted an enterprise wide approach to the risk management and this is outlined in the Risk Management Policy and Strategy communicated to relevant stakeholders. The Policy is based on the principles of ISO 31000, National Treasury Public Sector Risk Management Framework and complies with the recommendations of King IV Report on Corporate Governance as well as the Protocol on Corporate Governance in the Public Sector. This policy defines the objectives, methodology, process and responsibilities of the various risk management role players in the Organisation. The Risk Management policy is subject to annual review and any proposed amendments are submitted to the Audit Committee for consideration and recommendation to the Board for approval.

Risk Appetite Risk appetite is defined as the risk that the Organisation is prepared or willing to accept without further mitigating action being put in place or the amount and nature of risk the Organisation is willing to accept in pursuit of objectives. This is also defined as the risk propensity of the Board in pursuing the creation of sustainable wealth. The Board reviewed its risk appetite as outlined in the Risk Management Policy. Strategic Risks The key risks are identified, reviewed and continuously monitored by the Audit Committee and approved by the Board. Departmental Risk Registers are reviewed and progress on implementation of action plans are reported on a quarterly basis to the Audit Committee focusing on risks above tolerance levels. Strategic risk assessment includes the consideration of probable future scenarios taking cognisance of inter alia, political, environmental, social, technological, economical and legislative developments in both the water and construction sectors. The assessment is also informed by other risk reports such as the World Economic Forum Global Risk Report and locally, the Institute of Risk Management South Africa.

Table 9: Significant Risks

RISK DESCRIPTION SUMMARY OF INTERNAL CONTROLS & REMEDIAL ACTION

Late/No payments by municipalities for services provided

Continuous engagements with concerned municipalities at executive and board level

Develop a plan to support and assist municipalities to improve metering and payment systems.

Assist municipalities to identify main water issues and establish intervention programme.

Maintain four months operational reserves



RISK DESCRIPTION SUMMARY OF INTERNAL CONTROLS & REMEDIAL ACTION

Review and update of Service Level Agreements

National Disasters (Droughts, Floods, global warming)

Review and Implementation of Business Continuity Programme Continued implementation of Borehole Master Plan in Collaboration

with the University of the Free State Release of Water from Katse Dam as and when required through the

DWS Continuous monitoring of water levels in high risk areas Water Carting

Implementation of Infrastructure Programme limited to available funding which will impact negatively on meeting future water demands

Alternative funding for infrastructure projects to be sought for other critical projects

Complete running infrastructure projects and capitalise them

Power supply interruptions or failures

Construction and implementation of Hydropower plant Adequate Reservoir storage capacity Emergency preparedness plan Review and implementation Business Continuity Management

Programme which will commence immediately at the beginning of the new financial year.

Deteriorating and ageing water infrastructure

Review and funding of CAPEX Programme Projects implemented according to the approved CAPEX Plan Prioritisation of Projects for refurbishment and replacement of

infrastructure.

Labour unrests/Strikes Maintain good relationships with employees and Local Labour forums Maintain market related remuneration Compliance to Labour Relations Act, Employment Equity Act, Basic

Conditions of Employment Act, Skills Development Act

Compromised ICT Operational Systems (Software & Hardware)

ICT Steering Committee Finalisation of the ICT Governance Framework in line with King IV

Report on Corporate Governance Implementation of the Off Site Disaster Recovery and Continuity Plan Review, update and implementation of ICT Strategy

Workplace injuries

SHEQ Policy developed and consultation with employees and labour forums

SHEQ Policy awaits approval by the Board Appointment of Security guards Employee Wellness Program

Effectiveness of Risk Management The Board, through the Audit Committee, has considered the policies, procedures and independent assurance reports. This is to ensure that the internal controls and risk management processes implemented in Bloem Water are effective. The Board is not aware of any exposure or position that could culminate in the residual risk profile of Bloem Water.



7. Compliance with laws and regulations Bloem Water compliance universe consists of a number of applicable laws, regulations, codes, and guidelines. This applicable legislation, receives the attention of Management on an on-going basis including but not limited to the National Water Act 27 of 2014; the Public Finance Management Act 1999 as amended; the Basic Conditions of Employment Act 1997 as amended and the Employment Equity Act 1998 as amended. Bloem Water also provides access to information to stakeholders and other third parties in compliance with the provisions of Section 32 of the Constitution of the Republic of South Africa (Act 108 of 1996) read with the Promotion of Access to Information Act 2 of 2000 (PAIA). The entity applies the codes of good governance principles, which recommend organisations to consider disclosing in the report, the number and reasons for refusals of requests for information that were lodged with the organisation in terms of the PAIA. During the 2016-2017 financial years the organisation did not receive any requests.

8. Fraud and Corruption The Board together with Management is committed to establishing and maintaining an honest, open and well-intentioned atmosphere within the Organisation. Treasury Regulations require that the Accounting Authority, which is the Board, develop a risk management strategy, which must include a Fraud Prevention Plan. The Audit Committee reviewed and recommended the Anti-Fraud and Corruption Policy as well as the Whistle Blowing Procedures. Bloem Water has established a Fraud Hotline to enable anonymous reporting by employees and other stakeholders. The Hotline is managed by an independent external service provider who reports as and when there are reported allegations of fraud and corruption. Officials are also encouraged to report suspicious activities anonymously as accordingly indicated in the approved Whistle Blowing procedures.

9. Minimising conflict of interest A Declaration of Interest insertion is a standing item on each Agenda of every meeting of the Board and the Board Committees. This is to ensure that Directors and Executive Management declare any interest they may have as prescribed by the Water Services Act, Act 108 of 1997 and the Companies Act, Act 71 of 2008, and as directed by sound corporate governance principles encapsulated within the King IV Report on Corporate Governance in line with Principle 1(a) (ii) of the King IV, which stipulates that “the Board should avoid conflicts of interest”. Bloem Water also expects its designated employees to complete disclosure forms of interest on an annual basis. Director independence from an executive perspective is ensured through the separation of the role of the Chief Executive and the Chairperson, the absence of the Chief Executive’s right to vote and the right of Directors to seek independent professional advice on the affairs of Bloem Water at any given time.

10. Code of Conduct Members of the Board individually and collectively cultivate characteristics as stipulated in Principle 1 of King IV and exhibit them in their conduct. Bloem Water developed a Code of Ethics which is not only directed to employees but also to the Board Members as well. Such Code of Ethics was approved by the Board.



11. Safety, Health, Environment & Quality Bloem Water is committed to ensuring a safe and healthy workplace for its employees and stakeholders that may be affected in their workplace activities, by eliminating or minimising injuries, damage to plant and equipment, as well as the environment. During the year under review, the Health and Safety Policy was reviewed through a consultative process with the Local Labour Forum, employees, management and the Board. Health and Safety was operationalized by ensuring compliance to the Occupational Health and Safety Act, Act No. 85 of 1993. Various stakeholder engagement initiatives are being pursued by the Organisation to ensure that employees, contractors, service providers and surrounding communities actively participate in the Organisation’s safety programmes in order to entrench an interdependent safety culture for the benefit of all especially during implementation of infrastructure projects.

12. Company Secretary An effective Board has a Board Secretary in compliance with the Companies Act, Act 71 of 2008. It is a prerogative of every public company and state-owned entity to have a company secretary available to the Board. Accordingly, the Board of Bloem Water, as a public entity, has access to the advice and services of the Board Secretary whose role is the following:

i. provides guidance to the Board on the duties of the directors and good governance;

ii. assists with the induction and training programmes for Board members;

iii. ensures Board and Committee Charters are up to date and are reviewed annually or as required

iv. ensures that a yearly Board programme is in place and does all other things necessary to ensure that meetings are held as scheduled including special meetings;

v. prepares agendas of meetings in agreement with the Board and Board Committee Chairpersons;

vi. ensures that agendas and Board documents are distributed timeously to Board members and attendees;

vii. ensures that minutes of Board and Board Committee meetings are recorded, circulated to and agreed to by members of the Board;

viii. ensures that the decisions of the Board are implemented;

ix. assists with the evaluation of the Board, Committees and individual directors;

13. Information and Communication Technology Governance

Bloem Water recognizes that successful governance of Information and Communication Technology (ICT) is not only a question of technology transformation or governance frameworks. This becomes possible when leaders work collectively to set, engage, sponsor and deliver common objectives and measures for business value through ICT. It requires trust, respect, sponsorship and motivation across the organization. Bloem Water’s response to the King IV Report on Corporate Governance is to focus on the value that can be derived by Board leading in ICT Governance matters.

An ICT Steering Committee was established with terms of reference outlined in the charter at Executive level. The Capital Projects and Fixed Asset Committee has the delegated responsibility for overseeing ICT and reporting to the Board.



14. Corporate Social Responsibility Bloem Water, as part of its Corporate Social Responsibility has developed and implemented initiatives and programmes aimed at creating an organization that is responsive to the needs of the communities in its area of supply. The Board has adopted a holistic approach in line with the best practices of corporate governance principles, to ensure that economic, social and environmental matters are communicated through the Corporate Social Investment Initiatives. It is with great pride to report on Bloem Water’s flagship programme that was successfully implemented over the past three years and has had a positive impact on the health and hygiene of schools. Since commencement of this programme a total of 68 schools have benefitted. The initiative seeks to address water infrastructure challenges experienced by ordinary public schools. During the year under review, Bloem Water continued with this programme covering School Deep Cleaning, Health and Hygiene and Water Related Projects implemented at the various Municipalities as listed below:

Name of the Project Number of Schools

District / Municipality

Summary Description of the project

School Health and Hygiene

25 Mangaung Municipality

Public school sanitation, cleaning and waste removal, monthly service monitoring and equipment rental

School Renovations 8 Mantsopa Municipality, Mangaung Municipality, Xhariep District

Repairing, replacing/installing roofs, electricity wiring, plumbing and sewerage systems. Replacement of floors, renovation of restrooms, unblocking pipes

Water Related School Projects

10 Xhariep District and Mangaung Municipality

Connection of pressure valves and pumps, plumbing, Installation of tanks, provide Jojo tanks, repair leaks, installation of water basins with taps, water awareness sessions

School Deep Cleaning Project

25 Mangaung Municipality, Mantsopa Municipality, Xhariep District

Deep cleaning, unblocking drains, toilet refurbishments, cleaning chemicals and cleaning material, cleaning and painting of walls and floors, plumbing repairs, i.e. replacement of toilet seats and replacement of door handles, hiring cleaners, supplying toilet paper


14. Corporate Social Responsibility Bloem Water, as part of its Corporate Social Responsibility has developed and implemented initiatives and programmes aimed at creating an organization that is responsive to the needs of the communities in its area of supply. The Board has adopted a holistic approach in line with the best practices of corporate governance principles, to ensure that economic, social and environmental matters are communicated through the Corporate Social Investment Initiatives. It is with great pride to report on Bloem Water’s flagship programme that was successfully implemented over the past three years and has had a positive impact on the health and hygiene of schools. Since commencement of this programme a total of 68 schools have benefitted. The initiative seeks to address water infrastructure challenges experienced by ordinary public schools. During the year under review, Bloem Water continued with this programme covering School Deep Cleaning, Health and Hygiene and Water Related Projects implemented at the various Municipalities as listed below:

Name of the Project Number of Schools

District / Municipality

Summary Description of the project

School Health and Hygiene

25 Mangaung Municipality

Public school sanitation, cleaning and waste removal, monthly service monitoring and equipment rental

School Renovations 8 Mantsopa Municipality, Mangaung Municipality, Xhariep District

Repairing, replacing/installing roofs, electricity wiring, plumbing and sewerage systems. Replacement of floors, renovation of restrooms, unblocking pipes

Water Related School Projects

10 Xhariep District and Mangaung Municipality

Connection of pressure valves and pumps, plumbing, Installation of tanks, provide Jojo tanks, repair leaks, installation of water basins with taps, water awareness sessions

School Deep Cleaning Project

25 Mangaung Municipality, Mantsopa Municipality, Xhariep District

Deep cleaning, unblocking drains, toilet refurbishments, cleaning chemicals and cleaning material, cleaning and painting of walls and floors, plumbing repairs, i.e. replacement of toilet seats and replacement of door handles, hiring cleaners, supplying toilet paper



World Toilet Day – Health and Hygiene Programme

Bloem Water participates in the World Toilet Day celebration, where the entity confirms its commitment and support to the Department of Water and Sanitation, that “Water is Life and Sanitation is dignity”. Through the schools health and hygiene programme which is a flagship project, 25 schools annually identified undergo deep cleaning and are provided with cleaning materials and sanitary towels. After completion of these projects in building up to the World Toilet Day, schools are assessed and evaluated to determine whether the toilets have been maintained accordingly. The top three cleanest schools received Jojo Tanks to promote water harvesting and cleaning material to maintain the status while other schools that participated in the programme creatively write songs and short plays that speak to water and sanitation. This competition has shifted schools and learners perspective about health and hygiene as it relates to water and sanitation. The following three (3) schools won in the 2016/17 financial year.



15. Stakeholder Relationships The ultimate accountability for stakeholder engagement lies with the Board. The Board recognises that stakeholder management is a central part of the Organisation’s effectiveness and key to a sustainable business. It is committed to strengthen relationships with its stakeholders. The entity will continuously engage with stakeholders to have discussions on issues that matter and those that are important to the services. The values of transparency, co-operation and fairness, active participation with stakeholders and being environmentally conscious are regarded as key. Bloem Water has long-standing relationships with multiple stakeholders and it endeavours to maintain and further develop these associations to create value for all parties. The process to increase Bloem Water’s understanding of its stakeholders is on-going and includes identifying key clusters based on the degree to which they influence or are impacted by the Organisation, and documenting the various proactive engagements that are already in place as it seeks to further strengthen these relationships which are outlined in the table below:

Stakeholder Basis for engagement Engagement methods

Customers

Bloem Water operates as a Water Services Provider for the following municipalities: Mangaung Metro, Mantsopa, Kopanong and Naledi.

Annual Customer Survey for all municipalities

Participation in development of Municipal Integrated Development Plans

Planned strategic and operational meetings

Employees Employee engagement is a key element of the relationship between an organization and its employees. An "engaged employee" is defined as one who is fully absorbed by and enthusiastic about their work and so takes positive action to further the organization's reputation and interests. Engaged employees are more productive and improves the performance of the entity.

Employees engagements through Local Labour Forums and Employee Suggestion Box

Wellness Projects Climate survey (satisfaction index) Regular policy presentation sessions Quarterly EXCO meetings held in regions Pension Fund Road show Board road show Meetings with teams as and when required

Shareholder Department of Water and Sanitation

Bloem Water as a Government National Enterprise accounts to the Executive Authority, which is the Department of Water and Sanitation in alignment with Water Service Act No 108 of 1997.

Portfolio Committee meetings Annual Appraisal of Business Plans,

Shareholders Compact with the Board, Quarterly and Monthly performance reports and Annual reports

Communities Bloem Water through its Corporate Social Responsibility policy implements and promote socially responsible behaviour throughout the organisation and contribute in enhancing livelihoods of communities it operates in.

World Toilet Day Schools Competition Adopt-a-School Project Environment Impact Assessments for

Projects Public participation with regards to

servitudes

Vendors and Suppliers

Socio-Economic development Broad-based Black Economic Empowerment (‘BBBEE’) compliance Corporate Social Investment Improve Health and Safety standards

Training of Service Providers Suppliers evaluation and feedback sessions Presentations on strategic products and

services Site Visits

Government and Regulators

Licensing and compliance Debtors (Municipal) Payments

Catchment Management Agency Meetings Regional Water Affairs Reconciliation

Steering Committee Meetings


Bloem Water Annual Report 2016/17 Page 56 16. Audit Committee Report Stakeholder Relations



16. Audit Committee Report We are pleased to present our report for the financial year ended 30 June 2017.

Audit Committee Responsibility The Audit Committee reports that has complied with its responsibilities arising from Section 76(4)(d) and 77 of the Public Finance Management Act and Treasury Regulation 3.1.13. The Audit Committee also reports that it has adopted appropriate formal terms of reference as its Audit Committee Charter, has regulated its affairs in compliance with this Charter and has discharged all its responsibilities as contained therein. The Audit Committee has held meetings with the external and internal auditors on every Audit Committee meeting. Both the external and internal auditors have unrestricted access to the Audit Committee.

The effectiveness of the Audit Committee is assessed through a formal process on an annual basis.

Statutory duties In execution of its statutory duties the Audit Committee made the following submissions to the Board on matters concerning the organisation’s accounting policies, financial control, records and reporting:

Materiality framework, as well as internal control framework, Written assessment on the effectiveness of the internal financial controls; Recommended the Financial Statements for submission to the office of the Auditor General; Recommended Annual Financial Statements for approval by the Board; and Written assessment on the effectiveness of risk management and internal controls.

Delegated duties The Audit Committee received reasonable assurance that the processes and procedures followed through the risk management processes at Bloem Water are adequate and effective to ensure that financial risks are identified and monitored. The Committee is specially satisfied that the following areas have been appropriately addressed:

Fraud risk pertaining to financial reporting; Financial reporting risks; Internal financial controls; IT risk pertaining to financial reporting; and Reviewed tax and technology risks; in particular, how these are managed.

The Effectiveness of Internal Financial Control The Committee:

Reviewed the effectiveness of Bloem Water’s internal financial controls, received assurance from management, external and Internal Audit;

Reviewed policies and procedures for preventing and detecting fraud, bribery and corruption; and

Reviewed significant issues raised by the external and Internal Audit processes as well as the manner in which these issues were resolved.



The Audit Committee has complied with all applicable legal and regulatory responsibilities. Evaluated the independence, effectiveness and performance of Internal Audit, Satisfied itself that Internal Audit has had the necessary resources, standing and authority

within Bloem Water to enable it to discharge its functions; Approved the Internal Audit annual plan; and Encouraged the co-operation between external and Internal Audit throughout the reporting

year. In-Year Management Monthly/Quarterly Reporting Bloem Water submitted quarterly reports to the Executive Authority. Evaluation of Financial Statements We reviewed the Annual Financial Statements as prepared by Bloem Water Auditor’s Report

We reviewed Bloem Water’s implementation plan for all audit issues raised in the prior year and we are satisfied that all matters raised were adequately resolved.

The Audit Committee concurs and accepts the conclusions of the external auditor on the Annual Financial Statements and is of the view that the audited Annual Financial Statements be accepted and read together with the report of the Auditor-General. Annual Reporting Based on the processes in place by the Management and the assurance provided by Internal Audit, we have recommended this Annual Report to the Board for approval. On behalf of the Audit Committee

N MOKHESI CHAIRPERSON OF THE AUDIT COMMITTEE BLOEM WATER


We are pleased to present our report for the financial year ended 30 June 2017.

Audit Committee Responsibility The Audit Committee reports that has complied with its responsibilities arising from Section 76(4)(d) and 77 of the Public Finance Management Act and Treasury Regulation 3.1.13. The Audit Committee also reports that it has adopted appropriate formal terms of reference as its Audit Committee Charter, has regulated its affairs in compliance with this Charter and has discharged all its responsibilities as contained therein. The Audit Committee has held meetings with the external and internal auditors on every Audit Committee meeting. Both the external and internal auditors have unrestricted access to the Audit Committee.

The effectiveness of the Audit Committee is assessed through a formal process on an annual basis.

Statutory duties In execution of its statutory duties the Audit Committee made the following submissions to the Board on matters concerning the organisation’s accounting policies, financial control, records and reporting:

Materiality framework, as well as internal control framework, Written assessment on the effectiveness of the internal financial controls; Recommended the Financial Statements for submission to the office of the Auditor General; Recommended Annual Financial Statements for approval by the Board; and Written assessment on the effectiveness of risk management and internal controls.

Delegated duties The Audit Committee received reasonable assurance that the processes and procedures followed through the risk management processes at Bloem Water are adequate and effective to ensure that financial risks are identified and monitored. The Committee is specially satisfied that the following areas have been appropriately addressed:

Fraud risk pertaining to financial reporting; Financial reporting risks; Internal financial controls; IT risk pertaining to financial reporting; and Reviewed tax and technology risks; in particular, how these are managed.

The Effectiveness of Internal Financial Control The Committee:

Reviewed the effectiveness of Bloem Water’s internal financial controls, received assurance from management, external and Internal Audit;

Reviewed policies and procedures for preventing and detecting fraud, bribery and corruption; and

Reviewed significant issues raised by the external and Internal Audit processes as well as the manner in which these issues were resolved.

The Audit Committee is satisfied that significant internal financials are effective, from the processes as communicated and assurance provided. Regulatory compliance



PART D: HUMAN RESOURCE MANAGEMENT

PART D:

HUMAN RESOURCE MANAGEMENT


1. Introduction This year has been an exciting journey for Bloem Water with regard to human capital. In addition to performing the regular yet demanding operational requirements that are vital to the entity and its employees, an organisational study was undertaken with the objective to improve efficiencies and working towards alignment to the 13 National HR Standards for Professional Service Delivery of the SA Board for People Practices governing body. Performance targets were reviewed for improved alignment with targets as set out in the Shareholders Compact. Performance contracts were extended to assistant-manager level and the reporting framework was accordingly redefined. The year also marked the conceptualization of a Mentorship Programme which initiative was launched after introducing it to the respective structures in Bloem Water, including the Young Professionals and Local Labour Forums. A fully-fledged climate survey was conducted among employees to measure staff engagement. The survey showed a marginal improvement in employee engagement and alerted management to specific dimensions where interventions are required. While much progress can be reported, a lot of work has yet to be accomplished to adequately address talent management, succession planning and accountability through policy and reporting.

HR Priorities Develop leaders: A culture of accountability and education will go a long way to securing a line of future leaders. Good leaders are critical to the success of the entity and its employees. Supervisory levels attended leadership development and supervisory skills training.

Improve teamwork: Under effective leaders, are efficient teams who collaborate to complete tasks. Management has an interest in creating more collaborative work environments but the climate survey indicated that there is a disconnect between management and employees. The matter is included in the action plan/interventions prepared in response to the survey. Find the right talent: Notwithstanding the current fiscal environment, Bloem Water still needs to ensure it acquires and retains the talent necessary to achieve its objectives. Bloem Water applies competency tests where practically possible. It furthermore remains important to find a balance between recruiting for baseline and advanced skills. Skills development, based on identified skills gaps, contributes to the development of employees. Bloem Water made good progress in assessing individual development plans and aligning them with the workplace skills plan to ensure focused training and talent development. The organisational study performed an independent assessment and the data collected is useful in navigating ways to manage workforce levels.



1. Introduction This year has been an exciting journey for Bloem Water with regard to human capital. In addition to performing the regular yet demanding operational requirements that are vital to the entity and its employees, an organisational study was undertaken with the objective to improve efficiencies and working towards alignment to the 13 National HR Standards for Professional Service Delivery of the SA Board for People Practices governing body. Performance targets were reviewed for improved alignment with targets as set out in the Shareholders Compact. Performance contracts were extended to assistant-manager level and the reporting framework was accordingly redefined. The year also marked the conceptualization of a Mentorship Programme which initiative was launched after introducing it to the respective structures in Bloem Water, including the Young Professionals and Local Labour Forums. A fully-fledged climate survey was conducted among employees to measure staff engagement. The survey showed a marginal improvement in employee engagement and alerted management to specific dimensions where interventions are required. While much progress can be reported, a lot of work has yet to be accomplished to adequately address talent management, succession planning and accountability through policy and reporting.

HR Priorities Develop leaders: A culture of accountability and education will go a long way to securing a line of future leaders. Good leaders are critical to the success of the entity and its employees. Supervisory levels attended leadership development and supervisory skills training.

Improve teamwork: Under effective leaders, are efficient teams who collaborate to complete tasks. Management has an interest in creating more collaborative work environments but the climate survey indicated that there is a disconnect between management and employees. The matter is included in the action plan/interventions prepared in response to the survey. Find the right talent: Notwithstanding the current fiscal environment, Bloem Water still needs to ensure it acquires and retains the talent necessary to achieve its objectives. Bloem Water applies competency tests where practically possible. It furthermore remains important to find a balance between recruiting for baseline and advanced skills. Skills development, based on identified skills gaps, contributes to the development of employees. Bloem Water made good progress in assessing individual development plans and aligning them with the workplace skills plan to ensure focused training and talent development. The organisational study performed an independent assessment and the data collected is useful in navigating ways to manage workforce levels.



Human Capital Development




Training and Development:

Good business relationships were established with institutions of Higher Learning in the Province: University of the Free State (UFS), Central University of Technology (CUT) and Motheo TVET for training of employees. Training provided focused on technical skills requirements of the Organisation. The EWSETA played an important role in providing bursaries and funding water related training through discretionary grants. The workplace skills plan was developed in consultation with line managers and labour. It was successfully submitted to EWSETA in terms of legislated requirements.

Employee Health and Wellness: Employees are considered as the most important assets in Bloem Water. To ensure improved health and wellbeing, Health and Wellness Programmes are in place. Services available to employees include internal and external counselling, Psycho-physical Wellness, HIV/AIDS primary prevention.

Overhaul performance reviews: Performance management is well embedded at Bloem Water and quarterly reviews are performed at all levels. Performance goals and targets of senior staff were re-aligned with business plan targets. Re-alignment should now be undertaken for all other levels in the entity.

Workforce planning and strategies to attract and recruit a skilled and capable workforce

The organisational study alluded to earlier, was commissioned with the objective of improved efficiencies and to focus workforce planning going forward. The report highlights assessment findings in terms of governance/risk, efficiencies, and structural and skills elements. Soft issues were also identified and employees’ views were solicited with the intention to create a culture of participation and partnership on matters that are important for the success and continued sustainability of the entity and its employees.

A high staff turnover affects the smooth functioning of an organisation and the Board and management acknowledge that well designed recognition and reward strategies create an environment where employees feel appreciated for their efforts and contribution. Bloem Water values its employees, promotes growth and career advancement opportunities and offers market related salaries and benefits. The entity furthermore bestows an achiever of the year award in recognition of top performers in respective Regions. Training and development is regarded as another element of retention to enhance the ability of employees and promoting a culture of life-long learning.



Employee Wellness




Defined Benefit Pension Plan The entity has its own pension fund which is a Defined Benefit Plan. It is valuated in terms of IAS 19 and is currently in a fully funded position. The Board of Trustees, supported by the employer, has implemented various measures in place to maintain it at a fully funded position. Further details are included in the notes to the Annual Financial Statements.

Policy Development The entity embarked on a policy review process in the 2016/17 financial year. The Board adopted a policy that provides for annual policy revision by management and Board revision every three years. A consultative process is followed and allows for contributions by labour and employees. Quarterly policy awareness sessions are presented to staff and all approved policies are readily available on the intranet.

Future Plans Looking forward, Bloem Water remains focused on a continued journey of anticipating and adapting to change in the water sector. While many of the foundations have been formed, time and attention is required to evolve strategic initiatives to working collaboratively with stakeholders during challenging economic times in the best interest of the communities served and the public at large.

2. Human Resource Oversight Statistics Bloem Water provides the following key information:

Personnel Cost by programme/ activity/ objective

Programme/activity /objective

Total Expenditure for

the entity (R’000)

Personnel Expenditure

(R’000)

Personnel exp. as a % of total exp.

(R’000) No. of

employees

Average personnel cost

per employee (R’000)

Management

R 685,362,616

37,565,503.90 5.48111

23

1,633,282.78 Administration (including 2 Learnerships)

44,484,338.46 6.49063

86

517,259.75

Electrical 8,833,554.54 1.28889

19

464,923.92

Civil 11,573,967.88 1.68874

40

289,349.20

Water Treatment 37,268,120.37 5.43772

98

380,286.94

Mechanical 20,913,676.21 3.05148

79

264,730.08

Security 9,661,198.47 1.40965

38

254,242.07

Total 170,300,359.83

24.84821

383

Personnel Cost: Salary Band

Level Personnel Expenditure (R’000)

% of personnel exp. to total personnel

cost (R’000) No. of

employees Average personnel cost per employee

(R’000) Top Management 12,399,521.65 7.28 6 2,066,586.94

Senior Management 15,855,860.54 9.31 11 1,441,441.87

Professional qualified 8,741,640.67 5.13 6 1,456,940.11

Skilled 73,523,499.03 43.17 136 540,613.96

Semi-skilled 38,914,842.71 22.85 124 308,847.96 Unskilled 20,864,995.23 12.25 98 212,908.11 TOTAL 170,300,359.83 100.00 381


Defined Benefit Pension Plan The entity has its own pension fund which is a Defined Benefit Plan. It is valuated in terms of IAS 19 and is currently in a fully funded position. The Board of Trustees, supported by the employer, has implemented various measures in place to maintain it at a fully funded position. Further details are included in the notes to the Annual Financial Statements.

Policy Development The entity embarked on a policy review process in the 2016/17 financial year. The Board adopted a policy that provides for annual policy revision by management and Board revision every three years. A consultative process is followed and allows for contributions by labour and employees. Quarterly policy awareness sessions are presented to staff and all approved policies are readily available on the intranet.

Future Plans Looking forward, Bloem Water remains focused on a continued journey of anticipating and adapting to change in the water sector. While many of the foundations have been formed, time and attention is required to evolve strategic initiatives to working collaboratively with stakeholders during challenging economic times in the best interest of the communities served and the public at large.

2. Human Resource Oversight Statistics Bloem Water provides the following key information:

Personnel Cost by programme/ activity/ objective

Programme/activity /objective

Total Expenditure for

the entity (R’000)

Personnel Expenditure

(R’000)

Personnel exp. as a % of total exp.

(R’000) No. of

employees

Average personnel cost

per employee (R’000)

Management

R 685,362,616

37,565,503.90 5.48111

23

1,633,282.78 Administration (including 2 Learnerships)

44,484,338.46 6.49063

86

517,259.75

Electrical 8,833,554.54 1.28889

19

464,923.92

Civil 11,573,967.88 1.68874

40

289,349.20

Water Treatment 37,268,120.37 5.43772

98

380,286.94

Mechanical 20,913,676.21 3.05148

79

264,730.08

Security 9,661,198.47 1.40965

38

254,242.07

Total 170,300,359.83

24.84821

383

Personnel Cost: Salary Band

Level Personnel Expenditure (R’000)

% of personnel exp. to total personnel

cost (R’000) No. of

employees Average personnel cost per employee

(R’000) Top Management 12,399,521.65 7.28 6 2,066,586.94

Senior Management 15,855,860.54 9.31 11 1,441,441.87

Professional qualified 8,741,640.67 5.13 6 1,456,940.11

Skilled 73,523,499.03 43.17 136 540,613.96

Semi-skilled 38,914,842.71 22.85 124 308,847.96 Unskilled 20,864,995.23 12.25 98 212,908.11 TOTAL 170,300,359.83 100.00 381



Performance Rewards

Programme//activity/objective Performance rewards

Personnel Expenditure (R’000)

% of performance rewards to total personnel cost (R’000)

Top Management 2,148,955.31 12,399,521.65 17.33

Senior Management 1,729,328.13 15,855,860.54 10.91

Professional qualified 296,341.33 8,741,640.67 3.39

Skilled 4,264,631.53 73,523,499.03 5.80

Semi-skilled 1,696,233.67 38,914,842.71 4.36

Unskilled 1,043,197.93 20,864,995.23 5.00

TOTAL 11,178,687.90 170,300,359.83 6.56

Vacancies

Programme/activity/ objective

2015/2016 No. of Employees 2016/2017

Approved Posts 2016/2017

No. of Employees

2016/2017 Vacancies

% of vacancie

s Top Management 6 6 6 0 - Senior Management 11 11 11 0 - Professional qualified 10 14 6 8 57.14 Skilled 134 143 136 7 4.90 Semi-skilled 109 146 126 20 15.07 Unskilled 114 145 96 49 33.79 Total Permanent 384 465 381 84 18.49 Temporary Employees 1 20 2 18 90.00

GRAND TOTAL 385 485 381 102

Employment Changes

Salary Band Employment at beginning of period Appointments Terminations Employment at end

of the period Top Management 6 1 1 6 Senior Management 11 1 1 11 Professional qualified 10 0 4 6 Skilled 134 2 0 136 Semi-skilled 109 15 0 124 Unskilled 114 0 18 96 Temporary Employees 1 1 0 2 Total 385 20 24 381

Reasons for staff leaving

Reason Number % of total no. of staff leaving

Death 2 0.52

Resignation 11 2.89

Dismissal 2 0.52

Retirement 5 1.31

Ill health 2 0.52

Expiry of contract 2 0.52

Other 0 0.00

Total 24 6.3



FILLED POSTS PER RACE AND GENDER - 30.06.2017 RACE GENDER TOTAL % MALE % FEMALE %

AFRICAN MALE 244 63.71

71%

29%

FEMALE 93 24.28

INDIAN MALE 0 0.00

FEMALE 1 0.26

COLOURED MALE 9 2.35

FEMALE 5 1.31

WHITE MALE 18 4.70

FEMALE 13 3.39 TOTAL 381 100.00

MALE AND FEMALE TOTALS



PART E: FINANCIAL INFORMATION

PART E:

FINANCIAL INFORMATION



Bloem Water Financial statements for the year ended 30 June 2017



Financial statements for the year ended 30 June 2017 Entity information Registered address: 2 Mzuzu Street Pellissier Bloemfontein 9300 Postal address: PO Box 30121 Pellissier Bloemfontein 9322 Auditor: Auditor General South Africa Bankers: First National Bank of Southern Africa Limited ABSA Bank Investec Bank Standard Bank Nedbank Country of incorporation: South Africa Legal form: Schedule 3B entity Nature of business: The supply of purified and un-purified water



Financial statements for the year ended 30 June 2017 Contents Page Statement of responsibilities and approval 72 Independent auditor’s report 73 – 77 Statement of financial position 78 Statement of comprehensive income 79 Statement of changes in equity 80 Statement of cash flows 81 Notes to the financial statements 82 – 124 Detailed statement of comprehensive income 125 – 126



Statement of responsibilities and approval for the year ended 30 June 2017

The Board is responsible for the maintenance of adequate accounting records and the preparation, fair presentation and integrity of the financial statements and related information. The auditors are responsible to report on the fair presentation of these financial statements. The financial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice (SA GAAP) as at 1 April 2012 and in the manner required by the Public Finance Management Act of South Africa, Act No. 1 of 1999 and other enabling legislation. The application of SA GAAP as at 1 April 2012 has been mandated by the Accounting Standards Board. A detailed analysis to the application is set out in notes 1.1 and 1.2 to the financial statements. The Board also prepared the other information included in the annual report and is responsible for both its accuracy and its consistency with the financial statements. The Board is also responsible for such internal control as the Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. These controls are designed to provide reasonable, but not absolute assurance as to the reliability of the financial statements and to adequately safeguard, verify and maintain accountability of assets, and to prevent and detect misstatement and loss. Nothing has come to the attention of the Board to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review. The financial statements have been prepared on the going concern basis since the Board has every reason to believe that Bloem Water has adequate resources in place to continue in operation for the foreseeable future. The Auditor General South Africa has audited the financial statements. They have been given unrestricted access to all financial records and related data, including minutes of all meetings of the Board and committees of the Board. The Board believes that all representations made to the independent auditors during their audit were valid and appropriate. The audit report is presented as part of the financial statements. The financial statements were approved by the Board and signed by the Chief Executive.

Dr L Moorosi Chief Executive 29 September 2017



Report of the Auditor General to Parliament on Bloem Water

Report on the audit of the financial statements

Opinion

1. I have audited the financial statements of the Bloem Water set out on pages 78 to 124, which comprise the statement of financial position as at 30 June 2017, and the statement of comprehensive income, statement of changes in equity, and statement of cash flows for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies.

2. In my opinion, the financial statements present fairly, in all material respects, the financial position of Bloem Water as at 30 June 2017, and its financial performance and cash flows for the year then ended in accordance with South African Statements of Generally Accepted Accounting Practice (SA GAAP) and the requirements of the Public Financial Management Act (PFMA).

Basis for opinion

3. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the auditor-general’s responsibilities for the audit of the financial statements section of my report.

4. I am independent of the public entity in accordance with the International Ethics Standards Board for Accountants’ Code of ethics for professional accountants (IESBA code) together with the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA code.

5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Material uncertainty related to going concern

6. I draw attention to Note 23 in the financial statements, which indicates that the public entity incurred an operational loss of R5.2 million during the year ended 30 June 2017 and, as of that date, the public entity’s cash flows indicated a net decrease in cash and cash equivalents of R134 067 000 (2016: R235 971 000) as stated in note 5 and increase in trade and other receivables of R219 519 000 (2016: R96 267 000) in note 4. As stated in Note 23, these events or conditions, along with a significant increase in the impairment of trade receivables of R246 684 000 (2016: R111 660 000), as stated in note 4, indicate that a material uncertainty exists that may cast significant doubt on the public entity’s ability to continue as a going concern in the foreseeable future. My opinion is not modified in respect of this matter.



Emphasis of matter

7. I draw attention to the matter below. My opinion is not modified in respect of this matter.

Material impairments

8. As disclosed in notes 4 to the financial statements, management provided for the impairment of receivables to the value of R453 875 000(2016: R207 321 000).

Other matter

9. I draw attention to the matters below. My opinion is not modified in respect of these matters

Previous year audited by a predecessor auditor

10. The financial statements of the previous year were audited by a predecessor auditor in terms of section 4(3) of the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) on 23 September 2016.

Unaudited supplementary schedule

11. The supplementary information set out on pages 125 to 126 does not form part of the financial statements and is presented as additional information. I have not audited this schedule and, accordingly, I do not express an opinion thereon.

Responsibilities of the accounting authority for the financial statements

12. The board of directors, which constitutes the accounting authority, is responsible for the preparation and fair presentation of the financial statements in accordance with SA GAAP and the requirements of the PFMA and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

13. In preparing the financial statements, the accounting authority is responsible for assessing the Bloem Water’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the accounting authority either intends to liquidate the public entity or to cease operations, or has no realistic alternative but to do so.

Auditor-general’s responsibilities for the audit of the financial statements

14. My objectives are to obtain reasonable assurance about whether financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.



15. A further description of my responsibilities for the audit of the financial statements is

included in the annexure to the auditor's report.

Report on the audit of the annual performance report

Introduction and scope

16. In accordance with the PAA and the general notice issued in terms thereof I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance.

17. My procedures address the reported performance information, which must be based on the approved performance planning documents of the public entity. I have not evaluated the completeness and appropriateness of the performance indicators/measures included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

18. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected objectives presented in the annual performance report of the public entity for the year ended 30 June 2017:

Strategic objectives Pages in the annual performance report

Strategic objective 01 – Plan, develop, operate and maintain infrastructure to ensure sustainable water service delivery

25

Strategic objective 03 – Securing of supply and quality of raw water resources

25

Strategic objective 05 – Engaging and strengthening strategic partnerships with all relevant stakeholders 27

19. I performed procedures to determine whether the reported performance information was

properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

20. I did not identify any material findings on the usefulness and reliability of the reported performance information for the following objectives:



Strategic objective - 01 – Plan, develop, operate and maintain infrastructure to

ensure sustainable water service delivery. Strategic objective - 03 – Securing of supply and quality of raw water resources Strategic objective - 05 – Engaging and strengthening strategic partnerships with all

relevant stakeholders.

Other matter

21. I draw attention to the matters below.

Achievement of planned targets

22. Refer to the annual performance report on pages 18 to 40; 25 to 30 for information on the achievement of planned targets for the year and explanations provided for the underachievement of a significant number of targets.

Adjustment of material misstatement

23. I identified material misstatements in the annual performance report submitted for auditing. These material misstatements were on the reported performance information of Strategic objective 05: Engaging and strengthening strategic partnerships with all relevant stakeholders. As management subsequently corrected all of the misstatements, I did not raise any material findings on the reliability of the reported performance information.

Report on audit of compliance with legislation

Introduction and scope

24. In accordance with the PAA and the general notice issued in terms thereof I have a responsibility to report material findings on the compliance of the public entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

25. I did not identify any material findings in respect of the compliance criteria for the applicable subject matters.

Other information

26. The Bloem Water’s accounting authority is responsible for the other information. The other information comprises the information included in the annual report which includes the director’s report and the audit committee’s report as required by the Companies Act. The other information does not include the financial statements, the auditor’s report thereon and those selected objectives presented in the annual performance report that have been specifically reported on in the auditor’s report.

27. My opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon.



28. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements and the selected objectives presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed on the other information obtained prior to the date of this auditor’s report, I conclude that there is no material misstatement of this other information, I am required to report that fact.

Internal control deficiencies

29. I considered internal controls relevant to my audit of the financial statements, reported performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance thereon.

30. I did not identify any significant deficiencies in the internal controls.

Other reports

31. I draw attention to the following engagements conducted by various parties that had, or could have, an impact on the matters reported in the public entity’s financial statements, reported performance information, compliance with applicable legislation and other related matters. These reports did not form part of my opinion on the financial statements or my findings on the reported performance information or compliance with legislation.

32. Management initiated an investigation on alleged irregularities in supplier payments made during the 2014-15 financial year. The investigation was completed in the 2016/17 period and concluded that there were no losses incurred by the entity. The responsible officials were disciplined and concluded during the 2016/17 period in accordance with the entities disciplinary policies and procedures



Statement of financial position at 30 June 2017 Note 2017 2016 R’000 R’000 Assets Non-current assets 825 276 858 761 Property, plant and equipment 2 776 761 828 627 Defined benefit asset 15 48 515 30 134 Current assets 439 242 471 612 Inventories 3 13 272 12 238 Trade and other receivables 4 219 519 96 267 Cash and cash equivalents 5 134 067 235 971 Infrastructure project receivable 21 72 384 127 136 Total assets 1 264 518 1 330 373 Equity and liabilities Capital and reserves 863 617 826 626 Retained earnings 647 989 613 358 Capital replacement fund 87 350 87 350 Capital development fund 70 217 70 217 Insurance fund 14 482 12 122 Asset DWS reserve fund 43 579 43 579 Non-current liabilities 215 771 319 256 Interest bearing loans and borrowings 6 190 749 231 537 Deferred income 20 25 022 87 719 Current liabilities 185 130 184 491 Current portion of interest bearing loans and borrowings 6 47 455 58 771 Trade and other payables 7 137 675 125 720 Total equity and liabilities 1 264 518 1 330 373



Statement of comprehensive income for the year ended 30 June 2017 Note 2017 2016 R’000 R’000 Revenue 9 661 274 469 885 Water abstraction costs (21 004) (21 166) Gross income 640 270 448 719 Other income 9.1 3 745 13 131 Chemicals (15 130) (14 383) Depreciation (60 275) (59 920) Distribution cost (14 367) (15 298) Energy cost (93 140) (96 585) Repairs and maintenance (11 473) (11 460) Employment costs (170 300) (150 691) Impairment of trade receivables 4 (246 684) (111 660) Operating expenses (37 873) (48 081) Operating (loss) 10 (5 227) (46 228) Finance income 11 57 335 35 719 Finance costs 12 (15 117) (17 935) Profit/(Loss) for the year 36 991 (28 444) Other comprehensive income - - Total comprehensive profit/(loss) for the year 36 991 (28 444)



Statement of changes in equity for the year ended 30 June 2017 Note 2017 2016 R’000 R’000 Retained earnings Opening balance 613 358 643 482 Total comprehensive income/(loss) for the year 36 991 (28 444) Transfer from / (to) the insurance fund (2 360) (1 680) Closing balance 647 989 613 358

Capital replacement fund Opening balance 87 350 87 350 Transfer from / (to) retained earnings - - Closing balance 87 350 87 350 Capital development fund Opening balance 70 217 70 217 Transfer from / (to) retained earnings - - Closing balance 70 217 70 217 Insurance fund Opening balance 12 122 10 442 Transfer from / (to) retained earnings 2 360 1 680 Closing balance 14 482 12 122 Asset DWS reserve fund Opening balance 43 579 43 579 Transfer from / (to) retained earnings - - Closing balance 43 579 43 579



Statement of changes in equity for the year ended 30 June 2017 Note 2017 2016 R’000 R’000 Retained earnings Opening balance 613 358 643 482 Total comprehensive income/(loss) for the year 36 991 (28 444) Transfer from / (to) the insurance fund (2 360) (1 680) Closing balance 647 989 613 358

Capital replacement fund Opening balance 87 350 87 350 Transfer from / (to) retained earnings - - Closing balance 87 350 87 350 Capital development fund Opening balance 70 217 70 217 Transfer from / (to) retained earnings - - Closing balance 70 217 70 217 Insurance fund Opening balance 12 122 10 442 Transfer from / (to) retained earnings 2 360 1 680 Closing balance 14 482 12 122 Asset DWS reserve fund Opening balance 43 579 43 579 Transfer from / (to) retained earnings - - Closing balance 43 579 43 579


Statement of cash flows for the year ended 30 June 2017 Note 2017 2016 R’000 R’000 Cash flow from operating activities Net cash inflow from operating activities 17 416 43 236 Cash received from customers 252 434 350 188 Cash paid to suppliers and employees (224 905) (298 164) Cash generated from operating activities 13.1 27 529 52 024 Finance income 14 240 20 359 Finance costs (including borrowing cost capitalised) (24 353) (29 147) Cash flow from investing activities Net cash outflow from investing activities (82 199) (88 748) To expand and refurbish Additions to property, plant and equipment (40 417) (66 198) Proceeds on disposal of property, plant and equipment 16 177 Contributions made to defined benefit plan (41 798) (22 727) Cash flow from financing activities Net cash generated in financing activities (37 113) (12 098) Deferred income 14 991 - Interest bearing borrowings raised - 49 000 Interest bearing borrowings repaid (52 104) (61 098) Net decrease in cash and cash equivalents (101 896) (57 610) Cash and cash equivalents at the beginning of the year 235 943 293 553 Cash and cash equivalents at end of the year 13.2 134 047 235 943



Notes to the financial statements for the year ended 30 June 2017 1. Summary of significant accounting policies

The principle accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied, unless otherwise stated.

1.1. Basis of preparation and measurement Basis of measurement The financial statements have been prepared on the historical cost basis except where otherwise

indicated. The financial statements are presented in South African Rand (R) (rounded to the nearest thousand (R’000) except where otherwise indicated), which is the functional and presentation currency.

Statement of compliance The financial statements of Bloem Water have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice (SA GAAP) as at 1 April 2012 (including all amendments to May 2011) and the Public Finance Management Act of South Africa, Act No. 1 of 1999 (PFMA).

1.2 Changes in accounting policies and disclosures The new Companies Act, 2008 (Act No. 71 of 2008) required a re-evaluation of the continued existence of statements of SA GAAP. This resulted in a decision during March 2012 to withdraw statements of SA GAAP for financial years commencing on or after 1 December 2012. The withdrawal of statements of SA GAAP has an impact on schedule 3B public entities (i.e. Bloem Water) that are required to apply the SA GAAP reporting framework. In the interim, the Accounting Standards Board (ASB) has approved that public entities that previously applied statements of SA GAAP should continue to apply statements of SA GAAP as at 1 April 2012, including amendments to May 2011. Consequently, Bloem Water will continue to apply SA GAAP as at 1 April 2012 to the financial statements for the year ended 30 June 2017. During July 2015 a directive was issued by the ASB. The Board’s deliberations on this matter gave way to three consultations which resulted in the development of two Exposure Drafts on The Application of Standards of GRAP by Government Business Enterprises (Schedule 3B and 3D) (ED 124), and The Selection of an Appropriate Reporting Framework by Public Entities (ED 130), issued for comment in May 2014 and February 2015 respectively.



Notes to the financial statements for the year ended 30 June 2017 (continued) 1.2 Changes in accounting policies and disclosures (continued)

The Directive is effective for financial years commencing on or after 1 April 2018 so as to provide entities sufficient time to prepare for any change in reporting framework with earlier application permitted. Therefore the initial application is 1 April 2018, or earlier. The Directive is applied subsequently where entities believe that a significant change has occurred that leads them to conclude that they meet, or no longer meet, the criteria in the Directive. The Directive requires the conversion either to GRAP or IFRS based on certain criteria. In the event of a transition to IFRS, there are new or revised Accounting Standards and Interpretations in issue. These include the following Standards and Interpretations that are applicable to the business of the entity and will have an impact on future financial statements. These standards will be effective to Bloem Water from 1 July 2018 as this is will be the first financial year for Bloem Water commencing on or after 1 April 2018.

Standard or Interpretation The Board is of the opinion that the impact of the

application of the remaining Standards and Interpretations will be as follows:

Effective for the financial year end commencing 1 July 2018 IFRS 13 Fair Value Measurement

The standard will be applied prospectively and comparatives will not be restated.

IFRS 13 introduces a single source of guidance on fair value measurement for both financial and non-financial assets and liabilities by defining fair value, establishing a framework for measuring fair value and setting out disclosures requirements for fair value measurements. The key principles in IFRS 13 are as follows:

Fair value is an exit price Measurement considers characteristics of the asset or

liability and not entity-specific characteristics Measurement assumes a transaction in the entity’s

principle (or most advantageous) market between market participants

Price is not adjusted for transaction costs Measurement maximises the use of relevant

observable inputs and minimises the use of unobservable inputs The three-level fair value hierarchy is extended to all fair value measurements

The impact on the financial statements for Bloem Water cannot be reasonably estimated as at 30 June 2017.



Notes to the financial statements for the year ended 30 June 2017 (continued) 1.2 Changes in accounting policies and disclosures (continued) Standard or Interpretation The Board is of the opinion that the impact of the

application of the remaining Standards and Interpretations will be as follows:

Effective for the financial year end commencing 1 July 2018 IAS 19 (amendments) Employee Benefits: Defined Benefit Plans

In terms of the amendments, the following key changes will have an impact on the entity:

Actuarial gains and losses are recognised immediately in other comprehensive income. The corridor method and the recognition of actuarial gains and losses in profit or loss are no longer permitted.

Past service costs as well as gains and losses on curtailments / settlements are recognised in profit or loss.

Expected returns on plan assets are calculated based on the rates used to discount the defined benefit obligation.

The definitions of short-term and other long-term employee benefits have been amended and the distinction between the two depends on when the entity expects the benefit to be settled.

The impact on the financial statements for Bloem Water is considered to be significant. The unrecognised actuarial losses to be recognised in the statement of comprehensive income is expected to amount to approximately R49 million. Retained earnings and the pension fund asset are expected to decrease with approximately R49 million (i.e. a pension fund liability of approximately 0.43 million will exist). Additional amendments are of a presentation nature and will not have a significant impact on the entity’s financial statements.

IFRS 1 amendment Government Loans

The amendment provides an additional relief to first-time adopters of IFRS from retrospectively measuring government loans with a below-market rate of interest. The amendments address concerns that the retrospective measurement of these government loans at fair value at their dates of origination could lead to first-time adopters applying hindsight.

The impact on the financial statements for Bloem Water is not expected to be material.




Standard or Interpretation The Board is of the opinion that the impact of the application of the remaining Standards and Interpretations will be as follows:

Effective for the financial year end commencing 1 July 2018 IFRS 7 (AC 144) amendment Disclosures – Transfer of Financial Assets

In terms of the amendments additional disclosure will be provided regarding transfers of financial assets that are:

not derecognised in their entirety and derecognised in their entirety but for which Bloem Water

retains continuing involvement.


IAS 24 (AC 126) (Revised) The standard will be applied retrospectively.

IAS 24 (AC 126) (revised) addresses the disclosure requirements in respect of related parties, with the main changes relating to the definition of a related party and disclosure requirements by government-related entities. Under IAS 24 (AC 126) (revised), the definition of a related party has been amended, with the result that a number of new related party relationships have been identified.

Government-related entities including Bloem Water will have to provide the following disclosures: name of the government and nature of the relationship; nature and amount of each individually significant transaction and a qualitative or quantitative indication of the extent of other transactions that are collectively, but not individually, significant.

IAS 32 Offsetting Financial Assets and Financial Liabilities

The amendments clarify that an entity currently has a legally enforceable right to set-off if that right is:

not contingent on a future event; and enforceable both in the normal course of business and

in the event of default, insolvency or bankruptcy of the entity and all counterparties






IAS 7 Disclosure Initiative (Amendments to IAS 7)

The amendments provide for disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. This includes providing a reconciliation between the opening and closing balances for liabilities arising from financing activities. The impact on the financial statements for Bloem Water cannot be reasonably estimated as at 30 June 2017.

Effective for the financial year end commencing 1 July 2018 IAS 1 amendment Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income

This amendment provides for changes to the presentation of Items of Other Comprehensive Income to existing pronouncements.


Effective for the financial year end commencing 1 July 2018 IAS 19 Defined Benefit Plans: Employee contributions

The amendments introduce relief that will reduce the complexity and burden of accounting for certain contributions from employees or third parties. Such contributions are eligible for practical expedient if they are:

set out in the formal terms of the plan; linked to service; and independent of the number of years of service.


Effective for the financial year end commencing 1 July 2018 IAS 1 Disclosure Initiative The amendments provide additional guidance on the

application of materiality and aggregation when preparing financial statements. The amendments also clarify presentation principles applicable to the order of the notes, Other Comprehensive Income of equity accounted investees and subtotals presented in the statement of financial position and statement of profit or loss and other comprehensive income.






Effective for the financial year end commencing 1 July 2018 IFRS 15 Revenue from contracts with customers

This standard replaces IAS 11 Construction contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC 31 Revenue Barter of Transactions Involving Advertising Services.

The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised.


Effective for the financial year end commencing 1 July 2018 IFRS 9 Financial Instruments IFRS 9 addresses the initial measurement and

classification of financial assets and financial liabilities and will replace the relevant sections of IAS 39.

Under IFRS 9 there are two options in respect of classification of financial assets, namely, financial assets measured at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value. Embedded derivatives are no longer separated from hybrid contracts that have a financial asset host.





IFRS 9 Financial Instruments (continued)

The classification and measurement requirements of financial liabilities are the same as per IAS 39, except for the following two aspects:

fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss, that are attributable to the changes in the credit risk of the liability will be presented in other comprehensive income (OCI). The remaining amount of the fair value change is recognised in profit or loss. However, if this requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss. The determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently reassessed.

Derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value.

The standard will be applied retrospectively, subject to transitional provisions.


Standards and interpretations not expected to have an impact on the entity:

The following Standards and Interpretations are not applicable to the business of the entity and it is therefore expected not to impact on future financial statements.

IAS 12 amendment Deferred tax: Recovery of Underlying Assets

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IFRS 14 Regulatory Deferral Accounts




IAS 27 Equity method in Separate Financial Statements (2011)

IAS 28 Investments in Associates and Joint Ventures (2011)

IAS 36 Recoverable Amount Disclosures for Non-financial Assets

IAS 39 Novation of Derivatives and Continuation of Hedge Accounting

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

IFRIC 21 Levies

Amendments to IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortisation

IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters

IAS 16 and IAS 41 Agriculture: Bearer Plants

IAS 10 and IAS 28 Sale or Contribution of Assets between and investor and its Associates or Joint venture

IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

IFRIC 22 Foreign Currency Transactions and Advance Considerations

IFRS 16 Leases

IFRIC 23 Uncertainty over Income Tax Treatments

IFRS 17 Insurance Contracts 1.3 Significant accounting judgments, estimates and assumptions The preparation of the entity’s financial statements in conformity with SA GAAP requires

management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the reporting date. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are set out below:

a) Pension and other post-employment benefits

The cost of defined benefit pension plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. The net pension plan asset at 30 June 2017 is R48 515 029 (2016: R30 134 331). Further details are disclosed in note 15.



Notes to the financial statements for the year ended 30 June 2017 (continued) 1.3 Significant accounting judgments, estimates and assumptions

b) Trade and other receivables Loans and receivables shall be measured at amortised cost using the effective interest method. If there is objective evidence that an impairment loss on loans and receivables carried at amortised costs has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of the loss shall be recognised in profit or loss. Further details are disclosed in note 4.

c) Valuation and depreciation of property, plant and equipment Depreciation is based on the useful lives of the property, plant and equipment. The estimation of useful lives of property, plant and equipment is based on historical performance as well as expectations about future use and therefore require a significant degree of judgement to be applied by management. The depreciation rates and residual values, if any, represent management’s best estimates.

1.4 Property, plant and equipment

Land is carried at cost and not depreciated. Furniture and office equipment and vehicles and machinery are stated initially at cost, less accumulated depreciation and accumulated impairment losses in accordance with the provision of IAS 16 (AC 123) – Property, plant and equipment. Plant equipment, roads, buildings and pipelines and reservoirs are stated at cost, less accumulated depreciation and accumulated impairment losses. Cost includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the capitalisation of borrowing costs on qualifying assets (refer to note 1.12). Capital projects in progress are stated at cost which includes cost of material, direct labour and any directly attributable costs incurred in bringing it to its present location and condition. Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. When part of an asset is being replaced, the carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to profit or loss during the financial period in which it is incurred.



Notes to the financial statements for the year ended 30 June 2017 (continued)

1.4 Property, plant and equipment (continued)

Depreciation is calculated on a straight line basis over the estimated useful lives of the assets less its estimated residual value. The estimated useful lives for current and comparative periods are as follows: Vehicles and machinery: 15 years Plant equipment: 30 years Furniture and office equipment: 5 to 25 years Roads: 50 years Pipeline and reservoirs: 35 years Buildings: 60 years The assets’ residual values, useful lives and method of depreciation are reviewed and adjusted, if appropriate, at each financial year-end. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the year the asset is derecognised.

1.5 Funds and reserves

Capital replacement fund Amounts as determined by the Board are transferred to a separate fund to be utilised for the replacement of capital assets. Amounts equal to such transfers are retained and can be utilised at the discretion of the Board. Capital development fund Amounts as determined by the Board are transferred from available funds to a separate fund to be utilised at the discretion of the Board. The fund is utilised to finance development of capital infrastructures. Insurance fund At the discretion of the Board, an amount equal to the estimated external insurance premium may be transferred to the insurance fund. This fund will be utilised for the replacement of certain assets. The funds will be utilised at the discretion of the board.



Notes to the financial statements for the year ended 30 June 2017 (continued) 1.5 Funds and reserves (continued)

Asset DWS reserve fund An amount equal to the value of property, plant and equipment in the Thaba ‘Nchu region transferred from the Department of Water and Sanitation to Bloem Water was transferred to this fund. The amount constitutes a non-distributable reserve.

1.6 Revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the entity and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received/receivable excluding discounts, rebates, and value added tax or duties. The following specific recognition criteria must also be met before revenue is recognised: Sale of water Revenue is recognised when the significant risks and rewards of ownership of the water have passed to the buyer, usually on delivery of the water through the water meters and the revenue can be reliably measured.

1.7 Finance income

Finance income comprises interest receivable on trade receivables and finance income from investments and cash and cash equivalents. Finance income is recognised as it accrues in profit and loss, using the effective interest rate method.

1.8 Inventories

Inventories are valued at the lower of cost or net realisable value. Cost is determined on the weighted average basis. Obsolete, redundant and slow moving inventories are identified and written down to their estimated net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated cost necessary to make the sale. The cost of water inventory comprises of all costs of water abstraction, costs of conversion and other costs incurred in bringing the inventory to its present location and condition.




1.9 Employee benefits Pension obligations

The policy of Bloem Water is to provide retirement benefits for all its employees. The fund represents a Defined Benefit Plan administered by Verso Funds Administrator. Obligations for contributions to defined contribution plans are recognised as an expense in the statement of comprehensive income as incurred. The defined benefit asset or liability comprises the present value of the defined benefit plan obligation less past service cost not yet recognised and less the fair value of plan assets out of which the obligations are to be settled directly. The value of any asset is restricted to the sum of any past service cost not yet recognised and the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan. The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method. In terms of IAS 19 – Employee Benefits, Bloem Water applies the corridor rule to any actuarial gains or losses recognised during the year, meaning that actuarial gains and losses recognised by Bloem Water is the excess over the greater of: a) 10% of the present value of the defined benefit obligation at the end of the previous reporting

period; and b) 10% of the fair value of any plan asset at the same date. As required by the Pension Fund Act 25 of 1956, a qualified actuary performs the valuation. The actuarial valuation was performed by Independent Actuarial Consultants (Pty) Limited at reporting date.

Short term employee benefits Short term employee benefits are those that are paid within twelve months after the end of the period in which the services have been rendered. Remuneration to employees is charged to the statement of comprehensive income. Provision is made for accumulated leave, annual bonuses, and other short term employee benefits. Retirement benefit obligation Bloem Water shall recognise the expected cost of short-term employee benefits in the form of compensated absences as follows:

(a) in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and (b) in the case of non-accumulating compensated absences, when the absences occur.




1.9 Employee benefits (continued) Bloem Water shall measure the expected cost of accumulating compensated absences as the additional amount that the entity expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting period. Bloem Water shall recognise the expected cost of bonus payments when, and only when:

(a) the entity has a present legal or constructive obligation to make such

payments as a result of past events; and

(b) a reliable estimate of the obligation can be made.

A present obligation exists when, and only when, the entity has no realistic alternative but to make the payments.

1.10 Finance cost

Finance cost comprises interest payable on borrowings and is recognised using the effective interest rate method. Borrowing costs which are not capitalised (refer to note 1.12) are recognised in profit and loss.

1.11 Financial instruments

Non-derivative financial instruments carried on the statement of financial position comprise of cash and cash equivalents, investments, trade and other receivables, infrastructure receivable, trade and other payables and interest bearing borrowings. Financial instruments are initially carried at cost, which includes transaction costs. Subsequently, the instruments are recognised as follows: Investments and other financial assets Financial assets with the scope of IAS 39 (AC 133) – Financial Instruments: Recognition of Measurement are classified as short term investments, cash and cash equivalents, loans and receivables, held-to-maturity investments, or available-for-sale assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus directly attributable transaction costs. Bloem Water shall recognise a financial asset or a financial liability in its statement of financial position when, and only when, the entity becomes a party to the contractual provisions of the instrument.



Notes to the financial statements for the year ended 30 June 2017 (continued) 1.11 Financial instruments (continued)

Bloem Water shall derecognise a financial asset when, and only when:

(a) the contractual rights to the cash flows from the financial asset expire; or

(b) it transfers the financial asset as set out in the Accounting Standards and the transfer qualifies for derecognition in accordance with the Accounting Standards.

Bloem Water transfers a financial asset if, and only if, it either:

(a) transfers the contractual rights to receive the cash flows of the financial asset; or

(b) retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients in an arrangement that meets the conditions in the Accounting Standards.

Bloem Water shall remove a financial liability (or a part of a financial liability) from its statement of financial position when, and only when, it is extinguished— ie when the obligation specified in the contract is discharged or cancelled or expires.

Short term investments Short term investments are non-derivative financial assets with fixed determinable payments that are not quoted in an active market. After initial measurement short term investments are carried at amortised cost using the effective interest rate method less any allowance for impairment. Gains and losses are recognised in profit or loss when the short term investments are derecognised or impaired. Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the entity has the positive intention and ability to hold to maturity. After initial measurement held-to-maturity investments are measured at amortise cost using the effective interest method. Gains and losses are recognised in profit or loss when the investments are derecognised or impaired. Loans and receivables Loans, trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement loans and receivables are carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.




Available-for-sale financial investment Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the other financial asset categories. After initial measurement, available-for-sale financial assets are measured at fair value with unrealised gains or losses recognised directly in other comprehensive income until the investment is derecognised or determined to be impaired at which time the cumulative gain or loss previously recorded in other comprehensive income is recognised in profit or loss. Interest bearing borrowings

Interest bearing borrowings are recognised initially at fair value less attributable transaction costs. The discount or premium on the issue of loans is amortised over the period from acquisition to maturity so that a constant rate of interest is paid on the loan. The amortised amount is recognised in the statement of comprehensive income.

Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost, with any difference between cost and redemption value being recognised in the statement of comprehensive income over the period of the borrowings on the effective interest basis.

Trade and other payables

Trade and other payables are initially recognised at fair value and are subsequently measured at amortised cost. Impairment of financial assets The entity assesses at each reporting date whether a financial asset or group of financial assets is impaired. For loans and other receivables carried at amortised cost, the amount of the impairment loss is measured as the difference between the financial asset’s carrying amount and its present value of estimated future cash flows (excluding future expected credit losses that have been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced by the impairment loss and the loss is recorded in the statement of comprehensive income. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. For assets carried at cost, if there is objective evidence that an impairment loss on an unquoted investment that is not carried at fair value, because its fair value cannot be reliably measured, has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return of a similar asset.




If, and only if, the recoverable amount of an asset is less than its carrying amount. The carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognised immediately in profit or loss, unless the asset is carried at revalued amount in accordance with another Standard. Any impairment loss of a revalued asset shall be treated as a revaluation decrease in accordance with that other Standard. After the recognition of an impairment loss, the depreciation (amortisation) charge for the asset shall be adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life. If there is any indication that an asset may be impaired, recoverable amount shall be estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, Bloem Water determine the recoverable amount of the cash-generating unit to which the asset belongs (the asset’s cash-generating unit).

An impairment loss shall be recognised for a cash-generating unit (the smallest group of cash-generating units to which goodwill or a corporate asset has been allocated) if, and only if, the recoverable amount of the unit (group of units) is less than the carrying amount of the unit (group of units). The impairment loss shall be allocated to reduce the carrying amount of the assets of the unit (group of units) in the following order:

(a) first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units); and

(b) then, to the other assets of the unit (group of units) pro rata on the basis of the carrying amount of each asset in the unit (group of units).

Bloem Water shall assess at the end of each reporting period whether there is any indication that an impairment loss recognised in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset.

A reversal of an impairment loss for an asset other than goodwill shall be recognised immediately in profit or loss, unless the asset is carried at revalued amount in accordance with another IFRS (for example, the revaluation model in IAS 16). Any reversal of an impairment loss of a revalued asset shall be treated as a revaluation increase in accordance with that other IFRS. An impairment loss recognised for goodwill shall not be reversed in a subsequent period.

Fair value

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of another instrument which is substantially the same and discounted cash flow analysis or other valuation modes.



Notes to the financial statements for the year ended 30 June 2017 (continued) 1.11 Financial instruments (continued) Amortised cost

Held-to-maturity investments and loans and receivables are measured at amortised cost. This is computed using the effective interest rate method less any allowance for impairment. The calculation takes into account any premium or discount on acquisition and includes transactions costs and fees that are an integral part of the effective interest rate.

General risk management principles

Risk management is of critical importance to the entity as it understands that changing market conditions make risk unavoidable. Over the years the entity has sought and implemented a comprehensive risk management process to consistently identify, understand and properly manage risk at all times. Risk policies, limits and control procedures are continuously monitored.

1.12 Borrowing costs

Borrowing costs attributable to the constitution of qualifying assets are capitalised as part of the cost of these assets over the period of construction to the extent that the assets are financed by borrowings. The capitalisation rate applied is the weighted average of the borrowing costs applicable to the borrowings unless an asset is financed by a specific loan, in which case the specific rate is used.

1.13 Cash and cash equivalents

Cash and short term deposits in the statement of financial position comprise cash at banks and cash on hand. Short term investments with an original maturity of three months are classified as short term investments. For the purposes of the statement of cash flows, cash and cash equivalents comprise cash at banks, cash on hand and short term investments.

1.14 Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

Operating leases

Leases where substantially all of the risks and rewards of ownership are not transferred to the entity, are classified as operating leases. Operating leases are charged to profit and loss on a straight-line basis over the period of the lease.



Notes to the financial statements for the year ended 30 June 2017 (continued) 1.14 Leases (continued)

Finance leases Leases where the entity assumes substantially all the benefits and risks of ownership, are classified as finance leases. Finance leases are capitalised as property, plant and equipment at the lower of fair value or the present value of the minimum lease payments at the inception of the lease with an equivalent amount being stated as a finance lease liability. The capitalised amount is depreciated over the asset’s useful life. Lease payments are allocated between capital repayments and finance expenses using the effective interest rate method.

1.15 Capital and income related grants

Capital grants for infrastructure received by Bloem Water for its own benefit are reflected against deferred income until such time as the asset becomes available for use. On the date that the asset becomes available for use, the capital grant is credited against property, plant and equipment and is recognised in profit or loss over the remaining useful life of the depreciable asset as a reduced depreciation expense. Capital grants for infrastructure received by Bloem Water as an implementing agent are reflected against a grant liability and any spend on such project is reflected as a deduction in the grant liability. Grants related to income are reflected against deferred income for future expenditure to be incurred by the entity. The income is recognised in the period in which the related expenditure is incurred.

Government grants, including non-monetary grants at fair value, shall not be recognised until there is reasonable assurance that:

(a) the entity will comply with the conditions attaching to them; and

(b) the grants will be received.

1.16 Provisions and contingencies

A provision is recognised in the statement of financial position when Bloem Water has a present legal or constructive obligation as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are not made for future operating losses. Provisions are determined by discounting the expected future cash flows that reflect current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase in the provision due to a passage of time is recognised as finance costs.



Notes to the financial statements for the year ended 30 June 2017 (continued) 1.16 Provisions and contingencies (continued)

Bloem Water shall not recognise a contingent liability. Where the effect of the time value of money is material, the amount of a provision shall be the present value of the expenditures expected to be required to settle the obligation. The discount rate (or rates) shall be a pre-tax rate (or rates) that reflect(s) current market assessments of the time value of money and the risks specific to the liability. The discount rate(s) shall not reflect risks for which future cash flow estimates have been adjusted. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.

If Bloem Water has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision.

A constructive obligation to restructure arises only when an entity:

(a) has a detailed formal plan for the restructuring identifying at least:

(i) the business or part of a business concerned;

(ii) the principal locations affected;

(iii) the location, function, and approximate number of employees who

will be compensated for terminating their services;

(iv) the expenditures that will be undertaken; and

(v) when the plan will be implemented; and

(b) has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.

1.17 Other income Other income comprises of income that does not arise in the course of ordinary activities of

Bloem Water. These other income items, inter alia, include skills development grant, profit on disposal of assets, employee rent and cost recoupments, implementation agent income, insurance proceeds, etc.



Notes to the financial statements for the year ended 30 June 2017 (continued) 1.18 Implementation agent income

Implementation agent fees received by Bloem Water for the implementation of infrastructure projects on behalf of other entities and the relating contract costs are recognised as soon as the outcome of the transaction can be reliably measured. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: The amount of revenue can be measured reliably; It is probable that the economic benefits associated with the transaction will flow to the

entity; The stage of completion of the transaction at the end of the reporting period can be measured

reliably; and The costs incurred for the transaction and the costs to complete the transaction can be

measured reliably.



Notes to the financial statements for the year ended 30 June 2017 (continued) 2. Property, plant and equipment

Vehicles

and machinery

Plant equipment

Furniture and office equipment

Roads

Pipelines

and reservoirs

Land and

buildings

Capital projects

in progress

Total R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Movement 2017 (3 030) (3 238) (589) (55) (15 313) (470) (29 173) (51 868) Additions to property, plant and equipment

582

376

1 426

-

11 287

1 293

25 452

40 416

Transfers (from)/to CAPEX/ property, plant and equipment

-

-

-

-

13 717

9 386

(23 103)

-

Borrowing costs capitalised

-

-

-

-

-

-

9 237

9 237

Impairment/disposal - cost

(785)

-

(233)

-

-

-

-

(1 018)

Impairment/disposal - accumulated depreciation

350

-

182

-

-

-

-

532

Deferred Income project completed

-

-

-

-

-

-

(77 688)

(77 688)

Retention and accruals recognised

-

-

-

-

-

-

41 339

41 339

Retention and accruals capitalised

-

-

-

-

-

-

(4 410)

(4 410)

Depreciation (3 177) (3 614) (1 964) (55) (40 317) (11 149) - (60 276) Book value 30 June 2017

26 814

37 395

8 497

1 528

376 083

214 070

112 374

776 761

Cost 43 904 93 057 21 413 2 482 1 048 846 275 072 112 374 1 597 148 Accumulated depreciation

(17 090)

(55 662)

(12 916)

(954)

(672 763)

(61 002)

-

(820 387)



Notes to the financial statements for the year ended 30 June 2017 (continued) 2. Property, plant and equipment

Vehicles

and machinery

Plant equipment

Furniture and office equipment

Roads

Pipelines

and reservoirs

Land and

buildings

Capital projects

in progress

Total R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Movement 2016 (3 134) (2 900) (1 844) (55) (23 781) 26 721 380 (4 613) Additions to property, plant and equipment

529

89

791

-

-

762

64 027

66 198

Transfers (from)/to CAPEX/ property, plant and equipment

-

-

-

-

15 805

36 693

(52 498)

- Borrowing costs capitalised

-

-

-

-

-

-

11 212

11 212

Impairment/disposal - cost

(813)

-

(225)

-

-

-

-

(1 038)

Impairment/disposal - accumulated depreciation

543

-

183

-

-

-

-

726 Accumulated depreciation adjustment

12

522

36

-

-

-

-

570

Retention and accruals recognised

-

-

-

-

-

-

4 410

4 410

Retention and accruals capitalised

-

-

-

-

-

-

(26 771)

(26 771)

Depreciation (3 405) (3 511) (2 629) (55) (39 584) (10 734) - (59 920) Book value 30 June 2016

29 843

40 633

9 085

1 583

391 395

214 540

141 548

828 627

Cost 44 106 92 681 20 219 2 482 1 023 841 264 393 141 548 1 589 271 Accumulated depreciation

(14 263)

(52 048)

(11 134)

(899)

(632 446)

(49 853)

-

(760 644)



Notes to the financial statements for the year ended 30 June 2017 (continued) 2017 2016 R’000 R’000 2. Property, plant and equipment (continued) Borrowing costs on general borrowings are capitalised at an

average rate of 9,46% (2016: 9,57%) on qualifying assets. No specific borrowings existed at year end.

Amounts capitalised during the year (refer to note 12) 9 237 11 212 All assets are owned assets.

A register of all land and servitudes held by Bloem Water is available for inspection at the registered office of the entity.

The cost price of fully depreciated assets amounts to R1 508 083 (2016: R962 197).

3. Inventories Inventory comprise of the following: Chemicals 4 936 4 747 Consumables 6 071 6 043 Water 2 265 1 448 13 272 12 238 The amount of inventories written-off to net realisable value

through expenditure is Rnil (2016: Rnil).




2017 2016 R’000 R’000 4. Trade and other receivables Trade receivables 208 989 89 929 Total trade receivables 662 864 297 250 Less: Provision for impairment (453 875) (207 321) Personnel advances 39 - Other project receivables 1 096 993 Deposits – Eskom and Centlec 9 395 5 345 219 519 96 267 Trade receivables exceeding payment terms are interest

bearing at the prime overdraft rate plus 200 basis points. Payment terms are generally 30 days from statement date. At year-end the prime overdraft rate was 10,5% (2016: 10,5%). Movements in the provision for impairment of receivables were as follows:

Individually and collectively impaired R’000 Balance at 30 June 2015 96 315 Provision raised during the year 111 006 Balance at 30 June 2016 207 321 Balance at 30 June 2016 207 321 Provision raised during the year 246 554 Balance at 30 June 2017 453 875



Notes to the financial statements for the year ended 30 June 2017 (continued) 4. Trade and other receivables (continued) Gross Impairment Gross Impairment 2017 2017 2016 2016 R’000 R’000 R’000 R’000

At 30 June 2017, the age analysis for trade receivables is as follows:

Not past due 100 713 94 675 64 528 12 957 Past due 30 to 60 days 65 856 21 185 43 190 5 817 Past due 60 to 90 days 70 242 69 832 44 684 44 684 Past due more than 90 days 426 053 268 183 144 848 143 863

Total 662 864 453 875 297 250 207 321 Based on historical default rates, the entity believes that no additional impairment allowances are necessary in respect of trade receivables. The past due amounts not impaired have been received subsequent to year-end. Current Overdue 2017 2017 R’000 R’000

At 30 June 2017, the concentration of credit risk is as follows:

Mangaung Metropolitan Municipality 89 093 366 823 Kopanong Local Municipality 5 580 189 828 Mantsopa Local Municipality 113 88 Other 5 927 5 412

Total 100 713 562 151

2017 2016 R’000 R’000 5. Cash and cash equivalents ABSA Bank* 20 000 40 000 Nedbank* 20 004 50 298 Investec* 21 565 70 432 Current account – First National Bank 6 934 4 397 Call account – First National Bank 22 777 31 146 Money Market account – Standard Bank 42 767 39 678 Petty cash on hand 20 20

134 067 235 971

*



These investments are held on call deposit accounts, which are all fixed for 3 months or less. The investments are not actively traded and are carried at amortised cost. Interest on these accounts varies between 6,45% and 7,73% per annum (2016: between 6,46% and 7,51% per annum). As these investments are short-term highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value they are classified as cash and cash equivalents. The short-term investments has therefore been reallocated to cash and cash equivalents in the statement of financial position for the financial years. The reallocation has not affected or altered the current asset position of Bloem Water.

Interest on the current accounts were at 5% per annum (2016: between 3,75% and 6,4% per

annum). The interest on the money market accounts was 7,55% at year-end (2016: 7,62%).




These investments are held on call deposit accounts, which are all fixed for 3 months or less. The investments are not actively traded and are carried at amortised cost. Interest on these accounts varies between 6,45% and 7,73% per annum (2016: between 6,46% and 7,51% per annum). As these investments are short-term highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value they are classified as cash and cash equivalents. The short-term investments has therefore been reallocated to cash and cash equivalents in the statement of financial position for the financial years. The reallocation has not affected or altered the current asset position of Bloem Water.

Interest on the current accounts were at 5% per annum (2016: between 3,75% and 6,4% per

annum). The interest on the money market accounts was 7,55% at year-end (2016: 7,62%).



Notes to the financial statements for the year ended 30 June 2017 (continued) 2017 2016 R’000 R’000 6. Interest bearing loans and borrowings 6.1 Development Bank of South Africa Total amount outstanding 6 230 7 477 Less: Current portion of loan (1 467) (1 382)

4 763 6 095

The loan is unsecured and bears interest at a fixed rate of 8,91% per annum. Average repayments of R922 648 are made on a six monthly basis. The agreement came into effect on 31 March 2006 and will continue until 31 March 2021.

6.2 Development Bank of South Africa Total amount outstanding - 14 162 Less: Current portion of loan - (14 162)

- -

The loan was unsecured and bears interest at a fixed rate of 10% per annum. Average repayments of R14 510 734 were made on a six-monthly basis. The agreement came into effect on 1 October 2006 and have come to an end at 30 September 2016.

6.3 Nedbank Total amount outstanding 37 864 44 407 Less: Current portion of loan (7 159) (6 550)

30 705 37 857

The loan is unsecured and bears interest at a fixed rate of 9,12% per annum. Average repayments of R5 221 403 are made on a six-monthly basis. The agreement came into effect on 29 December 2006 and will continue until 29 December 2021.

6.4 Sanlam Total amount outstanding 16 510 25 754 Less: Current portion of loan (10 957) (10 170)

5 553 15 584

The loan is unsecured and bears interest at the 6 month JIBAR rate plus 1,45%. Interest varied between 9.117% and 9.408% (2016: 8,133% and 9,117%) per annum. The effective rate at 30 June 2017 was 9,4% (2016: 9,117%). Average repayments of R5 521 732 are made on a six-monthly basis. The agreement came into effect on 9 August 2008 and will continue until 8 August 2018.



Notes to the financial statements for the year ended 30 June 2017 (continued) 2017 2016 R’000 R’000 6. Interest bearing loans and borrowings (continued) 6.5 Nedbank Total amount outstanding 177 579 198 479 Less: Current portion of loan (27 852) (26 477) 149 727 172 002 The loan is unsecured and bears interest at a fixed rate of

9,8% per annum. The loan facility amounts to approximately R270 million and has a draw down arrangement. Average repayments of approximately R19,3 million are made on a six-monthly basis. The agreement came into effect on 1 March 2013 and will continue until 1 March 2023.

6.6 Corporate credit card Total amount outstanding 20 28 Less: Current portion of loan (20) (28) Corporate Credit Card account - - The credit card account is unsecured and bears interest at

17,45% per annum.

6.7 Total loans and borrowings Total amount outstanding 238 204 290 308 Less: Current portion (payable within 12 months) (47 455) (58 771) Total long term interest bearing borrowings 190 749 231 537




2017 2016 R’000 R’000 7. Trade and other payables Trade payables 9 864 8 730 Other payables 127 811 116 990 Accruals 61 073 87 025 SA Revenue Services – Value Added Tax 46 319 12 494 Cost recovery project 1 452 1 543 Payroll accruals 18 967 15 928 137 675 125 720

Trade and other payables are non-interest bearing and are normally settled on 30-day terms.

8. Taxation No provision is made for taxation since Bloem Water is

exempt from tax in terms of section 10(1)(cA) of the Income Tax Act.

9. Revenue Water sales 661 274 469 885 9.1 Other income Other income comprises of income that does not arise in

the course of ordinary activities of Bloem Water. These other income items, inter alia, include skills development grant, profit on disposal of assets, employee rent and cost recoupments, implementation agent fee, insurance proceeds, etc.

Other income 3 745 5 955 Implementation agent fee on Infrastucture Project - 7 176 3 745 13 131




2017 2016 R’000 R’000 10. Operating loss The following amounts have been included in operating loss: Depreciation 60 275 59 920

Internal and external auditors’ remuneration 1 529 1 731

Increase in provision for impairment of trade receivables and doubtful debts written off

246 684

111 660

Employee benefits relating to the pension fund assets and obligations

17 588

13 931

Actuarial losses 461 591 Interest cost on benefit obligation 22 576 17 778 Current service costs

Expected return on plan assets 17 432

(22 881) 13 562

(18 000) Board member emoluments (refer to note 16) 923 1 104 Key management emoluments (refer to note 16) 12 564 13 004 11. Finance income Investment income 7 769 13 572 Interest on trade receivables 43 096 15 359 Interest on cash and cash equivalents 6 470 6 788 57 335 35 719 12. Finance costs Interest on loans and borrowings 24 341 29 140 Borrowing costs capitalised (refer note 2) (9 237) (11 212) Other 13 7 15 117 17 935



Notes to the financial statements for the year ended 30 June 2017 (continued) 2017 2016 R’000 R’000 13. Notes to the statement of cash flows 13.1 Cash flow from operating activities Operating (loss) before finance income and costs (5 227) (46 228) Adjusted for: 333 892 192 238 Depreciation of property, plant and equipment 60 275 59 920 Increase in payroll accrual 3 040 2 110 Increase in provision for impairment of trade receivables

and doubtful debts written off

246 684

111 660 Loss on disposal of property, plant and equipment 476 (451) Movement in defined benefit pension asset 23 417 18 999 Movement in working capital (301 137) (93 986) Increase in inventories (1 035) (1 655) Increase in trade and other receivables (326 840) (88 869) Increase/decrease in infrastructure project receivables 54 751 (30 407) Increase in trade and other payables (28 013) 26 945 27 529 52 024 13.2 Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash

equivalents comprise of cash and cash equivalents and short term investments.

Cash and cash equivalents 134 067 235 971 Corporate credit card (20) (28) 134 047 235 943



Notes to the financial statements for the year ended 30 June 2017 (continued) 14. Financial instruments General risk management principles

Risk management is of critical importance to the entity as it understands that changing market conditions make risk unavoidable. Over the years the entity has sought and implemented a comprehensive risk management process to consistently identify, understand and properly manage risk at all times. Risk policies, limits and control procedures are continuously monitored.

Credit risk

Potential concentrations of credit risk mainly consist of short term investments, cash and cash equivalents and trade and other receivables.

The Board of Bloem Water limits the credit risk arising from short term investments and other cash items by dealing only with reputable well-established financial institutions in South Africa. Credit control procedures are in place which includes assessing credit worthiness of potential or existing customers. The financial positions of customers are monitored on an ongoing basis. Provisions are made for impairment allowances where deemed appropriate.

At 30 June 2017, Bloem Water did not identify any significant concentration of credit risk which had not been insured or adequately provided for. The entity is exposed to significant credit risk due to the nature of its customers and the extensive period it takes to recover amounts due.

Concentration of credit risk of trade and other receivables

At year-end, the following concentrations of credit risk existed with reference to trade and other receivables:

2017 2016 R’000 R’000

Mangaung Metropolitan Municipality 455 916 147 347 Kopanong Local Municipality 195 408 139 868 Naledi Local Municipality - 6 523 Other 11 540 3 512

662 864 297 250 The carrying amount of financial assets represents the

maximum credit exposure. The following accounts are exposed to credit risk at the reporting date:

Trade and other receivables (refer to note 4) 219 519 96 267 Cash and cash equivalent (refer to note 5) 134 067 235 971 Infrastructure project receivable (refer to note 21) 72 384 127 136

425 970 459 374

A maturity analysis of trade receivables are set out in note 4.



Notes to the financial statements for the year ended 30 June 2017 (continued) 14. Financial instruments (continued) Interest rate risk Interest rate risk arises from aspects of the entities namely, variable rate interest bearing loans.

Interest rate fluctuation will directly impact on the results of the entity. The following table identifies those financial instruments that are sensitive to interest rate re-price:

Variable rate interest bearing borrowings Interest rate

per annum 2017

R’000 2016

R’000 Sanlam 9,12% to 9,4% (16 510) (25 754) A change of 100 basis points in interest rates at the reporting date would have increased /

(decreased) profit by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2016.

Increase in interest rate Decrease in interest rate 2017 2016 2017 2016 R’000 R’000 R’000 R’000 Variable rate interest bearing borrowings (165) (257) 165 257 Loans and borrowings to the value of R221 693 (2016: R264 554 919) are fixed interest

rate loans. Therefore a change in interest rate at the reporting date would not affect the profit or loss.

Short term investments to the value of R61 568 525 (2016: R160 730 027) are fixed interest rate investments. Therefore a change in the interest rate at the reporting date would not affect the profit or loss.

Market risk Market risk is the risk that the value of a financial instrument will fluctuate with changing

market prices whether caused by factors specific to the instrument or to general external market changes. The entity has no financial instruments which are affected by changing market prices.

Liquidity risk Liquidity risk is the risk of the entity defaulting on its financial obligations as a result of

insufficient funding capacity in relation to such obligations. The entity manages this risk through maintaining adequate working capital, planning and continuing re-planning of long term project costs and funding requirements.



Notes to the financial statements for the year ended 30 June 2017 (continued) 14. Financial instruments (continued) Maturity profile of financial liabilities Apart from the long-term loans and borrowings, all the entity’s financial assets and liabilities

are expected to mature within a twelve-month period. The undiscounted contractual cash flows of the long-term liabilities are set out below:

Within 12

months Between

1 to 5 years More than

5 years R’000 R’000 R’000 Nedbank 10 443 36 564 - Nedbank 38 595 154 379 38 595 Development Bank of South Africa 1 845 5 534 - Development Bank of South Africa - - - Sanlam 11 631 5 812 - Total 62 514 202 289 38 595 The maturity of the contractual cash flows is the future undiscounted value. Capital management The overall objective of the entity’s capital management strategy is to maintain a strong capital

base so as to maintain stakeholder confidence and to sustain future development of the business. Long-term loans and cash reserves are managed through the process of reviewing all associated risks, including liquidity, credit and interest rate risks. It is also the policy of the entity to maintain a strong debt: equity as this plays an important role in the entity’s credit rating which impacts positively on the cost of funding. Accumulated income is managed through a number of initiatives and processes including planning and budgeting for long-term growth, capital expansion and maintaining or improving cost efficiencies.

2017 2016 R’000 R’000 Capital is monitored on the debt-to-adjusted-capital

ratio.

Total debt 400 901 503 747 Less: Cash and cash equivalents (134 067) (235 943) Net debt 266 834 267 804 Total equity 863 617 826 626 Less: Subordinated debt instruments - - Adjusted capital 863 617 826 626 Debt-to-adjusted-capital ratio 31% 32%



Notes to the financial statements for the year ended 30 June 2017 (continued) 14. Financial instruments (continued) Foreign currency

The entity is not exposed to foreign currency risk as no transactions in foreign currency are entered into.

Fair values

The carrying amounts of the financial assets and financial liabilities approximate their fair values.

Carrying amounts

Set out below are the carrying amounts of all the entity’s financial instruments that are carried in the financial statements:

2017 2016 R’000 R’000 Financial assets

Trade and other receivables 219 519 96 267 Cash and cash equivalents 134 067 235 971 Infrastructure project receivable 72 384 127 136

425 970 459 374

Financial liabilities

Interest bearing loans and borrowings – non-current 190 749 231 537 Trade and other payables 72 389 97 299 Current portion of interest bearing borrowings 47 435 58 743

310 573 387 579

15. Employee benefits

The entity provides retirement benefits for all its permanent employees through a funded defined benefit pension scheme that is subject to the Pension Funds Act, 1956 as amended.

The following tables summarise the components of net benefit expense recognised in the statement of comprehensive income and the funded status and amounts recognised in the statement of financial position for the respective plans:

Net benefit expense

Current service cost (17 432) (13 562) Interest cost on benefit obligation (22 576) (17 778) Expected return on plan assets 22 881 18 000 Net actuarial gain / (loss) recognised in the year (461) (591)

(17 588) (13 931)



Notes to the financial statements for the year ended 30 June 2017 (continued) 2017 2016 R’000 R’000 15. Employee benefits (continued) Present value of the defined benefit obligation (238 221) (219 469) Fair value of plan assets 237 736 216 550 Surplus of plan obligations over plan assets (485) (2 919) Actuarial losses not recognised 48 999 33 053 Defined benefit asset 48 515 30 134 The principal actuarial assumptions used were: % %

Discount rate 10.05 10,29 Salary increase rate 8.02 8,81 Expected rate of return on assets 10.05 10,29 Inflation 7.02 7,81 Post-retirement discount rate 2.84 2,29

2017 2016 R’000 R’000 The assets of the fund as at the valuation date were invested

as follows:

Prudential Inflation Plus 69 436 64 683 Coronation Managed 61 118 54 428 Sanlam Absolute Return 107 303 95 982 Cash at bank 2 342 2 174 Sundry debtors (245) (98) Sundry creditors (2 218) (619) Total assets 237 736 216 550 Limits of the corridor:

Unrecognised actuarial gains at 1 July 33 053 34 009 Limits of the corridor (23 822) (21 947) Excess loss 25 178 11 106 Average remaining lifetime 24 24 Actuarial loss to be recognised (1 057) (461)



Notes to the financial statements for the year ended 30 June 2017 (continued) 2017 2016 R’000 R’000 15. Employee benefits (continued)

Benefit liability

Present value of the defined benefit obligation at 1 July 219 469 192 503

Interest cost 22 576 17 778 Current service cost 17 432 13 562 Employee cost 5 829 5 067 Benefits paid (30 026) (2 709) Risk premiums - - Actuarial loss not recognised 2 941 (6 732)

Defined benefit liability 238 221 219 469

Benefit asset

Fair value of the asset at 1 July 216 550 184 900

Expected return on assets 22 882 18 000 Contributions 41 798 22 727 Benefits paid (30 027) (2 709) Actuarial gains / (losses) not recognised (13 467) (6 368)

Present value of the asset 237 736 216 550 Sensitivity analysis

Assumed pension fund cost trends rates have a significant effect on the amounts recognised in profit or loss. A one percentage point change in assumed pension fund cost trends rates would have the following effects:

1% Increase

Core assumption

1% Decrease

R’000 R’000 R’000

Effect on service cost 174 17 432 (174) Effect on interest cost 226 22 576 (226) Effect on defined benefit obligation 2 382 238 221 (2 382) 2017 2016 2015 2014 2013 R’000 R’000 R’000 R’000 R’000 Present value of defined benefit

obligation

(238 221)

(219 469)

(192 503)

(164 556)

(163 203) Fair value of plan asset 237 736 216 550 184 900 160 369 124 624

(485) (2 919) (7 603) (4 187) (38 579)

The Projected Unit Credit Method as used to place a value on the past service liabilities. The actuary discounted the Fund’s liabilities with reference to the yield on government debt. Reliance was placed on JSE Zero Coupon Nominal Bond Curve as at valuation date. A gross discount rate of 10.05% per annum, based on the effective yield on the above curve at duration 20 years. The salary increase and investment return assumptions reflect a “real return” of 1.88% (10.05% investment return relative to 8.02% salary inflation). There have been no experience adjustments made.



Notes to the financial statements for the year ended 30 June 2017 (continued) 16. Directors and key management emoluments Non-executive directors with their remuneration for the financial year are as follows: 2017

Board member Board

activity fees Expense

allowance Total

remuneration R R R Mr TB Phitsane 119 342 8 276 127 618 Ms P Matete 64 994 263 65 257 Adv LR Bomela 52 333 539 52 872 Dr MJ Ellman 84 740 617 85 357 Ms MSS Maboe Phike 146 401 63 481 209 882 Mr Z Mkiva 72 414 17 635 90 049 Mr N Mokhesi 36 534 4 621 41 155 Ms CM Phetwe 57 361 24 933 82 294 Dr J van der Merwe 133 318 35 296 168 614 767 437 155 661 923 098 2016

Board member Board

activity fees Expense

allowance Total

remuneration R R R Mr TB Phitsane 152 381 15 532 167 913 Ms P Matete 84 823 4 771 89 595 Adv LR Bomela 98 918 698 99 616 Dr MJ Ellman 108 995 643 109 638 Ms MSS Maboe Phike 165 377 45 612 210 989 Mr Z Mkiva 53 465 37 050 90 515 Mr N Mokhesi 41 815 4 807 46 622 Ms CM Phetwe 88 772 1 083 89 855 Mr DJC Sides 6 601 271 6 872 Dr J van der Merwe 172 403 20 013 192 416 973 550 130 481 1 104 031



Notes to the financial statements for the year ended 30 June 2017 (continued) 16. Directors and key management emoluments (continued) Key management personnel with their remuneration for the financial year are as follows:

2017 Key management

Short term employee

benefits

Other long term

benefits

Incentive

bonus

Total

remuneration R R R R

Dr L Moorosi 1 996 585 181 176 436 833 2 614 594 Mr OJ Stadler 1 498 282 336 275 348 006 2 182 563 Mr MG Rapudungoane 1 078 768 231 321 198 602 1 508 691 Mr TS Ngubeni 1 270 860 315 277 301 024 1 887 161 Ms NP Silevu 1 018 507 238 513 242 196 1 499 216 Ms SL Meyer 1 666 311 128 418 622 294 2 417 023 Ms TP Kgantsi 376 058 78 996 - 455 054

8 905 371 1 509 976 2 148 955 12 564 302

2016 Key management

Short term employee

benefits

Other long term

benefits

Incentive

bonus

Total

remuneration R R R R

Dr L Moorosi 1 953 884 181 176 452 227 2 587 287 Mr OJ Stadler 1 439 916 243 054 403 140 2 086 110 Mr MD Kgwale 1 149 093 101 133 425 612 1 675 838 Mr TS Ngubeni 1 076 329 265 876 234 027 1 576 232 Ms NP Silevu 886 077 175 041 77 579 1 138 697 Ms SL Meyer 1 477 444 113 858 405 447 1 996 749 Ms TP Kgantsi 1 317 567 272 287 353 263 1 943 117

9 300 310 1 352 425 2 351 295 13 004 030

Board meetings

Key management personnel are encouraged to attend board meetings. 7 Board meetings were held and attended as follows:

2017 Board member

Board meetings attended

Board activities / committee

meetings

Mr TB Phitsane 4 8 Ms P Matete 5 7 Adv LR Bomela 3 8 Dr MJ Ellman 4 13 Ms MSS Maboe Phike 5 22 Mr Z Mkiva 5 11 Mr N Mokhesi 3 5 Ms CM Phetwe 5 10 Dr J van der Merwe 5 18



Notes to the financial statements for the year ended 30 June 2017 (continued) 16. Directors and key management emoluments (continued)

2016 Board member

Board meetings attended

Board activities / committee

meetings

Mr TB Phitsane 7 10 Ms P Matete 6 3 Adv LR Bomela 5 7 Dr MJ Ellman 6 16 Ms MSS Maboe Phike 7 16 Mr Z Mkiva 6 7 Mr N Mokhesi 3 7 Ms CM Phetwe 7 5 Mr DJC Sides 0 2 Dr J van der Merwe 5 19 16.1 Number of employees

According to the payroll system the entity had 383 (2016: 397) employees (including learnerships) as at 30 June 2017.

17. Commitments and contingencies 2017 2016 R’000 R’000 Commitments Estimated capital expenditure 182 010 206 401

Approved and contracted 43 273 75 064 Approved not yet contracted 138 737 131 337 The capital expenditure is expected to be incurred as follows: 182 010 206 401

Within one year 182 010 206 401 Between one and five years - - Capital commitments, excluding interest capitalised, include all projects for which specific

Board approval has been granted up to the reporting date. Projects still under investigation for which specific Board approval has not yet been granted are excluded. A commitment of R410 million (Including VAT) have been made on the construction of steel Pipeline Parallel existing Caledon/Bfn PCP Line for 33.7km length, 1000mm diameter from Lieuwkop to Brandkop. The appointment is subject to confirmation of financial allocation per year as planned from the Department of Water and Sanitation.

The expenditure will be financed through general external borrowings, available cash resources

and internally generated funds.



Notes to the financial statements for the year ended 30 June 2017 (continued) 18. Related parties

Bloem Water purchases raw water from the Department of Water and Sanitation (“the Department”). All entities and directorates of the Department are seen as related parties to Bloem Water. Water sales are made to Municipalities in the Free State Province.

The Board members and key management, as identified in note 16, are considered related parties.

The following table provides the total amount of transactions, which have been entered into with related parties for the related financial year:

2017 2016 R’000 R’000 Statement of comprehensive income

Transactions with the Department of Water and Sanitation

Water abstraction cost 16 406 15 627 Water research cost 4 332 4 344 Catchment management cost 874 626 Implementation fee received on infrastructure project with

Department of Water and Sanitation.

-

7 176

Transactions with other related parties

Electricity cost - Eskom and Centlec 93 140 96 585 Water sales to Municipalities 641 016 458 114 Provision for impairment raised for Municipalities 448 652 205 683

Board members’ and key management emoluments are set out in note 16.

Statement of financial position

Amounts owed to The Department of Water and Sanitation 10 773 9 651

Amounts owed by Municipalities (refer note 14) 651 527 293 738

Deferred income recognised on Department of Water and Sanitation Grant

25 021

87 719

Infrastructure project receivable from Department of Water and Sanitation

72 384

127 136

19. Operating leases

The entity rents printing equipment under long term non-cancellable operating leases since January 2013.

Minimum future lease payments

Within one year 353 707 Two to five years - 353 More than five years - -

353 1 060



Notes to the financial statements for the year ended 30 June 2017 (continued) 2017 2016 R’000 R’000 20. Deferred income

Department of Water and Sanitation 25 022

87 719

Opening balance 87 719 87 719 Grant received during financial year 14 991 - Completed projects credited against PPE (77 688) - Closing balance 25 022 87 719

Funds received during the financial year were for the Steel bypass line parallel to existing Caledon/Bfn PCP line for 35km from LieuwKop to Brandkop. The Rustfontein to Botshabelo Pipeline project has been completed and credited against property, plant and equipment as per accounting standards.

21. Infrastructure project receivable Department of Water and Sanitation

Funds received from the Department of Water and Sanitation and Ngwathe Local Municipality(excluding VAT)

(520 603)

(465 851)

Funds utilised in respect of the project (excluding VAT) 546 459 546 459 Implementation agent fee (excluding VAT) 46 528 46 528

Funds advanced by Bloem Water in respect of the project 72 384 127 136

Bloem Water has been appointed as an implementing agent by the Department of Water and Sanitation for the construction of public toilets and the eradication of the bucket system in the Free State.

Bloem Water is entitled to receive an implementation agent fee amounting to 10% of the construction fee incurred. The agent fees for the financial year amounted to R0 (2016: R1,46 million) (excluding VAT). The agent fee income is included in other income on the statement of comprehensive income.

In terms of the implementation agent agreement, the following funds have been committed.

Funds committed by Department of Water and Sanitation (including VAT).

2013/14 230 000 2014/15 335 337 2015/16 * Funds for 2015/16 were committed in terms of agreed

scope

Funds received at year end (including VAT). 593 499 531 071



Notes to the financial statements for the year ended 30 June 2017 (continued) 2017 2016 R’000 R’000 21. Infrastructure project receivable (continued)

Funds utilised in respect of the project (including VAT) 622 963 622 963

Implementing agent fee being 10% of construction cost (including VAT)

53 042

53 042

22. Events after the balance sheet date

There were no significant events that have occurred between the reporting date and the date of signing the financial statements.

23. Going concern

We draw attention to the fact that Bloem Water made a profit of R36,9 million for the current financial year, however this was after taking into account the finance income which is based on the receivables that are significantly impaired due to doubtful collection. Consequently, the entity made an operational loss of R5.2 million.

At year-end, the company’s total assets still exceeded its total liabilities with approximately R864 million and the current assets exceeds its current liabilities with approximately R254 million. The entity will have sufficient cash resources to settle its short term liabilities as they become due in the normal course of business if debt is settle by due date. However the current declining cash flow from operations along with significant increase in impairment of trade receivables due to the outstanding accounts of major municipalities which deteriorated at year end in comparison to the beginning of the year, could result in going concern uncertainty.

The financial statements have been prepared on the basis of accounting policies applicable to a going concern since the Board has every reason to believe that Bloem Water has adequate resources in place to continue in operation for the foreseeable future.

24. Contingent liabilities

Bloem Water is involved in an ongoing litigation regarding the cancellation of a service contract in the prior year due to non-performance of the supplier. The supplier issued a counter claim against Bloem Water for contract breach. Management has not raised a liability in the financial statements as the outcome of this claim is not yet know.

Bloem Water is also involved in a number of pending labour arbitration matters. No liability has been recognised in the financial statements because management is of the view that the existence of the possible obligations will only be confirmed by the occurrence or non-occurrence of uncertain future events not within the control of Bloem Water.



Detailed statement of comprehensive income for the year ended 30 June 2017 2017 2016 R’000 R’000 Revenue

Bulk water sales 661 274 469 885 Water purchased (21 004) (21 166) Water opening stock 1 448 1 728 Water closing stock (2 265) (1 448) Water resource expenditure 21 821 20 886 Gross income 640 270 448 719 Other income 3 745 13 131 Infrastructure project - Implementation agent fee - 7 176 Other income 3 871 5 146 Rental income 351 358 Profit/(loss) on sale of assets (477) 451 Expenses Impairment of trade receivables (246 684) (111 660) Chemicals (15 130) (14 383) Depreciation (60 275) (59 920)

Distribution costs (14 367) (15 298)

Fuel costs (4 904) (6 151) Vehicle and transport costs (9 463) (9 147)

Electricity (93 140) (96 585) Repairs and maintenance (11 473) (11 460)

Staff costs (170 300) (150 691)

Payroll accrual (3 040) (2 111) Medical expenses (11 020) (8 656) Salaries and wages (158 813) (141 422) Training and development (362) (2 230) Defined benefit expenses 2 935 3 728

Schedule not covered by audit opinion



Detailed statement of comprehensive income for the year ended 30 June 2017 (continued)

2017 2016 R’000 R’000 Other operating expenses (37 873) (48 081) Advertising 370 413 Audit fees 1 529 1 731 Bank charges 103 102 Bursaries and donations 85 75 Cleaning costs 325 372 Computer and IT expenditure 2 195 3 570 Conference seminars and workshops costs 441 870 Consulting costs 3 780 2 058 Contractors 109 391 Courier and postage 7 5 General and administration expenses 946 1 706 Insurance 2 416 1 698 Legal and contract costs 3 898 2 896 Marketing costs 2 153 4 006 Printing and stationary 1 741 2 126 Programmes and initiatives 9 554 10 330 Protective clothing and uniforms 47 741 Relocation costs 15 60 Rent paid – heavy duty equipment 620 412 Safety and security 108 1 328 Infrastructure project – consultation expenses 2 402 7 610 Service contracts 103 103 Subscriptions licenses and membership fees 641 450 Telephone and fax 1 958 1 674 Tools and equipment 93 417 Travelling and stakeholder visits 2 231 2 937 Operating profit/(loss) (5 227) (46 228) Finance income 57 335 35 719 Finance expenses (15 117) (17 935) Interest on bank loans and overdrafts (15 104) (17 928) Other finance costs (13) (7) Profit/(Loss) for the year 36 991 (28 444) Total comprehensive profit/(loss) for the year 36 991 (28 444)

Schedule not covered by audit opinion

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