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Water BoardsWater Boards

Annual Reports for 2008/2009Annual Reports for 2008/2009

Presentation to the Portfolio Committee: Water & Environment

Presentation by

Ms Thoko SigwazaChief Director: Institutional Oversight

03-04 May 2010

OVERVIEW of WBs (1)OVERVIEW of WBs (1)Mandate and legislative frameworkMandate and legislative framework

• WBs derive their mandate from the Water Services Act, 1997

• WBs have to act within the following legislative framework:Water Services ActPFMA & Treasury RegulationsMunicipal Finance Management ActDivision of Revenue ActMunicipal Structures & Systems Act

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OVERVIEW of WBs (2)OVERVIEW of WBs (2)Establishment and disestablishmentEstablishment and disestablishment

• WBs are established and disestablished in terms of section 28 of the Water Services Act, 1997

• List of Established WBs Amatola NamakwaBloem OverbergBotshelo PelladriftBushbuckridge RandLepelle Northern SedibengMagalies UmgeniMhlathuze

• List of Disestablished WBs Albany Coast Ikangala

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OVERVIEW of WBs (3)OVERVIEW of WBs (3)DWA’s oversight role over WBsDWA’s oversight role over WBs

List of Documents submitted to the Minister Legislation

Policy Statements Sec 39 of Water Services Act, 1997

Shareholder Compacts Treasury Regulation 29.2

Corporate Plan & projection of revenue, expenditure & borrowings

Sec 52 of PFMA, 1999

Treasury Regulation 29.1

Business Plans Sec 40 of Water Services Act, 1997

Quarterly Reports Treasury Regulation 29.3.1

Annual Reports Sec 44 of Water Services Act, 1997

Sec 55(1)(d) & 65 of PFMA, 1999

Tariff Increases Sec 42 of MFMA, 2003

Financial misconduct procedures report Treasury Regulation 33.3.1

Materiality & Significance Framework Treasury Regulation 28.3.1

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OVERVIEW of WATER BOARDS (4)OVERVIEW of WATER BOARDS (4)• WB’s are separate legal institutions that have their own

boards of governance, own assets and are required to be self funding

• They are key strategic organisations that primarily provide bulk potable water services to water service authorities (municipalities), other water service institutions and major customers within a designated service area

• The WB’s vary considerably in size, activities, customer mix, revenue base and capacity - some have been around for more than 100 years, others are still considered to be new/emerging

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OVERVIEW of WATER BOARDS (5)OVERVIEW of WATER BOARDS (5)

• Most of the older and more established WB’s are centered on areas where there are significant urban development nodes (e.g. Rand Water, Umgeni Water, Bloem Water etc.)

• Some WB’s operate in more demographically diversified areas where there is a considerable urban or rural mix in the customer base

• WB’s service areas typically transcend the boundaries of individual WSA’s and in a number of cases even provincial boundaries (e.g. Rand Water supplies services to Gauteng, parts of Mpumalanga, the Free State and North West province)

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OVERVIEW of WBs (6)OVERVIEW of WBs (6)Chairpersons and Chief ExecutivesChairpersons and Chief Executives

WATER BOARD CHAIRPERSON CHIEF EXECUTIVE

Amatola Ms RN Mlonzi Ms N Mnukwa

Bloem Dr B Malakoane Acting: Mr O Stadler

Botshelo Ms GS Lebeko-Ratlhagane Mr S Bokaba

Bushbuckridge Mr P Ngomana Acting: Mr M Letswalo

Lepelle Northern Cllr MD Monakedi Mr LA Leballo

Magalies Prof MI Jahed Acting: Mr LM Motlhodi

Mhlathuze Ms D Myeni Acting: Mr V Botes

Namakwa Acting: Mr R Blake Acting: Mr C Carstens

Overberg Mr Y Emeran Mr AP Potgieter

Pelladrift Mr NR Williams Vacant

Rand Vacant Mr P Sechemane

Sedibeng Vacant Mr MF Ubisi

Umgeni Mr A Mahlalutye Mr M Msiwa

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RESPONSIBILITY FOR WATER SUPPLY: RESPONSIBILITY FOR WATER SUPPLY: WBs vis-à-vis MUNICIPALITIESWBs vis-à-vis MUNICIPALITIES

• The responsibility for water & sanitation provision rests with the Municipality as the Water Services Authority

• WB’s provide bulk treated water to Municipalities (WSA’s)• WSA’s have a prerogative to either use the services of WBs as Water

Services Provider or not. In some areas there is no alternative e.g. Gauteng

• WSA’s determine their capacity to do this by following a process i.t.o. sec 78 of the Municipal Systems Act

• If a WSA decides to use a WB, then a contract must be signed (section 19 of the WSAct) w.r.t. quantity, quality & the delivery point of water

• A Model Bulk Water Service Provider Contract (fair and balanced) was developed between SAAWU and SALGA for this purpose

• In some instances WB's act as retail water & sanitation WSP

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RELATIONSHIP WITH THE MINISTERRELATIONSHIP WITH THE MINISTER

• Minister appoints Board members & Chairpersons i.t.o. sec 35(1) of WSA

• The Board is accountable to the Minister• Minister signs a Shareholder’s Compact with WB’s & raises

issues of concern• Minister meets with new Boards, when appointed and also

meeting during the course of the year with Chairpersons of WB’s to discuss strategic issues

• Board members’ performance are assessed on an ongoing basis via reports submitted to the Minister (annual report, shareholder compact, quarterly report, business plans etc)

• Minister appointed a task team to look at governance problems at water boards, their work is expected to be completed at the end of May 2010

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SUMMATION of ANNUAL REPORTS SUMMATION of ANNUAL REPORTS (AR) 2008/09 (1)(AR) 2008/09 (1)

• QUALIFIED AUDITSQUALIFIED AUDITSAmatola WaterBushbuckridge Water (with emphasis of matter)

Namakwa (with emphasis of matter)• UNQUALIFIED AUDITSUNQUALIFIED AUDITS

Albany Coast Overberg WaterBloem Water Pelladrift WaterLepelle Northern Water Rand WaterMagalies Water Sedibeng WaterMhlathuze Water Umgeni Water

• Botshelo WaterBotshelo Water – The auditor-general provided a disclaimer of opinion as they were unable to obtain sufficient evidence to provide a basis for an audit opinion.

• Consolidated net profitConsolidated net profit – Exceeded budgeted profit by R68 million

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SUMMATION OF ARs 2008/09 (2)SUMMATION OF ARs 2008/09 (2)Consolidated financial performanceConsolidated financial performance

Total ’09 Total ‘08 % difference

Volumes (kl) 2 397 825 443 2 311 264 464 3,7%

Sales R7,7 billion R6,8 billion 12.5%

Net income R1,3 billion R1,4 billion -5.1%

Fixed Assets R11 billion R10,1 billion 9.5%

Investment R607 million R1,1 billion -47.2%

Current Assets R5,3 billion R4 billion 31.5%

Current Liabilities R3,3 billion R1,9 billion 74.5%

Long term debt R2,7 billion R3,9 billion -30.7%

Cash on Hand R1,9 billion R1,9 billion 0.4%

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SUMMATION OF ARs 2008/09 (3)SUMMATION OF ARs 2008/09 (3)Ratios Ratios

2009 2008

Gross profit percentage of sales 66.42% 67.58%

Net profit percentage of sales 17.21% 20.41%

Return on Asset (Net income/total assets) 7.79% 9.12%

Return on Equity (Net income/equity) 12.47% 15.05%

Current Ratio 1.59 2.11

Debtors days 69 61

Creditors days 173 184

Debt to assets (total debt / total asset) 38% 39%

Debt to equity (total debt / total equity) 60% 65%

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SUMMATION OF ARs 2008/09 (4) SUMMATION OF ARs 2008/09 (4) ANNUAL SURPLUS/DEFICIT IN R’000ANNUAL SURPLUS/DEFICIT IN R’000

SURPLUS DEFICIT

Albany Coast Water 1 069

Amatola Water 9 720

Bushbuckridge Water 6 013

Bloem Water 44 162

Botshelo Water 7 936

Lepelle Northern Water 40 283

Magalies Water 31 306

Mhlathuze Water 34 282

Namakwa Water 10 796

Overberg Water 2 404

Pelladrift Water 992

Rand Water 599 641

Sedibeng Water 40 679

Umgeni Water 527 014

CONSOLIDATED 1 343 440 12 857

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WATER BOARD CAPEX BUDGET FOR NEXT 5 YEARS

• PLANNED CAPEX SPENDING OVER THE NEXT 5 YEARS IS ESTIMATED AT R10 BILLION

• SHORT AND LONG TERM CASH RESERVES IS R4.4 BILLION

• LIKELY BORROWING TO FINANCE CAPEX IS R5.7 BILLION

• SURPLUS MUST BE LOOKED AT IN RELATIONSHIP TO THE ASSET MANAGEMENT PLAN, TO ENSURE EFFECTIVE GEARING OF DEBT, IF BORROWING IS EXCESSIVE, FUTURE TARIFFS WILL BE UNAFFORABLE

WATER BOARDS 2010 2011 2012 2013 2014 TOTALAmatola 70,585 64,145 54,765 1,100 0 190,595Bloem 113,700 133,400 57,000 35,700 90,900 430,700Botshelo 1,009 1,119 1,242 1,251 1,251 5,872Bushbuckridge 14,225 14,450 12,481 24,330 39,210 104,696Lepelle Northern 179,403 24,958 19,767 14,332 14,332 252,792Mhlathuze 314,073 33,888 62,302 34,251 0 444,514Magalies 90,000 90,000 0 164,197 0 344,197Overberg 7,815 9,520 10,610 3,470 5,150 36,565Pelladrift 6,365 11,040 8,400 11,070 3,450 40,325Rand 1,000,000 1,000,000 1,200,000 1,200,000 1,200,000 5,600,000Sedibeng 13,140 5,100 3,515 510 515 22,780Umgeni 655,215 642,585 431,171 474,649 505,910 2,709,530TOTAL 2,465,530 2,030,205 1,861,253 1,964,860 1,860,718 10,182,566

R 000

PER KILOLITER SOLD

Rand Water 1.38 0.58 0.34 0.04 0.09 0.11 1.56 0.41 286,014 490,551Umgeni Water 1.93 0.20 0.10 0.24 0.08 0.14 0.19 1.27 100,201 504,189Sedibeng Water 3.24 1.23 0.39 0.30 0.15 0.16 1.88 0.51 233,183 189,230Lepelle Northern Water 2.71 0.78 0.33 0.00 0.05 1.24 0.24 0.46 236,780 305,510Magalies Water 3.16 0.00 0.43 0.00 0.30 0.40 0.55 0.40 0 189,981Bloem Water 1.95 0.59 0.26 0.11 0.11 0.37 0.16 0.51 231,198 388,867Mhlathuze Water 1.44 0.44 0.27 0.08 0.08 0.23 0.00 0.36 239,955 543,449Amatola Water 5.54 1.05 0.22 1.38 0.24 0.24 1.02 0.25 124,012 117,734Bushbuckridge Water 2.94 1.39 0.16 0.38 0.38 0.29 0.54 0.25 154,885 111,289Botshelo Water 2.43 1.51 0.00 0.10 0.00 0.05 1.18 0.35 156,931 103,687Overberg Water 3.52 0.80 1.62 0.24 0.28 0.36 0.08 0.38 63,696 79,545Namakwa Water 8.71 1.51 2.14 0.06 0.12 4.01 0.00 -3.72 114,895 76,316Albaney Coast Water 7.87 1.35 1.64 2.07 0.00 2.29 0.00 -1.87 128,833 95,356Pelladrift Water 1.93 0.00 0.00 0.00 0.00 0.00 0.00 -0.23 0 423,061Medium (consolidated) 1.79 0.56 0.30 0.11 0.10 0.19 1.11 0.56 210,938 385,125Highest 8.71 1.51 2.14 2.07 0.38 4.01 1.88 1.27 286014 543449Lowest 1.38 0.20 0.10 0.04 0.05 0.05 0.08 -3.72 63696.00 76316

Surplus/ -Deficit

Labour product

Average labour WATER BOARD

Operating cost

Direct labour Energy

Mainte-nance

Chemicalpurifiy

Deprec- iation Raw water

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BENCHMARKING OF WATER BOARDS COSTBENCHMARKING OF WATER BOARDS COST

OVERSIGHT of WBs:OVERSIGHT of WBs:Financial componentsFinancial components

• Financial performance of WBs are appraised through, inter alia, the ARs

• DWA provides the Minister with comments on the ARs

• Minister notes content of ARs and approves tabling of ARs in Parliament

• DWA provides WB’s with written comments & questions re ARs

• Individual meetings are held with those WBs where serious matters require attention or intervention

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OVERSIGHT of WBs:OVERSIGHT of WBs:Non-financial componentsNon-financial components

• Total bulk potable water volume supplied by WBs: 2.39 billion kiloliters per annum

• Total capacity of 3.16 billion kiloliters per annum is available

• Total authorised abstraction: 2.36 billion cubic meters per annum

• WBs under spent on CAPEX by an average of 14.5%, except for Rand, Sedibeng and Amatola

• Rand Water contributes 60% to consolidated turnover, Umgeni 20% and other 11 WBs 20%

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ACHIEVEMENTSACHIEVEMENTS• Most WB’s have sufficient liquidity to cover short

to medium term obligations• Consolidated profit at year ended June 2009 was

5.4% in excess of budgeted profit• No State guarantees issued to support water

boards• No significant demand on Government to finance

expansion of bulk infrastructure• Blue Drop Certificates achieved by most WBs on

Drinking Water Quality

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MUNICIPAL DEBT OWNED TO WATER BOARD

DORA (Division of Revenue Act) requires that the equitable share for water be paid directly to municipalities. Where municipalities face financial difficulty, they use the water equitable share for other purposes, leaving water debt owed to water boards and DWA unpaid. Changes in legislation should be considered where the equitable share is paid directly to water boards and DWA for water provided.

Albany Coast 309,083 309,083 0 0 0 0 0Amatola 16,925,810 15,521,574 1,404,236 0 0 0 1,404,236Bloem Water 68,669,111 20,925,227 1,742,590 2,589,485 1,077,609 42,334,200 47,743,884Botshelo Water 39,976,842 4,587,385 3,875,856 4,581,451 1,111,878 25,820,271 35,389,457Bushbuckridge Water 184,907,094 7,455,683 7,689,505 7,152,384 6,889,605 155,719,917 177,451,411Lepelle Northern Water 244,856,005 22,666,850 8,940,899 8,523,125 8,957,373 195,767,758 222,189,155Magalies Water 6,472,092 5,090,242 1,331,958 21,831 5,821 22,240 1,381,850Mhlathuze Water 3,673,773 3,673,773 0 0 0 0 0Namakwa Water 1,493,861 1,493,861 0 0 0 0 0Overberg Water 732,093 732,093 0 0 0 0 0Pelladrift Water 227,531 101,115 126,416 0 0 0 126,416Sedibeng Water 221,495,081 27,534,505 24,501,219 21,203,346 32,687,848 115,568,163 193,960,576Rand Water 470,088,903 450,739,212 16,565,485 2,784,206 0 0 19,349,691Umgeni Water 135,858,265 130,343,101 5,515,164 0 0 0 5,515,164TOTAL 1,395,685,544 691,173,704 71,693,329 46,855,829 50,730,134 535,232,549 704,511,840

DEBTORS AGE ANALYSIS 100.00% 49.52% 5.14% 3.36% 3.63% 38.35% 50.48%

DAYS 120+ ARREARS

WATER BOARDS MUNICIPAL DEBT SUMMARY - MARCH 2010

OUTSTANDING BALANCE CURRENT DAYS 30 DAYS 60 DAYS 90

CHALLENGESCHALLENGES• Refurbishment & extension of infrastructure will require loan funding • A number of WBs experience water quality problems in the resource• 7 WBs require additional authorisations for abstraction• 2 WBs have debt/equity ratios exceeding 100%• 5 WBs have surplus/revenue ratio of under 10%• Namakwa and Pelladrift have net losses and are not financially

sustainable - require solutions• Staff retention & skills shortages at remotely located WBs• Not all WSAs have Bulk Water Service Provider Contracts• Trade receivables are generally high due to debt owed to WBs by some

municipalitiesFailure of debtor’s collection in weaker WBs affects viabilityPoor municipalities use equitable share for other purposes, even after water services are provided

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SOLUTIONS SOLUTIONS • Audit the CAPEX plan to ensure that service delivery is secured over

the medium to long term.• Intake water quality problems will have to be resolved with firm

application of legislation and support from CoGTA as most of the water quality problem are as a result of municipal discharge

• Namakwa will be provided with grant funding of R40 million (over three years from the current financial year) to refurbish infrastructure, once this is done consideration will be given to merged Namakwa with another water board to benefit from economies of scale

• Outstanding water service agreement will have to be resolved with the support of CoGTA

• With regards to skills shortages at remotely located water boards, the water boards could consider pooling skills and deploying them to where needed

• As a short term measure get support of National Treasury and CoGTA to mediate with municipalities for debt payment

• In the long term an amendment to DORA should allow for DWA to withhold equitable share from municipalities in arrears

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THANK YOU

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