ANNUAL REPORT PRESENTATION

ANNUAL REPORT PRESENTATIONANNUAL REPORT PRESENTATION

Celebrating a decade of Celebrating a decade of water services delivery water services delivery

in a democracyin a democracy

TARIFFSTARIFFS

K NAICKERK NAICKERTARIFFSTARIFFS

K NAICKERK NAICKER

WATER BOARD ACCOUNTABILITYWATER BOARD ACCOUNTABILITY

P CAMAYP CAMAYWATER BOARD ACCOUNTABILITYWATER BOARD ACCOUNTABILITY

P CAMAYP CAMAY

ANNUAL REPORTANNUAL REPORT

H KASANH KASAN

CONTENTCONTENT

• Rand Water profileRand Water profile• Customer Sales profileCustomer Sales profile• Sales trendSales trend• Cost of raw waterCost of raw water• Projected input costs vs Projected input costs vs

CPIXCPIX• Gross profitGross profit• ProfitabilityProfitability

CONTENTCONTENTCONTCONT

•Value creationValue creation

•Return on assetsReturn on assets

•Business performance IndicatorsBusiness performance Indicators

•Performance HighlightsPerformance Highlights

•Social responsibility trendSocial responsibility trend

•Future developmentsFuture developments

•Decade of Service Delivery - ReviewDecade of Service Delivery - Review

Rand Water profileRand Water profile• Largest water utility in AfricaLargest water utility in Africa• Bulk water supply increase to 3 414 Bulk water supply increase to 3 414

MM /d (3340M/d (3340M /d : 2003)/d : 2003)• Supplies 12 million people dailySupplies 12 million people daily• Sole area of service 18 000 kmSole area of service 18 000 km²²• 13 000 km² joint area of service with 13 000 km² joint area of service with

other Water Boardsother Water Boards

Rand Water profileRand Water profilecontcont

• Turnover : R3 258 bn ( R2 884 bn : 2003)Turnover : R3 258 bn ( R2 884 bn : 2003)

• Assets : R5 232 bn (R4 892bn : 2003)Assets : R5 232 bn (R4 892bn : 2003)

• Staff employed : 3 097 (3 108 : 2003)Staff employed : 3 097 (3 108 : 2003)

• Corporate ISO 9001 : 2000 accreditedCorporate ISO 9001 : 2000 accredited

• All plants ISO 14001 accredited All plants ISO 14001 accredited

CUSTOMER SALES PROFILECUSTOMER SALES PROFILE

SALES TRENDSALES TREND

TOTAL RAND WATER SALES 5-YEAR GROWTH

0

2.96%

4.60%

6.25%

2.22%

2,600

2,800

3,000

3,200

3,400

3,600

1999 / 2000 2000 / 2001 2001 / 2002 2002 / 2003 2003 / 2004

FINANCIAL YEAR

TOTA

L SA

LES

- AA

DD (M

l/day

)

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%

PERC

ENTA

GE

GRO

WTH

TOTAL RAND WATER SALES (AADD)

PERCENTAGE GROWTH (YEAR ON YEAR)

COST OF RAW WATERCOST OF RAW WATERC O S T O F R A W W A T E RC O S T O F R A W W A T E R

R e v e n u e v s R a w W a t e r - i n c r e a s e s i n u n i t c o s t s

4 . 0

6 . 0

8 . 0

1 0 . 0

1 2 . 0

2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4

y e a r e n d i n g 3 0 J u n e

R e v e n u e R a w w a t e r

R 2 1 m R 1 0 mR 1 2 m

C u m u l a t i v e c o s t s a b s o r b e d R 7 5 m

T o t a l R 7 5 m

R 3 2 m

PROJECTED INPUT COSTS PROJECTED INPUT COSTS VS CPIXVS CPIX

Projected input costs vs CPIX

-

2.0

4.0

6.0

8.0

10.0

2004 2005 2006 2007 2008 2009 2010

year to 30 June

perc

ent

Raw water Energy Labour Chemicals CPIX

GROSS PROFITGROSS PROFIT

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000000

2000 2001 2002 2003 2004

52.5

53

53.5

54

54.5

55

55.5

56

56.5

57

57.5

58

Gross Profit

Gross margin (%)

PROFITABILITYPROFITABILITY

0

100

200

300

400

2000 Actual 2001 Actual 2002 Actual 2003 Actual 2004 Actual

0

5

10

15

Profit for the year (R'm) Profit margin (%)

VALUE CREATIONVALUE CREATION

-265683

-155015

-99282

-55787

-300000

-250000

-200000

-150000

-100000

-50000

0R

'000

2000/1 2001/2 2002/3 2003/4

Year

RETURN ON ASSETSRETURN ON ASSETS

5.1

7.5

910

0

2

4

6

8

10

12

2001 2002 2003 2004

Year

%%

PROFITABILITYPROFITABILITY

Why generate large surplus (profit) ?Why generate large surplus (profit) ?

• Capital investment planned for next 5 years = R2,5 Capital investment planned for next 5 years = R2,5 billionbillion

• To access funds (debt) at lowest cost to fund To access funds (debt) at lowest cost to fund capital investmentcapital investment

• No loans from governmentNo loans from government• No guarantees from governmentNo guarantees from government• Ensure sustainability Ensure sustainability • Not profiteering but recovering cost of capitalNot profiteering but recovering cost of capital

BUSINESS PERFORMANCE BUSINESS PERFORMANCE INDICATORSINDICATORS

KPIKPI UnitUnit 20012001 20022002 20032003 20042004

Profit MarginProfit Margin %% 3,83,8 7,87,8 9,79,7 11.511.5

Net income per EmployeeNet income per Employee R’ 000R’ 000 25.8325.83 62.3062.30 90.4490.44 121.08121.08

Interest coverInterest cover XX 1,61,6 2.12.1 2.82.8 3.63.6

Return on AssetsReturn on Assets %% 5.15.1 7.57.5 9.09.0 9.99.9

Ave costs of capitalAve costs of capital %% 13.4513.45 13.0013.00 13.0013.00 12.0012.00

BUSINESS PERFORMANCE INDICATORSBUSINESS PERFORMANCE INDICATORSCONT

Debt/EquityDebt/Equity %% 99%99% 98%98% 84%84% 69%69%

Credit RatingCredit Rating AAAA AAAA AAAA AAAA

Assets T/O RatioAssets T/O Ratio XX 0.60.6 0.60.6 0.70.7 0.80.8

Current RatioCurrent Ratio XX 1.11.1 1.21.2 1.51.5 1.81.8

Operational costs/Operational costs/kℓkℓ soldsold CentsCents 9090 98.998.9 9898 106106

KPIKPI UnitUnit 20012001 20022002 20032003 20042004

BUSINESS PERFORMANCE INDICATORSBUSINESS PERFORMANCE INDICATORS

Employee Employee Productivity RatiosProductivity Ratios

20012001 20022002 20032003 20042004

EmployeesEmployees 32493249 31053105 31083108 30973097

KK soldsold 1,097,437,8361,097,437,836 1,147,865,3471,147,865,347 1,216,342,5851,216,342,585 1,252,828,2631,252,828,263

KK per employee per employee 337,777337,777 369,683369,683 391,359391,359 404,530404,530

RevenueRevenue

R’000R’000

2,180,1502,180,150 2,480,7272,480,727 2,884,4052,884,405 3,258,0553,258,055

Income per Income per employeeemployee

R’000R’000

671,02671,02 798,95798,95 928,06928,06 1052,001052,00

Profit per employeeProfit per employee

R’000R’000

25.8325.83 62.3062.30 90.4490.44 121.08121.08

PEFORMANCE HIGHLIGHTSPEFORMANCE HIGHLIGHTS

• Surplus : R375 millionSurplus : R375 million

• Revenue: R3 258 millionRevenue: R3 258 million

• Cash generated from operationsCash generated from operations

• Increase in salesIncrease in sales

33%

13%

9,1%

2,2%

PERFORMANCE HIGHLIGHTSPERFORMANCE HIGHLIGHTScontcont

• Customer SLA evaluationCustomer SLA evaluation

• Customer Satisfaction IndexCustomer Satisfaction Index

• Training spend ( as % of Total Payroll)Training spend ( as % of Total Payroll)

• Designated groups at managementDesignated groups at management

• BEE spendBEE spend

2003 2004

89%

77%

6,6%

60%

42,3%

88%

77%

7%

64%

46%

SOCIAL RESPONSIBILITY TRENDSOCIAL RESPONSIBILITY TREND

CategoriesCategories 20022002 20032003 20042004

Schools ProgrammeSchools Programme R445 692R445 692 R615 503R615 503 R639 279R639 279

Health HIV/AidsHealth HIV/Aids 485 002485 002 505 248505 248 R637 652R637 652

Community DevelopmentCommunity Development R325 125R325 125 R361 435R361 435 R548 055R548 055

CBPD ( Part sourced CBPD ( Part sourced externally)externally)

R18 824 178R18 824 178 R16 281 989R16 281 989 R14 840 968R14 840 968

FoundationFoundation N/AN/A N/AN/A R3 000 000R3 000 000

Total SpentTotal Spent R20 079 992R20 079 992 R17 764 175R17 764 175 R19 665 954R19 665 954

Jobs createdJobs created 435435 648648

FUTURE DEVELOPMENTSFUTURE DEVELOPMENTS

RAND WATER SERVICESRAND WATER SERVICES

• Providing water services value adding to Providing water services value adding to municipalities in South Africamunicipalities in South Africa

• Back-up supply for SASOL R40 million Back-up supply for SASOL R40 million pipelinepipeline

• NEPAD initiativesNEPAD initiatives

FUTURE DEVELOPMENTSFUTURE DEVELOPMENTScont

INFRASTRUCTURE PROJECTSINFRASTRUCTURE PROJECTS

• BRAKFONTEIN/RUSTENBURG 80 KM PIPELINEBRAKFONTEIN/RUSTENBURG 80 KM PIPELINE : : R450 million currently doing environmental R450 million currently doing environmental impactimpact

• WESTERN HIGHVELD REGION WESTERN HIGHVELD REGION PROJECTPROJECT : :

R113 million of which R40 million is from Rand R113 million of which R40 million is from Rand WaterWater

FUTURE DEVELOPMENTSFUTURE DEVELOPMENTSCONT.

• A total of R2,5 billion capital A total of R2,5 billion capital investment is planned over the next 5 investment is planned over the next 5 yearsyears

• R962 million in infrastructure R962 million in infrastructure development projects in progressdevelopment projects in progress

DECADE OF SERVICE DELIVERY DECADE OF SERVICE DELIVERY - REVIEW- REVIEW

DECADE OF SERVICE DELIVERYDECADE OF SERVICE DELIVERY

• Participated in Presidential Lead projects Winterveldt, Participated in Presidential Lead projects Winterveldt, Bushbuckridge (R142m)Bushbuckridge (R142m)

• The project facilitated supply through 3 500 communal The project facilitated supply through 3 500 communal standpipes – benefiting approximately 1 million peoplestandpipes – benefiting approximately 1 million people

• R215 million worth of projects implemented by CBPDR215 million worth of projects implemented by CBPD

• Winterveldt sanitation project – more than 2 540 toilets Winterveldt sanitation project – more than 2 540 toilets for Winterveldt built (R8,3m) benefiting 25 000 peoplefor Winterveldt built (R8,3m) benefiting 25 000 people

DECADE OF SERVICE DELIVERYDECADE OF SERVICE DELIVERY

• Integrated Water Demand Management Integrated Water Demand Management Interventions: R60 millionInterventions: R60 million

• Established Rand Water Services Pty (Ltd)Established Rand Water Services Pty (Ltd)• Launched Rand Water FoundationLaunched Rand Water Foundation• Significant Transformation within the Significant Transformation within the

organizationorganization• Designated group – Management levelDesignated group – Management level

64% (33% : 2000)64% (33% : 2000)• Women representation in management, professional Women representation in management, professional

and supervisory – 28,2% (22% : 2000)and supervisory – 28,2% (22% : 2000)

RAND WATER ISRAND WATER IS

Tariff Setting & Tariff Setting & AccountabilityAccountabilityRand WaterRand Water

Water Affairs & Forestry Water Affairs & Forestry Portfolio CommitteePortfolio Committee

October 2004October 2004

ISSUESISSUES

• Municipal Financial Management ActMunicipal Financial Management Act: : 6 months advance notice6 months advance notice

• National Treasury & SALGANational Treasury & SALGA: 40 days : 40 days for considerationfor consideration

• Bulk Water Supply ContractBulk Water Supply Contract: prior : prior consultation and information sharingconsultation and information sharing

• Core/Primary activity vs. non-coreCore/Primary activity vs. non-core

ISSUES – Core vs. Non-coreISSUES – Core vs. Non-core

CORECORE

Bulk WaterBulk Water

Bulk SanitationBulk Sanitation

Rand Water BoardRand Water Board

NON-CORENON-CORE

Retail WaterRetail Water

Community ProjectsCommunity Projects

Business Devt.Business Devt.

Farm OperationsFarm Operations

Pipe ManufacturingPipe Manufacturing

Rand Water Services Rand Water Services (Pty) Ltd(Pty) Ltd

PROCESSPROCESS

• DWAF raw water pricingDWAF raw water pricing• Board prelim. approvalBoard prelim. approval• Customer Consultation & Customer Consultation &

Information SharingInformation Sharing• Board prelim. approvalBoard prelim. approval• Submission to Treasury and Submission to Treasury and

SALGASALGA• Board final approvalBoard final approval• Customer NotificationCustomer Notification• Parliamentary approvalParliamentary approval

Aug. 2004Aug. 2004

Sept. 2004Sept. 2004

Sept. 2004Sept. 2004

Oct. 2004Oct. 2004

Oct. 2004Oct. 2004

Dec. 2004Dec. 2004

Dec. 2004Dec. 2004

March 2005March 2005

Tariff increases vs CPIX

(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

12.0

Vaal Scheme (20%) 0.9 10.7 5.3 8.8 9.0 (5.4) 7.2 7.8

TCTA (80%) 7.9 10.4 8.5 9.9 5.4 7.5 7.5 7.5

Total DWAF 6.5 10.5 7.9 9.7 6.1 5.1 7.4 7.5

Rand Water bulk tariff 6.5 8.0 9.0 9.0 5.7 5.9 6.0 6.0

CPIX 8.3 6.9 9.1 6.7 5.0 5.3 5.9 5.5

2000 2001 2002 2003 2004 # 2005 # 2006 # 2007# Forecast

Tariff increases

(10.0)

(5.0)

-

5.0

10.0

15.0

year

perc

ent i

ncre

ase

Vaal Scheme (20%) 0.9 10.7 5.3 8.8 9.0 (5.4) 7.2 7.8

TCTA (80%) 7.9 10.4 8.5 9.9 5.4 7.5 7.5 7.5

Total DWAF 6.5 10.5 7.9 9.7 6.1 5.1 7.4 7.5

Rand Water Bulk tariff 6.5 8.0 9.0 9.0 5.7 6.0 6.0 6.0

JHB Water 13.5 8.4 12.8 9.0

2000 2001 2002 2003 2004 # 2005 # 2006 # 2007

Water Board AccountabilityWater Board Accountability

Presentation to the Portfolio Presentation to the Portfolio CommitteeCommittee

IntroductionIntroduction

• Water Board accountability covered Water Board accountability covered by a number of measuresby a number of measures

• Presentation covers the broad Presentation covers the broad requirements of requirements of • Water Services Act, 1997Water Services Act, 1997• Public Finance Management Act, 1999Public Finance Management Act, 1999• Other requirementsOther requirements

Water Services Act, 1997Water Services Act, 1997

• Water Services Act, 1997Water Services Act, 1997• Water Boards are established in Water Boards are established in

terms of the Water Services Act, 1997terms of the Water Services Act, 1997• Executive Authority – Minister of Executive Authority – Minister of

Water Affairs and ForestryWater Affairs and Forestry• Has principal oversight over water Has principal oversight over water

boardsboards


• The Minister must review the provision of The Minister must review the provision of water services to water services water services to water services authoritiesauthorities

• Makes recommendations to Parliament on Makes recommendations to Parliament on the establishment, functions and the establishment, functions and disestablishment of water boardsdisestablishment of water boards

• Must monitor operational and financial Must monitor operational and financial performance of water boardsperformance of water boards


• Oversight through: Policy StatementOversight through: Policy Statement• In terms of Section 39(1) every water In terms of Section 39(1) every water

board must prepare and adopt a policy board must prepare and adopt a policy statementstatement

• Policy statement must be submitted to Policy statement must be submitted to the Minister, the relevant Province(s) the Minister, the relevant Province(s) and must be accessible to the Publicand must be accessible to the Public

• The Minister can issue a directive for a The Minister can issue a directive for a water board to amend a policy water board to amend a policy statementstatement


• Oversight through 5 year Business PlanOversight through 5 year Business Plan

• Section 40 requires water boards to prepare Section 40 requires water boards to prepare and adopt a five-year business planand adopt a five-year business plan

• Business plan must be submitted to the Business plan must be submitted to the MinisterMinister

• The Minister may require a water board to The Minister may require a water board to amend its business planamend its business plan

Water Services Act, 1997Water Services Act, 1997• Oversight through Annual StatementsOversight through Annual Statements

• Section 44 requires a water board to issue an Section 44 requires a water board to issue an Annual Report and audited financial statementsAnnual Report and audited financial statements

• The Annual Report and audited financial The Annual Report and audited financial statements must be submitted to Parliamentstatements must be submitted to Parliament

• Numerous other obligations range from:Numerous other obligations range from:• Ring fencing of additional activities Ring fencing of additional activities • Discontinuation and limitations of water services Discontinuation and limitations of water services


• Policy statements, business plans and Policy statements, business plans and annual reports appraised annually by the annual reports appraised annually by the Department of Water Affairs and Forestry Department of Water Affairs and Forestry and findings presented to the Minister to and findings presented to the Minister to inform decision making regarding water inform decision making regarding water boardsboards

Appointment of Board MembersAppointment of Board Members• Board members appointed by Minister of Board members appointed by Minister of

Water Affairs and ForestryWater Affairs and Forestry• Schedule 1 of the Act provides the procedure Schedule 1 of the Act provides the procedure

for the appointment of Board membersfor the appointment of Board members• Constitution of a selection panelConstitution of a selection panel

• Consists of Chief Executive, Provincial representative(s), Consists of Chief Executive, Provincial representative(s), Ministerial representative and Person of good repute Ministerial representative and Person of good repute within service areawithin service area

• Call for public nominations for Board members in water Call for public nominations for Board members in water board’s service areaboard’s service area

• Selection panel makes recommendations to the MinisterSelection panel makes recommendations to the Minister

Appointment of Board MembersAppointment of Board Members

• Section 35 requires:Section 35 requires:• That the Board must be That the Board must be representativerepresentative of water of water

services authorities that receive services from the services authorities that receive services from the water boardwater board

• Other Other interestsinterests served by the Board are represented served by the Board are represented• Broad populationBroad population is represented is represented• Local Government representationLocal Government representation determined through determined through

consultation by the Minister with relevant consultation by the Minister with relevant organisations in the service area that represent organisations in the service area that represent municipalities (the South African Local Government municipalities (the South African Local Government Association etc)Association etc)

Appointment of Board Appointment of Board MembersMembers

• Previous Rand Water Board consisted of Previous Rand Water Board consisted of representatives fromrepresentatives from

Municipalities : Municipalities : Women : Women : Men : Men :

• Current Board has Representatives Current Board has Representatives municipalities women menmunicipalities women men

Municipalities : 7 Municipalities : 7

Women : 7 Women : 7 Men : 12Men : 12

• One member of Provincial Legislature also One member of Provincial Legislature also includedincluded

Public Finance Public Finance Management Act, 1999Management Act, 1999

• National Treasury also has oversight over National Treasury also has oversight over financial performancefinancial performance

• Minister of Water Affairs and Forestry Minister of Water Affairs and Forestry given executive authority over water given executive authority over water boardsboards

Recent Developments to Recent Developments to Monitor Water boardsMonitor Water boards

1.1. Shareholders compact in terms of Shareholders compact in terms of Treasury Regulations ActTreasury Regulations Act

2.2. Quarterly reports in terms of Quarterly reports in terms of Treasury RegulationsTreasury Regulations

1.1. Shareholders CompactShareholders Compact

• It is a requirement of Treasury It is a requirement of Treasury RegulationsRegulations

May 2002( Regulation 29.2 )May 2002( Regulation 29.2 )• It sets parameters of the relationshipIt sets parameters of the relationship• Includes performance measures and Includes performance measures and

indicators which must be attained by indicators which must be attained by a water boarda water board

2. Quarterly Reports2. Quarterly Reports

• Are a requirement of Treasury Are a requirement of Treasury Regulations May 2002 (Regulation Regulations May 2002 (Regulation 29.3)29.3)

• The purpose is to monitor and The purpose is to monitor and evaluate performance as contained evaluate performance as contained in the Shareholders Compactin the Shareholders Compact

• To effect timeous corrective action To effect timeous corrective action

Other Mechanisms to Ensure Other Mechanisms to Ensure AccountabilityAccountability

• New National Task Team led by Department of Public New National Task Team led by Department of Public Enterprises to strengthen regulatory role of government Enterprises to strengthen regulatory role of government over parastatalsover parastatals• Development of mechanism to monitor Board performance Development of mechanism to monitor Board performance • Ensure good corporate governanceEnsure good corporate governance

• Bulk Water Services Model ContractBulk Water Services Model Contract• Borrowing Limits set by National TreasuryBorrowing Limits set by National Treasury• Adherence to King II on Corporate GovernanceAdherence to King II on Corporate Governance• Reporting to Portfolio Committee as and when requiredReporting to Portfolio Committee as and when required• CE salaryCE salary

THANK YOUTHANK YOU

Documents

ANNUAL REPORT PRESENTATION