Click to edit Master subtitle style 5/30/11 Botshelo Water 2009/2010 Annual Report Presentation to Portfolio Committee on Water and Environmental Affairs

Click to edit Master subtitle style

5/30/11

Botshelo Water 2009/2010 Annual Report Presentation to Portfolio Committee on Water and Environmental Affairs

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Brief1. Strategic Business Plan and Budget for

2011/2012

2. The 2009/10 AFS and Audit Report from AG

3. Key Performance areas and priorities for coming year

4. Proposed 2011/12 tariff increases

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Vision and MissionVision

Your preferred partner in water services provision

Mission

To provide water services towards improving the quality of life of communities

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Relationship with MunicipalitiesBW has Water Services Provider Agreements

with Dr Ruth Segomotsi Mompati and Ngaka Modiri Molema District Municipalities (DrRSMDM & NMMDM) in the North West Province.

DrRSMDM & NMMDM are Water Service Authorities and BW provides water services to 7 of their local municipalities.

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Relationship with Municipalities - achievementsAcceptance of BW Turnaround Strategy/Plan

by WSAs & Provincial Government.

WSAs, LMs and Dikgosi are involved in BW Strategic Planning sessions.

Municipalities accepted new water tariffs.

Water supply to rural areas was achieved during the year under review with minimal outages.

Accurate and timely meter reading, together with Municipalities, improved acceptance of billing procedures.

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Relationship with Municipalities – achievements (continued……)Engagement of National Treasury (MFMA,

Sec.42) to mediate i.r.o. of Ditsobotla Local Municipality.

Resuscitation of Coordination Committee in particular with Dr RSMDM.

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Relationship with Municipalities - ChallengesRe-convening of the Coordination Committee

in NMMDM.

Delayed payments by WSAs & LMs for water services rendered.

Non-payment of long outstanding and growing debts.

Length of Term of Water Services Provider Agreements.

Failure by Municipalities to promulgate bye - laws (unauthorised connections).

Industrial action by Municipalities employees.

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Outcomes Affecting the MinisterOutcome 10: Environment

Outcome 6: Infrastructure

Outcome 7: Rural Development

Outcome 9: Local Government

Outcome 4: Employment

Outcome 8: Human settlement

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Strategic Goals and Key PrioritiesGoal 1: To Provide quality water services

(supports Outcome 8 & 10)

Maintain standards in pursuit of Blue Drop status – SANS 241

DWA need to be influenced to address unauthorised extraction of water by farmers and other users

Outsourcing of meter reading services to be pursued

Address Ditsobotla Local Municipality non-payment

Streamline processes with water service authorities to eliminate unauthorised water connections

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Participated in processes to solve the Kraaipan, Madibogo, Madibogo Pan and Setlagole quality and quantity water issues

Address issues regarding Pomfret water Services

Engage Eskom to improve quality of energy supply to all areas

Expand preventative maintenance plan

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Strategic Goals and Key PrioritiesGoal 2: To provide water supply

infrastructure services (Supports Outcome 6,7, 8 and 10)

Acquire bulk infrastructure assets in line with the Strategic Framework for WS of 2003

Installation of dedicated pipelines from boreholes & treatment plants to reservoirs in rural settlements

Increase supply capacity to meet future demands

Influence other Government departments to involve BW in integrated planning of townships especially human settlement

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Strategic Goals and Key prioritiesGoal 3: promote sound stakeholder

engagement (supports outcomes 7, 9 and 10)

Obtain corporate social involvement through a corporate social responsibility programme

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Strategic goals and Key PrioritiesGoal 4: To ensure Business development

(existing and new business) (Supports Outcomes 4,7 and 10)

Acquire bulk waste water treatment plants

Develop a workable stock watering solution

Position as implementing agent for sanitation projects

Market expansion of Naledi, Malopo, Ratlou, Mamusa, Tswaing and Lekwa Teemane Local Municipalities

Conclude long-term water service provider agreements with the Water Service Authorities

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Strategic goals and Key PrioritiesGoal 5: To ensure internal business

excellence

Strengthen capacity of all directorates, especially the Finance Directorate

Address audit and corporate governance issues

Build capacity with regard to MISS

Implement OHS plan

Redesign the Organization

Build ICT Platforms and capacity. 1414

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Budget SummaryItem 2011/2012 R

Mil2010/2011 R

Mil

Income:

Water Sales 74.7 61.3

Municipal recoveries

62.2 75.5

Rentals .8 .8

Interest and recoveries

.6 5.4

Total Income 138.3 143.0

Expenses:

Dir Exp municipalities

50.4 58.4

Water Plant Treatment

50.1 49.5

Head Office 29.5 27.9

Capex .1 6.5

Total expenses

130.1 142.3

Surplus 8.2 0.7

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Overview of Income StatementTurnover increase from R88.4 Million to

R115.3 Million (30%)

Gross Profit increased from R61.9 Million to R67.6 Million (9%)

Employee cost increased by R 5.9 Million (17%)

Other expenses reduced by R 0.2 Million (excluding extraordinary expenses) (0.1 %)

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Overview of the Balance SheetBW is solvent (reserves R13.7 Million)

Cash balance R36.0 Million

DWA debt increased by R13.73 million

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Financial position and key ratiosBW is solvent (reserves R13.7 Million)- 2009

R7.5 Million

Debtors collection period (126 days) – 2009 114 days

Current Asset Ratio 0.87- 2009 0.69

Fire Proof Ratio (excluding stock and DWA debt and provisions) 4.02 – 2009 3.11

Creditors payment period 431 days

Creditor payment period excluding DWA 28 days

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Analysis of water Sales and RevenueDescription 2009/

10% 2008

/9%

Bulk Water Sales 34.18 30 24.02

27

Retail Water Sales 21.96 19 15.42

17

Rural Recoveries 46.74 40 36.11

41

Projects 12.06 10 12.01

14

Services 0.34 1 0.81

1

Total 115.28

100 88.37

100

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Analysis of Expenditure

Description 2009/`10R Mil

% of Turnover

2008/9R Mil

% of Turnover

Cost of Sales 47.66 44 26.45 33

Employee Costs

40.00 37 34.05 42

Other Expenses excluding adjustments

19.81 19 20.66 25

Turnover 107.47 100 81.16 100

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Analysis of ProfitabilityDescription 2009/1

0 R Mil

% 2008/9R Mil

%

Sales 115.28 100 88.37 100

Gross Profit 67.61 59 61.91 70

Net Profit/(loss)

9.89 9 7.94 9

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Non-financial performanceRecruitment and training of qualified

technical staff.

Successful implementation of Turn Around Strategy and Plan

Launch & implementation of Employee Wellness Programme – to manage change management

Water services were provided despite all challenges

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Overall operating conditionsNon- ownership of the water infrastructure

by BW (matter raised with the Ministry).

Insufficient funding to adequately maintain the rural water supply infrastructure.

Lack of water and infrastructure in peri-urban and rural areas to accommodate population growth.

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DEBT / CAPITAL STRUCTURENo long term Loans

Requests from DWA

Assets transfer

Writing off of the old debt (R48 million)

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Audit ReportDisclaimer due to:

• Property Plant and Equipment

• Investment properties

• Inventories

• Cash and Cash Equivalents

• Revenue

• Cost of Sales

• Expenditure

• Employee Cost

• Accounts payable

• Irregular, fruitless and wasteful expenditure

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Audit Report (Continued)Property Plant and Equipment (Due to new

Venus Accounting System implementation)

Prior year adjustment of R3.6 million

IAS 16 not complied with

Investment properties

Assets not registered in the name of Botshelo Water: Overflow from previous years – Attorneys are busy with the transferring process

Inventories

Very old consumable stock from prior years still in use– unable to value.

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Audit Report (Continued)• Cash and Cash Equivalents

• Bank reconciliations could not be performed timeously due to implementation problems experienced. As a result reports could not be provided timeously

• Revenue

• Cut off problems experienced due to implementation problems of the system

• Cost of Sale

• Cut off problems also experienced due to implementation problems of the system

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Audit Report (Continued)Expenditure

Cut off problems and rerunning of reports problems experienced with the implementation of the Venus Accounting System

Employee Cost

Integration problems experienced with the implementation of the system resulted in a limitation of scope

Accounts payable

Problems experienced with the implementation of the system resulted in a limitation of scope

Irregular, fruitless and wasteful Expenditure

Limitation of scope

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BOTSHELO WATER Improving the quality of life of communities

Tariff adjustments

2011 – 2012

26th May 2011

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Contents

1. Overview

2. Raw Water Tariffs

3. Challenges during consultation

4. Achievements.

5. Viability of Botshelo Water

6. The impact of tariff increases on end users

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1. Overview Botshelo Water abstracts water from different sources,

and one of the main sources of raw water is the Setumo Dam which collects recycled water from the Mafikeng and Mmabatho waste water treatment works and natural precipitation. The quality of the water therefore requires considerable chemicals, skill and care in treating to ensure safety and acceptability to the consumers.

Botshelo proposed a tariff of R 4.48, a 18% increase on the proposed tariff for 2010 – 2011 due mainly to electricity, maintenance, security and chemical increases.

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2. Raw Water Tariffs

Botshelo Water (BW) operates and maintains six bulk water treatment plants and abstracts water for them in accordance with registration certificates issued by DWA .

BW incurs a charge from DWA of R 1.8283 per kilo litre, a 9% increase from last year, at the major plants of Mafikeng and Mmabatho. This charge is perceived by Botshelo Water to be high compared to other similar Water Boards.

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3. Challenges during consultation

BW invited all 3 bulk clients, Mafikeng Local Municipality, Ngaka Modiri District Municipality and Ditsobotla Local Municipality to a consultative meeting on 27th October 2010.

BW also invited Provincial & National Treasury, SALGA and DWA to attend the meeting.

All except Ditsobotla LM and NMMDM attended.

DWA , Provincial & National Treasury, SALGA attended and made comments on our proposed tariff.

The outcome of the tariff revision process was submitted to National Treasury for approval.

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4. Achievements

Despite all the problems in the past, Botshelo Water has been able to function and avoid disestablishment with the revised 2010/2011 tariff of R 3.80 (excl VAT) and budgets were modified accordingly.

The proposed tariff of R 4.48 (excl VAT) will be enable BW to fulfill its functions, obligations and duties and ensure security of all the plants and that water resources will be sustainable.

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5. Viability of Botshelo Water

The following are tariffs as presented to the municipalities and the subsequent revisions after negotiating of discounts during previous years

Year Tariff + VAT = Total (Final agreed)

2005/2006 R 2.14 + 0.30 = R 2.44 (R 2.44)

2006/2007 R 2.14 + 0.30 = R 2.44 (R 2.44)

2007/2008 R 2.66 + 0.37 = R 3.03 (R 2.58)

2008/2009 R 2.66 + 0.37 = R 3.03 (R 2.58)

2009/2010 R 3.27 + 0.46 = R 3.73 (R 3.14 [5%])

2010/2011 R 3.80 + 0.53 = R 4.33 (R 4.33)

2011/2012 R 4.48 +0.63 = R 5.11 (R 5.11)

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5. Viability of Botshelo WaterContinued

Correcting previous tariffs1. Actual cost of production and tariff calculations are tabled

below, based on expenditure during the previous year, and allowing for additional much needed maintenance & security and Eskom increases.

Description 2010/2011 2011/2012 Increase

Cost of Raw water 1.667 1.757 9%

Employee costs 0.521 0.621 10%

Chemicals/Electricity/Transport

0.453 0.683 23%

Security 0.095 0.195 10%

Maintenance and Repairs 0.404 0.504 10%

Overheads 0.662 0.722 6%

Total 3.80 + VAT 4.48 + VAT 18%

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A full appraisal of the operations of the water treatment facilities indicated that security on most of Botshelo Water’s facilities was lacking. We have allowed for improved security to prevent any risk of access and potential interference to operational areas.

Eskom tariffs have, and will further increase. As BW operations are very dependent on electricity these increases will need to be catered for especially as operations will have to change to use more water from the power dependent plant due to potential drop in supply from the Grootfontein well fields.

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This will also imply additional chemicals as raw water quality is not as good as that from Grootfontein.

Maintenance cost will increase as the plant will be fully utilised, and refurbishment programme is nearing completion.

The result is a higher increase than recent CPIX inflation rates but the increases are totally out of the control of Botshelo Water, being dependent on Eskom and the vagaries of nature and threat of global warming.

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6. Impact on the end users

The majority of end users in our jurisdiction have access to 6 kl of Free Basic Water per household per month and this will probably remain unchanged.

The increase will not affect the indigent as there are indigent policies in place and they do not normally consume more than the 6 kl of water per month.

Larger consumers, where the top price of water is fixed at over R 9.00 will incur an increase of R 0.53 per kl an increase of 8%

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6. Impact on the end users continued….

These impacts can be greatly ameliorated by better control of water losses with implementation of water conservation and demand management and improved cost recovery on the part of the Local Municipalities, which are at unacceptable levels.

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Thank You

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Documents

Click to edit Master subtitle style 5/30/11 Botshelo Water 2009/2010 Annual Report Presentation to Portfolio Committee on Water and Environmental Affairs