MHLATHUZE MHLATHUZE WATERWATER

Presentation of the 2007/2008 Presentation of the 2007/2008 Annual Report to the Honourable Annual Report to the Honourable

Portfolio Committee on WaterPortfolio Committee on Water Presented by:

Mr. Bonginkosi Mshengu (Vice Chair of the Board)Mr Silas Mbedzi (Chief Executive)

Mr. Sibusiso Makhanya (General Manager: Engineering Services) Ms Lindy Dhlamini (Acting General Manager:Finance)

1 July 2009

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Table of Contents

Background Overview of service provided and areas served Achievement and challenges Audit Report Financial Analysis - Income Statement, balance

sheet etc. Performance summary:

Water Quality Load Shedding Risk Management

Service Delivery and Infrastructure Corporate Social Investment initiatives Conclusion

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BackgroundStatutory information

Established on 23 May 1980 in terms of Water Act, 1956

Deemed to be a water board ito Water Services Act, 1997 (s 84(2))

Compliance to all applicable legislation and best practice (eg PFMA, BBBEE, King II Report)

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BackgroundOperating Areas and Services Provided

Area of Operation

Bulk Water supply

Effluent Disposal

Operations &

Management

Scientific Services

Implementing

Agent:

School Water Services

Implementing Agent:

Working for Water.

IIembe DM

(Northern area)

uMkhanyakude DM

x x x

uThungulu DM x

Zululand DM x x x

uMhlathuze LM x x x x

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BackgroundProfile of Board & Executive

BO

AR

DE

XE

CU

TIV

EEQUITY

GENDER

AFRICAN WHITE INDIAN

6 1 1

FEMALE MALE

5 3

AFRICAN WHITE INDIAN

3 2 0

FEMALE MALE

0 5

EQUITY

GENDER

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BackgroundMap of Service Areas

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Achievements

Unqualified Audit Report for 2007/08 Increased area of operation to cater for the

outlying poor municipalities Remained financially sound – going concern Complied with all applicable legislation Have maintained being one of the top water

laboratories in the country and is the only ISO17025 accredited water laboratory in the region with a scope of analyses. Sampling and analyses of water and wastewater are carried out daily.

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Challenges

Inability to secure long term contract with water services authorities especially the ones that need our services most.

Non-payment from some of our municipalities

The current world recession having an impact on some of the industries that we supply water to in Richards Bay

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Audit ReportAudit Issues

o Unqualified Audit Opinion for FY2007/08;

No Matters of Emphasis;

Financial statements were prepared in accordance with SA GAAP, Water Services Act and the PFMA.

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Finance ReportIncome Statement

Actual

2007/8

R’000

Actual

2006/7

R’000

% increase/

(decrease)

Revenue 135 556 130 275 4.05%

Other Revenue 9 597 2 445 292.52%

Total Revenue 145 153 132 720 9.37%

Operating, General & Admin Costs (108 263) (97 119) 11.47%

Operating Income before finance costs 36 890 35 601 3.62

Net Finance Costs (8 493) (11 535) (26.37%)

Net income for the year 28 397 24 066 18.00%

Kilolitres Kilolitres

Volume of Bulk Water – Raw 11 276 9 427 19.61%

Volume of Bulk Water - purified 36 814 39 193 (6.07%)

Volume of Bulk Effluent 43 205 44 084 (1.99%)

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Finance Report Income Statement

Operating Income (before finance costs) by 3.62% (R35 601 million ⇒ R36 890 million)

Net Finance Costs reduced by 26.37% due to: The redemption of loans (R45,1 million) in

FY2006/07

The renegotiation of interest rates with the loan providers.

o All indications are that Mhlathuze water is a going concern

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Finance Report Finance Ratios

Target FY2007/08 FY2006/07 FY2005/06

Debtors’ days 45 days 37.5 days 40.4 days 53.0days

Current ratio 2:1 1.6:1 1.6:1 1.4:1

Quick ratio 1:1 1.5:1 1.6:1 1.3:1

Debt /Equity ratio

1< 1.5 1.66 1.86

Return on Assets

10% 8.4% 8.9% 9.6%

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Finance ReportSpecial Investigation Unit Subsequent to the year end, an

investigation by the Special Investigating Unit was instituted on the affairs of Mhlathuze Water.

The investigation was to cover the period from 1 January 2004 to the date of the publication of the proclamation (4 September 2008).

Mhlathuze Water has fully co-operated with the investigation.

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Water Quality Issues

Mhlathuze Water –

Has a SANAS 17025 accredited laboratory (accreditation since 2002);

Logs its data to the National Water Quality Reporting System to comply with 2010 water quality measures;

Does water quality testing and analysis for municipalities, industry and private individuals;

Is involved in the National Microbial analyses program for bacteriological quality and participates in 14 sites in its area of operation;

Maintained a 98% and 100% compliance with respect to physical and bacteriological water quality, in respect of the Nsezi Water Treatment Plant.

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Mhlathuze Water Quality Nsezi Water Treatment Plant

NSEZI WATER TREATMENT PLANT

Purified Water Quality Ÿ July 2007 - June 2008

  SANS 241 - 2006 Specification

Mhlathuze Water Specification Limit for Nsezi WTP

   

  Class I (Acceptable) Class II (Max. Allowable)

Constituent Limit % Within Limit Limit % Within Limit Limit % Within Limit

PHYSICAL REQUIREMENTS            

Turbidity (NTU) 1 97 5 100 0,5 90.7

Colour (Pt/Co) 20 99.2 50 99.5 5 32.8

Total suspended solids (mg/l-1) No Spec No Spec No Spec No Spec 0,5 91

CHEMICAL REQUIREMENTS            

Conductivity at 25 °C (mS/m-1) 150 100 370 100 89 99.7

pH 5,0 - 9,5 99.7 4,0 - 10,0 100 7,3 - 9,0 98.1

Total dissolved solids (mg/l-1) 1000 100 2400 100 500 100

MACRO DETERMINANTS (in mg.l-1)            

Total hardness as CaCO3 No Spec No Spec No Spec No Spec 300 100

Calcium as Ca 150 100 300 100 No Spec No Spec

Magnesium as Mg 70 100 100 100 70 100

Sodium as Na 200 100 400 100 150 100

Chloride as Cl 200 100 600 100 200 100

Sulphate as SO4 400 100 600 100 200 100

Nitrate as N 10 100 20 100 6 100

Fluoride as F 1,0 83.1 1,5 94.8 1 83.1

MACRO DETERMINANTS (in µg.l-1)            

Iron as Fe 200 97.3 2000 100 100 92.6

Manganese as Mn 100 97.8 1000 100 50 95.6

OTHER CONSTITUENTS            

Silica as SiO2 No Spec No Spec No Spec No Spec 15 27.6

Chemical oxygen demand as O2 No Spec No Spec No Spec No Spec 20 88.5

BACTERIOLOGICAL REQUIREMENTS            

Faecal coliform count per 100ml sample Nil 100 Nil 100 100 100

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MHLATHUZE WATEREnergy

Attached is a schedule of Mhlathuze Water’s power supply at the various installations.

Mhlathuze Water has agreed with the power suppliers that supply to critical installations would not be load shed, unless a total “blackout” occurs at Eskom.

Mhlathuze Water has also advised its customers of the electricity increases from Eskom and that these would be passed on to them if effected.

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Load Shedding ReadinessOwn Installations

INSTALLATION PURPOSE / UTILISATION ELECTRICY SPPLIER IMPACT OF POWER CUTS CONTINGENCY PLAN RISK RATING

Pump station 1 Disposal of Waste City of uMhlathuze Agreement exist not to System can operate under LowWater from Industry load shed, will only be gravity at 60%, if it is totalthrough A and B Line affected in the event of system failure then industry

total system failure halts

Nsezi Water Main Water City of uMhlathuze Agreement exist not to Has reservoir that can LowTreatment purification for load shed, will only be supply for for 6 hrs Plant Industry and WSA affected in the event of at lower pressure

total system failure

Middeldrift Transfer of Raw Water ESKOM Minimal impact on Mhlathuze Uthungulu owns Commnunity Lowtransfer Scheme from Tugela River to and Communities if outage reservoirs and is putting an to Goedertrou Dam Goedertrou Dam lasts less than 6 hrs a time upgrade of capacity

Mhlathuze Weir Transfer of Water from ESKOM A short outage will have no Monitoring the levels LowPump Station Mhlathuze River to Lake Nsezi impact of the Lake

Exxaro Hillendale PumpS Raw Water from ESKOM Exxaro has a 5 hrs reservoir None, Pump station draws LowPump Station Mhlathuze Riverto Hillendale Power from same source

Mine as Mine

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Service Delivery and Infrastructure Development ProjectsMhlathuze Water’s Area of Operations Largely rural and poverty stricken; Few large businesses within most Municipalities; Difficulty for Municipalities to attract skills; Compliance with S19(2) (Priority use of water

boards); Lack of infrastructure and development; Poor access to water; Inability to pay for water and infrastructure cost; Low concentration of people add to cost; Poor water availability – (Except Pongola-poort); Poor raw water quality (e.g. manganese, turbidity)

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Infrastructure Development Projects

Mhlathuze Water’s strategic direction involves – Forming strategic partnerships with Water

Services Authorities (“WSA’s”); Supporting and assisting WSA’s in meeting

their mandates; Assisting DWEA in water and sanitation

provision; Establishing strategic networks with all role

players (e.g. Industry, WSA’s, DWEA, Province);

Supplying any new industries and bulk users in the area (AmaZulu World, Alfluorco, Umbani Power, Pulp United).

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Service delivery and Infrastructure Development Projects

Internally funded projects

Purpose Amount

1 Nsezi upgrade Increase capacity from 134 000 to 204 000 m3/day

R185 million

2 Empangeni Phase II Increase capacity from 26 000 to 60 000 m3/day

R59 million

3 B Line Diffuser Replacement

Effluent disposal pipeline for Foskor

R10 million

4 Exxaro Fairbreeze Provide water for new mining operation

R210 miilion

5 Pulp United Water Supply R22 million

6 Alflourco Pipeline for water R160 million

Total value of internally funded projects R 646 million

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Service Delivery and Infrastructure Development Projects

Externally Funded Projects: DWEA

Purpose AmountR

1 Hlabisa Bulk Bulk water supply R89 million

2 Hluhluwe Phase 4 Pipe line for water supply

R290 million

3 Schools Sanitation Schools in the KZN northern region

R 55 million

4 Working for Water Water saving & job creation

R 3,5 million

Externally Funded: Province

1 Jozini /Ingwavuma Bulk Water Supply

Bulk water supply R276 million

2 Kwangwanase Bulk water supply R 76 million

Total Externally funded projects R 789,5 million

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Service Delivery and Infrastructure Development Projects The Working for Water contract with DWEA is for a

period of 3 years. Benefits to Communities include

Job Creation; Skills Transfer and Development; Enterprise Development.

o Total value of proposed projects amounts to R 1,435 billion.

o This excludes the drawing of water from the Pongola-poort Dam to supply surrounding communities, which will cost about R1,6 billion.

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Corporate Social Investment Mhlathuze Water believes that the aforesaid regional

bulk water scheme is the solution in the medium to long term and is funding feasibility studies with regard to this scheme.

Immediate water scarcity also has to be addressed. To address this, Mhlathuze Water approved an amount of R12 million to assist with the drought and water challenges faced by uMkhanyakhude District Municipality (UDM). This is being spent on, ie:

Drilling and equipping boreholes at Jozini, which were identified by UDM and the DWEA, to the value of R5 million;

Drilling and equipping boreholes at Ingwavuma Municipality to the value of R1.5 million. The sites were identified by the Department of Local Government and Traditional Affairs;

Rehabilitation of three water pump stations serving Ingwavuma Town, to the value of R1.5 million.

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Tariffs for the FY2009/10 period

A tariff increase of 18% was recommended by the Board for the period FY2009/10 but this was reduced by 4 % by DWEA.

This will have an effect on the magnitude of future tariff increases.

Capital upgrades and refurbishment were key considerations in the determination of the proposed tariff increase.

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CONCLUSION

The financial position of Mhlathuze Water continues to be healthy and it remains sustainable;

The Board and Management jointly continue to strive to achieve the entity’s vision of providing world class water and related services to all stakeholders in its service area.

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THANK YOURO LIVHUWASI YA BONGA

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Reviewed and Released by:Silas Mbedzi.

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