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Page Foreword by the Chief Executive 5

Strategy 7

Operating Environment Response to key Strategic Issues by the Chairperson of the Board Strategy Map and Outcomes Mission, Strategic Intent, Vision and Values

9 13 16 19

Business Plan 2010/11 to 2014/15 21

1 Introduction 23

2 Policy Statement 25

3 Directives by the Minister 27

4 Participation in Companies 29

5 Water Resources 31

6 Bulk Potable Water Supply Plan 43

7 Bulk Wastewater Treatment and Disposal 53

8 Other Activities 55

9 Human Resource Development Plan 61

10 Environmental Management Plan 69

11 Water Conservation and Demand Management Plan 73

12 Financial and Capital Expenditure Plan 75

13 Bank Accounts 119

14 Risk Management Plan 121

15 Fraud Prevention Plan 123

16 Other KPIs 125 Performance Scorecard 127

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CoGTA Cooperative Governance and Traditional Affairs

DBSA Development Bank of Southern Africa

DEA Department of Environmental Affairs

DWA Department of Water Affairs

EIB European Investment Bank

TCTA Trans-Caledon Tunnel Authority

UW Umgeni Water

ADWF Average Dry Weather Flow

BWS Bulk Water Supply

Capex Capital expenditure

CPI Consumer Price Index

DMTN Domestic Medium Term Note

MMTS Mooi-Mgeni Transfer Scheme

NPV Net Present Value

PPI Production or Producer Price Index

WDM Water Demand Management

WRM Water Resources Management

WW Water Works

WWW Wastewater Works

c/kl Cents per kilolitre

Ml Million litres

m3 Cubic metre

m3/a Cubic metres per annum

m3/s Cubic metres per second

- 5 -

This five-year business plan complies with the prescribed requirements and guidelines of the Department

of Water Affairs and National Treasury. The inputs, activities and outputs targeted in the business plan will

ensure that the following outcomes are progressively realised:

1. Product (Bulk Water and Wastewater) Quality

2. Customer Satisfaction

3. Operational Resiliency

4. Operational Optimisation

5. Infrastructure Stability

6. Stakeholder Understanding and Support

7. Financial Viability

8. Water Resources Adequacy

9. Community and Environmental Sustainability

10. Leadership and Employee Development

Taking cognisance of customer water demands and water backlogs, Umgeni Water has committed three

billion rand for bulk water supply infrastructure development, the bulk of which will be spent on:

Rural development: R 1,091 million,

Current and future growth (expansion and augmentation): R 992 million,

Upgrading and rehabilitation of infrastructure: R 756 million,

Information and communication technology: R60 million

The capital expenditure programme would thus ensure the organisation’s infrastructure is stable, provides

reliable bulk water supply to customers and supports community sustainability.

Through the rural development projects, Umgeni Water will deepen penetration in rural areas increasing its

bulk supply coverage of wards from 228, which represents 61% of the total wards in supply area, to 259,

which represents 69% of the total wards in supply area.

The financial plan will ensure that Umgeni Water contributes to an affordable tariff, maintains optimal debt

levels, improves return on assets and enhances it shareholder value.

Water resources adequacy is paramount to Umgeni Water providing sustainable water services, and in this

regard, Umgeni Water will lobby the Department of Water Affairs for adequate water resources to be timely

planned and developed. In this cycle, this includes the construction of Spring Grove Dam to supplement

the Mgeni system, Smithfield Dam on the Mkomazi River and the raising of Hazelmere Dam on the Mdloti

River. The cost of this infrastructure will be significant, notably the Spring Grove Dam, which will increase

the cost of raw water purchases by 300% in 2011/12.

- 6 -

Umgeni Water will further continue to manage its existing resource supplies with the utmost care, while

investigating alternative sources, including reuse and desalination, to assist with meeting the long-term

water requirements of the region.

Plans that promote water conservation and demand management as well as environmental and community

sustainability will be further developed and implemented. Research on climate change risks and

development of adaptation strategies will continue.

Umgeni Water will continue to provide ongoing support to municipalities, in particular, as an implementing

agent for the Greater Mbizana Regional Bulk Water Supply Scheme, as well as institutional support and

development for water services in respect of the OR Tambo District Municipality.

Leadership and employee development will be ensured through plans that deepen implementation of the

human resources strategy, notably through learnerships, graduate development and employee and

leadership development plans and programmes.

The Board of Umgeni Water will continue to strengthen corporate governance and risk management and

ensure monitoring in terms of the fraud prevention plan.

Umgeni Water will continue to collaborate with municipalities, such that there are sequential and reciprocal

funding streams between the Municipal Infrastructure Grant and Umgeni Water’s Capital Expenditure

programme, as well as, strengthen the collaboration efforts with the Department of Water Affairs to ensure

that the Bulk Infrastructure Grant targets vulnerable local municipalities, and leverages Umgeni Water’s

Capital Expenditure Programme.

Through this business plan, Umgeni Water will effectively contribute to the realisation of the twelve

outcomes of government.

MZIMKULU MSIWA

CHIEF EXECUTIVE

30 APRIL 2010

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Page

Strategy 7

Operating Environment Response to key Strategic Issues by the Chairperson of the Board Strategy Map and Outcomes Mission, Strategic Intent, Vision and Values

9 13 16 19

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SHAREHOLDER’S EXPECTATIONS

The Shareholder’s Expectations are implicitly and explicitly reflected in the following pronouncements:

President Jacob Zuma, made his State of the Nation Address on 11th February 2010, where he affirmed

government’s commitment to five priorities:

education,

health,

rural development and land reform,

creating decent work, and

fighting crime.

Sustainable water provision to all remains central to the achievement of government’s development

priorities. Furthermore, in an effort to address the country’s water scarcity situation, the president

indicated that measures will be put in place to reduce water loss by half by 2014. The president further

announced a new way of doing things in government, where work will be measured by outcomes,

developed through the national performance monitoring and evaluation system.

The Minister for Performance Monitoring and Evaluation, Collins Chabane, in a statement on

12th February 2010, announced the twelve Performance Outcomes of Government (i) mentioned by the

President in his State of the Nation Address:

1. “Quality of our basic education”

2. “A long and healthy life for all South Africans”

3. “All people in South Africa are, and feel safe”

4. “Decent employment through inclusive economic growth”

5. “Skilled and capable workforce to support an inclusive growth plan”

6. “An efficient, competitive and responsive infrastructure network”

7. “Vibrant, equitable, sustainable rural communities, contributing towards food security for all”

8. “Sustainable Human Settlements and improved quality of household life”

9. “Responsive, accountable, effective and efficient local government system”

10. “Protect and enhance our environmental assets and natural resources”

11. “Create a better South Africa, a better Africa and a better world”

12. “An efficient, effective and development oriented public service and an empowered, fair and

inclusive citizenship”

The Premier of KwaZulu-Natal Dr Zweli Mkhize in his State of the Province Address to the KwaZulu-Natal

Legislature on 24th February 2010 emphasised that access to basic services (which includes water

services), was vital to government meeting its outcomes.

(i) nine approved outcomes

- 10 -

ECONOMIC

The National Budget was presented by Finance Minister Pravin Gordhan on 17th February 2010. The

budget responds to South Africa’s economic crisis, where the country is emerging out of its first recession

in seventeen years during which approximately 900,000 people lost their jobs. Aspects of the national

budget include:

Relatively low economic growth of 2.3 % is projected for 2010, increasing to 3.6 % by 2012;

Inflation had fallen over the past year and should average 6 % during 2010/11;

A budget deficit of 7.3 % is projected for 2009/10, 6.2 % in 2010/11 and 4.1 % by 2012/13; and

Total public sector infrastructure investment of R 845 billion is planned over the next three years.

In the Provincial Budget presented to the KwaZulu-Natal Legislature on 4th March 2010, the MEC for

Finance, Ms Ina Cronjé indicated that KwaZulu-Natal was forecasting an increase in gross domestic

product of between 2.2% and 2.7% in 2010, Inflation is expected to be within the 6.5% to 7% range, and

access to potable water in KwaZulu-Natal has improved steadily over the years, but backlogs remained.

In the Monetary Policy Committee Statement of 25th March 2010, the Governor of the Reserve Bank,

Ms Gill Marcus stated that South Africa’s Actual inflation had dropped to 5.7 % at the end February 2010

and the outlook was an average inflation of 5.3% in 2010, reducing to a low of 4.9% in the 3rd quarter of

2010 and averaging 5.4% in 2011. Despite reduced uncertainty associated with electricity price increase,

electricity and other administered price increases remain a threat to the inflation outlook.

SOCIAL-ENVIRONMENTAL

The Minister of Water and Environmental Affairs, Ms Buyelwa Sonjica, in the Water Affairs Strategic Plan

2010/11 – 2012/13, stated commitment to support government’s development priorities through

ensuring all have access to potable water. The priorities of the Department of Water Affairs include:

Contributing to economic growth and social development, through:

Ensuring the provision of regional bulk water to support water services and creation of

decent employment through regional bulk programme;

Reconciliation of water requirements and water availability, through implementation of

desalination and recycling strategies; and

Ensuring effective water pricing and infrastructure funding.

Contribution to rural development, land reform and food security, through:

Creating sustainable rural livelihoods, through implementation of the rain water harvesting

programme and creating jobs and establishing SMMEs through Working for Water

programme.

- 11 -

Ensuring sustainable and equitable water resources management, through:

Improving equity in water allocation and ensuring sustainable water use, through

improving water use efficiency;

Improving equity in water services and management, thorough amendment of water

legislation; and

Protection and improvement of water quality.

Effective support to local government, through:

Interventions in support of local government and supporting municipalities in

implementing water conservation and demand management programmes.

The Minister of Water and Environmental Affairs, Ms Buyelwa Sonjica, outlined the strategic objectives in

the Environmental Affairs Strategic Plan 2010/11 – 2012/13, including:

Protecting, conserving and enhancing environmental, natural and heritage assets and resources,

Proactive planning, management and prevention of pollution and environmental degradation,

Contributing to sustainable development, livelihoods, green and inclusive economic growth, and

Responding and adapting to climate change impacts, which would otherwise threaten South

Africa’s ability to realise the Millennium Development Goals.

LOCAL GOVERNMENT

The Ministry of Cooperative Governance and Traditional Affairs (CoGTA, 2009), in its most recent study of

challenges facing local government, has categorised local municipalities in terms of their vulnerability and

developed a turnaround a strategy to address the challenges.

In the Umgeni Water supply area, nine local municipalities have been targeted for turnaround by CoGTA

because of their vulnerability:

In iLembe DM, the following local municipalities have been classified as vulnerable:

Ndwedwe and Maphumulo

In uMgungundlovu DM, the following local municipality has been classified as vulnerable:

Impendle

In Ugu DM, the following local municipalities have been classified as vulnerable:

Vulamehlo, uMzumbe, uMuziwabantu, and eZinqolweni

In Sisonke DM the following local municipalities have been classified as vulnerable:

Ingwe and uMzimkhulu.

The water backlog status of the above local municipalities according to Statistics South Africa, Community

Survey 2007, is shown in Table 1.

- 12 -

Table 1. Water backlog status of local municipalities (Statistics SA, 2007) that have been categorised as

vulnerable by CoGTA.

District Municipality Local Municipality Households 2007 River/stream as water source (%)

Ndwedwe LM 26 408 42.8 iLembe DM Maphumulo LM 19 934 61.2

uMgungundlovu DM Impendle LM 7 338 4.1

Vulamehlo LM 12 745 34.3 uMzumbe LM 40 579 42.0 uMuziwabantu LM 20 313 24.4 Ugu DM

eZinqoleni LM 10 952 10.6

Ingwe LM 22 289 13.6 Sisonke DM uMzimkhulu LM 43 545 54.6

The information in Table 1 indicates that, Impendle LM, eZinqoleni LM and Ingwe LM are less vulnerable

from a water backlog perspective.

- 13 -

Cognisant of the shareholder’s expectations as implicitly and explicitly pronounced in the following

statements and publications:

The State of the Nation Address by President Jacob Zuma on 11th February 2010,

The State of the Province Address by KwaZulu-Natal Premier Zweli Mkhize on 24th February 2010,

The Performance Outcomes of Government mentioned by the President in his State of the Nation

Address and outlined by Collins Chabane, the Minister for Performance Monitoring and Evaluation,

on 12th February 2010,

The Department of Water Affairs Strategic Plan 2010/11 to 2012/13, prefaced by the Minister of

Water and Environmental Affairs Ms Buyelwa Sonjica,

The Department of Environmental Affairs Strategic Plan 2010/11 to 2012/13, prefaced by the

Minister of Water and Environmental Affairs Ms Buyelwa Sonjica,

The National Budget Speech by Finance Minister Pravin Gordhan on 17th February 2010,

The KwaZulu-Natal Budget address by the MEC for Finance Ms Ina Cronjé on 4th March 2010,

The Statement of the Monetary Policy Committee of 25th March 2010, made by the Governor of the

Reserve Bank Ms Gill Marcus,

The State of Local Government in South Africa and the Local Government Turnaround Strategy, by

the Ministry of Cooperative Governance and Traditional Affairs, 2009,

The 2007 Statistics South Africa, Community Survey for local municipalities,

Umgeni Water has reviewed its strategy and concluded that no major changes are needed to the existing

strategy. However, several key focus areas, as outlined in the section that follows, have been identified to

be addressed in this business plan.

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Key focus areas to be addressed by Umgeni Water in this business plan:

Further increase the coverage of Umgeni Water’s bulk water services, setting

specific ward coverage targets per local municipality to be achieved

progressively over the five year period, notably for the rural wards where

backlogs continue to persist.

Continue to work together with:

Statutory stakeholders: National, Provincial and Local Government,

Contracted stakeholders: Investors, Organised Labour, Employees,

Suppliers and Customers, and

Non-Contracted stakeholders: Civil Society and Business Formations,

toward coordinated and effective bulk water services delivery in Umgeni

Water’s gazetted area of supply: bounded by the uThukela River in the North,

the Mtamvuna River in the South, Indian Ocean in the East and Drakensberg

Mountains in the West.

Optimise the timing and sequencing of the implementation of Umgeni Water’s

bulk infrastructure projects, to synchronise with the implementation of the

reticulation infrastructure provided by local municipalities to end users and

communities.

Collaborate with municipalities, such that there are sequential and reciprocal

funding streams between the Municipal Infrastructure Grant and Umgeni

Water’s Capital Expenditure Programme.

Collaborate with the Department of Water Affairs to ensure that the Bulk

Infrastructure Grant targets vulnerable local municipalities and leverages

Umgeni Water’s Capital Expenditure Programme.

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Lobby the Department of Water Affairs to invest in water resources

infrastructure that supports the water for growth and development strategy

and rural development initiatives, such as ‘One Home, One Garden’.

Support the activities of the Departments of Water Affairs and Environmental

Affairs, as well as the KwaZulu-Natal Department of Agriculture,

Environmental Affairs and Rural Development in targeted environmental and

community sustainability initiatives.

Deepen our strategic intent to support local government.

Continue to ensure financial viability of Umgeni Water.

Continue to promote the objectives of broad-based black economic

empowerment.

Ensure that there is employee and leadership development at Umgeni Water.

Furthermore, the Board will continue to uphold the highest standards of

corporate governance for Umgeni Water.

This five year business plan maps out how the organisation intends to deliver on its strategy.

MR ANDILE MAHLALUTYE

CHAIRPERSON OF THE BOARD OF UMGENI WATER

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The organisation’s strategy is indicated in the following strategy map:

Improve Return on

Assets

Contribute to an Affordable

Tariff

Maintain Strategic

Effectiveness

Exceed Customer

Expectations

Growth / Increase

Customer Base

Manage Stakeholder

Relations

Maintain an Optimal

Debt Level

Enhance Shareholder

Value

Conserve Limited Natural Resources

Contribute to National Development Agenda & Reduction of Backlogs

Ensure Operational Competence

Ensure Functional Excellence

To provide effective and affordable bulk water, bulk sanitation and related solutions to local

government in accelerating the water sector’s national developmental agenda

How our strategies add value

Customer and Growth

Financial

Developmental and Environmental

Organisational Learning and Growth

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As indicated in the strategy map, the organisation has twelve strategic objectives for its four identified perspectives.

1. Exceed Customer Expectations

2. Growth / Increase Customer Base

3. Manage Stakeholder Relations

4. Contribute to an Affordable Tariff

5. Maintain an Optimal Debt Level

6. Improve Return on Assets

7. Enhance Shareholder Value

8. Conserve Limited Natural Resources

9. Contribute to National Developmental Agenda

10. Maintain Strategic Effectiveness

11. Ensure Functional Excellence

12. Ensure Operational Competence

- 18 -

Umgeni Water’s strategic objectives target ten outcomes:

1. Product Quality (Water and Wastewater Quality)

2. Customer Satisfaction

3. Operational Resiliency

4. Operational Optimisation

5. Infrastructure Stability

6. Stakeholder Understanding and Support

7. Financial Viability

8. Water Resources Adequacy

9. Community and Environmental Sustainability

10. Leadership and Employee Development

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The organisation’s Mission, Strategic Intent, Vision and Values as stated below continue to provide a clear framework for developing the organisation’s business plan. The organisation’s business, as articulated in its mission, is the provision of water and sanitation services to local government. “To provide effective and affordable bulk water, bulk sanitation and related solutions to local government in accelerating the water sector’s national developmental agenda” The organisation wants to be recognised as a strategic and sustainable partner of municipalities, creating distinct shareholder value through providing bulk water and sanitation services as a catalyst for local economic development and supporting government’s developmental agenda. “A key partner in enabling local government to deliver effective water services” The organisation’s long term aspiration is to become the first-choice water utility in the developing world and to leave a positive legacy in the areas it serves. “To be The Number One Water Utility in the Developing World”

- 20 -

Six core values underpin the organisation’s business.

Partnering with municipalities to proactively identify and provide integrated sustainable solutions to enhance their capacity to deliver in accordance with their mandates.

We commit ourselves to the highest ethical standards by dealing with all internal and external stakeholders in an honest and transparent manner in order to engender trust. We appreciate the same integrity from our customers, suppliers, partners and other stakeholders.

We deliver sustainable and appropriate water and sanitation solutions that improve the quality of life and contribute to the human development agenda. We value and respect all people equally. We are committed to protecting our diminishing natural resources and reducing pollution in all areas of our involvement. We value the use of innovation, knowledge and intellectual capital, from our staff, customers, strategic partners and stakeholders, to enhance our delivery of water and sanitation services.

- 22 -

Page

Five Year Business Plan 21

1 Introduction 23

2 Policy Statement 25

3 Directives by the Minister 27

4 Participation in Companies 29

5 Water Resources 31

6 Bulk Potable Water Supply Plan 43

7 Bulk Wastewater Treatment and Disposal 53

8 Other Activities 55

9 Human Resource Development Plan 61

10 Environmental Management Plan 69

11 Water Conservation and Demand Management Plan 73

12 Financial and Capital Expenditure Plan 75

13 Bank Accounts 119

14 Risk Management Plan 121

15 Fraud Prevention Plan 123

16 Other KPIs 125

Performance Scorecard 127

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1.1 Introduction, Establishment and Governance

Umgeni Water was established in June 1974 to supply bulk treated water to municipalities in its designated

operational area. Over the years the organisation has grown into the largest bulk water supplier in

KwaZulu-Natal and has an operational area of 21,155 square kilometres. Umgeni Water’s gazetted area

of supply is bounded by the uThukela River in the North, the Mtamvuna River in the South, the Indian

Ocean in the East and Drakensberg Mountains in the West.

Umgeni Water derives its revenue from the sale of bulk potable water to its customers, which comprise six

Water Services Authorities in KwaZulu-Natal, namely, eThekwini Metropolitan Municipality, iLembe District

Municipality, Sisonke District Municipality, uMgungundlovu District Municipality, Ugu District Municipality

and Msunduzi Local Municipality. A total of 416 million cubic metres of potable water was supplied to

customers in 2008/9.

Umgeni Water operates in accordance with the Water Services Act (Act 108 of 1997) and the Public

Finance Management Act (Act 1 of 1999), amongst others, and its Executive Authority is the Minister of

Water and Environmental Affairs.

The organisation is governed by a Board comprising fifteen members (fourteen non-executives and one

executive, namely, the Chief Executive).

The Board has established three committees to assist it in discharging its responsibilities: Audit and Risk committee, Capital Expenditure, Procurement and Infrastructure committee, and Human Resources and Remuneration Committee.

The Executive Committee comprises the Chief Executive, General Manager Operations, General Manager

Finance, General Manager Engineering and Scientific Services and General Manager Corporate Services.

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- 25 -

There have been no significant changes in Umgeni Water’s policy statement.

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In February 2010, the Minister of Water and Environmental Affairs requested Umgeni Water to assist with

the turnaround strategy for the water services function in the OR Tambo District Municipality, in Eastern

Cape.

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4.1 Subsidiaries

Umgeni Water has:

two subsidiaries in which it has 100% shareholding, namely Umgeni Water Services (Pty) Ltd

and Msinsi Holdings (Pty) Ltd, and

an 18.5 % shareholding investment in Durban Water Recycling (Pty) Ltd.

- 30 -

- 31 -

5.1 Water Availability and Use Rights

Umgeni Water sources water primarily from twelve impoundments on three major water resource systems

namely, the Mgeni System (Mooi and Mgeni rivers), the North Coast System (Mdloti River) and the South

Coast System (Nungwane, Mzimayi and Mzinto rivers). Table 5-1 shows the capacities of these resources.

The Mgeni System comprises four dams on the Mgeni River, namely, Midmar Dam, Albert Falls Dam, Nagle

Dam and Inanda Dam. It is augmented by the Mooi-Mgeni Transfer Scheme (Phase 1) which consists of

the Mearns Weir on the Mooi River, the Mearns Pumping Station with a maximum transfer capacity of

3.2 cubic metres per second and a raw water transfer pipeline that discharges into the Mpofana Stream,

which flows into the Lions River and then into the Mgeni River upstream of Midmar Dam. The system

currently has a stochastic yield (99 %) of 334.5 million cubic metres per annum at Inanda Dam and is the

water resource for the greater Durban - Pietermaritzburg region and a primary source for the

uMgungundlovu District Municipality. This system also contributes to the water supply of the Upper

(Amanzimtoti to Umkomaas) and Middle (Umkomaas to Scottburgh) South Coast regions.

The North Coast System comprises the Hazelmere Dam on the Mdloti River, which serves as a dual-purpose

dam, providing water for both potable and irrigation requirements. The dam has a stochastic yield (98 %) of

19.0 million cubic metres per annum available for treatment and potable usage, provided the reserve

allocation is not imposed. This system serves the coastal strip and adjacent hinterland, from Verulam in

the south to the town of KwaDukuza in the north. Since July 2007 Umgeni Water has also been abstracting

water from the Mvoti River as part of managing the Mvoti Water Works and the supply of bulk potable water

to the town of KwaDukuza on behalf of the iLembe District Municipality.

Table 5-1: Water Resource Systems

System Catchment Impoundment Owner Manager Gross Capacity in million m3 Total for Umgeni Water Systems 822 Mgeni Mooi Mearns Weir DWA UW 5.1 Mgeni Midmar Dam DWA UW 235.4 Mgeni Albert Falls Dam DWA UW 289.1 Mgeni Nagle Dam UW UW 23.2 Mgeni Inanda Dam DWA UW 241.7 Mlazi Shongweni Dam# UW UW 3.8 Msunduzi, Mgeni Henley Dam# UW UW 1.5 Total for Central System 799.8 North Coast Mdloti Hazelmere Dam DWA UW 17.9 Total for North Coast System 17.9 South Coast Nungwane, Lovu Nungwane Dam UW UW 2.2 Mzimayi E J Smith Dam Ugu DM UW 1.0 Mzinto Umzinto Dam Ugu DM UW 0.5 Total for South Coast System 3.7 Other Ixopo Ixopo Dam UW UW 0.6

# not utilised for water supply

- 32 -

The South Coast System comprises a number of interlinked operational entities. The Upper South Coast

System primarily supports the southern eThekwini Metropolitan area from Amanzimtoti in the north to

Umkomaas in the south. Water resources for this area are obtained from the Nungwane Dam on the

Nungwane River (a tributary to the Lovu River), and is substantially augmented by the Mgeni system via the

South Coast Augmentation Pipeline and the South Coast Pipeline.

The Middle South Coast System comprises the coastal strip from Umkomaas in the north to Hibberdene in

the south. This system further supports the southern-most extremities of eThekwini Metro and the northern

part of Ugu District Municipality. To the south, a sand abstraction system on the Mtwalume River serves

the Mtwalume Water Works. The central portion of this area is partly supplied from the Umzinto Water

Works, which derives its raw water from the Umzinto and EJ Smith dams on the Mzinto and Mzimayi rivers

respectively. The upper portion, as well as a section of the central portion of this region is supported with

potable water from the Mgeni system, conveyed to the region via the South Coast Pipeline.

Registered abstractions are shown in Table 5-2.

Table 5-2: Registered Abstractions 2009/10

System Abstraction Point 103 m3/d

Mgeni Midmar Dam Nagle Dam (Albert Falls Dam) Inanda Dam

1,085

Hazelmere Dam 45 Mdloti River (Ogunjini) 1.4 North Coast Mvoti River 16 Nungwane Dam 26.5 E J Smith Dam Umzinto Dam 12.0

Mkomazi River Well points 7 South Coast

Mtwalume River Well points 7 Other Ixopo Dam 1.80

- 33 -

5.2 Raw Water Quality

Umgeni Water monitors the quality of the raw water it abstracts for water treatment purposes. Water

quality problems associated with these supplies include eutrophication, high suspended solids

concentrations, faecal contamination with associated pathogen risks, and chemical contamination,

particularly elevated concentrations of iron and manganese.

Table 5-3 shows the water quality problems per raw water source. The Department of Water Affairs is kept

appraised of the quality and risks associated with the source water and needs to more rigorously regulate

catchment practices and waste discharges, to continue to ensure the long term sustainability of these

resources.

Table 5-3: Water Quality of Raw Water Sources

System Catchment Impoundment Raw Water Quality Problem Water Quality Status

Mgeni Mooi, Mgeni Mearns Weir;

Midmar Dam High algal counts associated with high nutrient concentrations, and iron and manganese problems have been experienced on occasion.

Good

Mgeni Albert Falls Dam; Nagle Dam

High algal counts associated with high nutrient concentrations and high turbidity/suspended solids.

Good

Mgeni Inanda Dam Elevated algal counts, associated with high nutrient

concentrations, chemical contamination and high suspended solids.

Moderate

North Coast Mdloti Hazelmere Dam High suspended solids, chemical contamination, eutrophication and faecal contamination.

Moderate

Nungwane, Lovu

Nungwane Dam High iron and manganese concentrations, high algal counts and aquatic weed infestation, and faecal contamination.

Moderate

Mzimayi E J Smith Dam Faecal contamination, elevated algal counts, chemical contamination and high suspended solids concentrations.

Poor

Mzinto Umzinto Dam Chemical contamination, faecal contamination, and elevated algal counts and weed infestation.

Poor

South Coast

Mtwalume River abstraction Faecal and chemical contamination as well as high suspended solids concentrations.

Moderate

Other Xhobo Ixopo Dam Elevated levels of iron and manganese and high algal counts.

Moderate

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5.3 Water Demands, Planned Developments and Shortfalls

Umgeni Water’s bulk water sales growth has recently slowed, but remains positive, and is expected to

continue with a flatter but positive growth trend in the short term. With the economy having emerged from

the recent recession, there are expectations of continued housing and commercial growth leading up to,

and beyond, the 2010 World Cup event. Furthermore, the long-term water sales growth trend is not

expected to change due to the relative stability of the South African economy.

Umgeni Water, as a bulk water service provider, requires sustainable and cost-effective water resources to

meet its customer’s demands. In view of the significant lead times required to plan, design, construct and

commission major water resource development projects, future medium to long-term water resources from

the Department of Water Affairs (DWA), as the custodian of the country’s water resources, have to be

secured in a timely manner. DWA has to date undertaken regional water resource development

investigations within Umgeni Water’s area of operation in close collaboration with Umgeni Water and its

major customers. A number of these studies were co-funded by Umgeni Water. The status of water

demand within Umgeni Water’s area of supply, however, requires several of these water resource

investigations to be completed as a matter of urgency. Failing which, customers could be faced with severe

water shortages in coming years. A summary of resource needs is shown in Table 5-4 and described

further in the sections that follow.

Umgeni Water will continue to manage its existing resource supplies with the utmost diligence. In addition,

Umgeni Water is investigating alternative sources to assist with meeting the long-term water requirements

of the region, including:

Completion of a pre-feasibility investigation of a large-scale desalination plant for the

eThekwini region, and initiation of a follow-up detailed feasibility investigation,

Continuation of the reuse investigation at the Darvill Wastewater Works, and

Involvement in eThekwini Metro’s reuse investigation with the intention of combining the two

reuse projects into one regional initiative.

Further initiatives are described in the water conservation and demand management plan further in this

Business Plan.

Table 5-4: Summary of Water Resource/Supply needs, timing and estimated cost

Scheme Date Needed

Timing Est. Cost (2009)

Responsibility

Phase 2 Mooi-Mgeni Transfer Scheme: Spring Grove Dam 2007 Behind Schedule R 1,700 million DWA Phase 1 Mkomazi Water Project: Smithfield Dam 2010 Behind Schedule R 4,500 million DWA North Coast Supply System: Raising of Hazelmere Dam 2012 Behind Schedule R 100 million DWA Mvutshane Dam 2012 On Schedule R 136 million UW Mhlabatshane Dam 2010 Behind Schedule R195 million UW Sikoto Dam 2010 Behind Schedule R 95 million UW Lower Mvoti Regional Scheme: Welverdient Dam 2020 Behind Schedule R 1,000 million DWA Lower Mkomazi Bulk Water Supply Scheme 2019 On Schedule R 500 million UW Upper Mvoti Regional Scheme: Mvoti-Poort Dam 2025 On Schedule R 500 million DWA Upper Mzimkulu Regional Scheme: Mzimkulu Dam 2030 On Schedule R1,000 million DWA

- 35 -

5.3.1 Mgeni System: Planned Developments and Shortfalls

The Mooi-Mgeni River Transfer Scheme (MMTS) was intended for phased implementation in accordance

with growth needs. Phase 1 of this scheme (MMTS-1) was commissioned in 2003 and comprised the new

Mearns Weir on the Mooi River, the raising of Midmar Dam, the provision of a standby pump for the existing

Mearn’s Pumping Station and the registration of a servitude of aqueduct along sections of the Mpofana,

Lions and Mgeni rivers.

Phase 2 of this scheme (MMTS-2) comprises the proposed Spring Grove Dam (full supply capacity of

141.6 million cubic metres) on the Mooi River, a new pumping station at Spring Grove Dam and a new

pipeline to transfer water directly into the Mpofana River, which is within the Mgeni catchment. The overall

transfer capacity of the MMTS will then be increased to its ultimate rate of 4.5 cubic metres per second.

Over the past few years water demands from the Mgeni System have continued to grow, with this past

financial year showing a decreased growth rate from the previous year (refer to Figure 5-1). The current

financial year is expected to show a further decline in growth rate with an increase in the years thereafter.

Figure 5-1 indicates that demands have already exceeded the 99% assurance of supply level that will be

achieved with the commissioning of MMTS-2, and even further augmentation of the Mgeni System is

already needed. At the end of 2007 the Minister of Water and Environmental Affairs instructed the TCTA to

implement the MMTS-2 project as quickly as possible in order to augment the existing system and reduce

the risk of possible future restrictions. There is one appeal against the environmental Record of Decision,

which is currently being resolved. At this stage construction is scheduled to be completed in September

2012 with the first water delivered in April 2013.

It is evident from current and projected water demand trends (refer to Figure 5-1), that the planning of the

next major water resource development, the Mkomazi Water Project, to support the Mgeni system urgently

needs to be brought to a stage of implementation. Without this augmentation of the Mgeni system, Umgeni

Water will be unable to ensure that future water demand can be met timeously and at the appropriate level

of assurance. Therefore, there is now a need to move beyond the findings of the 1998 Pre-Feasibility study

of this scheme and initiate a detailed feasibility level investigation into this augmentation option.

DWA is currently in the process of compiling a terms of reference in this regard to make the necessary

appointments to undertake the investigation. Umgeni Water has undertaken to complete concurrent

detailed feasibility level investigations into the associated bulk water transfer infrastructure. It is envisaged

that these investigations will proceed simultaneously and in an integrated manner.

Phase 2 Mooi-Mgeni Transfer Scheme: Spring Grove Dam

Mkomazi Water Project: Smithfield Dam

- 36 -

Figure 5-1: Long-term demand projection of the Mgeni system

Figure 5-2: Long-term demand projection for the Hazelmere (Mdloti) system

- 37 -

Communities within the Ozwathini area are currently supplied with water from a number of boreholes that

are proving to be unsustainable. The long-term solution that has been proposed by Umgeni Water for this

region is to extend the existing Wartburg pipeline to also serve this region. However, current levels of water

demand in the area do no yet warrant the implementation of this project, and a medium to long-term

solution has been developed.

The proposed Ozwathini Bulk Water Supply Scheme project is located in the uMgungundlovu and iLembe

District Municipalities. The scheme will consist of a 5.5 million cubic metre dam on the Sikoto River (a

tributary of the Mvoti River), a raw water pump station and rising main to a 6,000 cubic metre per day water

works and a further pump station and rising main to supply potable water to the existing Nondobula

Reservoir. Potable water can be reticulated through existing networks to the various communities within

Ozwathini.

5.3.2 North Coast System: Planned Developments and Shortfalls

Water demand in the North Coast region (the coastal strip between Veralum, to the north of Durban, and

the town of KwaDukuza) has risen over the past few years and is expected to continue to grow in the future

(refer to Figure 5-2). The drop in demand for the 2008/09 financial year was as a result of a load shift from

the Hazelmere Water Works onto the Durban Heights Water Works, and not due to a drop in demand in the

North Coast area.

DWA recently commissioned the KwaZulu-Natal Coastal Metropolitan Areas Water Reconciliation Strategy

Study, which amongst other things, considered strategies for augmenting the North Coast water supplies.

The augmentation options included:

Raising of Hazelmere Dam,

Implementing the Lower Thukela Bulk Water Supply Scheme (BWSS), and

Building new dams on the Mvoti River (e.g. the Welverdient dam or the iSithundu dam).

Raising the full supply level of Hazelmere Dam by seven metres (85.98 masl to 93.00 masl) to increase the

firm yield (98 % assurance) of the resource to approximately 27.3 million m3 per annum, was found to be

the most cost effective and quickest option of augmenting the water supply to the North Coast region.

The environmental Record of Decision for this project has recently been issued. There is an urgent need for

DWA to initiate the necessary processes to ensure the full supply level (FSL) of Hazelmere Dam is raised by

2012 when the upgrade to the associated bulk water supply infrastructure is scheduled to be completed by

Umgeni Water.

Raising of Hazelmere Dam

Sikoto Dam

- 38 -

Following the raising of the Hazelmere Dam, the Lower Thukela BWSS is the most practical scheme to

implement to supply additional water to the area. This scheme would be required to augment the water

supplies of the Mdloti System, as the raising of Hazelmere Dam on its own would not provide sufficient

resources to supply this area. The Lower Thukela BWSS will draw water from the Thukela River and will not

require raw water storage. Umgeni Water is in the process of conducting a detailed feasibility investigation

for this scheme.

Communities in the largely rural areas inland from the North Coast region (areas bounded by the Thukela

and Mvoti rivers and extending from Greytown in the west to Maphumulo in the east) currently receive

water from boreholes or small stand-alone surface water supply schemes. Many communities in this area

receive a sub-RDP standard level of service.

Umgeni Water is currently implementing the Ngcebo Bulk Water Supply Scheme that draws water from the

Thukela River to supply potable water to some of these communities. Furthermore, Umgeni Water is in the

process of implementing Phase 1 of the Maphumulo Bulk Water Supply Scheme (BWSS) to supply the

communities of Maphumulo, Maqumbi and Ashville. This scheme will initially draw water directly from the

Imvutshane River, which is a tributary of the Hlambitwa River, which in turn is a tributary of the Mvoti River.

A detailed feasibility investigation of Phase 2 of this scheme has recently been concluded, which entails the

construction of a dam on the Imvutshane River to replace the run-of-river abstraction system. This will

increase the yield from the scheme and ensure a more sustainable supply. A possible later extension to

this scheme is to augment the Imvutshane Dam from the Hlambitwa River.

In the long-term the intention is to consolidate the various schemes in the area as well as incorporate other

communities that fall outside of the supply areas. This can be achieved through the development of a

regional bulk water supply scheme that is able to meet the potable water needs of the region on a long-

term sustainable basis. This regional scheme will best be supported by a water resource development on

the upper Mvoti River. Investigations conducted in the past have shown that a small dam at the previously

identified Mvoti–Poort dam site would be a potential solution. Umgeni Water has therefore requested DWA

to undertake appropriate water resource investigations linked to developing a dam at the Mvoti-Poort site

or at another suitable site in its vicinity. It is envisaged that the water resource development and transfer

infrastructure development investigations will proceed in a concurrent and integrated manner.

Lower Thukela Bulk Water Scheme

Upper Mvoti Regional Scheme: Mvoti-Poort Dam

Mvoti River: Imvutshane Dam

- 39 -

DWA and Umgeni Water conducted numerous water resource and supply infrastructure investigations of

the lower Mvoti River catchment during the latter half of the 1990s. At the time, the proposed iSithundu

Dam (serving both irrigation and potable water demands) with a downstream abstraction works located

near the town of KwaDukuza was identified as being the preferred infrastructure development

configuration. However, a number of critical assumptions have since changed. Most significantly,

legislative changes governing national raw water pricing has led to the irrigation sector withdrawing from

the proposed scheme on affordability grounds. The implication is that storage options serving only the

potable water sector now need to be considered.

Umgeni Water has therefore requested DWA to urgently re-institute investigations to review the findings of

the previous investigations and develop detailed feasibility plans for the next phase of water resource

augmentation for the North Coast System – most likely to be the proposed Welverdient Dam option.

Umgeni Water will undertake concurrent detailed feasibility level investigations into the associated bulk

water transfer infrastructure. It is envisaged that both investigations will proceed simultaneously and in an

integrated manner.

5.3.3 South Coast System: Planned Developments and Shortfalls

The water resources that support the Middle South Coast area lack substantial storage capacity, making

them especially susceptible during periods of drought. While the infrastructure linkages between the

Umzinto, Mtwalume and Craigieburn water works’ were able to alleviate localised supply shortages during

short periods, they were not able to sustain supply over longer periods and water restrictions were often

required.

Several localised solutions were investigated, including an assessment by DWA of the feasibility of a low-

level weir on the Mtwalume River to improve abstractions at this point during low flow periods. These minor

water resource developments only solve the problem in the short-term. As with the North Coast area, the

Middle South Coast area is experiencing strong growth in water demand, driven by economic growth in the

region, and it is envisaged that a major water resource development and/or inter-basin transfers will be

required to provide a long-term solution to water scarcity in the area.

Umgeni Water has commissioned Phase 1 of its South Coast Pipeline that transfers potable water from the

Mgeni System to the Upper and Middle South Coast areas. It is recognised that the Mgeni System has

insufficient resources to support this region in the medium to long-term and that a local sustainable long-

term scheme needs to be developed to replace it. The Mkomazi River is best suited for this purpose.

Umgeni Water intends initiating a detailed feasibility investigation of the Lower Mkomazi Bulk Water Supply

scheme, which will abstract water from the lower reaches of the Mkomazi River for treatment to feed into

the South Coast Pipeline.

Lower Mvoti Regional Scheme: Welverdient Scheme

Lower Mkomazi Bulk Water Scheme

- 40 -

The availability of a local sustainable source will then allow the extension of this pipeline (Phase 2) further

southwards to increase the area of supply and enable a linkage to other supply systems in the south. It is

unknown at this stage whether storage will be required. The initiation of this investigation can only proceed

once the results from the hydrological study that forms part of DWA’s Mkomazi Water Project Detailed

Feasibility Study are available.

The hinterland immediately adjacent to the coastal strip along the South Coast contains largely scattered

rural communities residing at elevations of up to 800 m above sea level. It will not be possible to supply

these inland areas from the South Coast Pipeline and they will therefore have to be served by other water

resources developments.

As a result, Umgeni Water intends to investigate the feasibility of a regional bulk water supply scheme that

utilises the Mzimkulu River as a source of raw water, to meet the water needs of significant portions of both

Sisonke and Ugu district municipalities on a long-term sustainable basis. The proposed Mzimkulu Regional

Scheme entails abstracting water from a dam on the upper Mzimkulu River, treating it at a water works in

the vicinity of Underberg and then conveying potable water under gravity along a south-easterly route

towards the coastline, supplying numerous rural communities along the way. Umgeni Water has, therefore,

requested that DWA undertake appropriate water resource investigations linked to developing a dam near

Underberg on the Mzimkulu River to support this proposed regional bulk supply scheme, and has

undertaken to conduct concurrent investigations into the bulk infrastructure transfer served from the dam

with DWA.

M

As an interim solution for the inland Bulwer to Donnybrook area, Umgeni Water has, on behalf of Sisonke

District Municipality, completed a detailed feasibility investigation of the proposed Bulwer Dam on the

Luhane River, which is a tributary of the Mkomazi River. The bulk supply component of this scheme still

needs to be undertaken.

Umgeni Water is currently implementing a bulk water supply scheme as part of a larger regional scheme

development by Ugu District Municipality aimed at reducing water services backlogs in certain rural areas in

the uMzumbe and Hibiscus Coast Local Municipalities. This scheme is situated within the Lower South

Coast Sub-Region. Ugu District Municipality is responsible for the reticulation component of the scheme,

which in its entirety, is planned to serve an estimated 101,000 people (approximately 15,300 households)

of which about half are currently classified as having a water service backlog.

Upper Mzimkulu Regional Scheme: Mzimkulu Dam

Bulwer Dam

Mhlabatshane Dam

- 41 -

The bulk component of the scheme will initially comprise of a dam on the Mhlabatshane River (a tributary of

the Mzumbe River), from where water will be pumped to a water works situated in close proximity to the

command reservoir. Potable water will then be supplied to Ugu District Municipality from the command

reservoir for reticulation through of an extensive gravity-fed network to the various communities in the area.

Some of the reticulation component currently exists as stand-alone schemes, with the remainder still to be

installed.

When water demands from this scheme exceed the firm yield of the dam, the intention is to develop the

second phase of the project. Water will be abstracted directly from the Mzimkhulu River, pumped to the

existing water works (which will need to be upgraded) and then fed into the reticulation system via the

command reservoir.

5.4 Management Arrangements

Umgeni Water operates the majority of the water resources infrastructure it uses on behalf of the

Department of Water Affairs (as per Table 5-1). This is currently undertaken without a signed agency

agreement. In 2009/10 the Department of Water Affairs indicated its intention to manage the operations

of its water resources infrastructure and will schedule this for 2011/12.

- 42 -

- 43 -

6.1 Potable Water Quantity Demand

Umgeni Water continues to develop water sales volume projections in consultation with its major

consumers. This is undertaken annually to enable Umgeni Water to project revenues and future capital

expenditure. Customer Bulk Supply Agreements require the Water Services Authorities to provide Umgeni

Water with projected demands at set intervals for each sales point, based on expected growth over the

contract period.

Short-Term Bulk Sales Forecast

The projected sales volumes are shown in Figure 6-1. In September 2008 the short-term bulk water sales

forecast for 2009/10 was estimated to be 1.237 million cubic metres per day. Following the recent

discussions with major customers and based on the latest economic and water sector development

information, this value has been revised downward to 1.158 million cubic metres per day (Figure 6-1). This

value is a consolidation of individual customer forecasts and is primarily shaped by the forecast provided by

Umgeni Water’s major customer, eThekwini Metro. This forecast represents a 2.67 % year-on-year increase

in growth, and is lower than the growth of 3.02 % that was achieved in the previous year.

This trend is expected to continue and, similarly, the short-term bulk water sales forecast for 2010/11 is

estimated to be 1.167 million cubic metres per day (Figure 6-1). This represents a 1.95 % year-on-year

increase in growth from 2009/10, which is slightly lower than the previous year, and is again primarily

determined by the forecast provided by eThekwini Metro.

Figure 6-1: Umgeni Water’s Historic and Projected Total Sales Volumes

- 44 -

Short-Term Demand Drivers

The two major urban areas, the eThekwini and Msunduzi regions, currently account for approximately 92 %

of the water supplied by Umgeni Water. Consequently, they remain the main drivers of demand within

Umgeni Water’s operational area.

It is expected that substantial urban and peri-urban housing growth will continue to occur within the

eThekwini area, with a number of substantial developments already in various stages of implementation.

Coupled with this is the completion of the new King Shaka International airport in 2010 that is expected to

attract significant industrial and commercial development to the region. These factors will continue to drive

growth in water sales in the eThekwini region, particularly to the north of the city of Durban.

The eThekwini Metro is, however, currently implementing an intensive Water Demand Management

programme, which includes a multi-million rand pipe replacement project, in order to reduce its non-

revenue water. It anticipates that this programme will start having a marked impact on its water purchases

from Umgeni Water, starting in the 2009/10 financial year.

Hence, the anticipated growth in bulk water sales to eThekwini Metro (as presented by the Metro) for

2009/10 and 2010/11 is 1.8 % and 1.7 % respectively. This equates to 910,000 cubic metres per day in

2009/10 and 926,000 cubic metres per day in 2010/11 (refer to Figure 6-2). These forecast values are

lower than the 3.4 % actual growth achieved by eThekwini in 2008/09, and the 5.4 % achieved in

2007/08. Actual sales are currently below the revised forecast.

Figure 6-3 shows the sales trends for the Msunduzi Municipality and projections for 2009/10 and

2010/11. The average daily sales, at 30 June 2009, amounted to 155,000 cubic metres per day. This

represents a 1.9% reduction in sales from the 158,000 cubic metres per day sold in the previous year.

There is no obvious explanation for this reduction. Municipal officials indicated that no major leaks were

repaired during this period and there were no aggressive water loss initiatives undertaken. Average daily

sales to the Msunduzi Municipality are expected to grow to 158,000 cubic metres per day by 30 June 2010

and to 161,000 cubic metres per day by 30 June 2011. This growth is lower that what was previously

forecast, with actual sales currently below this revised forecast.

- 45 -

Figure 6-2: Total daily sales to eThekwini Metro

Figure 6-3: Total daily sales to Msunduzi Local Municipality

- 46 -

Long-term Bulk Sales Forecast

The 30-year long term sales forecast for Umgeni Water’s entire supply area has been developed using long-

term growth rates agreed upon between Umgeni Water and its major customers. The base projection was

developed from the short-term forecasts and then extended at a compounded 1.5% growth rate until

2038/2039. This growth rate is considered acceptable for this long-term forecast as it closely matches the

forecast that was independently derived as part of the “Water Reconciliation Strategy Study for the

KwaZulu-Natal Coastal Metropolitan Areas” completed by the Department of Water Affairs, using a

population projection technique. Figure 6-4 depicts this long-term sales projection together with 1 % and

2 % growth rate scenarios for comparison.

The long-term sales projections, present an average view and fluctuations around the mean values can be

substantial, giving rise to localised infrastructure or water resources constraints. Sales would be monitored

on a regular basis to assess actual demand patterns that emerge after the 2010 Soccer World Cup. In the

interim, additional housing and other infrastructural developments are expected to occur which may

translate into significant and sustained water demand growth.

Figure 6-4: Long-term water sales projections, 2038/39

- 47 -

6.2 Water Quality

Umgeni Water will continue to treat bulk water to ensure all customers are provided with potable water that

is suitable for lifetime consumption. Water quality management programmes will cover the entire reach of

the organisation’s operational system and will comprise:

Water Quality Monitoring Planning, Sampling and Analysis Programmes:

Monitoring programmes are prepared or reviewed annually for sites in accordance with

legislative requirements, supplemented by requirements of customer bulk supply agreements

and any monitoring associated with water quality risks previously identified for the water works

system.

Water quality sampling and analyses will be undertaken in accordance with Umgeni Water’s

accredited quality management systems.

Water Quality Auditing, Risk Assessment & Reporting:

The SANS 241: 2006 Drinking Water Specification will be used for assessing compliance,

Emergency response protocols will be reviewed and implemented as needed,

Audit data, information and reports will be disseminated to stakeholders as per statutory

requirements and bulk supply agreements.

Water Safety and Security Plans:

Risk assessments of the catchments, treatment and distribution systems will be undertaken,

The risks identified will be prioritised and the effectiveness of control measures assessed.

Water Quality Management of proposed infrastructure:

Water quality assessments will be undertaken for proposed infrastructure projects,

These assessments, in partnership with DWA, will include water quality monitoring,

assessment of catchment hazards and risks, predictions of impounded quality to be treated,

and recommendations for design and operation of abstraction and outlet structures that would

optimise raw water quality.

- 48 -

6.3 Bulk Supply Agreements with Major Customers

Umgeni Water has signed Bulk Supply Agreements with five of the six Water Service Authorities it supplies,

notably eThekwini Metropolitan Municipality, iLembe District Municipality, Ugu District Municipality,

uMgungundlovu District Municipality and Sisonke District Municipality. The agreement with the Msunduzi

Local Municipality is still awaiting council signature.

These agreements cover obligations of both Umgeni Water and its customers for the management of bulk

water in respect of planning and implementation of the quality and quantity of treated water, asset

management and metering. Umgeni Water’s levels of service will continue to be regulated and monitored

at a micro level at the water works where the final treated water is distributed, as well as at a macro level

where regional systems are integrated for water supply. Monitoring frameworks have been formulated in

response to the formal agreement and are incorporated into operating rules, schedules and plans.

Monthly operational liaison meetings with the municipalities will continue to ensure that customer

requirements are continuously met and responses to new requirements are provided. Executive level

appraisal of performance against the requirements of the Bulk Supply Agreement will continue to be held at

quarterly frequency with Water Services Authorities.

Umgeni Water will continue to operate and maintain the thirty-seven water schemes within the iLembe

District Municipality as an interim annexure agreement to the existing Bulk Water Supply Agreement. The

objective is to operate these small stand-alone local water schemes, whilst the regional schemes are being

developed and phased in. In the interim, the small schemes are subject to the same water quality and

quantity standards and this requires ongoing rehabilitation of the existing infrastructure.

- 49 -

6.4 Bulk Water Supply Capacity, Condition and Development

Umgeni Water operates twelve water works in order to meet the present and forecasted customer water

demands. In addition, for bulk potable water transfer and distribution, the organisation manages

approximately 632 km of bulk pipelines and 118 km of tunnels. The organisation will continue to

implement its asset management plan to ensure assets perform at optimum levels and the costs of

required asset maintenance are quantified and budgeted for. Bulk water works supply capacity and

utilisation is shown in Table 6-1. Some of the smaller works are being operated above their design capacity

in response to customer demands. Upgrades and refurbishments in respect of bulk water works is

described in the section that follows and detailed in the capital expenditure plan in this business plan.

Table 6-1: Bulk Water Supply Capacity as at 31st March 2010

Waterworks Design Capacity (cubic metres per day)

Average Daily Inflow (cubic metres per day) Plant Utilisation

Durban Heights 614,000 515,760 84% Wiggins 350,000 255,500 73% Midmar 250,000 215,000 86% DV Harris 110,000 60,500 55% Hazelmere 45,000 36,900 82% Amanzimtoti 24,000 16,320 68% Umzinto 12,000 10,560 88% Mtwalume 7,500 8,175 109% Ixopo 2,200 2,244 102% Maphaphetwa 1,130 1,808 160% Ogunjini 1,000 1,300 130%

6.4.1 Water Works Upgrades and Refurbishments

Current sales projections indicate that the demands will exceed the current capacity of Midmar Water

Works (WW) on a regular basis from 2011/12. An upgrade from 250,000 to 375,000 million cubic metres

per day is therefore planned. The timing and size of this upgrade will be matched to the implementation of

Phase 2 of the Mooi-Mgeni Transfer Scheme (Spring Grove Dam), by the Trans-Caledon Tunnel Authority

(TCTA).

Similarly, Umgeni Water intends upgrading the Hazelmere WW from 45,000 to 75,000 million cubic metres

per day in order to meet anticipated future demands. The timing and size of this upgrade has been

matched to the raising of the full supply level of Hazelmere Dam by the Department of Water Affairs.

With respect to the Durban Heights WW, a booster pump station has been built to maintain an acceptable

pressure within eThekwini Metro’s northern supply network. In addition, roof rehabilitation of a major

reservoir and filter and process upgrades are also scheduled.

- 50 -

The current demand from the Wiggins System is due to continuous pumping into the eThekwini Ridge

Reservoir System and the new supply to the South Coast region. This increase has pushed the utilisation of

Wiggins WW closer to its capacity. The continuous pumping from the Wiggins WW Ridge has resulted in a

commensurate decrease in the utilisation of Durban Heights WW. eThekwini also draws potable water from

the South Coast Augmentation pipeline which receives water from the Wiggins WW system. The pipeline

together with the South Coast Pipeline delivers potable water to the Ugu District Municipality south of

eThekwini. The combined increased supply to both customers since commissioning has resulted in

increased utilisation of the Wiggins WW. Currently the WW is being optimised to assure response to the

increased demand.

The recent commissioning of the South Coast Pipeline has relieved some of the stress from the water

works’ in the Middle South Coast Region and has enabled the Craigieburn WW to be decommissioned.

6.4.2 Projects Specifically Targeting Rural Development

The following strategic projects have been identified as anchor projects for rural development and

community sustainability:

Richmond Pipeline –detailed design stage

Upgrade of Ndwedwe Reservoir 1 and Ndwedwe Reservoir 2 – construction stage.

Maphumulo Bulk Water Supply Scheme Phase 1 - construction stage.

Mhlabatshane Regional Bulk Water Supply Scheme - construction stage

South Coast Pipeline Phase 2 – Scottburgh to Kelso - detailed design and pipe procurement

stage

Upgrade of Mapaphetwa Water Works - construction stage

All water supply water works, pipeline and storage infrastructure projects that are scheduled to be

implemented by Umgeni Water over the next five years are detailed in the capital expenditure plan of this

business plan. In total, three billion rand will be spent, comprising:

Rural Development: R 1,091 million,

infrastructure Expansion and Augmentation: R 992 million,

Infrastructure Upgrading / Rehabilitation: R 756 million,

Information and communication technology: R60 million

Through implementation of its capital infrastructure development programme, Umgeni Water will

significantly increase its bulk supply coverage of wards from 228, which represents 61% of the total wards

in supply area, to 259, which represents 69% of the total wards in supply area, over the Five year period, as

shown in Table 6-2.

- 51 -

Table 6-2: Water Services Authority Bulk Water Supply Coverage 2010/11 to 2014/15

Water Service Authority Ward Coverage 2009/10 Ward Coverage to be achieved by 2014/2015

Overall Coverage of Water Services Authorities 228 of 375 wards (61%) 259 of 375 wards (69%)

Ugu District Municipality 17 of 81 wards (21%) 28 of 81 wards (35%)

iLembe District Municipality 48 of 66 wards (73%) 51 of 66 wards (77%)

Sisonke District Municipality 1 of 47 wards (2%) 5 of 47 wards (11%)

uMgungundlovu District Municipality * 62 of 81 wards (77%) 75 of 81 wards (93%)

Msunduzi Local Municipality 37 of 37 wards (100%) 37 of 37 wards (100%)

eThekwini Metro 100 of 100 wards (100%) 100 of 100 wards (100%)

* Includes Msunduzi LM, which is also shown separately.

6.5 Management and Operations Arrangements

The projects indicated in section 6.4 will be financed by Umgeni Water. The management and operations

arrangements will also be the responsibility of Umgeni Water and will be recovered through the bulk water

tariff.

- 52 -

- 53 -

7.1 Current and Projected Effluent Volumes

7.1.1 Darvill Wastewater Works

The current average daily flow for the Darvill Wastewater Works (WWW) is 84,000 cubic metres per day.

The permitted discharge is 28.835 million cubic metres per annum or 79,000 cubic metres per day. The

current Average Dry Weather Flow (ADWF) is 66,400 cubic metres per day compared with the works

estimated design capacity of 75,000 cubic metres per day ADWF. Flows are projected to increase at

approximately 1.5 % per annum over the next five years.

7.1.2 Ixopo Wastewater Works

The average daily flow for the Ixopo WWW is 780 cubic metres per day. The permitted annual discharge is

2.233 million cubic metres. The Average Dry Weather Flow for the WWW is anticipated to steadily increase,

but is unlikely to exceed the plant capacity of 1,000 cubic metres per day, over the next five years.

7.2 Condition of Treatment Infrastructure

Overall, the WWWs are in reasonable condition, and no major refurbishments are planned during this

period. However, ongoing capital renewal is expected in order to:

prevent disruptions to operations,

accommodate the increasingly high flows entering the works after rains which are above normal

expected peak flows, and

avoid river contamination.

7.3 Effluent Discharge quality

The percent effluent compliance is currently 81 %. Ongoing effort will be made to improve this to 90 % over

the next 12-month period. For the Darvill WWW most of the non-compliances were due to the storm dam

overflow due to interruption of the power supply and external high inflow volumes during the summer

months. DWA is continuing to assist Umgeni Water in working with the Msunduzi Municipality to resolve

these ongoing problems.

7.4 Sufficiency of Discharge Rights

Umgeni Water holds a permit (2045B) for effluent discharges from the Darvill WWW. This permit expired on

the 1st October 2004. Umgeni Water is still awaiting the granting of a licence from DWA, for which

application was made in 2004. In the interim, the conditions of the old permit are being complied with. All

other WWWs are smaller in volume (below 2,000 cubic metres per day) and are operated under General

Authorisations.

- 54 -

7.5 Bulk Wastewater Infrastructure Development

7.5.1 Darvill WWW

The current capacity of the Darvill WWW is 75,000 cubic metres per day ADWF and flows are projected to

increase at approximately 1.5 % per annum over the next five years. Challenges are experienced during

wet weather, requiring temporary storage of peak flows in the existing storm containment dam. Membrane

pilot plant investigations are to be undertaken as measures to increase the work’s capacity and improve

the effluent quality.

7.5.2 Ixopo WWW

The current capacity of the Ixopo WWW is 1,000 cubic metres per day ADWF and the projected 2013 inflow

is 950 cubic metres per day. No new infrastructure components will be required over the next five years.

7.6 Agreements with Customers

The Darvill and Ixopo Wastewater Works’ are owned and operated by Umgeni Water. Management fees

and/or tariffs are based on bulk wastewater agreements.

- 55 -

8.1 Implementing Agent: OR Tambo DM

In February 2008, an Infrastructure Funding Agreement was signed by the Department of Water Affairs

(Eastern Cape Region), OR Tambo District Municipality and Umgeni Water, in which Umgeni Water was

appointed as the Implementing Agent for a number of projects in the OR Tambo DM. Five projects have

been identified, including three feasibility studies, the design and implementation of a regional bulk water

supply scheme, and a bulk water supply intervention project.

Initial funding allocated by DWA through its Regional Bulk Scheme Programme for the five projects over a

three year period was R 62.8 million. Revised cost estimates have been submitted to both DWA and

OR Tambo DM for approval.

The two major projects are as follows:

Greater Mbizana Regional Bulk Water Supply Scheme, which includes the development of a new

Category 3 dam on the Ludeke River (a tributary of the Mtamvuna River), a pumped raw water

supply system to the existing Nomlacu Water Works (to be upgraded in two phases to

20,000 cubic metres per day), and a bulk treated water supply system within the Mbizana Local

Municipality. Estimated cost: in excess of R 1.1 billion over a multi-year development period (co-

funding from OR Tambo DM will be required in order to link the bulk water supply system to the

village reticulation).

Mthatha Bulk Water Intervention, which includes the upgrading and refurbishment of a number of

components of the bulk treated water supply system from the existing Thornhill Water Treatment

Plant to Fort Gale, Owen Dam and Signal Hill. Estimated cost: R 36 million (due for completion in

April 2010).

In addition, at OR Tambo DM’s request, two planning studies have been carried out by Umgeni Water in

developing regional bulk water master plans at a reconnaissance / conceptual level of detail, namely, in the

Qaukeni (Ingquza Hill) and Ntabankulu Local Municipalities.

OR Tambo DM has further extended Umgeni Water’s appointment to include the detailed feasibility study

and preliminary design of the Qaukeni (Ingquza Hill) Regional Bulk Water Supply Scheme.

8.2 Implementing Agent: uMgungundlovu District Municipality

The uMgungundlovu District Municipality had appointed Umgeni Water to be an Implementing Agent for the

Greater Eston Project aimed at addressing the backlogs in the Greater Eston area. Available capacity in the

uMbumbulu bulk pipeline is to be used. This work supports the objectives and the targets set by national

government for addressing water backlogs. Feasibility investigations are complete and the detailed design

is currently underway.

- 56 -

8.3 Implementing Agent: Sisonke District Municipality

In February 2008, the Sisonke District Municipality, appointed Umgeni Water as an Implementing Agent for

the proposed Greater Bulwer/Donnybrook Regional Bulk Water Supply Scheme, to supply water to the

towns of Bulwer and Donnybrook, as well as a number of rural communities in the corridor between the two

towns. The project is expected to be undertaken in a phased manner over the next few years, based on

priorities within the area and the availability of funding. The estimated long-term water demand is

11,000 cubic metres per day.

To date, the detailed feasibility study of the proposed Bulwer Dam has been completed, and an appeal to

the Environmental Record of Decision is being addressed by the Sisonke District Municipality.

In order for work to continue, Sisonke DM is required to allocate funds for:

the detailed feasibility study for the raw water supply infrastructure (including the raw water pump

station, rising main and water works);

the detailed feasibility study for the bulk water supply infrastructure (including bulk pipelines and

main distribution reservoirs);

the detailed design of the dam, raw water and bulk water supply infrastructure; and

the construction of all the bulk water components of the Greater Bulwer/Donnybrook Regional

Bulk Water Supply Scheme.

8.4 Implementing Agent: Department of Water Affairs Working for Water Programme

Umgeni Water was appointed by DWA in 2003 as its Implementing Agent for the control of terrestrial alien

invasive plants in selected catchments in the Mvoti to Mzimkhulu Water Management Area: Lions River

catchment, Umgeni Valley, Nagle Dam catchment, Karkloof catchment and Mvoti catchment.

The programme will hire and train people from within the community as contractors or to be employed as

part of the contractor’s team. Each team comprises eleven general workers who manually clear

demarcated areas. The teams use approved Working for Water clearing methods and apply herbicide as

per the Working for Water herbicide policy. The contractors employed by the programme are provided with

functional and developmental training to ensure that they can either become contractors on exit from the

programme or join the formal job market in other capacities.

The Implementing Agent agreement has a total budget of R 4 million for 2010/11, targeting the clearing of

29.64 square kilometres of land and creation of 900 job opportunities.

- 57 -

8.5 Water Quality Monitoring Services Support: to Municipalities

Umgeni Water will continue to provide water quality monitoring and related services support to

municipalities and for the business plan period have agreed contracts in place for support to Sisonke, Ugu

and uMgungundlovu District Municipalities:

Ugu District Municipality: Umgeni Water was awarded a tender by the Ugu District Municipality in

August 2009 to provide sampling, analyses and compliance reporting on water and wastewater

works for the municipality for one year. In addition, a once-off audit of all municipalities water and

wastewater works is required.

The value of the work is: R 1,369,296.

uMgungundlovu District Municipality: A contract was signed with the uMgungundlovu District

Municipality in October 2009 to provide sampling, analyses and compliance reporting on water

works for the municipality for five years, annually renewable. Implementation commenced on

1st March 2010.

The value of the work is: R 754,385.

Sisonke District Municipality: Umgeni Water signed a Memorandum of Understanding with the

Sisonke District Municipality in April 2009 to provide sampling, analyses and compliance reporting

on water and wastewater works annually for the municipality, as well as, set up a basic water

quality monitoring laboratory for the municipality.

The value of the sampling, analyses and compliance reporting work is: R 220,000 per annum.

The value of the work of setting up the laboratory will be R300,000.

8.6 Operation and Maintenance Contracts for Wastewater works

Umgeni Water has an Operations and Maintenance Contract with the uMgungundlovu District Municipality

for the Howick WWW. The uMgungundlovu District Municipality intends extending this contract for another

five years..

8.7 Implementing Agent: DWA Regional Bulk Programme

The Department Water Affairs has extended Umgeni Water’s project management support for systems

development and enhancement of the regional bulk infrastructure grant to September 2010.

- 58 -

8.8 Implementing Agent: Reduction of Schools and Households Water and Sanitation Backlogs

Umgeni Water will continue with its Implementing Agent contracts with the Department of Education and

the iLembe District Municipality for the provision of schools and households water and sanitation. The

uMgungundlovu District Municipality is yet to prepare business plans for its new sanitation programmes

and therefore it is not certain at this stage what its targets and budgets are. Planned programmes and

projected budgets over the five year period are shown in Table 8.1. Projected budgets are informed by the

number and size of enrolment and therefore funding requirements may be lower in some years despite a

larger number of schools than the preceding year.

Table 8.1: Schools and Households Water and Sanitation Programmes for 2010/11 to 2014/15

Programme Recipient Municipality 2010/11 2011/12 2012/13 2013/14 2014/15 Provision of Household Sanitation

iLembe DM Households: 500 units Budget: R 2.5 million

Households: 1000 units Budget: R 5.5 million

Households: 1000 units Budget: R 6.1 million

Households: 1000 units Budget: R 6.7 million

Households: 1000 units Budget: R 7.3 million

Provision of Schools Sanitation

Sisonke DM, Ugu DM, eThekwini Metro, iLembe DM, and uMgungundlovu DM

14 Schools provided with 190 toilet seats Budget: R 9 million

20 Schools provided with 260 toilet seats Budget: R 13 million

20 Schools provided with 260 toilet seats Budget: R 14 million

20 Schools provided with 260 toilet seats Budget: R 14.5 million

20 Schools provided with 260 toilet seats Budget: R 15 million

Boarding Schools Renovation

Ugu DM, eThekwini Metro, Zululand DM, Amajuba DM (Newcastle LM), uThukela DM, and uMgungundlovu DM,

4 Boarding schools Budget: R 30 million

4 Boarding schools Budget: R 40 million

4 Boarding schools Budget: R 45 million

3 Boarding schools Budget: R 30 million

2 Boarding schools Budget: R 20 million

Provision of Schools Buildings

Sisonke DM, eThekwini Metro, iLembe DM, uThukela DM, and uMgungundlovu DM

4 Integrated Schools Budget: R 60 million

4 Integrated Schools Budget: R 50 million

6 Integrated Schools Budget: R 50 million

4 Integrated Schools Budget: R 55 million

4 Integrated Schools with Budget: R 60 million

Building of Schools laboratories, libraries and computer rooms

Sisonke DM, Ugu DM, eThekwini Metro, iLembe DM, uThukela DM, and uMgungundlovu DM

Schools: 20 Budget: R 35 million

Schools: 20 Budget: R 35 million

Schools: 20 Budget: R 35 million

Schools: 20 Budget: R 35 million

Schools: 20 Budget: R 35 million

Labour intensive and developmental approaches will be adopted in implementation of programmes with

special focus on the following:

Training and Project Placement as part of Household Sanitation Programme: Indigent families will

be identified in consultation with ward councillors and community members and individuals will be

given basic bricklaying and carpentry training and project placements. Unemployed youth will be

trained and placed in projects as health and hygiene fieldworkers, book-keepers, store keepers

and quality assessors. Co-operatives will be established for supply and delivery of building

materials.

- 59 -

Learnerships as part of Department of Education Infrastructure Delivery Programmes:

Leanerships in bricklaying, carpentry, electrical work, plumbing as well as project management for

these, will be run in partnership with the Department of Labour. Trainees will be placed in

Department of Education Programmes once they have been certified competent in their

respective fields. Focus will be on unemployed youth with emphasis on women. The first year will

entail planning, administration and initiation of training. The outer years will be practical work

with wages and allowances paid in accordance with Department of Labour guidelines.

- 60 -

- 61 -

9.1 Implementation of Human Resources Strategy

Umgeni Water continues to face skills shortage challenges and in response continues to deepen

implementation of it Human Resources Strategy with the following seven focus areas:

1. Workforce Planning: To continually assess present and future workforce needs and align these

with business needs in an effective manner.

2. Recruitment, Retention and Engagement: To ensure effective attraction, retention and

engagement of staff with expertise, experience and skills, within a framework that ensures

equity and diversity.

3. Reward Management: To implement a pay and reward management system that supports

achievement of goals to ensure the organisation has the skilled, competent, motivated and

committed workforce its needs.

4. Employment Practices and Systems: To ensure that the organisation’s human resources

systems are efficient and effective and respond to its strategies.

5. Work/life Balance: To provide a safe, healthy and supportive working environment which

meets the organisation’s duty of care towards its staff and encourages an appropriate

work/life balance.

6. Staff Skills Development: To develop staff to excel in their individual and organisational roles

and functions in order to deliver on the organisation’s strategy.

7. Communication and Consultation: To ensure effective channels of communication which

enable all views to be heard and considered and information to be gathered that would inform

the organisation’s human resources strategies, plans and service delivery.

The organisation’s Workforce Plan, Employment Equity, Training and Development, HIV/AIDS and Wellness,

and Employee Relations plans are described further in this plan.

- 62 -

9.2 Workforce Profile

Umgeni Water will continue to maintain and enhance its core business systems, shown in Table 9-1, in

support of implementation of this business plan. The dearth of professionals, notably in the engineering

fields, continues to impact on the organisation’s plans and is being addressed by the training and

development programmes described further in this plan. The current and projected workforce numbers

and diversity in support of this is shown in Table 9-2 and Table 9-3, respectively.

Table 9-1: Umgeni Water Core Business Systems

Umgeni Water Core Business Systems 1. Water and Wastewater Operations 2. Water Quality Management 3. Water Infrastructure Asset Management 4. Water Infrastructure Planning 5. Water Infrastructure Development 6. Billing and Metering 7. Financial and Treasury Management 8. Human Resources Planning 9. Environmental Management 10. Information and Communications Technology 11. Supply Chain Management 12. Governance Continuance 13. Risk Management and Fraud Prevention 14. Strategy and Organisational Performance 15. Stakeholder Relationship Management

Table 9-2: Current Workforce Profile (as at 28th February 2010)

Male Female Occupational Levels A C I W A C I W

Total

Top management 3 0 0 0 1 0 0 1 5 Senior management 3 2 8 3 3 1 4 1 25 Professionally qualified and experienced specialists and mid-management 51 6 34 28 36 2 13 6 176

Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents

142 11 40 26 79 6 21 8 333

Semi-skilled and discretionary decision making 158 1 3 0 3 0 4 0 169 Unskilled and defined decision making 31 0 0 0 6 0 0 0 37 TOTAL PERMANENT 388 20 85 57 128 9 42 16 745

Table 9-3: Projected Workforce Profile: 2010/2011 to 2014/15

Male Female Occupational Levels A C I W A C I W

Total

Top management 3 0 0 0 1 0 0 1 5 Senior management 3 2 8 3 4 1 4 1 26 Professionally qualified and experienced specialists and mid-management 51 6 34 23 48 4 15 8 189

Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents

142 11 42 26 93 10 26 10 360

Semi-skilled and discretionary decision making 158 1 3 0 3 2 7 2 176 Unskilled and defined decision making 31 0 0 0 6 0 0 0 37 TOTAL PERMANENT 388 20 87 52 155 17 52 22 793

- 63 -

During this business plan period, five percent of the workforce is anticipated to retire normally from the

organisation (Figure 9-1). The make-up of this component of the workforce has been analysed. The

organisation currently has policies and plans in place, including a succession policy and leadership /

employee development plans and programmes that will mitigate the loss of skills and institutional memory

due to normal retirement.

Figure 9-1: Workforce Age Profile

9.3 Employment Equity

Umgeni Water will continue to diversify its workforce over the five year period through opportunities

presented by recruitment, retention, staff development, turnover and succession planning. The current and

projected workforce by race and gender are depicted in Figure 9-2 and Figure 9-3, respectively.

 

Figure 9-2: 5-Year Workforce Projection by Race  

 

 

 

 

 

 

 

 

 

 

Race Profile, Permanent Employeesat 28 February 2010

C, 29, 4%

A, 516, 69%

I, 127, 17%W, 73, 10%

Race Profile, Permanent EmployeesProjected for 2010/11 to 2014/15

W, 74, 9% I, 139, 18%

A, 543, 68%

C, 37, 5%

2%

20%

32%

18%15%

9%

5%

0

50

100

150

200

250

300

0 to 25 26 to 35 36 to 45 46 to 50 51 to 55 56 to 60 61 to 65

Age Pro fi l e

at 28 F ebruar y 2010

- 64 -

 

Figure 9-3: Gender Profile  

 

 

 

 

 

 

 

 

 

Development and Advancement of Women Employees

It is intended to develop and advance women employees in the organisation, and increase the women

complement over the next five years from 26% to 31% (Figure 9-3). Higher targets are set for the more

skilled workforce categories as indicated below and shown in the graphs in Figure 9-4.

Top Management + Senior Management: In the combined levels of Top and Senior

Management, it is planned to increase the women complement: from 37% women to 39%

women.

In the Professionally qualified and experienced specialists and mid-management + Skilled

technical and academically qualified workers, junior management, supervisors, foremen,

and superintendents, it is planned to increase the women complement: from 34% women

to 39% women.

In the combined levels of Semi-skilled and discretionary decision making + Unskilled and

defined decision making, it is planned to increase the women complement: from 6%

women to 9% women.

Figure 9-4: Current and Projected Gender Profiles by Occupational Level

Gender Profile, Permanent Employeesat 28 February 2010

Male, 550, 74%

Female, 195, 26%

Gender Profile, Permanent EmployeesProjected for 2010/11 to 2014/14

Male, 547, 69%

Female, 246, 31%

Gender Profile, Permanent EmployeesTop Management + Senior Management

at 28 February 2010

Male, 19, 63%

Female, 11, 37%

Gender Profile, Permanent EmployeesTop Management + Senior Management

Projected for 2010/11 to 2014/15

Male, 19, 61%

Female, 12, 39%

- 65 -

Figure 9-4, continued: Current and Projected Gender Profiles by Occupational Level.

9.4 Staff Skills Development

Staff skills development is essential to enable staff to excel in their individual and organisational roles and

functions and deliver on the organisation’s strategy. The organisation’s recruitment and retention

interventions are intended to ensure the organisation has sufficient flexibility to obtain the skills that it

needs to implement its business plan. The approach will include options for buying, making, converting

and creating skills, whilst continuing to ensure diversity is increased in under-represented areas. The

convert strategy will focus on core, scarce and critical skills through retraining. This will be achieved

through learnerships, training interventions and recognition of prior learning.

Learnerships

During this business plan period Umgeni Water will:

Continue to develop and complete thirty-seven external learnerships and fifteen internal

staff learnerships, in Water and Wastewater treatment, and

Extend its programmes to a total of seventy learners enrolled in the fields of Electrical,

Instruments, Mechanical Engineering and Water and Wastewater Treatment.

The Learnerships programme will utilise forty percent (40%) of the training and development budget.

Gender Profile, Permanent Employees Professionally qualified & experienced specialists & mid-management + Skilled

technical & academically qualified workers, junior management, supervisors, foremen &

superintendentsat 28 February 2010

M ale, 338, 66%

Female, 171, 34%

Gender Profile, Permanent Employees Professionally qualified & experienced specialists & mid-management + Skilled

technical & academically qualified workers, junior management, supervisors, foremen &

superintendentsProjected for 2010/11 to 2014/15

Female, 214, 39%

M ale, 335, 61%

Gender Profile, Permanent EmployeesSemi-skilled & discretionary decision making +

Unskilled & defined decision makingat 28 February 2010

M ale, 193, 94%

Female, 13, 6%

Gender Profile, Permanent EmployeesSemi-skilled & discretionary decision making

+ Unskilled & defined decision makingProjected for 2010/11 to 2014/15

Female, 20, 9%

M ale, 193, 91%

- 66 -

Bursary Programme

A create strategy will be used to create a skills pool that would address future skills demands in the

organisation. This will be achieved through:

Continuing with the current bursary programme and awarding further bursaries to achieve a

total of ten bursaries for skills identified, namely, civil engineering and financial.

More vigorously ring fencing eighteen positions in the structure for implementation of graduate

development programmes as mechanisms for addressing the core, critical and scarce skills

needed by the organisation.

Training and Development and Assisted Education Programmes

Training and development and assisted education programmes will be improved by better alignment of the

skills and competency needs of the business plan to individual’s development plan, as well as, the

workplace skills plan.

The staff skills development plan for the Five-Year Period is summarised in Table 9-4.

Table 9-4 Staff skills development plan for 2010/11 to 2014/15

Baseline 2010/11 2011/12 2012/13 2013/2014 2014/2015 Learnerships: • 52 learners enrolled as

water and wastewater process controllers andartisans.

Learnerships: • 70 learners

enrolled as water and wastewater process controllers and artisans.

Learnerships: • 70 learners enrolled

as water and wastewater process controllers and artisans.

Learnerships: • 70 learners enrolled

as water and wastewater process controllers and artisans.

Learnerships: • 70 learners enrolled

as water and wastewater process controllers and artisans.

Learnerships: • 70 learners enrolled

as water and wastewater process controllers and artisans.

Graduate development: • 18 graduates

developed in engineering, science and other required professional fields.

Graduate development: • 18 graduates

developed in engineering, science and other required professional fields.

Graduate development: • 18 graduates

developed in engineering, science and other required professional fields.

Graduate development: • 18 graduates

developed in engineering, science and other required professional fields.

Graduate development: • 18 graduates

developed in engineering, science and other required professional fields.

Graduate development: • 18 graduates

developed in engineering, science and other required professional fields.

Bursary: • 3 students enrolled in

engineering fields.

Bursary: • 10 students

enrolled in engineering and financial fields.

Bursary: • 10 students enrolled

in engineering and financial fields.

Bursary: • 10 students enrolled

in engineering and financial fields.

Bursary: • 10 students enrolled

in engineering and financial fields.

Bursary: • 10 students enrolled

in engineering and financial fields.

Training & Development • 492 Health and Safety

Compliance Training • 74 Technical Training • 104 Soft and Generic.

Training & Development Will be determined by and aligned to Individual Development Plans.

Training & Development Will be determined by and aligned to Individual Development Plans.

Training & Development Will be determined by and aligned to Individual Development Plans.

Training & Development Will be determined by and aligned to Individual Development Plans.

Training & Development Will be determined by and aligned to Individual Development Plans.

Assisted Education • 6 Operational Process

Control • 3 Project Management • 2 Supplychain

Management • 10 Water Quality,

Water Resources, Safety, Health and Environment.

• 1 Information and Communications Technology.

• 1 Finance and Treasury.

• 17 Management and Leadership Development.

Assisted Education: • 8 Operational

Process Control • 5 Project

Management • 2 Supplychain

Management • 12 Water Quality,

Water Resources, Safety, Health and Environment.

• 2 Information and Communications Technology.

• 2 Finance and Treasury.

• 17 Management and Leadership Development.

Assisted Education: • 10 Operational

Process Control • 7 Project

Management • 2 Supplychain

Management • 14 Water Quality,

Water Resources, Safety, Health and Environment.

• 2 Information and Communications Technology.

• 3 Finance and Treasury.

• 17 Management and Leadership Development.

Assisted Education: • 10 Operational

Process Control • 7 Project

Management • 2 Supplychain

Management • 14 Water Quality,

Water Resources, Safety, Health and Environment.

• 2 Information and Communications Technology.

• 3 Finance and Treasury.

• 17 Management and Leadership Development.

Assisted Education: • 10 Operational

Process Control • 7 Project

Management • 2 Supplychain

Management • 14 Water Quality,

Water Resources, Safety, Health and Environment.

• 2 Information and Communications Technology.

• 3 Finance and Treasury.

• 17 Management and Leadership Development.

Assisted Education: • 10 Operational

Process Control • 7 Project

Management • 2 Supplychain

Management • 14 Water Quality,

Water Resources, Safety, Health and Environment.

• 2 Information and Communications Technology.

• 3 Finance and Treasury.

• 17 Management andLeadership Development.

- 67 -

9.5 HIV/AIDS and Wellness Programme

Occupational health remains vitally important for Umgeni Water to ensure effective water service delivery to

customers. Umgeni Water will therefore continue to deliver a comprehensive occupational health service

to employees, which includes a HIV/AIDS programme and employee wellness programme.

The organisation’s HIV/AIDS programmes will continue to include:

Access to Voluntary, Counselling and Testing programmes.

Access of HIV positive employees to Anti-retroviral Treatment, enabled through the

Medical Aid Fund HIV/AIDS Programme.

Strengthening of HIV/AIDS awareness in the organisation.

The programmes are and will continue to be facilitated through two occupational health nursing

practitioners and one part-time occupational health medical consultant. These qualified practitioners will

further perform duties that include regular medical screening along with other medical surveillance

programmes, including, hearing, lung-function testing and biological monitoring.

Umgeni Water’s HIV/AIDS Management Forum plays a significant role and will further be utilised to

encourage employees to participate in the World AIDS day and Wellness Programme events, amongst

others.

Implementation of HIV/AIDS programmes and wellness programmes will be achieved through collaboration

with other organisations and partnerships with Umgeni Water’s medical aid fund and associated

institutions.

Publicly available information (Department of Health), estimates that HIV prevalence levels in the general

adult population in areas of primary operations population is 20%, compared with 7% at Umgeni Water, as

derived from the organisation’s medical aid health profile.

Awareness of HIV/AIDS will be strengthened, by supporting national campaigns including World AIDS Day,

the sixteen days of Activism Campaign for no violence against women and children, as well as all national

health days in the National Department’s of Health Calendar.

Umgeni Water will continuously review its HIV/AIDS Policy to align it with “best practice” and the

developments in HIV/AIDS management. The policy will address issues of stigma and prejudice against

persons living with HIV/AIDS. Umgeni Water will also review its HIV/AIDS risks and ensure relevant

information is captured in risk registers to enable HIV/AIDS to be better managed, monitored and mitigated

through sustainable long term initiatives.

9.6 Employee Relations

Umgeni Water will maintain a sound employee relations environment which will bear positive results and

provide value for the organisation. Formal employee relations are and will continue to be governed by

collective bargaining and recognition agreements underpinned by the applicable legislation.

- 68 -

Sixty-five percent (65%) of the total workforce are members of the majority union NEHAWU (National

Education Health and Allied Workers Union) and the relationship is subject to a collective bargaining

agreement. Umgeni Water will continue to negotiate salaries and conditions of employment with NEHAWU

in order to maintain a healthy working relationship.

- 69 -

Umgeni Water will continue to ensure environmental sustainability through the four best practice indicators

it had previously developed and will monitor the pertinent variables that describe these indicators:

Environmental Systems and Reducing Environmental Stresses,

Reducing Human Vulnerability to Environmental Stresses,

Institutional Capacity to Respond to Environmental Challenges, and

Environmental Stewardship.

Eco—efficiency: Changes in indicators for eco-efficiency will be assessed, such that Umgeni Water can

continue to put in place specific programmes to reduce resource usage over time.

Major eco-efficiency indicators identified include:

Energy Usage per kilolitre of water produced.

Water treatment Chemicals Usage per kilolitre of water produced.

Climate Change and Energy: Umgeni Water will continue to develop several initiatives in parallel in

response to climate change, including: researching future risk and developing adaptation strategies for

potential increases in floods, droughts, water quality and environmental threats; investigating energy

efficiency improvements; investigating switching to alternative energy sources; and Management of the

organisation’s carbon footprint.

Specific plans include:

Using the results of the Carbon Footprint Mapping exercise to set Emission Reduction Targets to

manage high impact areas,

Optimising Water Resource Systems Operation (operating rules) with regards to both securing

availability of raw water supplies and Reducing Electricity Utilisation/Loading incurred through

Pumping Inefficiency.

Annual evaluation and improvement of Power Factor Corrections at major installations.

Investigating alternative energy sources, including Use of Methane as part of the energy mix at the

Darvill Wastewater Works, use of turbines in raw water canals at major waterworks, and

identification of office energy management systems.

Water Stress: Umgeni Water will improve efficiency through identifying and reducing wasteful processes,

and engaging in water demand management and reuse practices.

- 70 -

Specific plans include.

Continuous assessment and Refinement of Water Balances of raw and potable water conveyance

and distribution systems.

Maintaining / Reducing Water Losses.

Other plans have been described in the section on Water Conservation and Demand Management.

Water Quality Deterioration: Umgeni Water has set resource quality objectives for abstractions for water

treatment that it will continue to use as alert triggers for mitigation against increased public health risks

and higher treatment costs.

Specific plans include.

Continuing to Monitor Quality of Raw Water Resources in order to assess source quality as well as

mitigate risks associated with the raw water abstracted.

Continuing to assess the risks associated with trends in eutrophication, chemical contaminants,

pathogens and suspended solids, and effectiveness of Raw Water Quality Objectives.

Engaging Catchment Management Stakeholders to further influence resource quality and quantity

objectives to safeguard consumer water quality.

In addition, Umgeni Water will continue to Improve Quality of Waste Discharges from its own sites

and will further quantify the impact of the Darvill waste discharge.

Environmental Health and Reducing Environmental Related Natural Disaster Vulnerability: Umgeni Water

will continue to safeguard public health as well as protect the natural environment, through its water,

health and hygiene education awareness programmes and through implementing its disaster management

programmes for floods, drought and water quality and environmental incidents.

Specific plans include:

Running Water Classrooms for Learners of all age groups at the Midmar, Darvill and Durban

Heights sites.

Implementing planned Rural Community Outreach programmes, targeting vulnerable communities.

Growing Awareness through Collaboration with Municipalities, DWA, DEA, Community and Civil

Society Groupings, Business Groupings, and others, for events coinciding with special

environmental days, including, Wetlands Day, Arbor Day, Water Week, Environmental Week,

Biodiversity Day, Marine Week, and others.

Improving Management of Servitudes.

Reducing Waste and Consumption Pressures: Umgeni Water has waste management plans for all

operational sites and will continue to implement these.

Specific plans include:

Waste Separation and Paper Recycling at all sites.

Collaboration with Municipalities, IT industry, responsible suppliers, retailers and other institutions,

to Improve Management of Electronic Waste (e-Waste).

- 71 -

Environmental Governance: Umgeni Water will maintain its institutional capacity and knowledge to ensure it

adequately responds to environmental sustainability challenges, as well as continues to implement its

environmental management system for the organisation.

Specific plans include:

Improved Integration of Quality Management Systems for environmental management, product

quality management, occupational health and safety management over the business plan period,

aligned to OHSAS 18001, ISO 9001 and ISO 14001, amongst others.

Biodiversity, Land Degradation and Reducing Ecosystem Stress:

Umgeni Water interacts with the water value chain from source-to-tap and will continue to ensure its Bulk

Water Infrastructure is Developed and Maintained in a Sustainable Manner. At a project level, Umgeni

Water will continue to apply Integrated Environmental Management (IEM) principles to its projects to

ensure it undertakes environmentally responsible planning, design, construction, operation,

decommissioning and maintenance of its assets and activities.

Specifically this would entail:

Undertaking relevant Environmental Impact Assessments and required mitigation during project

planning, design, construction and commissioning phases,

Development and implementation of sound Environmental Management Plans, and

Undertaking Environmental Monitoring and Auditing at all relevant project life-cycle phases.

- 72 -

- 73 -

Umgeni Water has been an advocate of water conservation and water demand management for many

years, and has had a Water Conservation Policy in place since 1999. The organisation recently developed

a Water Demand Management Strategy that provides direction to the initiatives that the organisation will

embark upon in the future in terms of promoting water demand management practices within its region.

The Water Demand Management (WDM) Strategy identifies thirteen WDM initiatives (both internal and

external) which have been prioritised in terms of their potential effectiveness. An internal WDM committee

has been formed to co-ordinate the activities around these initiatives.

In the past eighteen months the eThekwini Metropolitan Municipality had made significant investments in

various water loss reduction projects, with further spending planned in the future. Among their sixteen

dedicated interventions for curtailing water loss is the Asbestos Cement Pipe Replacement Programme

costing around R 1.6 billion to implement. A new pressure management system and an improved customer

billing system have also been introduced. The reduction in water purchases from Umgeni Water has

already become evident in the 2009/2010 financial year and has also influenced Umgeni Water’s capital

expenditure programme by deferring some of the augmentation projects to later dates.

Umgeni Water will continue with its education and public awareness programmes through the

environmental education unit targeting schools and encouraging learners and educators to visit our works.

- 74 -

- 75 -

The Financial Plan reflects that the projected operating performance for the period 2010-2015 although

positive, has been primarily affected by the following:

Reduction in projected volume growth

The projected bulk water revenue has been revised downward, reflecting a combined reduction in

revenue of R153 million, in years F’10 and F’11.

Above inflationary increases in energy and raw water costs

The estimated 30% increase in energy costs in the periods F’10 to F’13, has resulted in the total

energy costs being projected to increase from R 45.2 million in F’09 to R 64.7 million in F’10 and to

double to R 90.1 million in F’11.

The above inflationary increases for raw water costs are driven by the adoption of the Raw Water

Pricing Strategy as well as the recovery of 0.444 cents per kilolitre of capital unit charge for the

Spring Grove Dam from F’12 onwards. The latter represents an overall increase of 186 % on the total

raw water cost for that year.

Impairment of assets

F’12 reflects a significant reduction in operating profit due to the R 331 million impairment for rural

development projects. This impairment could be reversed or reduced should Umgeni Water’s

application to the Department of Water Affairs for Bulk Infrastructure Grant Funding be successful.

The operating cashflows are projected to remain strong, albeit with small annual reductions in the next

three years due to the lower revenue and increase in operating expenses.

The R 3,078 million capital expenditure programme reflects the organisation’s commitment to water

services delivery with R 1,091 million or 35 % to be spent on rural development projects.

From a debt management point of view Umgeni Water has successfully provided for the full repayment of

the UG65 bond of R 974 million in F’10 whilst successfully raising an eleven-year bond, UG21, for

R 600 million. The funding strategy also includes a R 350 million loan to be accessed from the European

Investment Bank (EIB). Umgeni Water will meet its gearing target ratios of 0.7 in F’10 and is expected to

remain below the approved R 1.8 billion borrowing limit during the next five years.

- 76 -

12.1 Financial Planning Assumptions

Tables 12-1 to 12.4 show the assumptions used in the financial planning process.

12.1.1 Macroeconomic Assumptions

Table 12-1: Macroeconomic Factors

Actual Approved Budget Forecast

F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15

CPI * 11.50% 6.90% 6.01% 5.10% 5.70% 5.50% 5.40% 5.40% 5.40%

PPI **

Average 14.30% -4.10% 5.95% 5.90% 6.10% 5.20% 5.20% 5.00% 5.00%

% Adjustment 2.50% 0.00% 2.50% 2.50% 2.50% 2.50% 2.50%

Revised average 14.30% -4.10% 8.45% 5.90% 8.60% 7.70% 7.70% 7.50% 7.50%

Interest Rate ***

Short-term 10.93% 7.58% 7.27% 6.75% 6.53% 6.92% 7.34% 7.60% 7.84%

Spread 0.35% 0.35% 3.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

11.28% 7.93% 10.27% 9.25% 9.03% 9.42% 9.84% 10.10% 10.34%

Long-term 8.48% 8.47% 8.06% 8.84% 9.08% 9.56% 9.80% 10.28% 10.28%

Spread 0.65% 1.50% 2.90% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

9.13% 9.97% 10.96% 10.84% 11.08% 11.56% 11.80% 12.28% 12.28%

* Consumer price index (CPI) levels are based on information received from the Bureau for Economic

Research (BER), as at March 2010.

** The forecast production or producer price index (PPI) rates, per the BER, have been adjusted upward

by 2.5 % from F’11.

*** Interest Rate:

(a) The short-term (three-month) rates are based on the average of: (i) Banker’s Acceptance (BA) forecast by the Bureau for Economic Research, and

(ii) The Local Money Market average, obtained from the mid-rate between 3m Banker’s

Acceptance (BA) from Forward Rate Agreement (FRA) (bid), and 3m BA from FRA (offer),

converted to NACM and the Swap rates per inet bridge.

(b) The long-term (ten-year) rate was based on the forecast of the R157 obtained from the Bureau

for Economic Research.

The 70 % fixed to 30 % floating interest ratio was applied to all new debt.

- 77 -

12.1.2 Staff Costs

Table 12-2: Employee Costs

Actual Approved Budget Forecast

F'08 F'09 F'10

F'10 F'11 F'12 F'13 F'14 F'15

Annual Salary Increase (%) # 7.5% 8.5% 8.0%

8.0% 7.8% 7.3% 7.6% 7.6% 7.6%

Staff Complement (Number) 785 825 895

895 910 910 910 910 910

- Permanent staff 715 733 838

734 808 808 808 808 808

- Contract staff 40 74 35

67 81 81 81 81 81

- Trainees 29 16 18

18 18 18 18 18 18

- DWA staff 1 2 4

1 3 3 3 3 3

- Vacant posts - - -

75 - - - - -

Staff Costs (R’000)

- Gross Salaries 206,896 238,182 281,355

272,198 316,707 339,827 365,484 393,260 423,148

- Less Recoveries (3,637) (8,806) (15,695)

(15,309) (18,756) (20,126) (21,645) (23,290) (25,060) - Normal staff costs (less recoveries) 203,259 229,376 265,661

256,889 297,951 319,701 343,838 369,970 398,088

- % Increase 14.4 15.1 18.1

14.3 16.4 7.3 7.6 7.6 7.6

- Retirement benefit costs 45,690 38,062 31,828

33,053 52,125 40,000 40,000 40,000 40,000

- Post retirement medical aid 31,646 24,640 19,870

25,000 25,000 25,000 25,000 25,000 25,000

- Pension 14,044 13,422 11,958

8,053 27,125 15,000 15,000 15,000 15,000

Total staff costs 248,949 267,438 297,488

289,942 350,076 359,701 383,838 409,970 438,088

- % Increase 10.6 7.4 11.2

16.5 20.7 2.7 6.7 6.8 6.9

# Based on nominal wage rate forecast by the Bureau for Economic Research.

- 78 -

12.1.3 Operating Costs

Table 12-3: Operating Costs

Actual Approved Budget Forecast

Operating costs F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15

Energy

- Forecast Price increase* 27.0% 25.0% 30.0% 30% 30% 10% 10%

- Cost (R’000)

39,442

45,400

76,181

64,732

90,127

117,166

152,315

167,547

184,302

-Total Increase in cost % 31.0 15.1

67.8

42.6

39.2

30.0

30.0

10.0

10.0

- Cost per kilolitre (c/kl) 9.8 10.9

17.3

15.2

20.9

26.6

33.9

36.6

39.5

-Total Increase in cost per kilolitre % 21.3 11.7

58.5

38.9

37.9

27.5

27.5 7.8 8.0

Chemicals

- Forecast Price increase 20.0% 15.0% 20.0% PPI

- Cost

25,175

32,751

35,163

30,668

33,947

37,291

40,966

44,919

49,186

- Total Increase in cost % 18.8 30.1

7.4

(6.4)

10.7 9.9 9.9 9.6 9.5

- Cost per kilolitre (c/kl) 6.2 7.9

8.0 7.2 7.9 8.5 9.1 9.8

10.5

-Total Increase in cost per kilolitre % 10.0 26.3

1.4

(8.8) 9.6 7.7 7.7 7.5 7.5

Maintenance

- Forecast Price increase 20.0% 10.0% 7.5% PPI

- Cost

106,983

138,783

160,189

156,687

166,872

179,721

193,559

208,076

223,682

- Total Increase in cost % 31.9 29.7

15.4

12.9 6.5 7.7 7.7 7.5 7.5

- Cost per kilolitre (c/kl) 26.5 33.3

36.4

36.7

38.7

40.8

43.1

45.4

48.0

- Total Increase in cost per kilolitre % 22.2 25.9

9.0

10.0 5.4 6.3 6.4 5.6 5.7

* As per the Bureau for Economic Research.

- 79 -

12.1.4 Raw Water Purchases

Significant increases are projected in the cost per kilolitre of raw water from F’12 due to the impact of the

capital unit charge for the funding of the Spring Grove Dam development.

The normal cost increases are based on the Raw Water Pricing Strategy. However, Umgeni Water’s

component of the tariff is expected to increase by only 5.5 % in line with projected consumer price index

levels.

Table 12-4: Raw Water Purchase Costs

Actual Approved Budget Forecast

Raw Water Cost F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15

Raw Water Volumes (million kl)

Volume Mgeni System 381 386 393 401 410 418

Volume Mdloti System 26 26 26 27 27 28

Volume Other 20 20 20 20 20 20

Total Volume 427 432 439 448 457 466

Raw Water Consumption Charge per System

Mgeni System

Tariff existing infrastructure (c/kl) 15.64 15.64 15.79 15.64 17.66 21.83 22.23 22.65 23.10

% Increase 12.9% 23.6% 1.8% 1.9% 2.0%

Tariff Spring Grove Dam (TCTA levy) (c/kl) 44.40 46.80 49.50 52.20

Total Tariff (c/kl) 15.64 15.64 15.79 15.64 17.66 66.23 69.03 72.15 75.30

Volume (million kl) 381 386 393 401 410 418

Mgeni System Consumption Cost (R’000) 60,652 62,407 65,239 61,777 70,482 284,211 302,546 322,930 343,734

% Increase 2.9% 4.5% -1.0% 14.1% 303.2% 6.5% 6.7% 6.4% Mdloti system

Tariff existing infrastructure (c/kl) 58.24 69.95 81.00 81.00 91.45 107.82 127.23 149.74 176.25

Cost Raising Hazelmere Dam Wall (R’000) 4,222 4,222 4,222

Volume (million kl) 26 26 26 27 27 28

Mdloti System Consumption Cost (R’000) 8,424 9,777 19,193 20,864 23,791 28,617 38,645 45,526 53,719

% Increase 16.1% 96.3% 113.4% 14.0% 20.3% 35.0% 17.8% 18.0% Total Consumption Costs (R’000) 69,077 72,185 84,431 82,642 94,273 312,828 341,191 368,456 397,452

% Increase 5.1% 4.5% 17.0% 14.5% 14.1% 231.8% 9.1% 8.0% 7.9%

Water Resource Management (WRM) Charge (based on registered volume)

Tariff - existing (c/kl) 1.25 1.33 1.41 1.49 1.73 1.83 1.93 2.04 2.15

Water Resource Management Cost (R’000) 5,092 5,560 6,365 6,361 7,460 8,043 8,655 9,322 10,027

% Increase 9.1 9.2 14.5 14.4 17.3 7.8 7.6 7.7 7.6

Total Raw Water Costs R'000

Total Consumption Costs 69,077 72,185 84,431 82,642 94,273 312,828 341,191 368,456 397,452

Water Resource Management Cost 5,092 5,560 6,365 6,361 7,460 8,043 8,655 9,322 10,027

Total Raw Water Costs 74,169 77,744 90,796 89,003 101,733 320,871 349,846 377,778 407,480

Effective unit cost (c/kl) 18.4 18.7 20.6 23.9 23.9 73.8 78.9 83.6 88.5

% Increase (2.5) 1.8 10.2 12.7 13.4 209.2 6.9 5.9 5.9

- 80 -

Bulk Water Sales Volumes

37

3.9

40

4.0

41

6.0

42

2.7

42

6.0

43

4.5

44

3.2

45

2.0

46

0.4

46

9.3

3.4%

8.1%

3.0%

1.6%

0.8%

2.0% 2.0% 2.0% 1.9% 1.9%

0

50

100

150

200

250

300

350

400

450

500

Kil

oli

tre

s (m

illi

on

)

0 .0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Pe

rce

nt

Gro

wth

(Y

ea

r o

n Y

ea

r)

Revenue 373.9 404.0 416.0 422.7 426.0 434.5 443.2 452.0 460.4 469.3

Growth YoY 3.4% 8.1% 3.0% 1.6% 0.8% 2.0% 2.0% 2.0% 1.9% 1.9%

F'07 Actual

F '08 Actual

F '09 Actual

F '10 Forecast

F '11 Forecast

F '12 Forecast

F '13 Forecast

F '14 Forecast

F '15 Forecast

F '16 Forecast

12.2 WATER SALES PROJECTIONS

Table 12-5: Volume sales

-------- Actual ------- Approved Budget Forecast

Sales Volume F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15

- Bulk (kl’000) 403,964 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447

- % Increase 8.05 2.97 5.88 1.62 0.78 2.00 2.00 2.00 1.86

- Wastewater (kl’000) 211 273 273 273 273 277 281 285 289

- % Increase 17.22 29.38 0 0 0 1.47 1.44 1.42 1.40

Figure 12-1: Bulk water sales volume

The significant increase in F’08 was due to additional sales to iLembe District Municipality.

- 81 -

F'10 Customer Base

Msunduzi - 14%

eThekwini - 78%eThekw ini - 78%

Msunduzi - 14%

uMgungundlovu - 3%

Siza Water - 1%

iLembe - 1%

iLembe Other - 2%

Ugu - 2%

Sisonke - 0.2%

Other - 0.5%

F'11 Customer Base

Msunduzi - 14%

eThekwini - 77%eThekw ini - 77%

Msunduzi - 14%

uMgungundlovu - 3%

Siza Water - 1%

iLembe - 1%

iLembe Other - 2%

Ugu - 2%

Sisonke - 0.2%

Other - 0.5%

Table 12-6: Sales Volume per Customer

Figure 12-2: Sales Volume per Customer, F’11

Figure 12-3: Sales Volume per Customer, F’10

Actual Budget Forecast F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15 F'16

Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Customer kl’m % kl’m % kl’m % kl’m % kl’m % kl’m % kl’m % kl’m % kl’m % kl’m %

eThekwini 315.5 6% 326.2 3.4% 342.9 4.0% 327.9 0.5% 329.5 0.5% 336.1 2.0% 342.8 2.0% 349.7 2.0% 356.2 1.9% 363.0 1.9%

Msunduzi 57.7 12% 56.5 -2.1% 61.8 4.0% 57.3 1.4% 58.2 1.5% 59.3 2.0% 60.5 2.0% 61.7 2.0% 62.9 1.9% 64.1 1.9%

uMgungundlovu 9.3 12% 10.6 13.4% 11.0 5.0% 10.9 3.0% 11.1 2.0% 11.3 2.0% 11.6 2.0% 11.8 2.0% 12.0 1.9% 12.2 1.9%

Siza Water 3.8 8% 3.8 1.4% 4.5 12.8% 3.9 3.0% 4.1 3.0% 4.1 2.0% 4.2 2.0% 4.3 2.0% 4.4 1.9% 4.5 1.9%

Ugu 5.6 16% 6.0 8.0% 6.8 13.0% 7.8 30.0% 8.0 2.0% 8.1 2.0% 8.3 2.0% 8.5 2.0% 8.6 1.9% 8.8 1.9%

iLembe 2.6 -2% 2.9 11.9% 9.6 15.0% 3.5 20.0% 3.1 -12.5% 3.1 2.0% 3.2 2.0% 3.2 2.0% 3.3 1.9% 3.4 1.9%

iLembe T/Over 5.7 - 5.7 -0.3% - - 8.4 49.2% 9.2 8.7% 9.4 2.0% 9.5 2.0% 9.7 2.0% 9.9 1.9% 10.1 1.9%

Sisonke 0.8 7% 0.8 2.5% 0.8 1.8% 0.8 3.0% 0.9 2.0% 0.9 2.0% 0.9 2.0% 0.9 2.0% 0.9 1.9% 1.0 1.9%

Other 3.0 -17% 3.4 14.3% 3.0 -0.2% 2.1 -38.8% 2.1 -0.5% 2.1 1.7% 2.1 1.7% 2.2 2.0% 2.2 1.9% 2.3 1.9%

Total 404.0 416.0 440.4 422.7 426.0 434.5 443.2 452.0 460.4 469.3

- 82 -

12.3 TARIFF PROJECTIONS

The F’11 tariff increase has been approved at 6.2 % which is 0.5 % higher than the 5.7 % forecasted CPI

level for F’11.

From F’12 onwards, tariff increases will be affected by the capital unit charges arising from the

implementation of water resources infrastructure, which will result in tariff increases above CPI levels.

Table 12-7: Bulk Water Tariff Projections

Actual Approved Budget

Forecast Bulk Water Sales Tariff (Rand per kilolitre) F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15

- Bulk Tariff 1

- Base Tariff

2.820

2.960

3.079

3.079

3.279

3.482

3.674

3.872

4.081

- Tariff Increase

0.141

0.118

0.200

0.200

0.203

0.192

0.198

0.209

0.220

- New Tariff - Umgeni Water

2.960

3.079

3.279

3.279

3.482

3.674

3.872

4.081

4.301

- % Increase – Umgeni Water

5.0

4.0

6.5

6.5

6.2

5.5

5.4

5.4

5.4

Add capital unit charge

- Spring Grove

-

-

-

-

-

0.444

0.468

0.495

0.522

- Mkomazi

-

-

-

-

-

-

-

-

-

Adjustment - over recovery

-

-

-

-

-

-

-

-

-

- Total Tariff

2.960

3.079

3.279

3.279

3.482

4.118

4.340

4.576

4.823

- % Increase -Total

5.0

4.0

6.5

6.5

6.2

18.3

5.4

5.4

5.4

- Bulk Tariff 2 - eThekwini

- Base Tariff

2.820

2.960

3.019

3.019

3.215

3.414

3.602

3.797

4.002

- Tariff Increase

0.141

0.059

0.196

0.196

0.199

0.188

0.195

0.205

0.216

- New Tariff - Umgeni Water

2.960

3.019

3.215

3.215

3.414

3.602

3.797

4.002

4.218

- % Increase - Umgeni Water

5.0

2.0

6.5

6.5

6.2

5.5

5.4

5.4

5.4

Add capital unit charge

- Spring Grove

-

-

-

-

-

0.444

0.468

0.495

0.522

- Mkomazi

-

-

-

-

-

-

-

-

-

Adjustment - over recovery

-

-

-

-

-

-

-

-

-

- Total Tariff

2.960

3.019

3.215

3.215

3.414

4.046

4.265

4.497

4.740

- % Increase -Total

5.0

2.0

6.5

6.5

6.2

18.5

5.4

5.4

5.4

- 83 -

12.4 SUBSIDY PROJECTIONS

Umgeni Water’s business plan includes a number of projects with a focus on rural development.

Umgeni Water has made written request and has had discussion (in December 2009 and February 2010,

respectively) with the Department of Water Affairs (DWA) regarding Bulk Infrastructure Grant funding /

financial support for the rural development projects. To date, DWA has not provided a firm commitment of

financial support and this financial plan therefore does not reflect the receipt of any grant funding. As a

consequence of this, Umgeni Water’s Net Profit has been negatively impacted by the impairment values

reflected below.

Table 12-8: Subsidy Requirement for Rural Development Projects

Project

Total capital

cost Interest

capitalised Escalation Total

project Economic

value Social Value NPV

Construction Commencement

Date

Commissioning Year and Value of

Impairment

Richmond Pipeline R 177m R 30m R 27m R 234m R 136m R 98m -R 254m 2012/03/31 F'16: R 98m

Mhlabatshane BWS Scheme R 155m R 22m R 15m R 192m R 42m R 150m -R 350m 2010/09/30 F'12: R 150m

Ozwathini BWS Scheme R 105m R 19m R 18m R 142m R 57m R 85m -R 218m 2010/03/31 F'15: R 85m

Maphumulo BWS Scheme (Phase 1) R 188m R 7m R 16m R 211m R 30m R 181m -R 421m 2009/09/30 F'12: R 181m

Maphumulo BWS Scheme (Phase 2) R 131m R 5m R 11m R 147m R 21m R 136m -R 293m 2009/09/30 F'17: R 136m

TOTAL R 756m R 83m R 87m R 926m R 286m R 650m

- 84 -

The anticipated tariff projections and proportion of each cost driver for the forthcoming six year period are shown in Table 12-9.

Table 12-9: Tariff cost per component

F'08 F'09 F'10 F'11 F'12 F'13 F'14 F'15 F'16 Components

R.c/kl R.c/kl % Change R.c/kl %

Change R.c/kl % Change R.c/kl %

Change R.c/kl % Change R.c/kl %

Change R.c/kl % Change R.c/kl %

Change

Direct costs

- Chemicals 0.056 0.070 26.7 0.065 (8.2) 0.072 11.0 0.078 8.3 0.084 7.9 0.090 7.7 0.097 7.7 0.105 7.7

- Depreciation 0.123 0.138 12.4 0.154 11.6 0.195 27.0 0.206 5.6 0.218 5.6 0.229 5.4 0.242 5.5 0.255 5.5

- Energy 0.084 0.092 9.4 0.128 39.6 0.178 39.3 0.230 29.0 0.293 27.5 0.316 7.9 0.341 8.0 0.360 5.5

- Maintenance 0.175 0.219 25.2 0.244 11.4 0.247 1.3 0.264 6.6 0.279 5.6 0.294 5.4 0.310 5.6 0.327 5.5

- Raw water 0.184 0.187 1.8 0.211 12.7 0.239 13.4 0.738 209.2 0.789 6.9 0.836 5.9 0.885 5.9 0.940 6.2

- Staff costs 0.161 0.176 9.6 0.192 9.3 0.217 12.7 0.238 9.9 0.251 5.5 0.265 5.5 0.280 5.7 0.296 5.6

- Other direct costs 0.020 0.008 (59.7) 0.021 158.0 0.022 5.6 0.026 21.9 0.028 5.9 0.029 4.9 0.033 11.4 0.036 10.4

Total direct costs 0.801 0.890 11.1 1.014 13.9 1.170 15.4 1.781 52.2 1.942 9.1 2.060 6.1 2.189 6.3 2.319 6.0

% of Total Costs 39.7% 46.8% 48.5% 50.2% 48.0% 61.0% 62.2% 60.1% 59.6%

Indirect costs

- Overheads 0.260 0.158 (39.4) 0.259 64.0 0.310 19.9 1.176 279.2 0.440 (62.6) 0.459 4.5 0.670 45.8 0.720 7.6

- Staff costs 0.315 0.338 7.2 0.375 10.8 0.438 17.0 0.474 8.1 0.500 5.4 0.527 5.5 0.557 5.6 0.588 5.6

- Depreciation 0.031 0.030 (2.6) 0.034 12.9 0.044 30.2 0.047 6.9 0.050 5.6 0.052 5.4 0.055 5.5 0.058 5.5

- Amortisation 0.227 0.225 (0.9) 0.231 3.0 0.218 (5.6) - (100.0) - - - - - - - -

Total indirect costs 0.833 0.751 (9.9) 0.898 19.7 1.011 12.5 1.697 67.9 0.989 (41.7) 1.039 5.0 1.282 23.4 1.366 6.6

% of Total Costs 41.2% 39.5% 43.0% 43.4% 45.7% 31.1% 31.4% 35.2% 35.1% Finance costs 0.386 0.260 (32.6) 0.178 (31.4) 0.149 (16.1) 0.234 56.9 0.251 7.0 0.214 (14.8) 0.171 (19.9) 0.204 19.0

% of Total Costs 19.1% 13.7% 8.5% 6.4% 6.3% 7.9% 6.5% 4.7% 5.2% Cost - Bulk water 2.020 1.900 (5.9) 2.090 10.0 2.330 11.5 3.712 59.3 3.182 (14.3) 3.313 4.1 3.642 9.9 3.890 6.8

Contribution

-Wastewater (0.007) (0.012) 88.1 (0.018) 49.1 (0.015) (18.7) (0.021) 42.7 (0.019) (9.0) (0.019) (1.2) (0.019) (1.6) (0.019) 2.9

-Section 30 Activities (0.018) (0.060) 240.5 (0.030) (49.4) (0.017) (42.9) (0.004) (78.0) (0.004) 2.3 (0.004) (2.1) (0.005) 40.5 (0.007) 27.9 Total cost 1.995 1.828 (8.4) 2.042 11.7 2.298 12.5 3.687 60.4 3.159 (14.3) 3.289 4.1 3.617 10.0 3.863 6.8

F’12 indirect costs include the impairment of rural development projects, equal to 76 cents per kilolitre.

- 85 -

12.5 FINANCIAL STATEMENT PROJECTIONS

Table 12-10: Consolidated Income Statement

Income Statement (in R'000) For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15 CONSOLIDATED Actual Actual Actual Budget Forecast

Volume of Bulk treated water sold (in kl'000) 373,857 403,965 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447

Revenue 1,180,260 1,280,747 1,485,496 1,617,089 1,616,236 1,614,484 1,848,658 1,986,476 2,133,673 2,288,096 Water Sales - Bulk 1,048,012 1,190,798 1,259,187 1,422,165 1,364,989 1,460,849 1,765,035 1,897,669 2,040,905 2,191,173 Water Sales - Reticulation - - - - - - - - - - Water Sales - Raw Water 179 246 368 26 356 384 418 453 487 523 Wastewater Sales 1,092 1,348 1,814 1,729 1,950 2,071 2,218 2,372 2,538 2,715 Wastewater Management Fee 43,158 33,736 40,116 42,724 42,724 45,372 49,229 53,364 56,246 59,283 Section 30 activities 87,819 54,619 184,012 150,447 206,218 105,808 31,759 32,616 33,497 34,402

Cost of sales 381,959 393,265 545,025 603,269 641,130 619,304 837,556 930,305 1,004,956 1,085,317

Changes in water inventory (1,509) (122) Chemicals 21,194 25,175 32,751 35,163 30,668 33,947 37,291 40,966 44,919 49,186 Depreciation 53,727 52,033 59,848 67,477 67,509 85,684 92,281 99,387 106,841 114,854 Energy 28,625 37,291 43,145 72,238 61,028 85,213 110,778 144,011 158,412 174,253 Maintenance 59,232 77,262 100,825 114,790 112,190 115,047 123,905 133,446 143,454 154,213 Raw Water 70,391 74,169 77,744 90,796 89,003 101,733 320,871 349,846 377,778 407,480 Staff Costs 72,836 79,497 82,666 93,441 91,848 104,436 112,060 120,521 129,680 139,536 Section 30 activities 70,751 38,461 141,132 119,812 178,404 82,119 26,995 27,724 28,473 29,241 Other direct operating activities 5,203 10,885 7,035 9,552 10,481 11,125 13,375 14,405 15,399 16,554

Gross profit 798,301 887,482 940,471 1,013,820 975,106 995,180 1,011,102 1,056,171 1,128,718 1,202,779 Gross profit % 68% 69% 63% 63% 60% 62% 55% 53% 53% 53%

Other operating income 6,476 6,756 30,826 5,834 7,132 7,370 7,579 7,795 8,023 8,264

Administration Expenses 334,223 337,680 329,163 388,473 394,149 446,352 742,828 444,593 476,392 597,531 Staff Costs 108,026 127,399 146,710 172,220 165,041 193,514 207,641 223,318 240,290 258,552 Energy 1,487 2,151 2,255 3,943 3,705 4,914 6,388 8,305 9,135 10,049 Depreciation 10,180 12,628 12,869 11,144 14,871 19,309 20,795 22,397 24,076 25,882 Amortisation 95,479 91,627 93,504 93,791 97,828 93,075 - - - - Impairments - - - - - - 331,000 - - 85,000 Other operating & administrative expenses 119,052 103,874 73,825 107,376 112,705 135,540 177,004 190,574 202,890 234,339

Operating income before interest 470,554 556,559 642,134 631,180 588,089 556,198 275,852 619,373 660,349 613,512

Net interest and finance charges 219,803 165,439 116,496 161,002 82,736 70,574 108,151 116,805 101,485 81,978 Interest Paid 309,417 270,735 267,571 249,093 234,541 140,466 155,296 151,116 137,751 128,735 Interest Received (89,614) (105,296) (151,075) (88,091) (151,805) (69,892) (47,145) (34,311) (36,266) (46,757)

Net Profit (Loss) 250,752 391,119 525,638 470,178 505,353 485,623 167,702 502,568 558,864 531,533

- 86 -

Table 12-11: Income Statement (S29)

Income Statement (in R'000) For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15 PRIMARY (S29) Actual Actual Actual Budget Forecast

Volume of treated water sold (in kl'000) 373,857 403,965 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447

Revenue 1,092,441 1,226,128 1,301,484 1,466,642 1,410,018 1,508,676 1,816,899 1,953,859 2,100,176 2,253,695 Water Sales - Bulk 1,048,012 1,190,798 1,259,187 1,422,165 1,364,989 1,460,849 1,765,035 1,897,669 2,040,905 2,191,173 Water Sales - Raw Water 179 246 368 26 356 384 418 453 487 523 Wastewater Sales 1,092 1,348 1,814 1,729 1,950 2,071 2,218 2,372 2,538 2,715 Wastewater Management Fee 43,158 33,736 40,116 42,724 42,724 45,372 49,229 53,364 56,246 59,283

Cost of sales 299,672 344,157 396,386 477,208 455,965 529,544 809,091 901,176 975,076 1,055,422

Changes in water inventory - (1,509) (122) - - - - - - - Chemicals 21,158 25,141 32,650 35,072 30,546 33,816 37,274 40,949 44,901 49,167 Depreciation 53,727 52,033 59,848 67,477 67,509 85,684 92,281 99,387 106,841 114,854 Energy 28,275 36,905 42,620 71,311 60,223 84,135 110,602 143,835 158,231 174,067 Maintenance 56,505 75,936 98,365 114,115 111,181 113,911 123,777 133,378 143,417 154,193 Raw Water 70,391 74,169 77,744 90,796 89,003 101,733 320,871 349,846 377,778 407,480 Staff Costs 64,795 70,936 78,587 89,257 87,465 99,599 111,265 119,724 128,861 138,693 Section 30 activities - - - - - - - - - - Other direct operating activities 4,821 10,546 6,694 9,180 10,038 10,666 13,021 14,057 15,048 16,969

Gross margin/profit 792,769 881,970 905,098 989,435 954,054 979,131 1,007,808 1,052,683 1,125,100 1,198,273 Gross profit % 73% 72% 70% 67% 68% 65% 55% 54% 54% 53%

Other operating income 5,770 6,155 30,023 5,427 6,562 6,750 7,579 7,795 8,023 8,264

Administration Expenses 338,566 338,692 317,958 384,130 385,361 437,075 741,192 442,835 474,501 595,496 Staff Costs 108,017 127,399 140,676 165,164 158,345 186,765 206,016 221,570 238,409 256,529 Energy 1,487 2,151 2,255 3,943 3,705 4,914 6,388 8,305 9,135 10,049 Depreciation 10,180 12,575 12,801 11,090 14,624 19,062 20,785 22,386 24,066 25,871 Amortisation 99,831 91,627 93,504 93,791 97,828 93,075 - - - - Impairments - - - - - - 331,000 - - 85,000 Other operating & administrative expenses 119,052 104,939 68,723 110,141 110,859 133,258 177,004 190,574 202,890 218,048

Operating income before interest 459,973 549,434 617,163 610,732 575,254 548,806 274,194 617,643 658,622 611,040

Net interest and finance charges 219,802 165,436 116,496 161,002 82,736 70,574 108,151 116,805 101,485 81,978 Interest Paid 309,416 270,732 267,571 249,093 234,541 140,466 155,296 151,116 137,751 128,735 Interest Received (89,614) (105,296) (151,075) (88,091) (151,805) (69,892) (47,145) (34,311) (36,266) (46,757)

Net Profit (Loss) 240,172 383,997 500,667 449,730 492,519 478,232 166,044 500,838 557,138 529,062

- 87 -

Table 12-12: Income Statement (S29 - Bulk)

Income Statement (in R'000) For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15 BULK WATER Actual Actual Actual Budget Forecast

Volume of treated water sold (in kl'000) 373,857 403,965 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447

Revenue 1,048,191 1,191,044 1,259,555 1,422,190 1,365,345 1,461,232 1,765,452 1,898,122 2,041,392 2,191,696 Water Sales - Bulk 1,048,012 1,190,798 1,259,187 1,422,165 1,364,989 1,460,849 1,765,035 1,897,669 2,040,905 2,191,173 Water Sales - Reticulation - - - - - - - - - - Water Sales - Raw Water 179 246 368 26 356 384 418 453 487 523

Cost of sales 281,408 323,587 370,237 450,606 428,610 498,298 773,627 860,599 931,099 1,007,753 Changes in water inventory - (1,509) (122) - - - - - - - Chemicals 18,897 22,458 29,294 31,528 27,324 30,559 33,766 37,171 40,839 44,801 Depreciation 51,416 49,554 57,358 64,986 65,018 83,194 89,599 96,499 103,736 111,516 Energy 24,755 33,828 38,105 65,402 54,061 75,878 99,867 129,880 142,881 157,182 Maintenance 52,281 70,761 91,228 109,196 103,246 105,413 114,625 123,522 132,821 142,802 Raw Water 70,391 74,169 77,744 90,796 89,003 101,733 320,871 349,846 377,778 407,480 Staff Costs 59,728 64,842 73,199 83,121 81,280 92,286 103,419 111,285 119,780 128,922 Other direct operating activities 3,940 9,484 3,432 5,576 8,678 9,235 11,479 12,397 13,263 15,050

Gross margin/profit 766,783 867,457 889,318 971,585 936,734 962,934 991,825 1,037,523 1,110,293 1,183,943 Gross profit % 73% 73% 71% 68% 69% 66% 56% 55% 54% 54%

Other operating income 5,770 6,155 26,452 5,427 2,990 3,178 4,007 4,223 4,451 4,692

Administration Expenses 325,338 336,506 312,212 378,616 379,735 430,617 737,238 438,338 469,631 590,222 Staff Costs 108,017 127,399 140,676 165,164 158,345 186,765 206,016 221,570 238,409 256,529 Energy 1,487 1,856 2,255 3,943 3,705 4,914 6,388 8,305 9,135 10,049 Depreciation 10,180 12,378 12,420 10,709 14,243 18,684 20,377 21,947 23,594 25,364 Amortisation 99,831 91,627 93,504 93,791 97,828 93,075 - - - - Impairments - - - - - - 331,000 - - 85,000 Other operating & administrative expenses 105,824 103,245 63,357 105,009 105,613 127,179 173,457 186,517 198,493 213,281

Operating income before interest 447,215 537,106 603,558 598,395 559,990 535,495 258,594 603,408 645,114 598,413 Net interest and finance charges 212,914 155,764 108,036 155,252 75,265 63,650 101,846 111,202 96,676 78,834

Interest Paid 302,528 261,060 259,111 243,343 227,070 133,542 148,991 145,513 132,942 124,828 Interest Received (89,614) (105,296) (151,075) (88,091) (151,805) (69,892) (47,145) (34,311) (36,266) (46,757)

Net Profit (Loss) 234,302 381,341 495,522 443,143 484,725 471,845 156,748 492,207 548,438 520,341

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Table 12-13: Income Statement (S29 Wastewater)

Income Statement (in R'000) For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15 WASTEWATER Actual Actual Actual Budget Forecast

Volume of treated water sold (in kl'000) - - - - - - - - - - Revenue 44,250 35,084 41,930 44,452 44,674 47,443 51,447 55,737 58,784 61,998

Water Sales - Bulk - - - - - - - - - - Water Sales - Reticulation - - - - - - - - - - Water Sales - Raw Water - - - - - - - - - - Wastewater Sales 1,092 1,348 1,814 1,729 1,950 2,071 2,218 2,372 2,538 2,715 Wastewater Management Fee 43,158 33,736 40,116 42,724 42,724 45,372 49,229 53,364 56,246 59,283

Cost of sales 18,264 20,570 26,149 26,602 27,354 31,246 35,464 40,577 43,977 47,669 Changes in water inventory - - - - - - - - - - Chemicals 2,261 2,683 3,357 3,544 3,222 3,257 3,508 3,778 4,061 4,366 Depreciation 2,311 2,479 2,490 2,490 2,490 2,490 2,682 2,889 3,105 3,338 Energy 3,520 3,077 4,515 5,909 6,162 8,257 10,734 13,954 15,350 16,885 Maintenance 4,224 5,175 7,137 4,919 7,935 8,498 9,152 9,857 10,596 11,391 Raw Water - - Staff Costs 5,067 6,094 5,388 6,136 6,186 7,313 7,846 8,439 9,080 9,770 Section 30 activities - - - - - - - - - - Other direct operating activities 881 1,062 3,262 3,604 1,360 1,431 1,542 1,660 1,785 1,919

Gross margin/profit 25,986 14,514 15,780 17,850 17,319 16,197 15,982 15,160 14,806 14,330

Gross profit % 59% 41% 38% 40% 39% 34% 31% 27% 25% 23% Other operating income - - 3,572 3,572 3,572 3,572 3,572 3,572 3,572 Administration Expenses 13,228 2,186 5,747 5,514 5,626 6,458 3,954 4,497 4,870 5,274

Staff Costs - - - - - - - - - - Energy - 295 - - - - - - - - Depreciation - 197 381 381 381 379 408 439 472 508 Amortisation - - - - - - - - - - Impairments - - - - - - - - - - Other operating & administrative expenses 13,228 1,694 5,366 5,132 5,245 6,080 3,546 4,058 4,398 4,767

Operating income before interest 12,758 12,328 13,605 12,336 15,265 13,311 15,600 14,235 13,509 12,627 Net interest and finance charges 6,888 9,672 8,460 5,750 7,471 6,924 6,305 5,603 4,808 3,907

Interest Paid 6,888 9,672 8,460 5,750 7,471 6,924 6,305 5,603 4,808 3,907 Interest Received

Net Profit (Loss) 5,870 2,656 5,145 6,586 7,794 6,387 9,296 8,632 8,700 8,721

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Table 12-14: Income Statement (S30)

Income Statement (in R'000) For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15 OTHER (S30) Actual Actual Actual Budget Forecast

Volume of treated water sold (in kl'000) - - - - - - - - - - Revenue 87,819 54,619 184,012 150,447 206,218 105,808 31,759 32,616 33,497 34,402

Other 87,819 54,619 184,012 150,447 206,218 105,808 31,759 32,616 33,497 34,402

Cost of sales 82,287 49,107 148,639 126,061 185,166 89,760 28,465 29,129 29,879 29,896 Changes in water inventory - - - - - - - - - - Chemicals 36 34 101 91 122 131 17 17 18 19 Depreciation - - - - - - - - - - Energy 350 386 526 927 805 1,078 176 176 181 186 Maintenance 2,727 1,326 2,460 675 1,009 1,136 128 67 37 21 Raw Water - - - - - - - - - - Staff Costs 8,041 8,561 4,078 4,184 4,383 4,838 795 797 820 843 Section 30 activities 70,751 38,461 141,132 119,812 178,404 82,119 26,995 27,724 28,473 28,473 Other direct operating activities 382 339 341 372 443 459 354 348 351 354

Gross margin/profit 5,532 5,511 35,373 24,385 21,052 16,049 3,294 3,488 3,618 4,506 Gross profit % 6% 10% 19% 16% 10% 15% 10% 11% 11% 13%

Other operating income 706 601 803 407 570 620

Administration Expenses (4,343) (1,012) 11,205 4,344 8,788 9,277 1,636 1,758 1,891 2,034 Staff Costs 9 - 6,034 7,056 6,696 6,749 1,625 1,748 1,881 2,023 Energy - - - - - - - - - - Depreciation - 53 68 53 246 246 11 11 11 11 Amortization - - - - - - - - - - Impairments - - - - - - - - - - Other operating & administrative expenses (4,352) (1,065) 5,102 (2,766) 1,846 2,282 - - - -

Operating income before interest 10,581 7,125 24,971 20,448 12,835 7,392 1,658 1,729 1,727 2,472 Net interest and finance charges 1 3 - - - - - - - -

Interest Paid 1 3 - - - - - - - Interest Received

Net Profit (Loss) 10,580 7,122 24,971 20,448 12,835 7,392 1,658 1,729 1,727 2,472

- 90 -

Table 12-15: Balance Sheet

Balance Sheet (in R'000) As at June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15 Actual Actual Actual Budget Forecast ASSETS Non-current assets 2,717,152 2,975,479 2,660,142 3,212,899 3,070,903 3,709,255 3,972,382 4,354,712 4,715,875 4,983,729 Property, plant and equipment 2,251,962 2,305,767 2,471,835 3,119,902 2,958,934 3,682,753 3,950,350 4,337,494 4,703,841 4,971,695 Other non-current assets 287,201 229,031 165,826 92,998 93,347 12,034 12,034 12,034 12,034 12,034 Investments 177,654 440,286 22,481 - 18,622 14,468 9,998 5,183 - - Employee loans 335 395 - - - - - - - - Current Assets 513,345 677,421 1,413,580 311,627 1,065,254 968,617 807,407 753,622 852,040 977,697 Inventories 7,461 10,251 9,129 10,251 9,129 9,129 9,129 9,129 9,129 9,129 Accounts receivable 128,500 140,570 174,617 165,205 182,972 191,626 216,990 228,059 240,012 252,552 Sundry Debtors 6,981 7,381 7,781 8,181 8,181 8,181 8,181 8,181 8,181 8,181 Current portion of employee loans 726 456 580 130 653 - - - - - Short-term investments 346,973 501,029 1,213,416 126,862 859,666 759,030 572,666 507,666 594,666 707,666 Interest Receivable 3,057 5,616 3,282 14 4,365 14 14 14 14 14 Bank balances and cash 19,647 12,118 4,775 985 289 638 427 574 39 156 Total assets 3,230,498 3,652,900 4,073,722 3,524,527 4,136,157 4,677,872 4,779,789 5,108,333 5,567,915 5,961,426 RESERVES & LIABILITIES Reserves Accumulated reserves 633,755 1,018,734 1,542,116 1,953,543 2,047,469 2,533,093 2,700,794 3,203,362 3,642,227 4,293,760 Non-current liabilities 2,179,811 2,141,153 1,105,182 1,185,503 1,598,616 1,639,076 1,567,971 1,409,169 1,311,261 1,169,803 Interest bearing borrowings 2,060,323 1,976,784 917,584 1,091,167 1,400,302 1,502,949 1,466,795 1,336,428 1,242,312 1,105,045 Post retirement medical benefit obligations 119,488 164,369 187,597 94,336 198,314 136,127 101,177 72,741 68,949 64,759 Current liabilities 416,932 493,013 1,426,424 385,481 490,072 505,704 511,023 495,802 494,428 497,862 Accounts payable (including accruals & leases) 169,262 232,840 273,818 232,840 273,818 273,818 273,818 273,818 273,818 273,818 Provisions 84,769 118,340 58,120 17,340 58,120 58,120 58,120 58,120 58,120 58,120 Current portion of interest bearing loans 120,268 101,554 1,061,320 117,282 117,282 134,937 143,180 130,367 131,356 137,267 Other payables/loans 42,633 40,279 33,166 18,018 40,851 38,829 35,905 33,497 31,133 28,657 Bank overdrafts Total reserves and liabilities 3,230,498 3,652,900 4,073,722 3,524,527 4,136,157 4,677,872 4,779,789 5,108,333 5,447,915 5,961,426

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Table 12-16: Cashflow Statement

Cash Flow Statement (in R'000) For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15

Actual Actual Actual Budget Forecast OPERATING ACTIVITIES

Operating profit before working capital changes 660,281 712,456 798,051 803,592 768,296 754,265 719,929 741,156 791,267 839,248 Changes in working capital 63,863 129,871 (54,893) (55,806) (522) (72,444) (62,396) (41,387) (17,404) (18,134)

Net cash from operating activities 724,144 842,327 743,157 747,785 767,774 681,821 657,533 699,769 773,862 821,114 INVESTING ACTIVITIES

Additions to property, plant and equipment (176,720) (108,391) (233,371) (655,215) (556,636) (815,969) 711,674) (508,928) (497,264) (493,591) Additions to intangible assets (452) (1,043) (2,774) Proceeds on disposal of Property, plant & equipment 185 1,630 14,157 Transfer to financial asset Disposal of investments 1,087 3,556 2,389 - - - - - - -

Net cash used in investing activities (175,900) (104,247) (219,600) (655,215) (556,636) (815,969) 711,674) (508,928) 497,264) (493,591) FINANCING ACTIVITIES

Net change in long-term borrowings (147,488) (112,533) (107,964) (1,086,095) (485,960) 120,301 (27,911) (143,180) (93,127) (131,356) Net Investments - LTI & RED (148,321) (378,895) (251,882) 812,321 278,180 105,154 190,470 69,815 (81,817) (113,000) Proceeds from (repaid to) short-term borrowings 24,059 (12,997) (14,222) 291,000 - - - - - - Interest received 28,387 23,410 102,456 157,166 151,805 69,892 47,145 34,311 36,266 46,757 Deferred (accrued) interest 74,891 (20,385) (479) (525) (705) (1,072) Interest paid (297,555) (264,593) (259,288) (266,658) (234,541) (140,466) (155,296) (151,116) (137,751) (128,735)

Net cash used in financing activities (540,918) (745,609) (530,900) (92,266) (215,625) 134,497 53,929 (190,695) 277,133) (327,407) CASH AND CASH EQUIVALENTS Net increase/(decrease) in cash and cash equivalents 7,325 (7,528) (7,343) 304 (4,486) 349 (211) 146 (534) 116 At beginning of year 12,321 19,647 12,118 680 4,775 289 638 427 574 39

At end of year 19,647 12,118 4,775 985 289 638 427 574 39 156

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Table 12-17: Statement of Changes in Equity

Statement of Changes in Equity (in R'000)

For the Year ended June 30, Capital Revaluation Accumulated

Contributions Reserve Profit (Loss) Total

Balance at 30 June 2008 442,847 (31,683) 573,631 1,018,734

Net movement - 31,683 525,638 523,381

Balance at 30 June 2009 442,847 - 1,099,269 1,542,116

Net movement - - 505,353 505,353

Balance at 30 June 2010 442,847 - 1,604,622 2,047,469

Net movement - - 485,623 485,623

Balance at 30 June 2011 442,847 - 2,090,246 2,533,093

Net movement - - 167,702 167,702

Balance at 30 June 2012 442,847 - 2,257,948 2,700,794

Net movement - - 502,568 502,568

Balance at 30 June 2013 442,847 - 2,760,516 3,203,362

Net movement - - 558,864 438,864

Balance at 30 June 2014 442,847 - 3,319,380 3,642,227

Net movement - - 531,533 651,533

Balance at 30 June 2015 442,847 - 3,850,913 4,293,760

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12.6 CAPITAL INVESTMENT PROJECTIONS

Table 12-18: Capital Expenditure Programme

CASHFLOWS UNESCALATED

CAPEX SUMMARY Actual Actual Budget Total Forecast

F08 F09 F10

CAPEX by

Function F10 - F15 F10 F11 F12 F13 F14 F15

R'000 R'000 R'000 % R'000 R'000 R'000 R'000 R'000 R'000 R'000

CATCHMENT MANAGEMENT 485 1,331 4,060 0.6% 19,229 4,323 4,500 406 500 9,500

WATER TRANSFER 44,164 204,875 475,030 69.6% 2,141,936 374,193 541,821 347,823 233,518 349,008 295,574

WATER TREATMENT 5,865 42,617 94,180 23.1% 709,971 71,219 192,741 252,588 145,873 5,700 41,850

OFFICE INFRASTRUCTURE 702 14,150 0.9% 28,806 28,556 250

OTHER IMMOVABLE 382 5,000 0.6% 18,000 5,100 3,400 2,000 3,000 4,500

UW IMMOVABLE BUDGET 51,598 248,823 592,420 95% 2,917,942 483,391 742,712 602,817 382,891 359,208 346,924

Business Plan 2009/10 3,271,430 592,420 619,230 418,730 448,330 493,320 699,400

% Increase / (Decrease) -11% -18% 20% 44% -15% -27% -50%

HEAD OFFICE 2,400 0.8% 24,050 16,800 4,750 2,000 500

MOVABLE ASSETS (ICT) 1,717 676 20,900 1.9% 59,951 18,851 11,100 8,150 6,300 10,550 5,000

SCIENTIFIC SERVICES & OTHER EQUIPMENT 1,769 606 26,165 1.5% 47,690 23,381 10,455 2,295 9,519 2,040

PLANT AND VEHICLES 82 13,330 0.9% 29,213 14,213 5,000 10,000

UW MOVABLE BUDGET 3,568 1,282 62,795 5% 160,904 73,245 31,305 12,445 26,319 12,590 5,000

Business Plan 2009/10 147,504 62,795 23,355 12,445 26,319 12,590 10,000

% Increase / (Decrease) 9% 17% 34% 0% 0% 100% 100%

TOTAL CAPITAL BUDGET 55,166 250,105 655,215 100% 3,078,846 556,636 774,017 615,262 409,210 371,798 351,924

Business Plan 2009/10 3,418,934 655,215 642,585 431,175 474,649 505,910 709,400

Increase / (Decrease) -340,088 -98,579 131,432 184,087 -65,439 -134,112 -357,476

% Increase / (Decrease) -10% -15% 20% 43% -14% -27% -50%

CASHFLOWS ESCALATED

SUMMARY OF ESCALATED BUDGET F08 F09 F10 F10 - F15 F10 F11 F12 F13 F14 F15

UW IMMOVABLE BUDGET 3,419,238 483,391 782,967 697,278 476,196 480,425 498,981

UW MOVABLE BUDGET 177,404 73,245 33,002 14,395 32,733 16,839 7,192

TOTAL CAPITAL BUDGET 3,596,642 556,636 815,969 711,674 508,928 497,264 506,172

ESCALATION % 17% 0% 5% 16% 24% 34% 44%

- 94 -

Capital Expenditure Summary

Other, R180m, 6%

Growth through Expansion and Augmentation, R992m, 32%

Information and Communications

Technology, R60m, 2%

Rural Development,

R1,091m, 35%

Upgrade and Rehabilitation, R756m, 25%

Table 12-19: Capital Expenditure Allocation

2011 Business Plan 2010 Business Plan

2010-2015 2010-2015 Expenditure Allocation

R'm % of Total R'm % of Total

Increase / (Decrease)

Rural Development Projects 1,091 35% 994 29% 97

Augmentation 886 29% 1,405 41% -519

Expansion 106 3% 50 1% 57

Upgrade 631 20% 630 18% 1

Rehabilitation 125 4% 127 4% -2

Information Communication & Technology 60 2% 52 2% 8

Other 180 6% 161 5% 19

Total Umgeni Water CAPEX 3,079 100% 3,419 100% -340

Figure 12-4: Capital Expenditure Allocation

- 95 -

0.35

0.40

0.45

0.50

0.55

0.60

0.65

F'07 F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15 F'16

Asset Turnover

Fixed Asset Turnover

ForecastActual

5%

7%

9%

11%

13%

15%

17%

19%

21%

23%

25%

F'07 F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15 F'16

Return on Asset

ForecastActual

Table 12-20: Financial indicators

Financial Indicators and Ratios F'07 F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15 F'16

Actual Actual Actual Budget Forecast UW Target

Return on Asset 17.39% 20.53% 22.63% 18.58% 18.05% 14.25% 6.57% 13.48% 13.28% 11.68% 10.44% 15% to 20%

Asset turnover 0.436 0.472 0.523 0.476 0.496 0.414 0.440 0.432 0.429 0.436 0.397

Fixed asset turnover 0.524 0.555 0.601 0.518 0.546 0.438 0.468 0.458 0.454 0.460 0.417

Figure 12-5: Asset Turnover

Figure 12-6: Return on Asset

- 96 -

Table 12.21: Umgeni Water Five-Year Capital Expenditure Programme showing Schedule of Cashflows for Major Projects

Cashflows 2010 - 2015 Project

Category

Rural

Development

Projects

Project Description Customer

Project

Stage

Ranking

Project Total

Business

Plan F'10

Project

Total

Business

Plan F'11

Project

Total

Increase /

(Decrease)

F'10 - F'15

Cashflows F10 F11 F12 F13 F14 F15

EXP Rural Maphumulo BWS Phase 1 iLembe DM A1 93,010 180,746 87,736 180,746 16,588 100,807 60,241 3,110

AUG Pipeline: Avondale to Honolulu Phase 1 (17km) iLembe DM A1 164,156 157,260 -6,896 81,227 66,915 5,500 8,812

AUG Pipeline: Honolulu to Mvoti Balancing Reservoir (7km) iLembe DM A1 77,300 77,300 77,300 54,241 21,060 1,999

AUG Pipeline (’57): Umlaas Road to eThekwini Offtake Point (M) eThekwini MM A1 128,660 128,660 76,249 56,397 14,852 5,000

AUG Pipeline ('61) : DV Harris to World’s View Reservoir eThekwini MM, Msunduzi LM A1 92,000 92,000 65,093 54,001 11,092

AUG Durban Heights Northern Aqueduct Booster Pump Station eThekwini MM A1 63,715 63,715 26,554 22,206 4,348

EXP Rural Ngcebo BWS Scheme Phase 1 iLembe DM A1 40,001 40,001 20,738 15,240 5,498

AUG Pipeline: South Coast Phase 1 - Amzimtoti to Umkomaas and to Scottburgh eThekwini MM, iLembe DM, Ugu DM A1 31,000 17,205 -13,795 14,742 6,634 6,634 1,474

EXP Rural Mhlabatshane Sub-Regional Scheme Ugu DM A2 55,600 195,000 139,400 155,000 10,000 53,500 83,000 8,500

AUG Pipeline (’61): extension from ED2 to ED4. eThekwini MM, Msunduzi LM A2 78,000 105,000 27,000 101,547 20,876 46,771 28,800 5,100

AUG South Coast Augmentation Booster Pump Station eThekwini MM, Ugu DM A2 58,800 77,812 19,012 74,578 38,566 32,000 4,012

AUG Mapaphetwa WW: Plant Upgrade to 5.0 Ml/d and reservoir eThekwini MM A2 20,300 37,300 17,000 35,941 1,170 28,127 4,760 1,884

EXP Rural Pipeline: to Richmond (30km) uMgungundlovu DM B1 241,318 181,064 -60,255 120,828 1,213 1,213 2,452 42,200 38,750 35,000

EXP Rural Maphumulo BWS Phase 2 iLembe DM B1 125,680 135,955 10,275 73,681 2,907 8,501 25,000 37,274

AUG Pipeline: Hazelmere to Bifurcation (10km) eThekwini MM, iLembe DM B1 97,400 97,400 97,400 13,242 69,031 15,127

UPG Hazelmere WW: Upgrade from 45 to 75Ml/day eThekwini MM, iLembe DM B1 76,390 76,390 76,328 469 38,035 29,850 7,974

AUG Manyavu uMgungundlovu DM B1 25,000 25,000 25,000 25,000

UPG Quarry Reservoir upgrade to 7.5Ml eThekwini MM, Ugu DM B1 21,500 21,500 21,500 450 20,050 1,000

AUG New Raw Water Pipeline ('251/'51) from Midmar Dam to Pumpstation eThekwini MM, Msunduzi LM, uMgungundlovu DM B1 19,940 -19,940

UPG Hazelmere WW Pumpstation upgrade eThekwini MM, iLembe DM B1 19,500 19,500 19,500 1,040 15,710 1,120 1,630

UPG Bruyns Hill Reservoir upgrade to 4Ml uMgungundlovu DM B1 14,970 14,970 14,970 190 12,618 760 1,402

AUG Pipeline ('61): extension from ED4 to Umlaas Road eThekwini MM, Msunduzi LM, uMgungundlovu DM B1 179,500 220,960 41,460 8,879 4,779 4,100

UPG Rural Ndwedwe Reservoir 2 Upgrade to 2Ml eThekwini MM, iLembe DM B1 7,970 7,970 7,970 2,200 4,710 1,060

UPG Rural Ndwedwe Reservoir 1 Upgrade to 2Ml eThekwini MM, iLembe DM B1 7,970 7,970 7,970 2,200 4,710 1,060

EXP Central Ndwedwe BWS Phase 1: Ozwathini pipeline (31km) and 3 reservoirs iLembe DM B2 116,000 116,000

UPG Midmar WW: Upgrade Phase 2 from 250 to 375Ml/d eThekwini MM, Msunduzi LM, uMgungundlovu DM B2 230,100 230,100 230,078 514 1,014 122,950 100,600 5,000

AUG Pipeline: Claridge to Wartburg Phase 1 augmentation uMgungundlovu DM B2 199,572 199,572 122,989 225 1,350 40,836 40,578 40,000

AUG Raw Water Pipeline ('251): Midmar Pumpstation to Midmar WW duplication eThekwini MM, Msunduzi LM, uMgungundlovu DM B2 69,000 -69,000

AUG Raw Water Pipeline to Hazelmere WW eThekwini MM, iLembe DM B2 18,780 18,780 1 18,772 982 982 15,808 1,000

EXP Rural Greater Vulamehlo Sub-Regional Scheme Ugu DM C1 51,000 51,000 6,000 3,000 3,000

EXP Rural Greater Bulwer BWS Scheme Sisonke C1 69,900 69,900 5,000 5,000

- 97 -

Cashflows 2010 - 2015 Project

Category

Rural

Development

Projects

Project Description Customer

Project

Stage

Ranking

Project Total

Business

Plan F'10

Project

Total

Business

Plan F'11

Project

Total

Increase /

(Decrease)

F'10 - F'15

Cashflows F10 F11 F12 F13 F14 F15

EXP Rural Lower Thukela BWS iLembe DM C1 340,900 1,000,000 659,100 351,000 5,000 21,100 21,900 101,000 101,000 101,000

EXP Rural Ozwathini BWS Scheme: Sikoto Dam and Pipelines eThekwini MM, iLembe DM C1 147,700 147,700 147,700 2,700 15,000 65,000 65,000

EXP Bhobhoyi Upgrade Ugu DM C1 75,000 75,000 75,000 22,500 50,000 2,500

AUG Durban Heights WW:Process Upgrade to 75 Ml/d eThekwini MM C1 80,000 -80,000

AUG Umlaas Road Reservoir 2 (45Ml) eThekwini MM, Msunduzi LM, uMgungundlovu DM C1 80,650 80,650

UPG Wiggins Highlift Pumpstation (Including Surge Anticipator) eThekwini MM C1 63,800 63,800 63,800 4,500 25,920 27,500 5,880

UPG Durban Heights WW: Filter Upgrade eThekwini MM C1 49,350 80,400 31,050 80,400 5,400 40,000 35,000

AUG Pipeline: South Coast Phase 2a from Scottburgh to Kelso eThekwini MM, Ugu DM C1 96,000 51,000 -45,000 31,000 6,880 22,484 1,636

EXP Pipeline: Blythedale (Shayamoya) (3km) and revervoir iLembe DM C1 9,500 18,000 8,500 18,000 6,000 11,100 900

UPG Groenekloof Reservoir Upgrade to 5Ml Msunduzi LM, uMgungundlovu DM C1 17,000 -17,000

EXP Rural Greater Mpofana Regional Scheme Umgungundlovu DM C1 268,812 268,812 14,369 2,859 5,280 6,230

EXP Pipeline: link to Zinkwazi (10km) iLembe DM C1 9,500 14,000 4,500 13,300 1,000 12,300

REH Durban Heights WW: Reservoir 3 Roof Rehabilitation eThekwini MM C1 12,900 12,900 12,900 6,030 5,000 1,870

AUG Umzinto Water Works.1 eThekwini MM, Ugu DM C1 12,000 11,100 -900 11,100 1,800 8,100 200 1,000

AUG Mkomazi BWS eThekwini MM, Msunduzi LM, uMgungundlovu DM C1 3,209,104 3,308,000 98,896 8,000 3,600 4,000 400

REH Pipeline: Nungwane Raw Water Aqueduct (18km) eThekwini MM, Ugu DM C2 76,220 76,220 76,220 900 900 200 7,640 66,580

AUG Darvill WWW: Plant Capacity Increase to 85Ml/d (NBR - 10Ml/d in 3-5yrs) Msunduzi LM 100,000 100,000 20,000 20,000

OFF Air-conditioner Renewal: Head Office 4,000 23,306 19,306 23,306 23,306

Major Projects 6,873,768 7,971,917 1,098,150 2,687,675 424,090 686,977 565,501 341,526 354,008 315,574

Other Immovable Projects 3,847,614 4,001,611 153,997 230,267 59,301 55,735 37,316 41,365 5,200 31,350

TOTAL IMMOVABLES 10,721,382 11,973,528 1,252,147 2,917,942 483,391 742,712 602,817 382,891 359,208 346,924

OTHER Movables - Head Office 10,300 24,050 13,750 24,050 16,800 4,750 2,000 500

ICT - Information Communication & Technology 52,627 175,627 123,000 59,951 18,851 11,100 8,150 6,300 10,550 5,000

OTHER - Scientific Services 48,264 48,264 47,690 23,381 10,455 2,295 9,519 2,040

OTHER - Plant & Vehicles 42,593 44,213 1,620 29,213 14,213 5,000 10,000

TOTAL MOVABLES 153,784 292,154 138,370 160,904 73,245 31,305 12,445 26,319 12,590 5,000

TOTAL UMGENI WATER CAPEX BUDGET 10,875,165 12,265,682 1,390,517 3,078,846 556,636 774,017 615,262 409,210 371,798 351,924

CASHFLOWS AS PER 2009/10 BUSINESS PLAN 3,418,934 655,215 642,585 431,175 474,649 505,910 709,400

INCREASE / (DECREASE) -340,088 -98,579 131,432 184,087 -65,439 -134,112 -357,476

UPG = Upgrade, EXP = Expansion, REH = Rehabilitation, AUG = Augmentation, ICT = Information and Communications Technology

A1 = In Construction, A2 = In Tender, B1 = In Detailed Design, B2 = In Preliminary Design, C1 = In Detailed Feasibility, C2 = In Pre-Feasibility

- 98 -

Thirty-Year Capital Expenditure Programme by Function

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

F10 F11 F12 F13 F14 F15 F16 F17 F18 F19 F20 F21 F22 F23 F24 F25 F26 F27 F28 F29 F30 F31 F32 F33 F34 F35 F36 F37 F38 F39

Financial Year

Ran

d (

mill

ion

s)

Catchment Management Water Transfer Water Treatment Department of Water Affairs

Figure 12-7: Thirty-Year Capital Expenditure Elements: Water Resources (DWA), Water Transfer and Water Treatment (UW)

2010-2015 - R3,078m • North Coast Supply System - R 798m • Maphumulo Phase I & II - R254m • Midmar WW - R244m • Ugu Regional Scheme - R236m • Pipeline (’61) Mgeni System - R175m • Durban Heights System - R169m • South Coast System - R146m • Wartburg System - R138m • Richmond Pipeline - R121m

2016-2022 - R4,583m • Mkomazi Bulk Water Supply - R1,700m • North Coast Supply System - R 418m • Pipeline (’61) Mgeni System - R383m • Lower Thukela BWS - R340m • Lower Mkomazi BWS Scheme - R325m • Wartburg System - R325m

DWA : R 6,175m • F'10 to F'14 - Spring Grove Dam R1,604m • F'14 to F'21 - Mkomazi Water Resources Project - R 3,300m • F'10 to F'12 - Hazelmere Dam Raising - R100m • F'20 to F'24 - Lower Mvoti Dam - R550m • F'23 to F'26 - Mvoti Poort Dam - R400m • F'18 to F'20 - Lower Mkomazi Dam - R221m

- 99 -

Table 12-22: Summary of Major Movements between 2009/10 and 2010/11 Business Plans

Project System Customer Increase / Decrease 2010 Business Plan 2010 - 2015

2011 Business Plan Total Cashflows

2010 - 2015 Umgeni Water

Funding Grant

Funding

% R'000's R'000s R'000s R'000s R'000s

IMMOVABLE CAPITAL EXPENDITURE -11% -353,488 3,271,430 2,917,942 2,942,942 -25,000

North Coast Supply System iLembe DM 50% 266,627 531,740 798,367 823,367 -25,000 Ugu Regional Schemes Ugu DM 283% 174,400 61,600 236,000 236,000 Wartburg System uMgungundlovu DM 325% 105,489 32,470 137,959 137,959 Lower Mvoti Supply System iLembe DM 23% 51,785 223,380 275,165 275,165 Durban Heights WW eThekwini MM 24% 32,952 135,650 168,602 168,602 Manyavu uMgungundlovu DM 100% 25,000 25,000 25,000 Mapaphetwa WW eThekwini MM 77% 15,641 20,300 35,941 35,941 Head Office Infrastructure Immovable 76% 12,406 16,400 28,806 28,806 Wiggins WW eThekwini MM 7% 5,400 81,900 87,300 87,300 South Coast System eThekwini MM, Ugu DM 3% 4,220 141,600 145,820 145,820 Midmar WW System eThekwini MM, Msunduzi LM, uMgungundlovu DM 2% 4,178 239,700 243,878 243,878 Hazelmere WW eThekwini MM, iLembe DM 2% 1,930 104,270 106,200 106,200 Security Perimetre Walls 6% 1,000 17,000 18,000 18,000 Nungwane Pipeline eThekwini MM, Ugu DM 0% 76,220 76,220 76,220 Pipeline (’57): Umlaas Road to eThekwini Point eThekwini MM -11% -9,751 86,000 76,249 76,249 Darvill WWW Msunduzi LM -27% -12,400 46,600 34,200 34,200 Groenekloof Msunduzi LM, uMgungundlovu DM -100% -25,700 25,700 Umlaas New Water Project Msunduzi LM, uMgungundlovu DM -87% -48,300 55,300 7,000 7,000 Howick uMgungundlovu DM, Msunduzi LM -97% -53,000 54,500 1,500 1,500 Sisonke/Ixopo System Sisonke -93% -64,900 69,900 5,000 5,000 Raw Water Pipeline: Midmar Dam to DV Harris eThekwini MM, Msunduzi LM, uMgungundlovu DM -76% -89,640 118,080 28,440 28,440 Richmond Pipeline uMgungundlovu DM -49% -116,473 237,300 120,828 120,828 Mkomazi Bulk Water Supply eThekwini MM, Msunduzi LM, uMgungundlovu DM -95% -156,542 164,542 8,000 8,000 Nottingham Road uMgungundlovu DM -93% -184,639 199,008 14,369 14,369 Pipeline (’61) Mgeni System eThekwini MM, Msunduzi LM -63% -295,141 470,660 175,519 175,519 Other Projects 3% 1,969 61,610 63,579 63,579

MOVABLE CAPITAL EXPENDITURE 9% 13,400 147,504 160,904 160,904

Head Office Infrastructure 133% 13,750 10,300 24,050 24,050 Information Communication & Technology 16% 8,151 51,800 59,951 59,951 Scientific Services 1% 616 47,074 47,690 47,690 Plant & Vehicles -24% -9,117 38,330 29,213 29,213

TOTAL CAPITAL EXPENDITURE -10% -340,088 3,418,934 3,078,846 3,103,846 -25,000

- 100 -

12.7 DEBT MANAGEMENT AND FUNDING REQUIREMENTS

12.7.1 Introduction

Based on the debt maturity profile and cumulative debt curve, the following key issues have been identified

and are taken into account in terms of creating the short, medium and long-term funding strategy:

1. Capital structure

A key principle to managing the outstanding debt is to target the optimum capital structure of 70 %

fixed and 30 % floating so as to minimise volatility of both the tariff and income statement.

2. Asset/liability matching

A further key principle to managing Umgeni Water’s debt is to match the maturity dates and

quantum of debt outstanding in any year to the free cash generated by operations after servicing

interest and operational expenditure. There still exists a mismatch between liabilities and free

cash. This needs to be pro-actively managed on an ongoing basis.

3. Optimal Debt Level

The key driver in determining the optimal level of debt for Umgeni Water was the ability to service

debt given the cashflows generated after capital expenditure. A best-case scenario is that for

every R1 of debt to be repaid, there is R1.40 of operational cash flow after capital expenditure to

fund the repayment.

4. Redemption portfolio

Having debt with large bullet repayments, such as the UG65 bond, exposes Umgeni Water to

forward starting interest rate and refinancing risk. These risks can be eliminated through

redemption portfolio management.

- 101 -

12.7.2 Funding Strategy

Table 12-23: Funding requirements (2009/10 to 2014/15)

FUNDING REQUIREMENTS Short term (R’m) Medium Term

(R’m) Long Term

(R’m)

Financial Year F10 F11 F12 F13 F14 F15

Operational Cashflows 768 682 658 700 774 821

Capex (Escalated) (557) (816) (712) (509) (497) (494)

Net Operating Cashflow (shortfall) after Capex 211 (134) (54) 191 277 328

Refinance - Capital (existing Debt) (1,182) (113) (119) (121) (108) (112)

UG21 600 - - - - -

EIB* 238 95 (17) 20 (19)

Refinance - Finance costs (existing Debt) (8) (20) (24) (24) (11) 10

UG21 - (64) (64) (64) (64) (64)

EIB (7) (21) (29) (27) (29)

Funding Requirements (379) (101) (186) (65) 86 113

Redemption Portfolio - UG65 640 -

Redemption Portfolio - New bond

Redemption Portfolio – Interest

Net Annual Incremental Funding Requirement 262 (101) (186) (65) 86 113

Net (Funding) Investing requirements

Opening Balance Call investments 370 632 531 345 280 367

Closing Balance 632 531 345 280 367 480

* European Investment Bank

Short term funding strategy: FY10 to FY12

During F’10 a Three Billion Rand Domestic Medium Term Note programme was established allowing for

short term paper and longer dated debt such as bonds to be issued with relative ease.

The incremental funding requirement in F’11 and F’12 will be adequately covered from the call

investments on hand, which were primarily derived from the funds obtained on the R 600 million UG21

bond issued in F’10 and R 400 million funding will be obtained from the proposed European

Investment Bank (EIB) loan.

All surplus cash is to be invested in short term financial assets (three to six-month term deposits).

The net investing (funding) portion excludes the R 200 million liquidity buffer as reflected in the

balance sheet.

- 102 -

Medium-term: FY13 to FY15

The medium term funding requirements indicate that Umgeni Water will not require additional borrowings

above the EIB drawdown in F’14 and that it holds sufficient funds to cover any incremental funding.

Table 12-24: Funding requirements (2009/10 to 2014/15)

  Rand (millions) 

FUNDING REQUIREMENTS  L/Term  L/Term  L/Term  L/Term  L/Term  L/Term 

Financial Year    F15  F16  F17  F18  F19  F20 

Operational Cashflows   821  876   976   1,054    1,131    1,210 

Capex (Escalated)  (494)   (1,167)  (1,233)   (942)   (781)  (1,482) 

Net Operating and Capex cash flow  328  (291)   (256)   112    350    (272) 

Refinance ‐ Capital (existing Debt)  (112)  (118)   (117)   (220)   (260)  (4) 

UG21  ‐  ‐  ‐  ‐   ‐   ‐ 

EIB*   (19)   (19)   (19)   (19)   (19)   (19) 

Refinance ‐ Finance costs (existing Debt)  10   (5)   (50)   (85)   86    (90) 

UG21   (64)   (64)   (64)   (64)   (64)   (64) 

EIB   (29)   (27)   (26)   (24)   (22)   (21) 

Funding Requirements  113  (524)   (532)   (300)   71    (470) 

Redemption Portfolio ‐ UG65                   

Redemption Portfolio ‐ New bond         (48)   (155)   (195)   398 

Redemption Portfolio – Interest                  43 

Net Incremental Funding   113  (524)   (580)   (455)   (124)   (29) 

Requirement p.a.                                       

Net (Funding) Investing requirements                   

Opening Balance Call investments  367  480   (45)   (625)  (1,080)  (1,204) 

Closing Balance   480   (45)   (625)  (1,080)  (1,204)  (1,233) 

* European Investment Bank

Long-term: FY15 onwards

The current projections reflect that Umgeni Water will in the long term require additional long term funding

to provide for its next phase of high capital expenditure.

12.7.3 Terms and Conditions on which money is borrowed

The terms and conditions on which money is borrowed differ according to loan agreements and bond

issues. Bank committed facilities offered can be for a full twelve months or for a specified seasonal period.

This committed facility would attract a facility fee on any unutilised balances during the agreed period only.

Accessing the uncommitted facility will be subject to Umgeni Water giving the relevant banks at least

forty eight hours notice in order that the bank may obtain the necessary credit approval to make the funds

available to Umgeni Water.

A summary of the various funding facilities that Umgeni Water currently has and major conditions relating

to those facilities are as per Table 12-25.

- 103 -

12.7.3.1 Bank Funding

Table 12-25: Bank Funding Facilities

Bank Type of facility Committed Uncommitted

FNB Working capital facility R100 million RMB Multipurpose Treasury Facility R100 million Standard Bank General banking facility R50 million Investec General credit facility R50 million ABSA Overnight facility

Bridging facility R65 million R300 million

Nedbank General banking facility R 49,9 million

First National Bank

Instruments available under the short-term direct facility are:

Overdraft – prime less 1% up to R10 million, thereafter prime;

Corporate term loans – negotiable rate;

Bankers acceptances (Acceptance credits) – negotiable rate;

Promissory Notes – negotiable rate;

Offshore Finance – negotiable rate; and

Call loans – negotiable rate.

Standard Bank

Instruments available under the general short-term bank facility are:

Overdraft – prime;

Call loans – negotiable rates;

Short-term loans – negotiable rates;

Revolving acceptance credit facility and foreign currency finance facility;

Offshore trade and working capital loans; and

Other instruments – as offered by the bank.

Investec Bank

Instruments available under the general credit facility are:

Bank call facility – negotiable rates;

Foreign financing facility – negotiable rates; and

Foreign exchange dealing facility – negotiable rates.

ABSA Bank

Instruments available under the general credit facility are:

Bank call facility – negotiable rates; and

Call bonds – negotiable rates.

- 104 -

12.7.3.2 Annuity Loans

Terms, conditions and maturity are specific to each loan agreement. The most significant loans and the

balances as at 30 June 2010 (forecast) are: loan 71, which is the DBSA fifteen-year loan at, R 547million;

and loan 73, which is the DBSA ten-year loan, at R 243 million.

12.7.3.3 Capital Market Bonds

Domestic Medium Term Note (DMTN) Programme

The DMTN Programme was established to fund long term capital expenditure requirements and to fund

short term working capital requirements. The DMTN Programme was completed and signed off on

25 November 2009.

Under this DMTN Programme, Umgeni Water may from time to time issue unsecured or secured registered

notes of any kind, in an aggregate outstanding nominal amount which will not exceed R 3 billion.

Notes may comprise without limitation:

• Fixed rate, floating rate, mixed rate, zero coupon notes or a combination of such foregoing

notes or any other type of notes determined by Umgeni Water and the relevant dealers.

Interest rate

The interest rate will be determined at the time of issuance of notes and will be specified in the Applicable

Pricing Supplement.

Maturity

The Notes are not subject to any minimum or maximum maturity.

Issuance of UG21 bond under the DMTN Programme

On 02 March 2010, after a very successful road show, Umgeni Water issued a R 600 million unsecured

fixed rate bond, the UG21, at an interest rate of 10.70 %, under the DMTN Programme.

The UG21 falls due on 02 March 2021 and interest payments are due on 02 March and 02 September

each year.

The UG21 was oversubscribed at the time of issuance.

12.7.3.4 Development Funding Institutions

Proposed European Investment Bank (EIB) Loan

The due diligence for Umgeni Water was completed during 2009 and the Board of the EIB, in principle,

approved the R 400 million twenty-year loan, on the 7 December 2009. The Contract Agreement is still

being finalised.

- 105 -

12.8 PROPOSED BORROWINGS

12.8.1 Borrowings Domestic and Foreign

Short-term borrowings consist mainly of the portion of long term debt falling due within one year. In F’09,

there is a significant increase in the short-term borrowings due to the UG65 bond redemption in the

following year (F’10).

Table 12-26: Proposed total borrowings

TOTAL PORTION IN RANDS

DATE OF BORROWING

TOTAL GROSS BORROWING LONG TERM SHORT TERM

Actual Actual Actual

Total Short term

Short-term portion of long

term debt

Short-term borrowings

2007/2008 2,078,337,303 1,976,783,560 - - 101,553,743 101,553,743 -

2008/2009 1,978,904,300 917,448,873 - - 1,061,320,091 1,061,320,091 -

Projected Projected Proposed Total Projected Projected Projected

2009/2010 1,517,584,209 800,302,212 600,000,000 1,400,302,212 117,281,997 117,281,997 -

2010/2011 1,637,885,541 1,265,365,376 237,583,329 1,502,948,705 134,936,836 134,936,836 -

2011/2012 1,609,974,821 1,359,768,753 107,026,116 1,466,794,869 143,179,952 143,179,952 -

2012/2013 1,466,794,869 1,336,427,700 - 1,336,427,700 130,367,169 130,367,169 -

2013/2014 1,373,668,255 1,205,071,336 37,240,555 1,242,311,891 131,356,364 131,356,364 -

2014/2015 1,242,311,891 1,105,044,774 - 1,105,044,774 137,267,117 137,267,117 -

Table 12-27: Borrowing programme in Rands - Foreign

FOREIGN PORTION IN RANDS

DATE OF BORROWING

TOTAL GROSS BORROWING LONG TERM SHORT TERM

Actual Actual Actual

Total Short term

Short-term portion of long term debt

Short-term borrowings

2007/2008 - - - - - - -

2008/2009 - - - - - - -

Projected Projected Proposed Total Projected Projected Projected

2009/2010 - - - - - -

2010/2011 237,583,329 - 225,704,163 225,704,163 11,879,166 11,879,166 -

2011/2012 344,609,451 225,704,163 101,674,816 327,378,979 17,230,472 17,230,472 -

2012/2013 364,619,532 310,148,506 35,378,527 345,527,034 19,092,499 19,092,499 -

2013/2014 345,527,034 326,434,535 - 326,434,535 19,092,499 19,092,499 -

2014/2015 326,434,535 307,342,036 - 307,342,036 19,092,499 19,092,499 -

* The loans are denominated in South African Rands and thus there is no currency risk

- 106 -

Table 12-28: Borrowing programme –Domestic

DOMESTIC PORTION IN RANDS DATE OF BORROWING

TOTAL GROSS BORROWING LONG TERM SHORT TERM

Actual Actual Actual

Total Short term

Short-term portion of long

term debt

Short-term borrowings

2007/2008 2,078,337,303 1,976,783,560 - - 101,553,743 101,553,743 -

2008/2009 1,978,768,965 917,448,873 - - 1,061,320,091 1,061,320,091 -

Projected Projected Proposed Total Projected Projected Projected

2009/2010 1,517,584,209 800,302,212 600,000,000 1,400,302,212 117,281,997 117,281,997 -

2010/2011 1,400,302,212 1,265,365,376 11,879,167 1,277,244,543 123,057,670 123,057,670 -

2011/2012 1,265,365,370 1,134,064,590 5,351,300 1,139,415,890 125,949,480 125,949,480 -

2012/2013 1,102,175,336 1,026,279,194 35,378,527 990,900,666 111,274,670 111,274,670 -

2013/2014 1,028,141,221 878,636,801 37,240,555 915,877,356 112,263,865 112,263,865 -

2014/2015 915,877,356 797,702,738 - 797,702,738 118,174,618 118,174,618 -

12.8.2 Maturity Profile of Debt

The maturity profile (Table 12-29) indicates the short and long term borrowings.

Table 12-29: Maturity profile of debt (Balance Sheet)

Maturity Profiles - Investment and Debt Investment maturity structure (R'm) F'08 F'09 F'10 F'11 F'12 F'13 F'14 F'15

< 1year 501 1,213 860 759 573 508 595 708 53% 98% 98% 98% 98% 99% 100% 100% 1-5 years 440 22 19 14 10 5 - - 47% 2% 2% 2% 2% 1% 0% 0% 5-10 years - - - - - - - - 0% 0% 0% 0% 0% 0% 0% 0% +10 Years - - - - - - - - 0% 0% 0% 0% 0% 0% 0% 0% Total Investments 941 1,236 878 773 583 513 595 708 Debt maturity structure (R'm) F'08 F'09 F'10 F'11 F'12 F'13 F'14 F'15 < 1year 102 1,061 117 135 143 130 131 137 5% 54% 8% 8% 9% 9% 10% 11% 1-5 years 1,433 275 533 593 534 525 417 903 69% 14% 35% 36% 33% 36% 30% 73% 5-10 years 470 417 267 834 769 704 700 119 23% 21% 57% 51% 48% 48% 51% 10% +10 Years 74 226 600 76 164 107 126 83 4% 11% 0% 5% 10% 7% 9% 7% Total Borrowings 2,079 1,979 1,517 1,638 1,610 1,466 1,374 1,243 Net Borrowings 1,137 743 639 865 1,027 953 779 535 Long - term debt (>1 year) 1,977 918 1,400 1,503 1,467 1,336 1,243 1,106 Movement -4.0% -53.6% 52.5% 7.4% -2.4% -8.9% -7.0% -11.0% Short - term debt (<1 year) 102 1,061 117 135 143 130 131 137 Movement -15.6% 945.1% -88.9% 15.1% 6.1% -8.9% 0.8% 4.5%

- 107 -

-

500

1,000

1,500

2,000

2,500

Ra

nd

(m

illi

on

)

F '07 F '08 F '09 F '10 F '11 F '12 F '13 F '14 F '15

Financial Year Ending 30 June

Debt Maturity Structures

+10 Years

5-10 years

1-5 years

< 1year

Table 12-30: Fixed versus Floating Debt

Fixed vs Floating F'08 F'09 F'10 F'11 F'12 F'13 F'14 F'15

Rand 1,561,507,126 1,503,543,294 1,067,585,477 1,237,886,809 1,259,976,089 1,166,658,979 1,123,532,367 1,042,176,003 Fixed

% 74.1% 75.0% 70.3% 75.6% 78.3% 79.5% 81.8% 83.9%

Rand 564,222,400 500,000,000 450,000,000 400,000,000 350,000,000 300,000,000 250,000,000 200,000,000 Floating

% 25.9% 25.0% 29.7% 24.4% 21.7% 20.5% 18.2% 16.1%

Total Rand 2,125,729,526 2,003,543,294 1,517,585,477 1,637,886,809 1,609,976,089 1,466,658,979 1,373,532,367 1,242,176,003

Figure 12-7: Debt Maturity structure

- 108 -

Debt Curve - Funding Against Limits

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

Financial Year ending 30 June

Ran

d (m

illio

ns)

RedemptionPortfolio*

Borrowing Limit

fundingrequirements

Net Debt

Gross Debt

12.8.3 Analysis of Funding Against Approved Borrowing Limits

In preparing the funding strategy, cognisance was taken of the level of gross debt against the unconditional

borrowing limit set by the Department of Water Affairs and National Treasury which is R 2,800 million for

F’10 and R 1,800 million for F’11.

Figure 12-8: Analysis of funding against approved borrowing limits

Table 12-31: Gross Borrowings (R’m)

Borrowing Limit F10 F11 F12 F13 F14 F15 F16 F17

Gross Borrowings 1,518 1,638 1,610 1,467 1,374 1,242 1,150 1,594

At Peak 973

Contingencies 25 164 161 147 137 124 115 159

TOTAL GROSS BORROWINGS 2,515 1,802 1,771 1,613 1,511 1,367 1,265 1,753

Approved borrowing Limit 2,800 1,800

(Over) Under utilisation 285 (2) 29 187 289 433 535 47

The borrowing limits of R 2,800 million and R 1,800 million were approved by National Treasury as per the

approval letter dated 15 December 2009.

- 109 -

Gross Borrowings - Business Plan F'11

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

'07 '09 '11 '13 '15 '17 '19 '21 '23 '25 '27 '29 '31 '33

Financial Year ending 30 June

Ran

d (m

illio

ns)

Borrowing Limit Gross Borrowings - F'11 Gross Borrowings - F'10

Net Debt Curve: Budget F'10

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

F'07 F'09 F'11 F'13 F'15 F'17 F'19 F'21 F'23 F'25 F'27

Financial Year ending 30 June

Ran

d (m

illio

ns)

Borrowing Limit F'10 Budget F'11 Budget

12.8.4 Debt Curve

Figure 12-9: Comparison of gross Debt Budget F’10 to Budget F’11

The shift in long-term borrowings arises primarily from the reduction in volumes sales and the thirty-year increase in Capex.

Figure 12-10: Comparison of net Debt Budget F’10 to Budget F’11

- 110 -

12.9 FINANCIAL RISK

Umgeni Water assumes a low risk tolerance approach to risk. The three risks described in the sections that

follow have been identified as specific treasury risks and are managed proactively to ensure their timely

mitigation.

12.9.1 Sustainable Tariff

An unsustainable tariff will affect Umgeni Water’s ability to fund future capital expenditure programmes and

undertake operational expansion. This risk impacts on the organisation’s ability to deliver on its financial

strategies, namely, ‘Contribute to an Affordable Tariff’.

Mitigation approach

Umgeni Water monitors and reports on cashflow funding requirements and maintains optimal debt levels,

has a transparent and formalised tariff policy, together with a robust tariff model. The organisation

undertakes water demand planning, liaises with stakeholders to obtain commitment to the capital

expenditure programme and subsequently undertakes project evaluation to assess sustainability of the

programme.

12.9.2 Liquidity Risk

Liquidity risk will result in Umgeni Water being unable to raise sufficient funds in the required currency and

at the correct time to meet its financial obligations. This will impact on the organisation’s ability to achieve

its financial strategies, namely, ‘Enhance Shareholder Value’.

Mitigation approach

To mitigate liquidity risk, Umgeni Water has:

Short-term funding facilities to meet ongoing cash requirements for which facility options are in

place with four banks (FNB, Standard, ABSA, Nedbank);

A Domestic Medium Note (DMTN) Programme has been established allowing for longer dated debt

such as bonds to be issued with relative ease;

Provided for a R 200 million cash buffer investment to cater for delayed payments by its

customers;

A redemption strategy framework, which provides guidelines for managing the risks associated

with refinancing large debt maturities (such as the UG65 bond). The build-up in the redemption

portfolio over a three-year period is: 10 % of the capital redemption value three years before

maturity, 40 % two years before maturity, 75 % a year before maturity, and the balance of 25 % is

funded during the year of maturity; and

Borrowing limits approved by National Treasury, which are currently: R 2,800 million for F’10, and

R 1,800million for F’11.

- 111 -

12.9.3 Credit Risk

Credit risk concentration will result in Umgeni Water being exposed to counter-party failure. This has the

potential to impact on the organisation’s ability to ‘Maintain an Optimal Debt Level, amongst its other

strategies.

Mitigation approach

Umgeni Water will:

According to its Investment Policy, mitigate credit risk by conducting transactions only with counter

parties and issuers who satisfy soundly based and acceptable assessment processes, and only

after formal limits have been set. In addition, same-day settlement limits will be set wherever

possible and/or strict settlement procedures set and adhered to, and

Continue monitoring of the credit quality of counterparties.

- 112 -

12.10 FINANCIAL RATIO PROJECTIONS

Table 12.32: Financial Ratio Projections

Financial Indicators and Ratios F08 F09 F10 F10 F11 F12 F13 F14 F15 UW

Actual Actual Budget Forecast Target A Performance criteria/indicators

1 Volume of water sold (kl'000) 403,965 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447

eThekwini Municipality(kl'000) 329,723 342,912 331,992 335,310 342,011 348,847 355,824 362,443

Other WSA's(kl'000) 86,233 97,500 90,689 90,668 92,479 94,328 96,214 98,004

2 Total gross revenue (R'000) 1,280,747 1,485,496 1,617,089 1,616,236 1,614,484 1,848,658 1,986,476 2,133,673 2,288,096

3 Total Bulk Revenue (R'000) 1,190,798 1,259,187 1,422,165 1,364,989 1,460,849 1,765,035 1,897,669 2,040,905 2,191,173

eThekwini Municipality(R'000) 995,433 1,102,461 1,067,354 1,148,720 1,311,145 1,468,182 1,655,655 1,861,925

Other WSA's(R'000) 263,754 319,704 297,635 312,129 453,890 429,488 385,250 329,248

4 Weighted average Water tariff (R/kl) (tot bulk revenue/tot bulk vol) 3.000 3.229 3.229 3.429 4.062 4.282 4.514 4.758

eThekwini Municipality 2.960 3.019 3.215 3.215 3.414 4.046 4.265 4.497 4.740

Other WSA's 2.960 3.079 3.279 3.279 3.482 4.118 4.340 4.576 4.823

5 Net profit (loss) for the year 391,119 525,638 470,178 505,353 485,623 167,702 502,568 558,864 531,533

6 Cost of raw water (c/kl) 18.360 18.690 20.616 21.057 23.882 73.850 78.941 83.572 88.497

7 Profit from Operations/Revenue 0.435 0.432 0.390 0.364 0.345 0.149 0.312 0.309 0.268

8 Total expenditure/Revenue 0.700 0.667 0.713 0.692 0.704 0.913 0.751 0.742 0.771

9 Cost of sales/Revenue 0.307 0.367 0.373 0.397 0.384 0.453 0.468 0.471 0.474

10 Total cost/volume (Rand/kl) (Consolidated) 2.219 2.382 2.617 2.645 2.667 3.886 3.366 3.502 3.833

11 Total cost/volume (Rand/kl) (Primary only) 2.100 1.997 2.321 2.186 2.435 3.817 3.296 3.431 3.764

12 Total cost/volume (Rand/kl) (Bulk only) 2.020 1.900 2.235 2.090 2.330 3.712 3.182 3.313 3.640

13 Net Finance costs (Rand/kl) 0.410 0.280 0.366 0.196 0.166 0.249 0.264 0.225 0.178

14 Personnel cost ratio (Total Personnel costs/Total Costs excl

finance costs) 0.283 0.262 0.268 0.248 0.280 0.202 0.250 0.250 0.237 <0.60

15 Personnel cost per kilolitre (Personnel costs/Annual volume) 0.512 0.551 0.603 0.608 0.699 0.736 0.776 0.818 0.865

16 Personnel cost per kilolitre (Personnel costs/Annual volume)

(Primary only) 0.491 0.527 0.578 0.582 0.672 0.730 0.770 0.812 0.858

17 Personnel cost per kilolitre (Personnel costs/Annual vol) (Bulk only) 0.476 0.514 0.564 0.567 0.655 0.712 0.751 0.792 0.837

- 113 -

Table 12.32, continued: Financial Ratio Projections

Financial Indicators and Ratios F08 F09 F10 F10 F11 F12 F13 F14 F15 UW

Actual Actual Budget Forecast Target

B Operating Risks

18 Working ratio (total expenses excluding depreciation, amortisation

and finance costs divided by Total revenue) 0.449 0.477 0.507 0.529 0.537 0.794 0.631 0.633 0.674 <0.75

19 Operating Ratio (Total Costs excluding depreciation &

amortisation/Total Revenue) 0.578 0.555 0.606 0.580 0.581 0.852 0.690 0.680 0.710 <0.75

20 Controllable working ratio (total expenses excluding raw water,

depreciation, amortisation & interest, divided by total revenue) 0.391 0.424 0.451 0.474 0.474 0.620 0.455 0.456 0.496

21 Return on assets (income before interest & taxes divided by total

assets excluding investments) 20.53% 22.63% 18.58% 18.05% 14.25% 6.57% 13.48% 13.28% 11.68% 15% to 20%

22 Asset turnover (revenue divided by total assets excluding

investments ) 0.472 0.523 0.476 0.496 0.414 0.440 0.432 0.429 0.436

23 Gross margin % 69.29% 63.31% 62.69% 60.33% 61.64% 54.69% 53.17% 52.90% 52.57%

24 Current asset turnover (revenue divided by current assets

excluding investments) 7.261 7.421 8.752 7.862 7.703 7.875 8.077 8.290 8.473

25 Fixed asset turnover (revenue divided by fixed assets) 0.555 0.601 0.518 0.546 0.438 0.468 0.458 0.454 0.460

26 Trade debtors collection period (Trade Debtors divided by revenue

times 365) excluding VAT 35.141 37.636 32.710 36.247 38.002 37.581 36.758 36.016 35.340

27 Accounts receivable turnover (revenue divided by accounts

receivable) (Excl. VAT) 9.111 8.507 9.788 8.833 8.425 8.520 8.710 8.890 9.060 >9.6

* Accounts receivable is made up as follows:

- Trade Debtors 140,570 174,617 182,972 191,626 216,990 228,059 240,012 252,552

- Provision for Doubtful debts - - - - - - - -

140,570 174,617 165,205 182,972 191,626 216,990 228,059 240,012 252,552

- 114 -

Table 12.32, continued: Financial Ratio Projections

Financial Indicators and Ratios F08 F09 F10 F10 F11 F12 F13 F14 F15 UW

Actual Actual Budget Forecast Target

C Financial Risks

28 Current ratio (current assets divided by current liabilities) 1.374 0.991 0.808 2.174 1.915 1.580 1.520 1.723 1.964

29 Debt service/interest cover ratio (income before interest & taxes

divided by interest) 3.364 5.512 3.920 7.108 7.881 2.551 5.303 6.507 7.484 > 1.75

30 Debt ratio (total debt divided by total assets) 0.569 0.486 0.343 0.367 0.350 0.337 0.287 0.247 0.208 <0.40

31 Gross Debt-equity ratio (total liabilities divided by total

accumulated reserves) 2.040 1.283 0.619 0.741 0.647 0.596 0.458 0.377 0.289 < 0.7

32 Net Debt-equity ratio (Net liabilities divided by total accumulated

reserves) 1.116 0.482 0.554 0.312 0.341 0.380 0.298 0.214 0.125 < 0.7

33 Weighted Average Cost of Capital (WACC) (Per AFS) 13.22% 12.63% 10.72% 9.59% 9.51% 9.48% 9.51% 9.56% 9.67%

34 Weighted Average Cost of Capital (WACC) (Finance costs/Gross

borrowings) 13.03% 13.52% 20.61% 15.45% 8.58% 9.65% 10.30% 10.03% 10.36%

35 Net Weighted Average Cost of Capital (WACC) (Net finance

costs(excl retic asset interest income)/Net borrowings) 16.82%

36 Financial Leverage (D/(D+E)) (Net of redemption assets) 0.617 0.449 0.382 0.423 0.391 0.372 0.313 0.274 0.224

D Debt Management

Net Debt

Total Borrowings (as per Balance sheet) 2,078,337 1,978,904 1,208,449 1,517,584 1,637,886 1,609,975 1,466,795 1,373,668 1,242,312

Total Investment (as per Balance sheet) * 941,315 1,235,897 126,862 878,288 773,497 582,664 512,849 594,666 707,666

Net Borrowings (Total Borrowings - Total Investment) 1,137,022 743,008 1,081,587 639,296 864,388 1,027,311 953,946 779,002 534,646

* Includes R 200 million liquidity buffer.

- 115 -

Table 12.32, continued: Financial Ratio Projections

Financial Indicators and Ratios F08 F09 F10 F10 F11 F12 F13 F14 F15 UW

Actual Actual Budget Forecast Target

E Business Credit Risk

37 EBIT interest coverage (EBIT/interest paid) 2.056 2.495 2.534 2.507 3.960 1.776 4.099 4.794 4.766

38 EBITDA interest coverage (EBITDA/interest paid) 2.633 2.993 3.226 3.276 5.370 2.504 4.905 5.744 5.859

39 Cash from operations/average total debt 0.405 0.376 0.619 0.506 0.416 0.408 0.477 0.563 0.661

40 Return on average total capital 0.546 0.416 0.323 0.287 0.220 0.102 0.193 0.181 0.143

41 EBITDA/Sales 0.557 0.544 0.497 0.475 0.467 0.210 0.373 0.371 0.330

42 Funds flow net debt pay back (cash from operations before WC

adj/total interest bearing debt) 0.343 0.403 0.665 0.506 0.461 0.447 0.505 0.576 0.676

F Surplus Ratios

43 Accounting Surplus (NP)/Fixed Assets (PPE) 0.170 0.213 0.151 0.171 0.132 0.042 0.116 0.119 0.107

44 Return on turnover (NP)/Revenue 0.305 0.354 0.291 0.313 0.301 0.091 0.253 0.262 0.232

45 EBITDA 712,847 808,355 803,592 768,296 754,265 388,929 741,156 791,267 754,248

46 Net Debt/EBIDAR 1.595 0.919 1.346 0.832 1.146 2.641 1.287 0.985 0.709

- 116 -

Operating Income

642588 556

276

619660

614

-

200

400

600

800

F09 F10 F11 F12 F13 F14 F15

Ra

nd

(m

illi

on

s)

Net F inance Costs

116

8371

108117

101

82

-

40

80

120

160

F09 F10 F11 F12 F13 F14 F15

a

Ra

nd

(m

illi

on

s)

Net Profit

526 505 486

168

503559 532

-

200

400

600

F09 F10 F11 F12 F13 F14 F15

Ra

nd

(m

illi

on

s)

12.11 SELF EVALUATION STATEMENT ON FINANCIAL RESPONSIBILITY

12.11.1 Operating Performance

Figure 12-11: Operating Performance indicators

The forecasted decline in operating profits is due to the low volume growth in water sales combined with

double digit increases in both direct and indirect costs. Net profits are projected to reduce significantly due

to the following impairments:

The lower debt levels have however contributed to lower finance costs which has had a positive impact on

net profits

F'12: Maphumulo BWS Scheme (Phase 1) R 181m

F'12: Mhlabatshane BWS Scheme R 150m

F’12: Total R 331m

F'15: Ozwathini BWS Scheme R 85m

F'16: Richmond Pipeline R 98m

- 117 -

0.80 0.89 1.011.17

1.781.94 2.06 2.19 2.320.83 0.75

0.90

1.01

1.700.99

1.04

1.281.37

0.26

0.18

0.15

0.23

0.250.21

0.17

0.20

0.39

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

F'08

Actual

F'09

Actual

F'10

Forecast

F'11

Forecast

F'12

Forecast

F'13

Forecast

F'14

Forecast

F'15

Forecast

F'16

Forecast

Ra

nd

pe

r k

ilo

litr

e

Direct Costs Indirect Costs Finance charge

Umgeni Water has three business segments namely Bulk Potable Water, Bulk Wastewater and Section 30

Activities as described below.

Bulk Potable Water

Table 12-33: Performance Ratios

Umgeni Water F08 F09 F10 F11 F12 F13 F14 F15

Target Actual Actual Forecast

Cost per kilolitre - Bulk water 2.235 2.020 1.900 2.090 2.330 3.712 3.182 3.313 3.640

Net surplus ( R millions) 470 381 496 485 472 157 492 548 520

The cost per kilolitre of bulk potable water is projected to increase from F’10 onwards due to the significant

increases in the direct costs of production and the impairment of rural development projects.

Figure 12-13: Cost per kilolitre – Bulk Water (Cost Components)

Bulk Wastewater

The bulk wastewater section of the business segment is not projected to show growth and will maintain an

average net profit of around R 7 million per annum due to relatively low increases in the management fee

and higher costs.

- 118 -

Section 30 Activities

The revenue from section 30 activities is projected to increase from R 184 million in F’09 to R 206 million

in F’10. This growth arises from Umgeni Water’s appointment as an implementation agent for the

Department of Water Affairs, the Department of Education and District Municipalities.

12.11.2 Financial Position

Table 12-34: Financial and Solvency Ratios

Umgeni Water F08 F09 F10 F11 F12 F13 F14 F15

Target Actual Actual Forecast

Current Ratio 1.374 0.991 2.174 1.915 1.580 1.520 1.723 1.964

Net Debt : Equity Ratio <0.7 1.116 0.482 0.554 0.312 0.341 0.380 0.298 0.214

Debt : Equity Ratio <0.7 2.040 1.283 0.741 0.647 0.596 0.458 0.377 0.289

Debt Service >1.75 3.364 5.512 7.108 7.881 2.551 5.303 6.507 7.484

Debt : Asset ratio <0.40 0.569 0.486 0.367 0.350 0.337 0.287 0.247 0.208

Return on Assets (income before interest & taxes divided by total assets excluding investments)

15% to 20% 21% 23% 18% 14% 7% 13% 13% 12%

Umgeni Water’s gearing, although significantly higher than the sector average, has shown a steady

improvement since 2002 and is now projected to reach an acceptable level of 0.741 in F’10 after the

redemption of the UG65 bond.

The reduction in debt impacts positively on the debt to asset ratio which will reduce from 0.486 in F09 to

0.367 in F’10 which is within the targeted ratio of less than 0.40.

Asset productivity as measured by the return on assets ratio shows a declining trend from 23 % in F’09 to

12 % in F15, due to the capital expenditure programme with lower operating profits.

- 121 -

Risk management in the organisation is guided by an Integrated Risk Management Framework which

comprises:

Development of risk profiles at all organisational levels;

Integration of risk profiles and systematic development of mitigation measures;

Measurement of responses to risks; and

Risk Monitoring and evaluation.

Integrated Risk Management is implemented at strategic, divisional and departmental levels. A Priority

Scale guides both the risk accountability and the organisation’s risk appetite:

The Board, which is ultimately accountable for Risk Management, ensures that risk is

proactively managed in the organisation.

The Corporate Risk Management Committee, which comprises the Executive, Top

Managers and the Divisional Risk Champions monitor the status of strategic and

operational risks on a quarterly basis.

The Audit Committee monitors the status of strategic risks quarterly and reports the status

to the Board.

The Executive, Top Management and the Board review the organisation’s strategic risks

(annual basis) and report these to Audit Committee and the Board.

The organisation’s current Strategic Risks are:

Water resources availability including climate change,

Infrastructure availability to meet demand timeously,

Sustainable Tariff,

Liquidity risk,

Credit risk,

Servitude encroachment, and

Health, Safety and Environment,

- 122 -

- 122 -

- 123 -

Umgeni Water has in place a fraud prevention committee to effectively manage fraud as prescribed in

Section 29.1.1 of the Treasury regulations in the PFMA.

The committee comprises an independent chairman, the internal auditors and management. The focus of

the activities of this committee is on deliberate misrepresentation which could lead to the prejudice of

others and falsification.

An integrated fraud prevention plan had been established to prevent or respond to incidents of fraud.

Umgeni Water will continue to operate a fraud hotline service, managed by an external service provider,

and made available to all staff members and other stakeholders, including suppliers, to enable all

stakeholders to report suspicions of fraud.

.

- 124 -

- 125 -

15.1 Other Key Performance Indicators as per Shareholder’s Compact

PERFORMANCE OBJECTIVE OUTCOMES/ OUTPUT INDICATORS MEASURE

1. Water quality compliance Water quality standards met Test results, SANS 241 % compliance

2. Water losses Reduced levels of unaccounted for water

Water lost as a percentage of total water produced %

3. Reliability of supply No unplanned interruptions to supply exceeding 24 hours

Number of days supply disrupted divided by total number of possible supply days

%

4. Financial Reporting Compliance Unqualified audit report Annual external audit Qualified /

Unqualified 5. Staff turnover Optimal staff retention Percentage of staff leaving % 6. Board member

performance Improved performance of fiduciary duties/governance

Annual performance assessment %

7. Positive internal audit report

Internal audit issues dealt with Internal audit reports No repeat and

unresolved findings 8. Bulk supply

agreements with municipalities/ other customers

Statutory and service level agreements in place

Municipalities / other customers with bulk supply agreements

%

9. Improved financial performance

Improved viability and sustainability

Financial ratios: Net Debt: Equity Debt: Service Debt: Assets

Positive improvement trend

10. Manage costs within the approved budget

No. over expenditure/ losses Financial reports % variance

11. Achieve statutory reporting compliance

Reporting compliance achieved

Statutory submissions made on time

Submission dates met or missed

12. Dividend / Surplus Targets

Targets as per shareholder’s compact met Financial reports % variance

13. Increased access to services

Contribution to national objectives Capex spend / projects

Capex spend or number of projects per

municipality 14. Other water board

specific objectives As per attached Scorecard As per attached Scorecard As per attached Scorecard

- 126 -

Page 128

• The extent to which water and wastewater complies with legislated standards.

Product Quality (Water and Wastewater Quality)

Strategy Outcome

Exceed Customer Expectations

Performance IndicatorStrategic Objective

Potable water quality: has met SANS Class 1.

Wastewater quality: has met discharge permit requirements.

Potable water quality: has met SANS Class 1.

Wastewater quality: has met discharge permit requirements.

Potable water quality: has met SANS Class 1.

Wastewater quality: has met discharge permit requirements.

Potable water quality: has met SANS Class 1.

Wastewater quality: has met discharge permit requirements.

Potable water quality: has met SANS Class 1.

Wastewater quality: has met discharge permit requirements.

Potable water quality: projected to have met SANS Class 1.

Wastewater quality: projected to have met discharge permit requirements.

Water quality monitoring programmes.

Water quality monitoring programmes.

Water quality monitoring programmes.

Water quality monitoring programmes.

Water quality monitoring programmes.

Water quality monitoring programmes.

Water quality auditing and reporting.

Water quality auditing and reporting.

Water quality auditing and reporting.

Water quality auditing and reporting.

Water quality auditing and reporting.

Water quality auditing and reporting.

Targets for Product Quality (Water and Wastewater Quality)

Water safety and security plans.

2013/2014

Water safety and security plans.

2009/10

Water safety and security plans.

2010/11

Water safety and security plans.

2011/12

Water safety and security plans.

2012/13

Water safety and security plans.

2014/2015

Page 129

• The extent to which contractual obligations have been met and structured feedback received.

Customer Satisfaction

Operational Resiliency

Operational Optimisation

Strategy Outcomes

Exceed Customer Expectations

Performance IndicatorStrategic Objective

Adequate pressure at consumer supply point: continuously.

Adequate pressure at consumer supply point: continuously.

Adequate pressure at consumer supply point: continuously.

Adequate pressure at consumer supply point: continuously.

Adequate pressure at consumer supply point: continuously.

Adequate pressure at consumer supply point:Projected to have been met continuously.

Duration of service interruptions:

Less than 24 hours for supplies larger than 50,000 cubic metres per day.

Less than 48 hours for supplies smaller than 50,000 cubic metres per day.

Duration of service interruptions:

Less than 24 hours for supplies larger than 50,000 cubic metres per day.

Less than 48 hours for supplies smaller than 50,000 cubic metres per day.

Duration of service interruptions:

Less than 24 hours for supplies larger than 50,000 cubic metres per day.

Less than 48 hours for supplies smaller than 50,000 cubic metres per day.

Duration of service interruptions:

Less than 24 hours for supplies larger than 50,000 cubic metres per day.

Less than 48 hours for supplies smaller than 50,000 cubic metres per day.

Duration of service interruptions:

Less than 24 hours for supplies larger than 50,000 cubic metres per day

Less than 48 hours for supplies smaller than 50,000 cubic metres per day

Duration of service interruptions:

Less than 24 hours for supplies larger than 50,000 cubic metres per day.

Less than 48 hours for supplies smaller than 50,000 cubic metres per day.

Customer volume demand: met

98% of the time.

Customer volume demand: met

98% of the time.

Customer volume demand: met

98% of the time.

Customer volume demand: met

98% of the time.

Customer volume demand: met

98% of the time.

Customer volume demand:projected to have been met 100% of the time.

Number of liaison meetings: Quarterly

Number of liaison meetings: Quarterly

Number of liaison meetings: Quarterly

Number of liaison meetings: Quarterly

Number of liaison meetings: Quarterly

Number of liaison meetings: Quarterly

Targets for Customer Satisfaction, Operational Resiliency, Operational Optimisation

2013/20142009/10 2010/11 2011/12 2012/13 2014/2015

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The extent to which the capital expenditure programme contributes to product quality, customer satisfaction, stakeholder understanding and support, community sustainability, operational optimisation and operational resiliency.

Infrastructure StabilityGrowth / Increase Customer Base

Strategy Outcome Performance IndicatorStrategic Objective

Stability of supply to customers, stability of bulk water supply systems and standards and norms:

Flexible supply systems

Stability of supply to customers, stability of bulk water supply systems and standards and norms:

Flexible supply systems

Stability of supply to customers, stability of bulk water supply systems and standards and norms:

Flexible supply systems

Stability of supply to customers, stability of bulk water supply systems and standards and norms:

Flexible supply systems

Stability of supply to customers, stability of bulk water supply systems and standards and norms:

Flexible supply systems

Stability of supply to customers, stability of bulk water supply systems and standards and norms:

Flexible supply systems

Targets for Infrastructure Stability

2013/20142009/10 2010/11 2011/12 2012/13 2014/2015

Page 131

• The extent to which feedback on performance has been received from Statutory stakeholders: Executive Authority, Portfolio Committee for Water Affairs, National Treasury, Provincial Government, Executive Mayors.

Stakeholder Understanding and Support

Manage Stakeholder Relations

Strategy Outcome Performance IndicatorStrategic Objective

Portfolio Committee:

1 scheduled presentation

Portfolio Committee:

1 scheduled presentation

Portfolio Committee:

1 scheduled presentation

Portfolio Committee:

1 scheduled presentation

Portfolio Committee:

1 scheduled presentation

Portfolio Committee:

1 scheduled presentation

Executive Authority:

2 scheduled presentations

Executive Authority:

2 scheduled presentations

Executive Authority:

2 scheduled presentations

Executive Authority:

2 scheduled presentations

Executive Authority:

2 scheduled presentations

Executive Authority:

2 scheduled presentations

Provincial Government and Executive Mayors:

1 scheduled presentation

Provincial Government and Executive Mayors:

1 scheduled presentation

Provincial Government and Executive Mayors:

1 scheduled presentation

Provincial Government and Executive Mayors:

1 scheduled presentation

Provincial Government and Executive Mayors:

1 scheduled presentation

Provincial Government and Executive Mayors:

1 scheduled presentation

Targets for Stakeholder Understanding and Support – Statutory Stakeholders

National Treasury:

2 scheduled presentations

2013/2014

National Treasury:

2 scheduled presentations

2009/10

National Treasury:

2 scheduled presentations

2010/11

National Treasury:

2 scheduled presentations

2011/12

National Treasury:

2 scheduled presentations

2012/13

National Treasury:

2 scheduled presentations

2014/2015

Page 132

• The extent to which feedback on performance has been received from Contracted stakeholders: Investors, OrganisedLabour, Employees.

Stakeholder Understanding and Support

Manage Stakeholder Relations

Strategy Outcome Performance IndicatorStrategic Objective

Organised Labour:

4 scheduled presentations

Organised Labour:

4 scheduled presentations

Organised Labour:

4 scheduled presentations

Organised Labour:

4 scheduled presentations

Organised Labour:

4 scheduled presentations

Organised Labour:

4 scheduled presentations

Investors:

1 scheduled presentation

Investors:

1 scheduled presentation

Investors:

1 scheduled presentation

Investors:

1 scheduled presentation

Investors:

1 scheduled presentation

Investors:

1 scheduled presentation

Targets for Stakeholder Understanding and Support – Contracted Stakeholders

Employees:

4 scheduled presentations

2013/2014

Employees:

4 scheduled presentations

2009/10

Employees:

4 scheduled presentations

2010/11

Employees:

4 scheduled presentations

2011/12

Employees:

4 scheduled presentations

2012/13

Employees:

4 scheduled presentations

2014/2015

Page 133

• The extent to which feedback on performance has been received from Non-Contracted stakeholders: Civil Society and Business Formations.

Stakeholder Understanding and Support

Manage Stakeholder Relations

Strategy Outcome Performance IndicatorStrategic Objective

Civil Society and Business Formations:1 scheduled presentation

Civil Society and Business Formations:1 scheduled presentation

Civil Society and Business Formations:1 scheduled presentation

Civil Society and Business Formations:1 scheduled presentation

Civil Society and Business Formations:1 scheduled presentation

Civil Society and Business Formations:1 scheduled presentation

Targets for Stakeholder Understanding and Support – Non-Contracted Stakeholders

2013/20142009/10 2010/11 2011/12 2012/13 2014/2015

Page 134

Financial Viability

Strategy Outcome

• The extent to which a constant tariff in real terms has been maintained.

Contribute to an Affordable Tariff

Performance IndicatorStrategic Objective

Total cost/kl:

R3.640

Total cost/kl:

R3.313

Total cost/kl:

R3.182

Total cost/kl:

R3.712

Total cost/kl:

R2.330

Total bulk cost/kl:

Target: R2.235

Projected: R2.090

Tariff Increase:

5.4%

Projected CPI:

5.4%

Tariff Increase:

5.4%

Projected CPI:

5.4%

Tariff Increase:

5.4%

Projected CPI:

5.4%

Tariff Increase:

18.4%

Projected CPI:

5.5%

Tariff Increase:

6.2%

Projected CPI:

5.7%

Tariff Increase:

6.5%

Projected CPI:

5.1%

Targets for Financial Viability

Operational cashflow:

R 658 million

2011/12

Operational cashflow:

R 700 million

2012/13

Operational cashflow:

R 774 million

2013/2014

Operational cashflow:

R 682 million

2010/11

Operational cashflow:

R 821 million

Operational cashflow:

Target: R 638 million

Projected: R 768 million

2014/20152009/10

Page 135

Financial Viability • The extent to which cashflow supports the debt level.

Maintain an Optimal Debt Level

Strategy Outcome Performance IndicatorStrategic Objective

Debt:Assets:

0.208

Debt:Assets:

0.247

Debt:Assets:

0.287

Debt:Assets:

0.337

Debt:Assets:

0.350

Debt:Assets:

Target: <0.4

Projected: 0.367

Debt Service:

7.484

Debt Service:

6.507

Debt Service:

5.303

Debt Service:

2.551

Debt Service:

7.881

Debt Service:

Target: >1.75

Projected: 7.108

Debt:Equity:

0.289

Debt:Equity:

0.377

Debt:Equity:

0.458

Debt:Equity:

0.569

Debt:Equity:

0.647

Debt:Equity:

Target: <0.7

Projected: 0.741

Net Debt:Equity:

0.214

Net Debt:Equity:

0.298

Net Debt:Equity:

0.380

Net Debt:Equity:

0.341

Net Debt:Equity:

0.312

Net Debt:Equity:

Target: <0.7

Projected: 0.554

Targets for Financial Viability

2011/12 2012/13 2013/20142010/11 2014/20152009/10

Page 136

Financial Viability

Strategy Outcome

• The percentage improvement on return on asset. Improve Return on Assets

Performance IndicatorStrategic Objective

ROA:

11.68%

ROA:

13.28%

ROA:

13.48%

ROA:

6.57%

ROA:

14.25%

ROA:

Target: 18.58%

Projected: 18.05%

Targets for Financial Viability

Asset Turnover:

0.440

2011/12

Asset Turnover:

0.432

2012/13

Asset Turnover:

0.429

2013/2014

Asset Turnover:0.414

2010/11

Asset Turnover:

0.436

Asset Turnover:

Target: 0.476

Projected: 0.496

2014/20152009/10

Page 137

Financial Viability

Strategy Outcome

• The extent to which the credit rating has been maintained.

Enhance Shareholder Value

Performance IndicatorStrategic Objective

Credit Rating:

AA+ Long term.

F1+ short term.

Credit Rating:

AA+ Long term.

F1+ short term.

Credit Rating:

AA+ Long term.

F1+ short term.

Credit Rating:

AA+ Long term.

F1+ short term.

Credit Rating:

AA+ Long term.

F1+ short term.

Credit Rating:

AA+ Long term.

F1+ short term.

Surplus:

R 532 million

Surplus:

R 559 million

Surplus:

R 503 million

Surplus:

R 168 million

Surplus:

R 486 million

Surplus:

Target:470 million

Projected actual: R 505 million

Targets for Financial Viability

2011/12 2012/13 2013/20142010/11 2014/20152009/10

Page 138

• The percentage water services coverage by Umgeni Water in each local municipality and metro in gazetted supply area.

Community and Environmental Sustainability

Strategy Outcome

Contribute to National Developmental Agenda

Performance IndicatorStrategic Objectives

iLembe DM

51 of 66 wards (77%)

iLembe DM

50 of 66 wards (76%)

iLembe DM

48 of 66 wards (73%)

iLembe DM

48 of 66 wards (73%)

iLembe DM

48 of 66 wards (73%)

iLembe DM

48 of 66 wards (73%)

Ugu DM

28 of 81 wards (35%)

Ugu DM

25 of 81 wards (31%)

Ugu DM

17 of 81 wards (21%)

Ugu DM

17 of 81 wards (21%)

Ugu DM

17 of 81 wards (21%)

Ugu DM

17 of 81 wards (21%)

Water service coverage:

259 of 375 wards (69%)

Water service coverage:

238 of 375 wards (63%)

Water service coverage:

228 of 375 wards (61%)

Water service coverage:

228 of 375 wards (61%)

Water service coverage:

228 of 375 wards (61%)

Water service coverage:

228 of 375 wards (61%)

Umgungundlovu DM *

75 of 81 wards (93%)

Umgungundlovu DM*

62 of 81 wards (77%)

Umgungundlovu DM *

62 of 81 wards (77%)

Umgungundlovu DM *

62 of 81 wards (77%)

Umgungundlovu DM *

62 of 81 wards (77%)

Umgungundlovu DM *

62 of 81 wards (77%)

Sisonke DM

5 of 47 wards (11%)

Sisonke DM

1 of 47 wards (2%)

Sisonke DM

1 of 47 wards (2%)

Sisonke DM

1 of 47 wards (2%)

Sisonke DM

1 of 47 wards (2%)

Sisonke DM1 of 47 wards (2%)

Msunduzi LM

37 of 37 wards (100%)

Msunduzi LM

37 of 37 wards (100%)

Msunduzi LM

37 of 37 wards (100%)

Msunduzi LM

37 of 37 wards (100%)

Msunduzi LM

37 of 37 wards (100%)

Msunduzi LM

37 of 37 wards (100%)

eThekwini Metro

100 of 100 wards (100%)

eThekwini Metro

100 of 100 wards (100%)

eThekwini Metro

100 of 100 wards (100%)

eThekwini Metro

100 of 100 wards (100%)

eThekwini Metro

100 of 100 wards (100%)

eThekwini Metro

100 of 100 wards (100%)

2011/12 2012/13 2013/2014

Targets for Community and Environmental Sustainability through balanced geographical Service coverage

2010/11 2014/20152009/10

Page 139

The extent to which capital expenditure programmes and other programmes contribute to skills development, job creation, empowerment and capacity building.

Community and Environmental Sustainability

Strategy Outcome

Contribute to National Developmental Agenda

Performance IndicatorStrategic Objectives

Alignment to expanded public works programme.

Alignment to expanded public works programme.

Alignment to expanded public works programme.

Alignment to expanded public works programme.

Alignment to expanded public works programme.

Alignment to expanded public works programme.

Alignment to preferential procurement framework act.

Alignment to preferential procurement framework act.

Alignment to preferential procurement framework act.

Alignment to preferential procurement framework act.

Alignment to preferential procurement framework act.

Alignment to preferential procurement framework act.

2011/12 2012/13 2013/2014

Targets for Community and Environmental Sustainability through the fight against poverty and underdevelopment

2010/11 2014/20152009/10

Page 140

The extent to which Umgeni Water influences timely planning, development and investment in water resources infrastructure

Water Resources Adequacy

Strategy Outcome

Conserve Limited Natural Resources

Performance IndicatorStrategic Objectives

Joint planning sessions with Department of Water Affairs:

Bi-annual

Joint planning sessions with Department of Water Affairs:

Bi-annual

Joint planning sessions with Department of Water Affairs:

Bi-annual

Joint planning sessions with Department of Water Affairs:

Bi-annual

Joint planning sessions with Department of Water Affairs:

Bi-annual

Joint planning sessions with Department of Water Affairs:

Bi-annual

2011/12 2012/13 2013/2014

Targets for Water Resources Adequacy

2010/11 2014/20152009/10

Page 141

The extent to which negative impacts on the natural environment have been mitigated.

Community and Environmental Sustainability

Strategy Outcome

Conserve Limited Natural Resources

Performance IndicatorStrategic Objectives

Environmental sustainability plan developed, implemented and reviewed.

Environmental sustainability plan developed, implemented and reviewed.

Environmental sustainability plan developed, implemented and reviewed.

Environmental sustainability plan developed, implemented and reviewed.

Environmental sustainability plan developed, implemented and reviewed.

Environmental sustainability plan developed and implemented.

2011/12 2012/13 2013/2014

Targets for Community and Environmental Sustainability

2010/11 2014/20152009/10

Page 142

Stakeholder Understanding and Support.

Leadership and Employee Development

Strategy Outcomes

The extent to which corporate performance is aligned to strategy and plans.

The extent of alignment between the business plan and strategy.

The extent of alignment of the strategy to mandate.

The extent to which the operating environment has influenced strategy.Maintain Strategic Effectiveness

Performance IndicatorStrategic Objective

Targets for Stakeholder Understanding and Support and Leadership and Employee Development

2014/20152013/20142012/132011/122010/112009/10

Statutory compliance: Annual Report presentations to stakeholders

Business /Corporate Plan approved

Shareholder’s Compact signed

Quarterly reporting to Executive Authority

Annual review of strategy

Statutory compliance: Annual Report presentations to stakeholders

Business /Corporate Plan approved

Shareholder’s Compact signed

Quarterly reporting to Executive Authority

Annual review of strategy

Statutory compliance: Annual Report presentations to stakeholders

Business /Corporate Plan approved

Shareholder’s Compact signed

Quarterly reporting to Executive Authority

Annual review of strategy

Statutory compliance: Annual Report presentations to stakeholders

Business /Corporate Plan approved

Shareholder’s Compact signed

Quarterly reporting to Executive Authority

Annual review of strategy

Statutory compliance: Annual Report presentations to stakeholders

Business /Corporate Plan approved

Shareholder’s Compact signed

Quarterly reporting to Executive Authority

Annual review of strategy

Statutory compliance: Annual Report presentations to stakeholders

Business /Corporate Plan approved

Shareholder’s Compact signed

Quarterly reporting to Executive Authority

Annual review of strategy

Page 143

Leadership and Employee Development

Strategy Outcome

The extent to which the organisation’s structure is continuously reviewed and aligned to strategy.

Ensure Functional Excellence

Performance IndicatorStrategic Objective

Continuous review of structure and roles of divisions.

Continuous review of structure and roles of divisions.

Continuous review of structure and roles of divisions.

Continuous review of structure and roles of divisions.

Continuous review of structure and roles of divisions.

Continuous review of structure and roles of divisions.

Targets for Leadership and Employee Development

2014/20152013/20142012/132011/122010/112009/10

Interdivisional collaboration.Interdivisional collaboration.Interdivisional collaboration.Interdivisional collaboration. Interdivisional collaboration. Interdivisional collaboration.

Page 144

The extent to which the systems, skills and competencies enable implementation of strategy.

Leadership and Employee Development.

Operational Optimisation.

Operational Resiliency.

Ensure Operational Competence

Strategy Outcomes Performance IndicatorStrategic Objective

Organisational systems in place and are aligned to ISO standards and systems (OHSAS 18001, ISO 9001, ISO 14001).

Organisational systems in place and are aligned to ISO standards and systems (OHSAS 18001, ISO 9001, ISO 14001).

Organisational systems in place and are aligned to ISO standards and systems (OHSAS 18001, ISO 9001, ISO 14001).

Organisational systems in place and are aligned to ISO standards and systems (OHSAS 18001, ISO 9001, ISO 14001).

Organisational systems in place and are aligned to ISO standards and systems (OHSAS 18001, ISO 9001, ISO 14001).

Organisational systems are in place and an integrated management system based on OHSAS 18001, ISO 9001 and ISO 14001 is being developed:

Targets for Leadership and Employee Development, Operational Optimisation and Operational Resiliency

2014/20152013/20142012/132011/122010/112009/10

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The extent to which core and distinctive competencies are enhanced.

The extent to which there is leadership and employee development in place.

Leadership and Employee Development

Operational Resiliency.

Ensure Operational Competence

Strategy Outcomes Performance IndicatorStrategic Objective

Learnerships programme developed.

Learnerships programme developed.

Learnerships programme developed.

Learnerships programme developed.

Learnerships programme developed.

Learnerships programme developed.

Professional and leadership development programmes in place.

Professional and leadership development programmes in place.

Professional and leadership development programmes in place.

Professional and leadership development programmes in place.

Professional and leadership development programmes in place.

Professional and leadership training and development programmes.

Workforce that is competent, motivated, adaptive, and works safely.

Workforce that is competent, motivated, adaptive, and works safely.

Workforce that is competent, motivated, adaptive, and works safely.

Workforce that is competent, motivated, adaptive, and works safely.

Workforce that is competent, motivated, adaptive, and works safely.

Workforce that is competent, motivated, adaptive, and works safely.

Core competencies to deliver on mandate.

Core competencies to deliver on mandate.

Core competencies to deliver on mandate.

Core competencies to deliver on mandate.

Core competencies to deliver on mandate.

Core competencies to deliver on mandate.

Targets for Leadership and Employee Development and Operational Resiliency

2014/20152013/20142012/132011/122010/112009/10