BOTSHELO WATER Improving the quality of life of communities

Tariff adjustments2010 – 20115th May 2010

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Contents1. Overview2. Raw water Tariffs3. Challenges during consultation4. Achievements.5. Viability of Botshelo Water6. The impact of tariff increases on end

users

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1. Overview Botshelo Water abstracts water from different sources,

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

Botshelo proposed a tariff of R 3.80, a 16% increase on the proposed tariff for 2009 – 2919 due mainly to electricity, maintenance, security and chemical increases.

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2. Raw Water Tariffs

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

BW incurs a charge of R 1.667 (No increase on last year’s tariff) per kilo litre at the major plants of Mafikeng and Mmabatho. This is perceived by Botshelo Water to be high compared to other similar Water Boards.

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3. Challenges during consultationWe held a consultative meeting with our 3 bulk

clients, Mafikeng Local Municipality, Ngaka Modiri District Municipality and Ditsobotla Local Municipality on 30th November 2009.

BW also invited SALGA, DWA to attend to meeting.All three of our major clients mentioned above

attended the consultative meeting.DWA was represented by 3 officials. SALGA did not

attend or apologise, but did comment on our proposed tariff.

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

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4. Achievements

Despite all the problems in the past, Botshelo Water has been able to function and avoid disestablishment with the revised 2009/2010 tariff of R 3.27 and budgets were modified accordingly.

The proposed tariff of R 3.80 will be enable BW to fulfill its functions, obligations and duties and ensure security of all the plants and that water resources will be sustainable.

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5. Viability of Botshelo Water

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

Year Tariff + VAT = Total (Final agreed)

2005/2006 R 2.14 + 0.30 = R 2.44 (R 2.44) 2006/2007 R 2.14 + 0.30 = R 2.44 (R 2.44) 2007/2008 R 2.66 + 0.37 = R 3.03 (R 2.58) 2008/2009 R 2.66 + 0.37 = R 3.03 (R 2.58) 2009/2010 R 3.27 + 0.46 = R 3.73 (R 3.14

[5%]) 2010/2011 R 3.80 + 0.53 = R 4.33 (R 4.33)

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5. Viability of Botshelo WaterContinued

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

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

Description 2009/2010 2009/2010 Increase

Cost of Raw water 1.576 1.667 5%

Employee costs 0.465 0.521 12%

Chemicals/Electricity/Transport 0.257 0.453 76%

Security 0.050 0.095 90%

Maintenance and Repairs 0.261 0.404 55%

Overheads 0.658 0.662 0.5%

Total 3.27 + VAT 3.80 + VAT 16%

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

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

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

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

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

7. Impact on the end users

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

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

Larger consumers, where the top price of water is fixed at over R 7.00 will incur an increase of R 0.53 per kl an increase of 8% 11

7. Impact on the end users continued….

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

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