DWA CONSOLIDATED REPORT ON THE PERFORMANCE OF

THE TRANS-CALEDON TUNNEL AUTHORITY (TCTA) AND

THE WATER RESEARCH COMMISSION (WRC)2011/12 FINANCIAL YEAR

Prepared for the Portfolio Committee on Water and Environmental Affairs

23-24 April 2013

PURPOSE

The purpose of this presentation is to provide a strategic overview of the performance of the TCTA and the WRC for the 2011-12 financial year, both from an institutional performance and financial performance perspective

THE SHAREHOLDER MANAGEMENT

3

• Quarterly reporting • Annual Reports• Entities reporting to Portfolio Committee –once a year

Performance Monitoring &

Evaluation

NWRI WB2+1WB2+1

WB 3

WB 3

REPORTING AND GOVERNANCE

CMA 9

CMA 9

CMA 2

CMA 2

CMA 1

CMA 1

Water

board 3

Water

board 3

TCTA TCTA

MinisterMinister

DWAInstitutional

oversight (national &

regional)

DWAInstitutional

oversight (national &

regional)

ParliamentParliament

Public institutions report to the public and Parliament through Annual Reports and to the Department with quarterly performance reports

WRCWRC

Minister appoints boards; approves

shareholder compact

Minister appoints boards; approves

shareholder compact

Portfolio Committee

reviews reports and plans

(hearings, visits)

Portfolio Committee

reviews reports and plans

(hearings, visits)

(1) Oversee institutional establishment;(2) Oversee governance (manage board appointment processes, training etc.); (3) Oversee shareholder compact; (4) Oversee business plans, quarterly performance reports and financial statements etc.

(1) Oversee institutional establishment;(2) Oversee governance (manage board appointment processes, training etc.); (3) Oversee shareholder compact; (4) Oversee business plans, quarterly performance reports and financial statements etc.

279 WUAs &Irrigation Boards

279 WUAs &Irrigation Boards

TCTA STRATEGIC INTENT

• Deliver on all the directives provided by the Minister• Ensure that all project activities facilitate social transformation and build sustainable communities by providing jobs and empowering women, youth and the disabled• Operate the business and its projects and processes in a cost effective manner• Build the knowledge and capability of the organisation• Ensure the continuous availability of high calibre human capital for delivering on the organisational mission into the future

The strategic intent of the TCTA is to assist the shareholder (DWA) to realise national development goals. TCTA’s corporate goals are aligned with the strategic agenda of Government.

The strategic goals for the reporting year were as follows:

PRIMARY PURPOSE OF TCTAThe primary purpose of TCTA is to raise finance and manage the repayment of the debt for each project on behalf of DWA.

DWA cannot do this as a Government Department cannot borrow money

RANGE OF TCTA’S ACTIVITIESTCTA is a multi disciplinary state owned entity specialising in project financing, implementation and liability management.

TCTA’s products and services are as follows:•Project Management and Implementation of bulk raw water infrastructure

• Project design• Project construction• Environmental compliance• Land acquisition• Operation and Maintenance (Outfall tunnel North of LHWP)

•Debt management•Structuring and raising project finance•Knowledge management•Risk management•Operation and maintenance•Socio-economic transformation•Tariff setting

TCTA GOVERNANCE

The Governing Board of the TCTA is appointed by the Minister. The current Board was appointed in August 2010 for a four year term.

As part of the 13 member Board, the Minister appoints two non executive directors, one from DWA and one from National Treasury for the purposes of stakeholder representation.

TCTA’s CURRENT MANDATE AND DIRECTIVES

• Lesotho Highlands Water Project – South Africa portion of the Delivery Tunnel North•Lesotho Highlands Water Project – fulfilling all South African financial obligations to the Government of Lesotho•Advisory services to water management institutions, water boards and DWA• Berg Water Project • Vaal River Eastern Subsystem Augmentation Project• Mooi-Mgeni Transfer Scheme Phase 2• Komati Water Scheme Augmentation Project• Olifants River Water Resource Development Project Phase 2• Mokolo-Crocodile River Water Augmentation Project Phase 1• Metsi Bophelo Borehole Project• Acid Mine Drainage: pump station and neutralisation plant•Refurbishment of Mooi-Mgeni Transfer Scheme – Phase 1

PROGRESS AGAINST MANDATE AND DRIECTIVES

Project Date Received Implementation Status as of 31 March 2012 Next Key Milestones Planned

LHWP 1: Delivery Tunnel North

12 December 1986 Delivering water.In operation and maintenanceDebt Management in accordance with approved strategies

Debt Repayment

2023

LHWP 1: To fulfil all the Republic’s financial obligations in terms of or resulting from the Treaty

3 August 1994 (and incorporated into amended Notice of Establishment 24 March 2000)

Debt Management in accordance with approved strategies

Advisory Services to Water Management Institutions, Water Boards and DWA

Open ended directive Provided services to:DWABloem WaterSedibeng WateruMgungundlovu Municipality

Completed during 2011 -12

Berg Water Project: Dam and Supplementary Pumping Scheme

6 May 2002 Construction complete and handed over to DWA for O & MFinal account to be settled subject to arbitration

Debt Repayment

202831 March 2029

PROGRESS AGAINST MANDATE AND DRIECTIVES

Project Date Received Implementation

Status as of 31 March 2012

Next Key Milestones Planned

Vaal River Eastern Subsystem Project: Pump Station and 131 km pipeline

6 October 2004 System commissioned and delivering waterDefects liability period not commenced on pump stations or pipeline

Handover of Works to DWADebt Repayment

Aug 2012 31 March 2028

Mooi Mgeni Transfer Scheme – Phase 2

29 November 2007

Construction commenced in Feb 2011

ImpoundmentDebt Repayment

Dec 20122034

Olifants River Water Resources Development Project: Pipeline

17 June 2008 (directive revised12 March 2012)

Construction commenced in March 2012

Water Delivery Dec 2013

Komati Water Scheme Augmentation Project: Pump station and Pipeline

29 September 2008

Construction commenced in January 2011

Water DeliveryDebt Repayment

Dec 20122033

PROGRESS AGAINST MANDATE AND DRIECTIVES

Project Date Received Implementation

Status as of 31 March 2012

Next Key Milestones Planned

Mokolo -Crocodile Water Augmentation Project: Pump Station and Pipeline

19 May 2010 Construction commenced in Sept 2011

DebottleneckingWater DeliveryDebt Repayment

Dec 2012Sep 20132033

Metsi Bophelo Borehole Project: Boreholes in 6 Provinces

2 March 2011 Construction commenced in September 2011 and completed the technical works Eastern Cape, Mpumalanga, KwaZulu Natal, North West, and Free State in March 2012.

Boreholes handed over to Water Service Authorities

June 2012

Acid Mine Drainage: Pump Stations and Treatment Plant

6 April 2012 Tender evaluation complete. Award dependent on available funds

Pumping and treatment to prevent breaching of Environmental Critical Level in Central Basin

June 2013

Lesotho Highlands Water Project 2: Funding

Awaiting directive Funding strategy still under discussion and awaiting Government approval

Raising of funding Under negotiation with LHDA/LHWC

FINANCE

PROJECT SURPLUSES AND DEFICITSEach project is accounted for separately.

Throughout the project life-cycle, the projects reflect net surpluses and deficits depending on the phase and repayment profile of the project

At the end of the debt repayment period these balance themselves off to zero

DEBT CURVE ON LHWP

REATIONSHIP WITH WATER TRADING ACCOUNT

The physical assets are recognised in the books of the Water Trading Account as well as the liability for the Water Trading Account to pay tariffs to TCTA

TCTA reflects a financial asset in its books representing the future tariff payments to be received from DWA over the projects debt repayment period

A close working relationship has been forged between TCTA and the Water Trading Account, with tangible strides made in improving customer billing and leverage on expertise

TCTA AS A GOING CONCERN

TCTA is satisfied that given the certainty of cash-inflows from the Department of Water Affairs, that TCTA will have sufficient resources to continue in operational existence for the foreseeable future and for this reason the going concern basis continues to be adopted in preparing the financial statements for the ended 31 March 2012

TCTA BONUSES

NAME POSITION BONUS

R’000

TOTAL SALARY(incl bonus )R’000

J Ndlovu CEO 1 738 5 014

J Nhlapho COO 513 3 179

H Nazeer CFO 415 2 716

L Radzuma CRO 340 2 077

J Claassens Exec: PM 425 2 621

R Matabane Exec: HRM 1 973

C Bleeker Exec: Enterprise Support Services 352 2 015

Z Mbele Exec: Project Finance 399 2 444

L Mnisi Exec: Company Secretary 285 1 781

O Busari Exec: Knowledge Management 395 2 395

TCTA JOB CREATION

PROJECT MMTS-2 ORWRDP-2 KWSAP MCWAP-1 TOTAL S

Unskilled local 173 0 218 111 502

Semi-skilled Africans

263 0 14 59 336

Other (skilled & staff)

42 0 50 52 144

Total 478 0 282 222 982

TCTA: SUMMARY & CONCLUSION

The TCTA is playing an increasing strategic role in the sustainable development and use of raw water resources. Despite the current challenges in its operating macro-economic environment and its multi-project arrangements, the TCTA has reported satisfactory results for the 2011/12 financial year by achieving the majority of its contracted deliverables.

WRC OVERVIEW The WRC derives its mandate from the Water Research Act, Act no 34 of 1971.

In terms of its mandate the WRC is to perform the following functions:

• Promoting co-ordination, co-operation and communication in the area of water research and development• Establishing water research needs and priorities• Simulating and funding water research according to priority• Promoting effective transfer of information and technology• Enhancing knowledge and capacity building within the water sector

WRC STRATEGIC INTENTThe WRC serves as South Africa’s water centred knowledge hub providing the nation with knowledge for sustaining its most precious resource, water.

The WRCs strategy for knowledge creation and its research portfolio is underpinned by its four main key strategic areas (KSAs) these being:

•Water resource management•Water linked ecosystems•Water use and waste management•Water utilisation in agriculture

WRC GOVERNANCE

The Governing Board of the WRC is appointed by the Minister for a four year term and is the Accounting Authority (AA) for the institution in terms of the PFMA.

The Governing Board is constituted of independent non executive members with the exception of the Chief Executive and the Director General of the Department of Water Affairs who serve in an ex officio capacity.

WRC PERFORMANCERevenue 2011/12

During the year under review the WRC continued to leverage levy income by striving to obtain funds from other sources to support water research.

Indicator 2011/12 Budget

2011/12Year-end

ActualLevies as % of total income 86% 83%

Other sources of income as % of total income(rental of facilities & equipment)

14% 17%

Leveraged income as a % of other income *

80% 79%

Income Indicators*Leveraged income includes all other income with the exception of interest

received

WRC PERFORMANCE (continued)

Research Spend (Allocation)

WRC PERFORMANCE (continued)Research Spend (% utilized)

KSA Planned % allocation of funds

% of funds utilised for research projects

Water Resource Management

26 (28) 28 (31)

Water-Linked Ecosystems 14 (13) 17 (20)Water Use and Waste Management

33 (36) 34 (29)

Water Utilisation in Agriculture

27 (23) 21 (20)

The actual % of funds utilised for research projects in each of the KSAs, relative to the allocated funds and is summarised in the table below. (2010/11 data in brackets)

WRC PERFORMANCE (continued)Annual Audit

• The WRC obtained an unqualified audit report of its annual financial statements for 2011/12 financial year.

WRC PERFORMANCE (continued)

Statutory Compliance

The WRC complied with all statutory reporting requirements for the reporting period including:

• strategic plans• business plans• budget• quarterly reports• other relevant statutory submissions

WRC PERFORMANCE (continued)

Research PortfolioDuring the year under review, the WRC managed 322 research projects at various stages of project life cycle, of which about 79% (259 projects) were active projects. In addition 133 reports were published.

Financial Year 2011/12 2010/11

Total No of projects 322 328

No of active projects 258 259

No of new projects 74 77

No of finalised project 96 76

No of solicited projects 101 109

WRC BONUSES

NAME POSITION BONUSES TOTAL INCOME (incl bonuses)

DP Naidoo CEO 0 705 250

R Kfir Former CEO 125 096 820 866

NB Patel CFO 73 306 1 217 155

GR Backeberg Executive Manager 66 526 1 007 286

JN Bhagwan Executive Manager 73 824 1 262 880

E Karar Executive Manager 73 824 1 256 880

R Lutchman Executive Manager 73 113 1 119 807

HG Snyman Executive Manager 73 469 1 109 060

MS Liphadzi Executive Manager 72 682 1 110 311

WRC JOB CREATION

2011/12

506 students on funded projects

6 new appointments at the WRC

WRC ACHIEVEMENTS AGAINST KNOWLEDGE GENERATION INDICATORSObjective Indicators Target

2011/12Achieved2011/12

Improve knowledge on water resource management

To increase the cumulative knowledge by initiating new research projects addressing water management

31 31

To provide the country with supportive knowledge via finalised projects 13 32

To search for new innovative approaches to support water management

2 2

Enhance the knowledge on healthy ecosystems and preserve biodiversity

To increase the cumulative knowledge by initiating new research projects addressing ecosystem health and biodiversity

6 7

To provide the country with supportive knowledge via finalised projects 5 14

To search for new innovative approaches to support ecosystem management

2 3

Objective Indicators Target 2011/12

Achieved2011/12

Improve the knowledge base on water use and waste management, addressing the domestic, mining and industrial use of water

To increase the cumulative knowledge by initiating new research projects addressing water use and waste management

26 30

To provide the country with supportive knowledge via finalised projects 28 38

To search for new innovative approaches to water use and waste management 7 14

Improve the knowledge on productive water utilisation in agriculture

To increase the cumulative knowledge by initiating new research projects addressing productive water utilisation in agriculture

6 6

To provide the country with supportive knowledge via finalised projects 12 12

To search for new innovative approaches to support productive utilisation of water in agriculture

3 3

WRC ACHIEVEMENTS AGAINST KNOWLEDGE GENERATION INDICATORS (cont)

Objective Indicators Target 2011/12

Achieved2011/12

Improve knowledge dissemination

To enhance public understanding of water research (measured as volumes/cumulative number of issues of The Water Wheel) 6 6

To cumulatively increase the numbers of technical and policy briefs 30 36

To improve the dissemination of water research (measured as volumes/cumulative number of issues of Water SA)

4 5

To engage the sector in knowledge-sharing events (number of workshops)

20 21

Enhance research capacity To increase the number (cumulative) of students supported by research projects 400 506

WRC ACHIEVEMENTS AGAINST KNOWLEDGE DISSEMINATION AND CAPACITY BUILDING INDICATORS

Objective Indicators Target 2011/12 Achieved 2011/12

Improved financial performance

Maintain income growth (income growth is measured as meeting the budgetary target of 10% of income)

Meet budget target in full

13% achieved

Maintain high level of research ratio (measured as research funding and support as percentage of total income)

74% (revised budget)

75% achieved

Improve cash-flow management (measured against availability of cash for effective operation)

R25 m. More than R25 m. cash available – achieved R90 m., which is i.r.o. research project commitments

Enhance effective financial management

Improve quality budget planning and reporting (measured as the percentage deviation between actual and budget at year-end)

10% 6% achieved

Improve response to audit results (measured as a percentage of the previous year’s internal audit queries addressed and an unqualified vs. qualified external audit)

70% (internal audit)Unqualified report (external audit)

87.5% achieved (62.5% fully; 25% partially)

Decrease roll-over of research funds (measured as the deviation from the budgetary figure for roll-over of research project funds)

20% 8% roll-over achieved

WRC ACHIEVEMENTS AGAINST FINANCIAL INDICATORS

Objective Indicators Target 2011/12 Achieved2011/12

Improve the system for fund management

To expand Fund Management System to include short-term projects

To conduct a pilot consisting of 10% of short-term projects

Pilot fully implemented

Improve stakeholder relationships

Enhance WRC relationship with the research community (number of WRC 101 courses)

2 4

Improve human resource management

Improve equity (measured by percentage of new appointments being EE)

90% of new appointments are EE

83%

Enhance staff skills by training (measured against in-house and external training courses (cumulative))

2 in-house training courses 5 external training courses

3 in-house, 12 external training courses completed

WRC ACHIEVEMENTS AGAINST SUPPORT SYSTEMS & PROCESSES INDICATORS

WRC: SUMMARY & CONCLUSION

The Commission is a unique, valuable and strategic research entity that plays an important role in the water sector and water research by establishing needs and priorities, stimulating and funding research, promoting the transfer of information and technology and enhancing knowledge and capacity building in the water sector. The Commission has reported satisfactory results for the 2011/12 financial year.

THANK YOU !!!!