MHLATHUZE WATER BOARD 1. GRAPHICAL AREA OF SUPPLY 2

MHLATHUZE WATER BOARD

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GRAPHICAL AREA OF SUPPLY

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OVERVIEW OF THE WATER BOARD

Mhlathuze Water (MW) area of supply covers some 37,000km² stretching from uThukela River in the south and up to East Coast to Mozambique and Swaziland borders, around Vryheid and back to the uThukela River.

MW operational area covers 4 WSA’s in KZN: uMkhanyakude District Municipality Zululand District Municipality uThungulu District Municipality uMhlathuze Local Municipality

Supply Bulk Water and Sanitation services to Industries & Water Services Authorities in its area of operation

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SHC 2014/2015

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Performance Objective

Outcomes/Impact

Indicators Measure Target2014/15

Actual 14/15

Comments/Corrective Action

1. Water Quality

Compliance

Water quality standards met

Test results, SANS 241

% compliance Risk-defined health - ≥95% Risk-defined operational - ≥93% Accute Health - 1 Micro - ≥97% Accute Health - 1 Chem - ≥97% Chronic Health - ≥95% Aesthetic - ≥93%

100% 99.7%100%100% 100% 100%

Target exceeded.Target exceeded.Target exceeded.Target exceeded.Target exceeded.Target exceeded.

2. Non-Revenue Water

Reduced levels of unaccounted for water (UAW)

Water lost as a % of total water produced

% <5% 1.82% Target met.

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

% <1% 0% Target met.

4. Financial Reporting Compliance

unqualified audit report

Annual external audit

Qualified/Unqualified

Unqualified Audit Opinion Unqualified (Clean Audit)

Target met

5. Staff Turnover

Optimal staff retention

% staff leaving % 8%(2% is the quarterly target)

5.26% Target exceeded.

6. Board Member Attendance

Improved performance of fiduciary duties/governance

Annual attendance

% 80% 81.8% Target met.

SHC 2014/2015 continue

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Outcomes/Impact


Actual 14/15


7.Effective Internal Controls And Risk Management

No repeat or unresolved findings

Internal audit reports

Number repeats No repeats findings

No repeats findings

Target met

Number unresolved

No unresolved findings

No unresolved findings

Target met

8. Bulk Supply Agreements Concluded With Municipalities/ Other Customers

Statutory and service level agreements in place

Municipalities/other customers with bulk supply agreements

% 100% 100% Target met.

9. Improve Financial Ratios

Improved viability and sustainability

Financial ratios

Liquidity 1.60 1.88 Target exceeded

Gross profit margin % (Primary Activities)

84% 84% Target met.

Gross profit margin % (Secondary activity)

11.8% 20.60% Target exceeded

Net profit margin % (primary activity) 14% 21.6% Target exceeded

Debt/ Equity ratio 0.47 0.45 Target metReturn on assets % 8.2% 9.00% Target exceeded

Debtors days # 45 days 34.98 Target exceeded


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Outcomes/Impact


Actual 14/15


10. Increase BBBEE Spend

Spend increased and increased new entrants

% of spend increased and # of increased new entrants

% increase Maintain above 51% of discretionary spend

60% Target exceeded

# new entrants

20 new entrants 98 Target exceeded

11. Manage Costs Within The Approved Budget

No over expenditure/losses

Financial reports % variance 5% (over/under budget) 2% over budget

Within target

12. Capital Expenditure

Infrastructure available to meet demands

Overall project expenditure within R target

% variance 75% spent

84.79% Target met.

Overall project completion dates within targets

% variance 80%(20% quarterly target)

90% Target exceeded.

13. Increased access to Services

Contribution to national objectives

No. of new projects

No. of new projectsDOE & DBE

DWS

DEA

144 (based on the number of schools)

15

3

76 DOE

15

3

Target not met.39 DOE projects were cancelled due to the fact that the budget was retracted by DOE. Target met.

Target met.


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Outcomes/Impact


Actual 14/15


14. Engagement in Secondary Activities

Extent of involvement

% of total turnover

% of total turnover

63% 61% Target not met due to the external work that was suspended by DOE.

15. Achieve Statutory Reporting Compliance

Reporting compliance achieved

Statutory submissions made on time

Submission dates met/missed

Submission dates met

3rd Quarterly Report submitted on 14 May 2015 (deadline 15 May 2015).Business Plan and Shareholder Compact submitted on 28 May 2015 (deadline 31 May 2015).

Target met.

16. Jobs Created Permanent and contract (direct)

Total Number of jobs created

Number

5

118 Target exceeded.(Due to the transfer of CoU Staff)

Temporary (indirect)

Total Number Number 500(quarterly

target is 125)

768 Target exceeded.

17. Corporate Social Responsibility Initiatives

Good corporate citizenship

Number of initiatives

Number and and value

At least 9 initiatives for

R1.2 m 14 initiatives to the value of R1 145 564

Target exceeded.

18. Training And Skills Development

Skills and capacity building

Training courses, learner-ships, bursaries

Total Number of training, learnership and bursaries

108(quarterly

target is 27)

118 Target exceeded.

Financial Performance 2014/2015 Bulk water volumes increased by 21% mainly due to the increase in

raw water volumes. (RBM and City of uMhlathuze (Esikhaleni) and the increase in potable water supply to the City of uMhlathuze for Richards Bay.

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Financial Performance 2014/2015 Although the tariffs for the all the schemes shows a downward

trend for the past five years, revenue increased overall by 44% generated from better than expected bulk water volume sales. This resulted from the drought situation in KwaZulu Natal, whereby Mhlathuze Water was in a position to supply the City of uMhlathuze with water from the Mhlathuze River and Nsezi Water Treatment Plant.

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Financial Performance 2014/2015 Mhlathuze Water has maintained strong operating surpluses.

Overall, the surplus for the year of R89,9 million (2014: R79,1m) reflects an increase of 14% from the previous year.

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CAPITAL EXPENDITURE 2014/2015 Capital expenditure increase by 9% from the previous year. The three major projects that contributed to the increase are:

– Nsezi Balancing Reservoir (20ML) - R17 million– City of uMhlathuze Pump upgrade - R56 million– Re-route B-line to C-line - R12 million

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Audit Opinion 2014/2015 KPMG Inc. were appointed for the 2014/2015

financial year audit. Annual financial statements were prepared in

accordance with SA GAAP, the relevant provisions of Water Services Act in a manner required by PFMA.

MW received a Unqualified (Clean) Audit Opinion for the 2014/2015 year.

All internal controls were considered as relevant.

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1st Quarter 2015/2016Performance on Key Strategic Objectives:

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Outcome/ Impact

Indicators/ Calculation

Measure Performance Targets CommentsTarget

2015/16Target

Quarter 1

Actual Quarter

1

Variance

1 Bulk potable water quality

compliance

Water quality standards met

Test results, SANS 241

Class 1:Class 2:

% compliance 95% 95% 100% 5% Target exceeded

2 Manage avoidable

water losses

Reduced avoidable water

losses in treatment and

distribution systems

Avoidable water lost as a percentage of water produced

% <5% <5% 3.80% -1.2% Target met

3 Reliability of supply

No unplanned interruptions to

bulk supply exceeding 24

hours

Number of days supply interrupted as a % of possible

supply days

% <1% <1% 0% 1% Target exceeded

4 Increased access to Services

Contribution to national

objectives of extending services

Actual CAPEX spend on expansion

related projects (initiatives by the Minister) as % of

budget

% 80% 20% 17% -3% Target not met.

Performance on Key Strategic Objectives:

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Outcome/ Impact

Indicators/ Calculation


2015/16Target

Quarter 1

Actual Quarter

1

Variance

5 Financial reporting compliance

Unqualified audit report

Annual external audit Unqualified report with no matters of emphasis (Clean Audit)

Unqualified report with no

matters of emphasis

(Clean Audit)

N/A N/A N/A Annual Target

6 Improve key financial ratios

Improved viability and sustainability

Current Ratio Ratio 1.60 1.59 1.95 0.36 Target exceededGross profit margin % (primary activity)

% 78% 79% 85% 6% Target exceeded

Gross profit margin % (secondary activity)


Net profit margin (primary activity)

% 13% 14% 24% 10% Target exceeded mainly due to savings on other operating expenses

Net profit margin (secondary activity)

% 1% 1% -1% -2% Target not met, mainly due to IA fees o/s from DWS due to VAT issue - resolved in Sep, expect payment in Oct. Delay in payment on RBIG projects.

Debt equity % 0.37% 0.37% 0.44% -0.07% Target not met, expected to improve when capital payments are due in Nov, Dec, May and June.

Return on Assets Ratio 7% 7% 9% 2% Target exceeded

Debtors days Number 45days 42 days 38 days 4 days Target exceeded

Repairs and maintenance as % of PPE and

% 3% 0.75% 0.33% -0.42% Target - 1.5% of maintenance cost against the PPE value of R658 million is expected to be spend at end of Dec 2015.

Staff remuneration as % of total operating expenditure

% 13% 12% 13% 1% Target met


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Performance Objective Outcome/ Impact Indicators/ Calculation

Measure Performance Targets CommentsTarget 2015/1

6

Target Quarter

1

Actual Quarter

1

Variance

7 Increase BBBEE expenditure in relation to operational projects

Spend increased and increased new entrants awarded contracts in the financial year

Spend % achieved 51% 51% 81% 30% Target exceeded

8 Manage costs within the approved budget

Actual expenditure compared with budgeted epxenditure for the quarter

Financial reports % increase 5% 5% 4% -1% Within target - increase in energy cost, more pumping is required due to drought in the KZN area.

9 Capital expenditure programme

Infrastructure available to meet demands

Overall project expenditure within R target

% variance 80% 20% 14% 6% Target not met, expenditure is expected to improve in the 2nd quarter, as a lot of projects are in progress.

Overall project completion dates within targets

% variance 85% 21% 30% 11% Target exceeded.

10 Engagement in secondary activities

Growth in turnover from secondary (other activities)

% of total turnover


11 Bulk supply agreements concluded with municipalities/other customers

Statutory and Service Level Agreements in place

Municipalities/Other Customers with bulk supply agreements

% 100% N/A N/A N/A Annual Target


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Outcome/ Impact Indicators/ Calculation


2015/16Target

Quarter 1

Actual Quarter

1

Variance

12 Implementation of Ministerial directives

New Ministerial directives issued are implemented on time

Progress against implementation plan

% 80% N/A N/A N/A Annual Target

13 Support Rural Development Total Number of

identified rural Municipalities supported

Signed contracts, MOUs etc

Number 2 N/A 1 1 Target met

14 Achieve statutory reporting compliance

All statutory reports submitted on time

Submission dates met

% 100% 100% 100% 0% Target met.

15 Staff levels Optimal staff retention

Staff turnover % 8% 2% 0.37% 1.30% Target met.

16 Training and Skills Development

Skills and capacity building

Learnerships Number 12 3 11 8 Target exceeded

Bursaries employees

Number 25 6 7 1 Target exceeded

Graduate Programmes

Number 4 1 2 1 Target exceeded


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Measure Performance Targets Comments

Target 2015/16

Target Quarter

1

Actual Quarter

1

Variance

17 Jobs Created Permanent and contract (direct)

Total number Number 5 1.25 1.00 (0.25) Target not met

Temporary (indirect)

Total number Number 200 50 135 85 Target exceeded.

18 Board Effectiveness

Improved performance of fiduciary duties/governance

Board Member attendance of all Board/committee meetings

% 80% 80% 63.6% -16.4% Target not met.

Decision making: % number resolutions taken by the board vs number of resolutions required

% 80% 80% 84.6% 4.6% Target exceeded

19 Effective Internal Controls and Risk Management

Internal audit findings dealt with

Internal audit reports Number of repeat findings

3 N/A N/A

N/A

Q1 audit is scheduled to start on 02 November 2015

Number of unresolved findings

3 N/A N/A N/A

Q1 audit is scheduled to start on 02 November 2015


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Measure Performance Targets

Comments

Target 2015/16

Target Quarter

1

Actual Quarter

1

Variance

20 Good Governance

Improved controls and risk mitigation

Breaches of materiality and significance framework

Number <5 N/A N/A N/A Annual Target

21 Corporate Social Responsibility Initiatives

Good corporate citizenship

Number of initiatives undertaken

Number 5 1.25 1 0 Target not met. Four initiatives approved in the 1st quarter to be implemented in the 2nd quarter.

22 Health and safety within working environment

Reduced number of disabling injuries

Reduced number of disabling injuries

Number 1.75 0.38 1.37 Within target

External Project-CAPEXJozini bulk supply

Project budget summary Approved budget

R2,074billion R980million - Bulk Only (DWS)

R74million – Reticulation Only (COGTA)

Non-approved Budget

R1,02billion (Reticulation. Zone 6 - 12)

Expenditure to date

R752million

Project Progress

Bulk Pipelines, reservoirs and pump stations 74% Complete

Reticulation (No more funding approved) 30% Complete

Current financial year 2015/16

Budget: R290 million

Expenditure: R142,7 million (End Sept 2015)

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Hluhluwe Bulk Water Supply

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Project budget summary

R96million

Approved budget

R96million - Bulk Only (DWS)

Expenditure to date

R160million(Actual cost of works)

Additional R22million approved for the next Phase, but allocation not yet received from DWS.

Project Progress – Phase 4

Bulk Pipelines, reservoirs and reticulation - 98% Complete

Dukuduku Resettlement - Water Supply

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R143million

Approved budget


Expenditure to date

R136million

Project Progress



Budget: R15 million

Expenditure: R10 million (End Sept 2015)

Hlabisa - Bulk Water Supply

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R205million

Approved budget


Expenditure to date

R197million

Project Progress



Budget: R8 million

Expenditure: R3 million (End Sept 2015)

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Presentation to the DWS – 2015 first quarter report

Where do we derive our mandate

Section 29

Section 29

Section 30

Section 30

Magalies Water Strategy

Magalies Water Strategy

Vision, Mission, Core Strategy, values

Water Services Authorities being served

Municipality ProvinceMoses Kotane Local Municipality North WestRustenburg Local Municipality North WestThabazimbi Local Municipality LimpopoBela Bela Local Municipality LimpopoModimolle Local Municipality LimpopoCity of Tshwane Metropolitan Municipality Gauteng

April 2014

Bulk Water Services Infrastructure

April 2014

Name Design Capacity (ML/day)

Pipeline length (km)

Reservoir storage capacity

(ML/day)Vaalkop WTP 240 544 271Klipdrift WTP 18 150 1Cullinan WTP 16 10 10Wallmannsthal WTP 12 36 32Total 286 740 314

Where do we serve the Water Services Authorities

April 2014

Municipality Vaalkop Klipdrift Wallmannsthal CullinanMoses Kotane Local Municipality X Rustenburg Local Municipality X Thabazimbi Local Municipality X City of Tshwane Metropolitan Municipality

X X X

Modimolle Local Municipality X Bela Bela Local Municipality X

Map of Supply Area

April 2014

Strategic Trajectory

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F F

F

F

A

B

ED

DC

GG

G

H

B H H

Part A: Northern part of Rustenburg LM including RBA (PWS SOUTH)Part B: Southern parts of Kgetlengrivier LM, with possible extensions to Groot Marico and Zeerust (PWS SOUTH)Part C: Mankwe region of Moses Kotane LM (PWS NORTH)Part D: Madikwe region of Moses Kotane LM (PWS NORTH)Part E: North eastern Moses Kotane LM and part of Thabazimbi LM (PWS NORTH)Part F: Moretele North, Madibeng North, Bela Bela, Modimolle, Mokgoopong, Dr JS Moroka (KLIPVOOR)Part G: Brits, Hartbeespoort and southern parts of Madibeng LM (Mining Belt)Part H: Supply to CoT via Klipdrift, Wallmannsthaal & Cullinan System

Business Growth through capital expansions with area of supply coverage

Performance for the quarter

Item (R'000) Annual budgetActual-September 2015

Budget-September 2015

Revenue 486 624 107 758 110 245 Total expenditure 402 548 81 247 91 706 Capital expenditure 1 012 619 125 000 275 000


Target 2015/16

Target Quarter ended 30 September 2015

Actual Quarter ended 30 September 2015

Variance

Bulk potable water quality compliance

Acute health 1-100%Chronic health-97%Operational parameters-95%Aesthetic parameters-95%

Acute health 1-100%Chronic health-97%Operational parameters-95%Aesthetic parameters-95%

Acute health 1-98.5%Chronic health-98.5%Operational parameters-91.9%Aesthetic parameters-95%

Acute health 1-(1.5%)Chronic health-1.5%Operational parameters-(3.1%)Aesthetic parameters-0%

Manage avoidable water losses

5% 5% 7% 2% Average plant and distribution losses are in excess of the target due to the high losses experienced at the Klipdrift Plant. This is due to non-recycling of backwash water and this process will be enhanced during the plant upgrades.

Reliability of supply 0% 0% 0% 0%

Increased access to Services

100% 25% 35% 10%

Performance Targets Comments

Organisational Effeciency and Effectiveness

Performance Perspective



Target 2015/16



Variance

Finance 2 2 3 117% 17% 25% 8%

Not applicable Not applicable Not applicable Not applicable

23% 23% 19% -4%

Not applicable Not applicable Not applicable Not applicable Magalies Water does not operate Section 30 business as a trading activity.

33% 0% 0% 0% Financial leverage has not been utilised to fund capital expansions. The process to develop a funding plan for capital expansions is still being developed to determine the most appropriate funding mix and capital structure.

11% 11% 5% -6%50 days 50 days 47 days 3 days5.30% 5.30% 0.11% -5.19

33% 33% 28.30% 4.7%


Improve key financial ratios




Target 2015/16



Variance

Finance 30% 30% 0% -30% Most of the contracts will be awarded in the second quarter as procurements processes took effect during the first quarter.

20 5 0 0

Manage costs within the approved budget

5% 5% 11% 6%

100% 25% 12% -13% Projects delayed mainly due to community unrests in the Walmannsthal area. Court interdicts have been obtained to deal with elements that were disruptive to the construction process. Some of the projects were still in procurement phase and will be awarded in the second quarter. The Projects Management and Supply Chain Management Units have been enhanced for projects implementation.

92% 92% 70% -22%

Engagement in secondary activities

2.50% 3% 3% 0%


Increase BBBEE expenditure in relation to operational projects

Capital expenditure programme




Target 2015/16



Variance

Staff levels 3% 3% 0.3% 2.7%

20 20 20 010 10 10 010 10 10 0

24 6 7 1

500 125 259 134

Performance Targets CommentsPerformance Perspective


Organisational Capacity

Training and Skills Development

Jobs Created


Target 2015/16



Variance

100% N/A N/A N/A Annual Target

100% N/A N/A N/A Annual Target

0 0 0 0

0 0 0 0

Good Governance 0 0 0 0 There were no breaches to the Materiality and Significance Framework.

Corporate Social Responsibility Initiatives

4 0 0 0 Corporate Social Investments intiatives will be implemented from the second quarter. The needs of Municipalities have been submitted and CSI is implemented on a needs basis.

Internal Audit activities for the year are yet to commence. The rolling 3 year internal audit plan will be submitted to the Audit Committee this quarter.

Performance Targets CommentsPerformance Perspective


Board EffectivenessGeneral Performance

Effective Internal Controls and Risk Management

Thank you

Documents

MHLATHUZE WATER BOARD 1. GRAPHICAL AREA OF SUPPLY 2