1 Presentation to the Portfolio Committee on Home Affairs 13 October 2010.
Presentation to the Portfolio committee of Water and Environmental Affairs
description
Transcript of Presentation to the Portfolio committee of Water and Environmental Affairs
Presentation to the Portfolio committee of Water and Environmental Affairs
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BUSHBUCKRIDGE WATER
ANNUAL REPORT FOR 2009/10
TARIFF 2011/12
AND
STRATEGY 2011/12
BACKGROUND Established in 1997 by the Minister of Water Affairs and Forestry in accordance with the
Water Services Act.Mandated to provide water services to other water service institutions.Area of operation include the BLM and part of the Nsikazi area in MLM.Legislative imperatives include corporate governance, PFMA, MFMA, WSA, NWA.
Area Ml/day Population Bushbuckridge Local Municipality Area (BL1) (8 PWTW) 96 700 000Mbombela Local Municipality Area (MLM) (6 PWTW) 71 500 000
( MLM) (1WWTW) 3.5
BOARD OF DIRECTOR
The term of the current board of directors is from February 1, 2010 – March 31, 2014. There was overlap in terms of office of BoDs. The board comprises 9 members, namely:
Term ended 0 Feb 2010 Appointed – 02 Feb 2010
Ms. TP. Nyakane – Maluka (Chairperson) Mr. P Ngomana (Chairperson)
Rev. R. Ngomane (Deputy Chairperson) Adv. G Khoza (Deputy Chairperson)
Mr. C. Phiri Adv. H Mbatha
Mr. BL. Mavuso (resigned 06 March 2009) Ms. C Van Rensburg (CA. SA)
Ms. N. Kubayi Ms. C Makwela
Mr. N. Nxumalo (resigned October 2009) Ms. S Khoza
Mr. M. Makhweyane Rev. R Ngomane
Ms. B. Ngobeni (resigned 20 March 2009) Mr. M Vilakazi
Mr. C Padayachee
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BACKGROUND….CONT SERVICE
AREA
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MISSION, VISION, & VALUES Page 1
MISSION
BW strives to provide sustainable water and sanitation services, contributes to water resource management and provide service through optimal utilisation of appropriate resource to enhance socio-economic development
VISIONTo be the best public water service utility
VALUES Customer first Investment in human resources Accountability and transparency Service Excellence Sound financial responsibility Environmental stewardship Social responsibility
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MAJOR ACHIEVEMENTS
& CHALLENGES
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Achievements 95% implementation of the Minister’s directives w.r.t. first phase Reviewed the corporate governance policies and board charter in line with the King
III best practices; Increase revenue on sale of potable water and management contract by 11% and
13% respectively but still faced challenges with full cost recovery; Increased profitability on the Nsikazi Project (Management contract) by R900 000
from –R10 000 loss but the payments were three months in arrears at the end of financial year;
Increased the potable water supply by 6% Increased monthly payment of invoices by 40% (R3Million to R5Million per month)
62% payment of monthly invoices Complied with the requirement of SANS 241 as amended in terms of drinking water
quality Achieved transformation and corporate citizenship targets through:-
Supported economic growth policy objectives on BBBEE discretional use by 71% purchases of goods and services from BBBEE companies or entities;
Contributed to national government targets for skills development through employment of temporary employees, leanership and internships.
Challenges
-Debt recovery •Bushbuckridge Local Municipality R128M•Disestablished Bohlabela District Municipality R 26M
-Lack of Long term Service Level Agreements• Currently operating on short term contracts at MLM and BLM
- Infrastructure challenges•Transfer of assets (DWA)•Aged and inadequate infrastructure
-Risk of technical insolvency•going concern •Debt recovery•Cash flow constrains
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NON FINANCIAL PERFORMANCE
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SUMMARY OF NON FINANCIAL PERFORMANCE Pages 48-52
Goal 1: Exploring and exploiting strategic ways for organisational financial sustainability & business development
Achieved organisational stability; Strengthened the organisational capacity by filling critical
vacancies; increasing efforts in the areas of training and staff development
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SUMMARY OF NONFINANCIAL PERFORMANCE
Goal 1: Cont.... The Minister appointed a new Board. Improved good governance by ensuring that compliance with
relevant legislations was observed; Increased organisational visibility by improving relations with
stakeholders; Increased BBBEE discretional spending; Improved relationship with the organised labour.
Setting up processes to improve debt collection
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SUMMARY OF NONFINANCIAL PERFORMANCE ...CONT
Goal 2: Promote institutional relations
Undertaken programmes on water conservation and demand management
Implementing the corporate social responsibility programmes by donating jojo tanks to the communities and other NGO’s, and donated soccer boots to various schools.
Improved stakeholders relations;
Goal 3: Providing sustainable water and sanitation services
Increased the volume of portable water by 10% in the BLM area and decrease of 5% in the MLM area
Complied with water quality standards (SANS 241)
Other Reportable Performance Area
• Finalised the case of the suspended Chief Executive• Reviewed the governance structures• Reviewed the corporate governance policy (Board charters and
committee terms of references
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FINANCIAL PERFORMANCE
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SUMMARY OF FINANCIAL PERFORMANCE
Volume of water sold
2010 2009
25,694,187
24,149,817
R3.07 R2.94
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SUMMARY OF FINANCIAL PERFORMANCE
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INDEPENDENT AUDITORS REPORT
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SUMMARY OF THE INDEPENDENT AUDITOR’S REPORT
Independent Auditors: Stabilis Inc BW received a qualified Audit report with emphasis on the following matters:
Basis of qualificationTrade Receivables Valuation –The trade received on
outstanding debt of R167,630,525 and R 26,478,120 owed by BLM and BDM respectively is R0.00. Provision of doubtful debts on the outstanding debt is R 82,399,855
Emphasis of Matter Payments of invoices by BLM-the existence of material
uncertainty which may cast doubt inability to continue with the business
Fixed Assets transferred during 1999/2000 without transferring ownership ( Non Compliance with section 73(2)(a) of WSA)
Forensic audit report - R644,654 not yet recoveredExceeded borrowing limits by R196 000 16
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INPUT COST OF BULK WATER
RAW WATER RAW WATER CHARGESCHARGES
COST OF RAW WATER SUPPLIED FROM DWAFCOST OF RAW WATER SUPPLIED FROM DWAF
DIRECT STAFF & DIRECT STAFF & LABOUR COSTLABOUR COST
ALL DIRECT COST OF STAFF WHO ARE ALL DIRECT COST OF STAFF WHO ARE RESPONSIBLE FOR O&M OF SCHEMES & PLANT RESPONSIBLE FOR O&M OF SCHEMES & PLANT
DIRECT ENERGY DIRECT ENERGY COSTCOST
ESKOM CHARGES FOR BOTH FACILITY & USAGE ESKOM CHARGES FOR BOTH FACILITY & USAGE FOR PUMPING, PURIFICATION & PLANT FOR PUMPING, PURIFICATION & PLANT LIGHTINGLIGHTING
CHEMICALSCHEMICALS FULL COST OF CHEMICALS USED FOR DOZING FULL COST OF CHEMICALS USED FOR DOZING OF WATEROF WATER
MAINTENANCEMAINTENANCE COST OF ROUTINE MAINTENANCE OF PLANT & COST OF ROUTINE MAINTENANCE OF PLANT & EQUIPMENTEQUIPMENT
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INPUT COST OF BULK WATERREFURBISHMENTREFURBISHMENT COST OF SUBSTANTIAL REPAIR OR COST OF SUBSTANTIAL REPAIR OR
REPLACEMENT OF PLANT & EQUIPMENT WHICH REPLACEMENT OF PLANT & EQUIPMENT WHICH DOES NOT FORM PART OF ROUTINE DOES NOT FORM PART OF ROUTINE MAINTENANCEMAINTENANCE
OVERHEAD OVERHEAD ALLOCATIONALLOCATION
PORTION OF HEAD OFFICE AND OTHER PORTION OF HEAD OFFICE AND OTHER INDIRECT COSTS ALLOCATED TO EACH INDIRECT COSTS ALLOCATED TO EACH SCHEMESCHEME
The following financial assumptions were considered:
ASSUMPTION
ActualBudg
etProjected
09/10 10/1111/1
212/1
313/14
14/15
CPI 6.9% 6.0% 5.7% 5.4% 5.6% 6.0%Salaries and wages
10.9% 10.0% 9.5% 8.5% 9.0% 9.5%
Interest rate 10.3% 10.0% 8.5% 9.0% 11.0%11.5%
Energy cost 31.3% 24.8%25.2%
26.1%
7.3% 7.5%
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NORMS FOR BULK POTABLE WATER TARIFFS
Water boards May set a single tariff for its whole supply area. May set a separate tariff for each scheme or each
water treatment plant – motivated by differentials in the cost of supplying to different customers.
The subsidization or cross subsidization of free basic water is a municipal concern and not within the capability of water boards.
Tariff increases may be smoothed out over time to take into consideration projected future infrastructure development costs.
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TARRIF STRUCTURE
35 373 975m3/year35 373 975m3/year AmountAmount %% Amount p/mAmount p/m
Raw Water (vc)Raw Water (vc) 6 336 9696 336 969 4.844.84 528 058528 058
Electricity (vc)Electricity (vc) 12 568 83212 568 832 9.609.60 1 047 4031 047 403
Maintenance (vc)Maintenance (vc) 15 793 10015 793 100 12.0612.06 1 316 0921 316 092
Chemicals (vc)Chemicals (vc) 8 850 0008 850 000 6.766.76 737 500737 500
Refurbishment (vc)Refurbishment (vc) 10 058 00010 058 000 7.687.68 838 167838 167
Capex (vc)Capex (vc) 14 917 00014 917 000 11.3911.39 1 243 0831 243 083
Salaries (fc)Salaries (fc) 40 630 09240 630 092 31.0431.04 3 385 8413 385 841
Administration cost (fc)Administration cost (fc) 21 760 897 21 760 897 16.6216.62 1 813 4081 813 408
TOTALTOTAL 130 914 617130 914 617 100100 10 909 55110 909 551
Cost structureCost structureKeys = VC: Variable costKeys = VC: Variable cost
= FC: Fixed cost= FC: Fixed cost
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TARRIF APPORTIONMENT
Variable Cost ComponentVariable Cost Component R1.94R1.94(Raw water, Electricity, Chemicals, Maintenance)(Raw water, Electricity, Chemicals, Maintenance) Fixed Cost ComponentFixed Cost Component R1.76R1.76(Salaries and Admin Cost)(Salaries and Admin Cost)
Tariff for 2011/2012Tariff for 2011/2012 R3.70R3.70
NBNB ** = Proposed tariff review, due to upgrading of = Proposed tariff review, due to upgrading of certain water certain water worksworks
Average for year ending 30 June
Actual
Projected
10/11 11/12 12/13 13/14 14/15
Bulk Water Tariff
DWA 1.48 1.64 1.79 1.95 2.13
Bulk Potable Water Tariff
BWB 3.45 3.70 * 3.90 * 4.02 * 4.02
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TARRIF STRUCTURE
M3/yearM3/year M3/dayM3/day
Total Water ConsumptionTotal Water Consumption 35 373 97535 373 975 96 91596 915
Total water consumption is based on an average water Total water consumption is based on an average water loss of 9% loss of 9%
Total water consumption represent the total bulk potable Total water consumption represent the total bulk potable water to be supplied to the municipalitywater to be supplied to the municipality
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COMMENTS FROM STAKEHOLDERS
SALGASALGA The capital expenditure is significant in amount;The capital expenditure is significant in amount; The tariff is lower than the sector average increase;The tariff is lower than the sector average increase;
NATIONAL TREASURYNATIONAL TREASURY Proposed tariff increase will lead to a better cost Proposed tariff increase will lead to a better cost
recovery.recovery. The proposed tariff will result in the organisation being The proposed tariff will result in the organisation being
financial viabilityfinancial viability The capital expenditure is significant in amount;The capital expenditure is significant in amount;
BUSHBUCKRIDGE LOCAL MUNICIPALITYBUSHBUCKRIDGE LOCAL MUNICIPALITY We have not received any comments from We have not received any comments from
Bushbuckridge Local Municipality. Bushbuckridge Local Municipality. 24
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Vision; Mission & ObjectivesVision“to be a leading water services utility”
Mission”to provide affordable and sustainable bulk water and sanitation services through optimal use of resources”
Strategic ObjectivesThe organisation’s objectives are articulated as:•To provide bulk water supply and sanitation services •To entrench sound corporate governance and financial management•To optimise stakeholder interaction and engagement•To acquire, develop and manage infrastructure for bulk water and sanitation services•To promote effective water resource management•Optimize human capital investment
Values•Passion and Commitment•Honesty•Integrity•Respect•Service Excellence•Customer Focus
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2011/12 PLAN
Supply area•Currently servicing area of Bushbuckridge Local Municipality (BLM) and sections of the Mbombela Local Municipality (MLM), both situated in the Ehlanzeni district of Mpumalanga Province.
Planned Expansion and other services•Full coverage of the current supply areas.•Coverage of the entire Ehlanzeni District area i.e. Nkomazi, Thaba Chweu and uMjindi Local Municipalities and roll out to other WSAs within the MP province. •MOUs to conduct assessment on status of infrastructure signed with Nkomazi LM and Thaba Chweu LM.•Assuming Project implementing Agency role for WSAs and other government agencies.•Provision of Scientific Services to WSAs and other institutions.
Water resources management•Assist WSAs with Water Conservation and Demand Management.•Regular monitoring of upstream raw water pollution and advise the regulators on mitigation measures.
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1. Contribution to economic growth and social development
2. Ensure sustainable and equitable water resources management
3. Promoting rural development
4. Effective support to local government
5. Improving the Department’s capacity to deliver services
6. Contribution to global relations
Department of Water Affairs Priority areas.
To provide bulk water supply and sanitation services - Develop and operate bulk water infrastructure-Water quality (Potable water and Waste water)-Development of the Demand Management Strategy
To entrench sound corporate governance and financial
management-Corporate governance framework and policies-Debt management strategy -Sustainable tariff structure-CSI-Audit and Risk management
To optimise stakeholder interaction and engagement-Contracts with municipalities and other stakeholders-Partnership with other water institutions To acquire, develop and manage infrastructure for bulk water and sanitation services-Integrated Infrastructure development Plan -Asset management Strategy
To promote effective water resource management-participate in strategy development for water resource management (CMAs)-Water conservation programmes-Consideration of environmental impact on activities of BW
Optimize human capital investment-Skills development programme-Performance management systems (Board to level one employees)
To provide bulk water supply and sanitation services - Develop and operate bulk water infrastructure-Water quality (Potable water and Waste water)-Development of the Demand Management Strategy
To entrench sound corporate governance and financial
management-Corporate governance framework and policies-Debt management strategy -Sustainable tariff structure-CSI-Audit and Risk management
To optimise stakeholder interaction and engagement-Contracts with municipalities and other stakeholders-Partnership with other water institutions To acquire, develop and manage infrastructure for bulk water and sanitation services-Integrated Infrastructure development Plan -Asset management Strategy
To promote effective water resource management-participate in strategy development for water resource management (CMAs)-Water conservation programmes-Consideration of environmental impact on activities of BW
Optimize human capital investment-Skills development programme-Performance management systems (Board to level one employees)
Bushbuckridge Water –Key Strategies
Alignment to Government Priorities
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PROJECTED INCOME STATEMENTMedium Term Expenditure Framework Forecast
2011/12 Budget Year Budget Year Budget Year Budget Year
Original Budget Adjusted Budget
Full Year Forecast 2012/13 2013/14 2014/15 2015/16
R' Thousand
Turnover
161,358,214
4,149,868
165,508,082
181,631,058
191,289,678
200,536,899
212,551,392
- Bulk portable water
122,040,214
5,792,650
127,832,864
137,174,300
145,054,650
152,452,470
163,505,274
- Operation and maintenance
39,318,000
(1,642,782)
37,675,218
44,456,758
46,235,028
48,084,429
49,046,118
Less: Variable Costs
(28,060,000)
(7,020,721)
(35,080,721)
(35,381,625)
(38,229,750)
(41,640,975)
(45,113,235)
- Raw water purchased
(6,305,000) 279,581
(6,025,419)
(7,344,878)
(8,231,115)
(9,542,925)
(10,688,076)
- Energy
(10,343,000)
(3,459,634)
(13,802,634)
(14,940,450)
(15,985,350)
(17,104,500)
(18,344,576)
- Chemicals
(11,412,000)
(3,840,667)
(15,252,667)
(13,096,298)
(14,013,285)
(14,993,550)
(16,080,582)
Contribution Margin
133,298,214
(2,870,852)
130,427,361
146,249,433
153,059,928
158,895,924
167,438,157
Budget Estimates
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Budget EstimatesPROJECTED INCOME STATEMENT CONTINUES
Medium Term Expenditure Framework Forecast2011/12 Budget Year Budget Year Budget Year Budget Year
Original Budget Adjusted Budget
Full Year Forecast 2012/13 2013/14 2014/15 2015/16
Less: Fixed Operating Costs (141,427,000)
8,072,772
(133,354,228)
(132,951,000)
(132,447,619)
(137,300,848)
(143,143,945)
- Staff costs (47,072,000)
(439,227)
(47,511,227) (54,018,608)
(58,487,378)
(61,845,713)
(66,329,527)
- Maintenance and Refurbishment (21,949,000)
(8,381,545)
(30,330,545) (25,187,663)
(21,409,513)
(28,299,620)
(30,351,342)
- Other Operating Costs (20,241,000)
(1,364,206)
(21,605,206) (23,228,205)
(25,085,855)
(27,152,715)
(29,460,696)
- Provision for doubtful debts (52,165,000)
18,257,750
(33,907,250) (30,516,525)
(27,464,873)
(20,002,800)
(17,002,380)
Other Income 374,000
-
374,000 400,000
1,279,084
1,506,077
1,615,268
Net Profit before Depreciation (7,754,786)
5,201,920
(2,552,867) 13,698,433
21,891,393
23,101,154
25,909,480
Less: Depreciation -6,555,000
4,573,849
-1,981,151 -6,959,453
-12,171,000
-10,099,000
-8,079,200
Operating (Deficit)/Surplus before net finance costs
(14,309,786)
9,775,769
(4,534,018) 6,738,980
9,720,393
13,002,154
17,830,280 - Finance Income
53,000 114,619
167,619 546,842
1,151,176
1,355,470
1,434,904
- Finance Expense -136,000
-
-136,000 -108,000
-67,000
-
-
Net Surplus/(Deficit) (14,392,786)
9,890,388
(4,502,399) 7,177,822
10,804,569
14,357,623
19,265,184
Accumulated earnings at the beginning of the year -8,022,000
21,122,856
13,100,856 8,598,458
15,776,280
26,580,849
40,938,472
Accumulated earnings at the end of the year (22,414,786)
31,013,244
8,598,458 15,776,280
26,580,849
40,938,472
60,203,655
Proposed CAPEX
Medium Term Expenditure Framework Forecast
2011/12 Budget Year Budget YearBudget Year
Budget Year
Description Original Budget
Adjusted Budget
Full Year Forecast 2012/13 2013/14 2014/15 2015/16
Refurbishments
1,390,000
4,980,000
6,370,000
-
6,500,000
- 500,000
Buildings
-
-
-
- 500,000
17,159,040
Motor Vehicles 981,000
(181,000)
800,000
1,000,000
500,000
1,000,000
Computer Equipments and Software
635,000
141,000
776,000
250,000
60,000
100,000
5,195,000
Plant and Equipment
2,513,000
5,612,500
8,125,500
4,500,000
13,274,703
16,195,000
Furniture and Fittings 50,000
221,000
271,000
200,000
100,000
105,000
20,879
5,569,000
10,773,500
16,342,500
4,950,000
20,934,703
17,400,000
23,874,919
Budget Estimates
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