2014/18 BUSINESS PLAN

Transcription

1 2014/18 BUSINESS PLAN

2

3 3 Contents Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13 Chapter 14 Chapter 15 Chapter 16 Chapter 17 Chapter 18 Chapter 19 Foreword Introduction Policy Statement Self Appraisal of Business Achievements and Strategic Plan Directives by Minister Participation in Companies, Trusts, Joint Ventures and Transactions Water Resource Development Bulk Potable Water Plan Bulk Waste Water Treatment and Disposals Retail and Industrial Water Supply Other Activities Human Resource Development Plan Environmental Management Programme and Plans Water Conservation and Water Demand Management Financial Plan Bank Account Details Analysis of Risks Declaration of Disclosure Shareholders Compact Annexures Annexure A Annexure B Annexure C Annexure D Annexure E Annexure F Annexure G Annexure H Annexure I Service Area Map Scheme Layout Plan Key Statistics Strategic Plan and Corporate Scorecard Major Dam Yields High Level Organogram Financial Model 5 Year Capex Programme Bank Account Details

4 1 Chapter 1 Foreword by the Chief Executive Amatola Water is in year two of its new long term strategic plan with a 20-year timeframe as aligned to the country s National Development Plan. Central to this strategy is the refocus of Amatola Water s core mandate to Section 29 activities. Good progress has been made in implementing the strategy, with 55.3% primary business in 2012/13 compared to 41% primary of 2011/12. Further progress is underway in the current financial year and so far Amatola Water is on target to achieve its five-year goal of 70% primary and the 20 year goal of 90% primary business. Amatola Water is expanding its role to water service delivery and contribution to community livelihoods and sustainability in its gazetted area by upgrading six of its plants and related bulk infrastructure in these regions. These upgrades are underway and will be completed over the next two years, resulting in increased production capacity from 112 mega litres to mega litres. This is a key catalytic project in terms of the refocus on the Section 29 mandate. Amatola Water supports the Department s Institutional Reform and Realignment (IRR) initiative and the ability of this initiative to truly change the bulk water, bulk sanitation and water resource infrastructure management in the Eastern Cape Province in a way that will transform water services delivery. The Board comprehensively performed and submitted to the Minister of Water and Environmental Affairs a Due Diligence report on the Southern Water Utility as per the directive from the Minister. Collaborating with DWA on numerous initiatives within the Province has impacted positively on services on the ground. The significant progress on the King Sabata Dalindyebo Presidential Intervention (KSD PI) combined with the master planning for the OR Tambo District Municipality (ORTDM) is a good example of this. As part of its contribution to a decent standard of living for all South Africans, Amatola Water continues to advocate the design standard of approximately 750l per household per day on all infrastructure projects to align with the intent of the National Development Plan. The Ntabelanga Dam and related infrastructure on the Mzimvubu system will have a significant positive impact on the eastern region of the Province. Most relevant to Amatola Water is the opportunity to supply quality potable water to three district municipalities, namely the OR Tambo, Joe Gqabi and Alfred Nzo district municipalities in the region of a 98% assurance of supply. In a significant step to redress previous inequalities, this project will allow the communities in these areas access to services at a consistent high standard for generations to come. In addition to delivering on its core mandate Amatola Water understands it must do so in a responsible manner and thus continues to improve its governance with progress made to achieve unqualified audit opinions and a surplus of R 25 million in the latest audited financial results. Amatola Water presents the 2014/18 business plan to the Department for consideration and invites it to enter into a social compact to accelerate the transformation of the Eastern Cape Province bulk water service provision function. M. Msiwa Acting Chief Executive

5 Amatola Water is on target to achieve its 5 year goal of 70% Primary and 20 year goal of 90% Primary Business 2

6 3 Chapter 2 Introduction Establishment Amatola Water is a national government business enterprise (water board) operating in the water sector. As an essential service utility, it is mandated by the Water Services Act (Act 108 of 1997) to offer services in bulk water supply (both potable and untreated water), waste water treatment and other related services, to the public benefit. The organisation was established by the Minister of Water and Environmental Affairs as a water board in terms of section 108 (2) of Water Act, 1956 (Act No. 54 of 1956), by the notice in the Government Gazette, on 14 November 1997 which was superseded by the Water Services, Act 108 of In terms of this and ensuing legislative provisions, Amatola Water operates as a Schedule 3(b) national government business enterprise, as recognised under the provisions of the Public Finance Management Act (PFMA). Amatola Water commenced formal trading in April 1998, with a directive from the Department of Water Affairs (DWA) to provide improved and extended water services to enhance the quality of life and socioeconomic potential of the people of the Eastern Cape Province. In July 1998, operational control of various water services facilities that had previously been operated by Eastern Cape homeland governments and by departments of central Government together with attendant personnel was vested with Amatola Water in terms of a Transfer Agreement concluded between the water board and the State. Vision, Mission and Organisational Values Amatola Waters vision, mission and values are reviewed annually to ensure alignment to its mandate and shareholders strategic intent. Vision To lead sustainable bulk water services in the Eastern Cape. Mission Amatola Water strives to contribute to the public health and community livelihoods by providing bulk potable water, bulk sanitation to Water Service Authorities and managing water resource management infrastructure

7 4 Values We are inspired by an unwavering commitment to empower our stakeholders through the consistent demonstration of: Responsibility Excellence Integrity Accountability Amatola Water recognises the importance of living out core values in the implementation of its mission to ensure the realization of its vision. Basing every decision and action on these values is deemed vital to Amatola Water s overall success, growth and financial strength, now and into the future. Service Area Amatola Water s gazetted service area includes most the Amathole and Chris Hani District Municipalities, the Ndlambe Municipality and smaller portions of the Cacadu and Joe Gqabi District Municipalities. Amatola Water s gazetted area incorporates km²of the Eastern Cape Province. Annexure A contains a map detailing Amatola Water s current service area. Annexure B contains a map detailing the scheme polygons of bulk infrastructure operated by the organisation. Annexure C provides key statistic for the region where Amatola Water operates.

8 5 Chapter 3 Policy Statement Amatola Water developed its Policy Statement as a separate document in accordance with the requirements of the Department of Water Affairs (DWA). The approach of separating the Business Plan and the Policy Statement into two documents and submitting both simultaneously for appraisal is continued by Amatola Water for the 2014 / 2015 year.

9 6 Chapter 4 Strategy and Self Appraisel of Business Achievements Strategy Strategic Direction Amatola Water developed a new 20 year strategic direction for the organisation in the previous year. As an entity of the state, the new direction is based on what Amatola Water believes to be its role and purpose of formation i.e. assisting the state to achieve its objectives. In this process of alignment Amatola Water has adopted a 20 year timescale for its long term strategic goals, as the state has done in documents such as the National Development Plan. These 20 year strategic goals give Amatola Water its long term direction within which the next 5 year strategic goals and objectives are set. Detailed planning is then done for the 5 year window within the direction of these 20 year strategic goals. As a unique post democracy rural water board Amatola Water believes this new strategic direction will allow it to perform the function it was created for in a manner that successfully contributes to government providing the quality of life of the citizens within the Eastern Cape. Section 4b of the Constitution states that Local Government, in respect to water and sanitation, is responsible for: Water and sanitation services limited to potable water supply systems and domestic waste-water and sewage disposal system. With local government mandated for the distribution of potable water, the abstraction of raw water and production of potable water is the mandate of the Water Board. Institutional Reform and Realignment and the thinking around a Provincial Water Enity has further emphasis this thinking. As such Amatola Water s strategic direction is that of the provision of potable water and sanitation services through bulk infrastructure. In the past Amatola Water has been drawn into assisting water service authorities with water services delivery in many different areas and activities which has resulted in a 50/50 split between its Primary and Secondary businesses (sec 29 and sec 30 activities as per the water service act). Strategically focusing, on the reason for its formation as state entity, Amatola Water 20 year strategic goal is to have a 90/10 split between these activities. With 90% of its business being that of bulk water and sanitation activities including water resource infrastructure management and 10% provided advisory and related services to Water Service Authorities. This focus on products and services to be provided is closely aligned to Amatola Water understanding of the Regional Water Utility functions through the Institutional Reform and Realignment process. As part of Amatola Water contribution to a decent standard of living for all South African citizen, as described in the National Development Plan, Amatola Water has adopted a design standard of approximately 750l per

10 7 household per day on all infrastructure projects. Amatola Water believes considering the 20 year planning cycle and the National Development Plan we need to start now in achieving the desired standard for all South Africans. In pursuit of its mandate and strategic direction, the water board has adopted the following as its Corporate Vision and Mission: Vision To lead sustainable bulk water services in the Eastern Cape. Mission Amatola Water strives to contribute to the public health and community livelihoods by providing bulk potable water, bulk sanitation to Water Service Authorities and managing water resource management infrastructure Values Amatola Water values continue as: We are inspired by an unwavering commitment to empower our stakeholders through the consistent demonstration of: Responsibility Excellence Integrity Accountability Strategy Framework Amatola Water has adopted the Balanced Scorecard approach with the four quadrants as set out by Kaplan and Norton and the standard four quadrants are used: 1. Financial Quadrant 2. Stakeholder and Customer Quadrant 3. Internal Processes Quadrant 4. Learning and Growing Quadrant As part of giving appropriate structure to its strategy measures and performance monitoring and management system Amatola Water has also adopted the Ten Areas for Successful Water Utility Service Provision.

11 8 Effective and Holistic WSP Function Product Quality Customer Satisfaction Employee Leadership/ Development Water Resources Adequacy Community Sustainability Financial Viability Infrastructure Stability Operational Resiliency Operational Optimisation Stakeholder Support These ten fit within the four balanced scorecard quadrants and help ensure Amatola Water focuses on all the relevant areas to be a successful water utility. The ten are as follows: 1. Water and Wastewater Quality: is achieved when Amatola Water produces bulk potable water and wastewater in compliance with statutory requirements and consistent with customer needs at both AW owned and ROU plants. 2. Customer Satisfaction: is the degree to which Amatola Water provides reliable, responsive, and affordable products and services to WSA customers which meet or surpass customer expectations. Timely feedback to customer-agreed service levels to maintain responsiveness to customers needs and to delight these customers. 3. Stakeholder Relationships and Support: As an organ of state Amatola Water has a variety of different stakeholders, most notable the Department of Water Affairs. This outcome includes managing and building relationships with the various stakeholder groups by aligning initiatives to support key stakeholder programs and informed by the inter-governmental framework, as well as influencing these stakeholders to have common understanding of Amatola Water role and catalytic initiatives within the sector. 4. Infrastructure Stability: is achieved when Amatola Water s infrastructure is consistent with customer service levels, and consistent with anticipated growth and system reliability goals. 5. Financial Viability: is achieved when Amatola Water manages operating expenditures and increasing revenues in a manner that strengthens the balance sheet in a sustainable manner. In addition, the organisation aims at a sustainable tariff that is consistent with customer expectations, recovers costs and provides for future expansion.

12 9 6. Water Resource Adequacy: is achieved when Amatola Water assesses the scarcity of freshwater resources, investigates sustainable alternatives, manages water abstractions assiduously and has access to stable raw water resources to meet current and future customer needs. 7. Community / Environmental Sustainability: is achieved when Amatola Water is explicitly cognisant of and attentive to the impacts it has on current and future community sustainability, supports socio economic development and manages its operations, infrastructure, and investments to protect, restore and enhance the natural environment, whilst using energy and other natural resources efficiently. 8. Leadership and Employee Development: is achieved when Amatola Water is dedicated to continual learning and improvement, recruits and retains a workforce that is competent, motivated, adaptive and works safely, ensures institutional knowledge is retained and improved; provides opportunities for professional and leadership development, and is led by an integrated senior leadership team. 9. Operational Resiliency: is achieved when Amatola Water s proactively and effectively manages business risks across all areas of the business in a manner that ensures sustainability of the organisations even in times of challenges and difficulties. 10. Operational Optimization: is achieved when Amatola Water has on-going, timely, cost-effective, reliable, and sustainable performance improvements in all facets of its operations, has a culture of accountability and every employee and department striving to improve systems and processes. Strategic Goals and Objectives Amatola Water has refined its 20 year goals and has developed 5 year Strategic Objectives that if it acheives will successfully implemented the new strategy. Measures and targets for each of the next 5 years have been set and are included in Annexure D. 20 Year Goals Category Product quality (primary) Product quality (primary) Primary product quantity Customer satisfaction Employee / leadership development Employee / leadership development Goal Blue and green drop certification for all bulk works - (owned and rou) Providing accredited laboratory water services for the entire province Increase volumes to 350 mega litres per day 80% of wsa s in the province as contracted customers through ownership or rou Enhanced strategic effectiveness Build cross-functional excellence/ effectiveness

13 10 20 Year Goals Category Employee / leadership development Employee / leadership development Water resource adequacy Community sustainability Financial viability Infrastructure stability Infrastructure stability Operational resiliency Operational resiliency Operational optimisation Operational optimisation Stakeholder support Stakeholder support Goal Develop operational competence (individual) Renowned knowledge hub for water services sector in ec 98% assurance of supply at a minimum service level of 750l per household per day Contribute to decent living standards and enhance public health within communities in ec through quality adequate water services Improve solvency, liquidity and profitability to achieve an investment grade Fitch Rating 80 % of the infrastructure master plan implemented (investment / needed resources) 98% availability of water supply and 90% reliability of sanitation services Bulk water utility with interconnected regional schemes in the eastern cape Fully implemented businesses continuity system (ims, quality systems, knowledge management) Continuous improvement philosophy institutionalized Continuous alignment of people, skills, systems, policies and procedures for strategy implementation To be the center of a fully-fledged provincial water utility (irr) Strong and well established relationships with stakeholders internal and external Balanced Scorecard Quadrant WSU Area (10 Outcomes) 5 Year Objective(s) SC: Stakeholder and Customer CS: Customer Satisfaction 2 additional Bulk water supply contracts with WSA (3 currently) (ROU) Increase volumes to 160 mega litres per day Improved customer satisfaction 7.5/10 average score Acquire contracts for Water Resource Infrastructure Management WQ: Water and Waste Water Quality Acquire contracts for Waste water works Achieve Statuary Quality compliance at All AW Owned and ROU plants efficiently Blue drop advisory services

14 11 Balanced Scorecard Quadrant WSU Area (10 Outcomes) 5 Year Objective(s) SC: Stakeholder and Customer F: Financial Perspective CE: Community / Environmental Sustainability SS: Stakeholder Relationships & Support FV: Financial Viability P: Internal Processes WA: Water Resource Adequacy IS: Infrastructure Stability Contribute to decent living standards and enhance public health within communities in ADM through quality adequate water services Provide services and invest in technologies / systems in an environmentally responsible and sustainable manner Strengthen and deepen relationships with statuary, contracted and non statutory stakeholders Be centre of new provincial regional bulk utility On-going strengthening of Balance Sheet to sustainable services (Ratios) Surplus per financial year contribution to build reserves for infrastructure investment Explore sourcing of funding alternatives for growth of new infrastructure (excluding replacement) 98% Assurance of supply in ADM, Ndlambe and ORTDM Region (Sandile and Mzintlava Dams) 90% Availability of water supply for all bulk services AW Plant Upgrade and KSD PI Projects Develop and EC water master plan to direct future funding streams Minimise production and distribution water losses OR: Operational Resiliency Interconnected supply to Amahlathi, Ngqushwa, Nkonkobe, Ndlambe Business continuity system implemented Fully implemented IMS system OO: Operational Optimisation Accredited laboratory providing services across the entire Eastern Cape Aligning People, Skills, Systems, Policies and Procedures for Strategy Implementation Fully functional governance, compliance, risk and fraud prevention systems for clean audit Continuous improvement system

15 12 Balanced Scorecard Quadrant WSU Area (10 Outcomes) 5 Year Objective(s) LG: Learning and Growing ED: Leadership & Employee Development Enhanced Strategic Effectiveness Build Cross-Functional Excellence/ Effectiveness Develop Operational Competence (individual) Entrenching the appropriate corporate culture: Decisive Leadership; resolving Organisational Politics; and Issues of Conflict To be a renowned knowledge hub for the water services sector in the Eastern Cape Strategy Implementation and Catalytic Initiatives With Amatola Water 20 year strategy in place and refinement occurring each year, full attention can be given to the implementation of strategy. Three additional interventions have being developed in the institution in order to facilitate this further: 1. Catalytic Initiatives 2. Divisional Performance Reviews 3. Board Committee Strategy Implementation Monitoring and Evaluation The following are the list of key Catalytic Initiatives which will drive the successful implementation of the strategy and success of Amatola Water: 1. Institutional Realignment and Reform. 2. AW Plant Upgrade and KSD PI Projects. 3. Aligning People, Skills, Systems, Policies and Procedures for Strategy Implementation. 4. Entrenching the appropriate corporate culture: Decisive Leadership; resolving Organisational Politics; and Issues of Conflict. 5. Fully functional governance, compliance, risk and fraud prevention systems for clean audit. As part of improving its internal Strategy Monitoring and Evaluation Amatola Water has implemented a quarterly internal peer review of divisional effectiveness at implementing strategy. Divisions present their quarterly performance and are rated in five areas by other divisions and the CEO. These areas include evidence of performance and cascading the strategy to lower levels of staff. As part of its oversight role and responsibility for Strategy, the Board has allocated to its committees the oversight of the strategy implementation of the 10 areas for successful Water Utilities as follows:

16 13 Area Board Committee Director Responsible Financial Viability FINCO CFO Stakeholder Support Corporate Citizenship CEO Employee / Leadership Development HRC D: CS Customer Satisfaction Strategy & BD CEO Product Quality Strategy & BD D: Ops Infrastructure Stability FINCO D: P&D Operational Resiliency Strategy & BD D: Ops Operational Optimisation Strategy & BD D: CS Community Sustainability Corporate Citizenship D: CS Water Resource Adequacy Strategy & BD D: P&D Self Appraisal of Business Achievements Self-appraisal of Amatola Water business achievements covers the time period from July 2013 to December Self-appraisal of the previous financial year is covered in the previous year business plan and the annual report for 2011/2012. This self-appraisal is done comparing to the corporate balance scorecard as submitted to DWA in the previous business plan. The performance is indicated for quarter 1 and quarter 2 separately and are as per the quarterly reporting approved by the Board. In the area of its Primary mandate the Board has performed well, with increased volume sales and a high quality of water provided and more than 98% assurance of supply. A main focus of the Board has been improving and sustaining its financially viability due to previous years challenges. The Board has performed well in this area and for the first six months of the year made a surplus of R21 million. Highlights for the Year to Date: Increase in the volume sold and quality of bulk potable water above the targets Surplus of R 20 million and significantly improved liquidity Percentage compliance with environmental management plans across AW Challenging areas for the Year so far: Debtors days improving but still 127 against target of 70 days and baseline of 113 days Labour cost still high at 40% of total cost compared to the target of 38% Capex spend significantly behind schedule Various areas were the setting up of the new measurement systems is not complete making it difficult to ascertain progress of strategy implementation in these areas.

17 14 Finance is busy with various interventions to improve the Debtors days. Staff costs are being reviewed with the understanding that the current total compliment is higher than the desired levels. Capex spend is being prioritised. 63% of scorecard targets have been met for the first six months, compared to 68% achievement in the previous quarter indicating a great gap between planned strategy implementation and the current reality within Amatola Water. Should this trend continue, this would become a ma jor concern for Amatola Water. Achievement of Targets 0% 25% 11% 63% Achieved Partially Achieved Not Achieved Information Outstanding

18 15 WSU Ob No. Objectives Me No. CS CS1 Increased customer base and penetration (delivery options/ services) CS1.1 CS1.2 CS1.3 CS CS2 Improved customer satisfaction CS2.1 CS2.2 WQ WQ1 Achieve SANS at All AW Owned & ROU plants efficiently WQ1.1 WQ1.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment STAKEHOLDER & CUSTOMER PERSPECTIVE Number of bulk potable water supply agreements BCMM, ADM & Ndlambe in place Number of ROU agreements in place AW singed a ROU with Makana LM in October 2013 Volume of Water Sold by owned and ROU plants 85 ml/day This is normal during the peak summer months and will drop towards winter time. Average Customer satisfaction score n/a % Compliance to customer kpa as per customer charter n/a 70% 0 70% 0 Systems to manage this still being implemented % Compliance SANS Class 1 potable water (Owned and ROU) 99% 98% 99.1% 98% 97.9% Newly appointed plant superintendents and changing of chemical suppliers were the cause for the drop in the compliance target % Compliance with effluent license standards (Owned and Rou) n/a 60% N/A 60% N/A No agreement in place or owned plants

19 16 WSU Ob No. Objectives Me No. CE CE1 Contribute to decent standard of living and in support of rural livelihoods CE1.1 CE CE2 Provide services and invest in technologies / systems in an environmentally responsible and sustainable manner CE2.1 CE2.2 CE2.3 CE2.4 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment Number AW Schemes with capacity to supply 750l per household per day at terminal reservoir Nahoon & Laing schemes % Compliance with environmental management plans across AW (owned and ROU) n/a 50% 30% 5% 80% 8 of 10 works compliant No of alternative energy technologies introduced No of Permanent jobs created in programs Survey was done by UP and the report said that payback period is not viable should reconsider after upgrades at Sandile. No. of Temporary Jobs Created (indirect) n/a

20 17 WSU Ob No. Objectives Me No. Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment SS SS.1 Strengthen and deepen relationships with statuary, contracted and non statutory stakeholders SS1.1 % Compliance with Executive Authority mandates (MTEF, NDP and DWA Strategy) 100% 100% 100% 100% DWA quarterly reported submitted late SS1.2 SS1.3 % Compliance with contractual commitments (excl customers) 95% 95% 0 95% 0 No of consultative meetings with key interest groups n/a Systems still being set up Still on target for the year FINANCIAL PERSPECTIVE FV FV1 On-going strengthening of Balance Sheet to sustainable services (Ratios) FV1.1 Liquidity Ratios: FV1.2 Debtors Days The current ratio is adverse at the end of quarter 2, the debtors have significantly decreased compared to debtors at year end by almost 59%. The debtors days are adverse as the balance of trade debtors include both primary and secondary debtors where

21 18 WSU Ob No. Objectives Me No. Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment FV1.3 Employee to revenue (R Million) R0.9 R 1 mil 200 K 250 K 420 K Revenue has not grown sufficiently to the level of complementing the number of employees in the organisation. Section 30 revenue is relatively lower than budget while there is a slight movement in the number of employees. FV1.4 Solvency ratio FV1.5 Return on assets % 0.02% 0.1% 1.11% 0.1% 3.99% Solvency ratio is favorable. Return on assets is favorable due to higher than expected profit return for the quarter. FV1.6 FV1.7 Net profit margin % (All) - 3% 7% 3% 13% Gross profit margin % (All) 22% 25% 28% 25% 34% Increases in the volumes sold for potable and raw water has contributed positively to the surplus. Increases in the volumes sold for potable and raw water has contributed positively to the gross profit. FV1.8 Total expenditure R in 000 R550 R80 R138 R159 Expenditure on direct input costs has increase to accommodate the demand for potable water.

22 19 WSU Ob No. Objectives Me No. Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment FV1.9 BBBEE spend - 100% 100% 100% 100% The target has been achieved in the second quarter however there is needs for improvement on BBBEE spend on Qualifying Small Enterprises and Emerging Micro Enterprises in the coming quarters FV1.10 Electricity Cost (R/KL) Electricity usage is relatively high during the peak demand season (winter). There's a downward trend from October to December 2013 as we move in swiftly in the low demand season. FV1.11 Chemical Cost (R/KL) Actual chemical expenditure and usage has increased in the second quarter due to water turbidity. FV FV2 Surplus per financial year contribution to build reserves for infrastructure investment FV2.1 Revenue in Rands (in million rands) R423 R352 R84 R140 R167 Increases in the volumes sold for potable and raw water has contributed positively to the revenue generated in the second quarter

23 20 WSU Ob No. Objectives Me No. FV2.2 FV2.3 FV2.4 FV2.5 FV FV3 Explore sourcing of funding alternatives for infrastructure development FV3.1 FV3.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment Surplus in Rands (in Million) 0 R10 R6 2.5m R21 Higher than expected surplus due to higher sales of potable water and monthly recognition of project revenues. Amount of targeted surplus placed in reserve fund (in million Rand) 0 R6 R R13 Management targets to put into reserves 60% of the surplus. % Revenue Secondary Business / Total Revenue 55% 45% 33% 55% 34% Section 30 revenue has been generally lower than budgeted due to loss of revenue from the termination of Joe Gqabi contract and other secondary business activities. % Labour costs of total costs 41% 38% 41% 38% 40% The labour costs to total cost ratio is adverse. This ratio is going to improve as some of the employees will be transferred to ADM in third and fourth quarter. Amount of Grant funding secured R0 R0 N/A R0 0 Not scheduled in first year Amount of Lending (capital market) funding secured 0 R0 N/A 0 0 Not scheduled in first year

24 21 WSU Ob No. Objectives Me No. FV3.3 FV FV4 Sustainable & Affordable Tariff FV4.1 WA WA1 Adequate water security and assurance in support of water supply WA1.1 IS IS1 Reliable infrastructure IS1.1 IS1.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment Amount of Development Agency funding secured 0 R0 N/A 0 0 % average increase of tariff (within government targeted inflation) 10% 8% 9.3% 8% 9.3% Not scheduled in first year Tariff negotiations and consultation is progress. The final average tariff increase will be made available in the third quarter. INTERNAL PROCESSES QUADRANT % assurance level (1 in 50 year drought / restriction) 98% 98% 98% 98% 98% No over abstraction from any resource at present supply levels % Infrastructure CAPEX vs. Revenue 0% 4% 1% 1% 0% The target has not been achieved however there is great need to increase revenue generated from operations in order to start with top priority CAPEX projects. Overall capex project completion dates within targets as a percentage 0% 75% 0% 0% 21% Progress is being made with planning and feasibilities on capex projects

25 22 WSU Ob No. Objectives Me No. IS1.3 IS IS1.4 IS IS2 Influence Provincial Water Infrastructure Sector Planning IS2.1 IS IS3 IS IS4 Minimise produced and distributed water to efficiently reduce water losses IS3.1 Upgrade plants to provide minimum 5 megs per day IS4.1 OR OR1 Ensure uninterrupted water supply, with adequate pressure to customers OR1.1 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment Increased access to services measured by Rand spend on Capex Projects R0 R26 Mil R56K R5Mil R4,2 Mil Performance against this measure is improving % Infrastructure Maintenance of Revenue 8% 6% 9% 2.5% 9% The target has been achieved however there is great need to increase revenue generated from operations in order to carry out planned and preventative maintenance. % alignment of water supply schemes to adequate water resources n/a 95% 95.9% 95% 100% Adequate resources at current demand levels % total water loss AW Owned and ROU 15% 12% 11.2% 13% 12% No. of plants commissioned at 5 megs per day Water losses came down and the target was achieved, but still need some attention in the Debe, Peddie and Laing areas Nahoon, Sandile, Laing & Peddie No. unplanned interruptions to supply >24 hours % 99.53% of Assurance of Supply was achieved in Q2

26 23 WSU Ob No. Objectives Me No. OO OO1 OO OO2 Adequate systems, structures, policies and processes to enable strategy implementation OO1.1 As responsible public entity ensure strong Governance, Compliance, Risk and Fraud Prevention systems OO2.1 OO2.2 OO2.3 OO2.4 OO2.5 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment % compliance with predetermined KPA timeframes SCM, HR and SHEQ n/a 75% 0 75% 0 Systems to measure not in place yet Un-qualified Audit Y Y Y Y Y Effective internal controls and risk management Internal audit findings: Number Repeats n/a Effective internal controls and risk management Internal audit findings: Number unresolved n/a During the follow-up audit conducted by the internal auditors, a total of 102 findings were followed up and : 29 were found to have been addressed ; 27 partially addressed and 43 were not addressed. This is currently being prioritised. Information outstanding % Compliance to KING III n/a 50% 67% 50% 67% % Compliance to applicable legislation in Legal register n/a 80% 0% 80% 0% Currently there is no company secretary who leads this process

27 24 WSU Ob No. Objectives Me No. OO2.6 OO2.7 OO2.8 LG LG1 Enhanced Strategic Effectiveness LG1.1 LG1.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment % implementation of Integrated Risk Framework and Fraud prevention plan n/a 60% 20% 20% 25% Draft Strategic Risk register complete. Risk Committee established and functional Board member attendance n/a 80% 83% 80% 67 % Improved controls and risk mitigation, indicated by number of Breaches of materiality and significance framework n/a LEARNING & GROWTH QUADRANT % Achieved of the Corporate Scorecard Targets 75% 68% 65% 63% With increasing targets and information outstanding the performance against scorecard has reduced No. of interactions between Board and Executive Authority National Strategy Session

28 25 WSU Ob No. Objectives Me No. LG1.3 LG1.4 LG2 Build Cross- Functional Excellence/ Effectiveness LG2.1 LG2.2 LG3 Develop Operational Competence (individual) LG3.1 LG3.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment Average Board Committee Rating of adequacy of submissions (Out of 5) n/a n/a Rating not performed for quarter 2 meetings % MANCO resolutions which are implemented in prescribed timeframes n/a 90% 0 90% 0 Average Divisional Performance Review Scores n/a Still setting up measurements Divisional performance and evidence requires continued improvement % identified critical posts filled by predetermined recruitment time n/a 80% 58% 60% 70.8% During the second quarter 3 additional positions were filled adding up to 70.8% of the critical positions filled as at 31 December No. of organisational beneficial schemes developed and successfully implemented n/a Developed draft PDP guidelines; 2. Draft policy gap analysis report and 3. Process flows for learnerships, recruitment, and job evaluation. % implementation of PDPs 70 85% 0 10% 31% 110 employees were trained during the second quarter in line with the PDPs.

29 26 WSU Ob No. Objectives Me No. Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment LG3.3 % Staff Turnover 9% 6% 3.3% 4% 5.88% There were 9 terminations during the 2nd quarter. LG3.4 DWA Total Number Of staff presently on Training courses, learner-ships, bursaries employees and 17 learners were trained; the full operation of the Learnership Academy has been delayed due to the project charter which is yet to be approved. Achieved Partially Achieved Not Achieved Information Outstanding

30 27 Chapter 5 Directives by Minister Amatola Water received one directive as defined in section 41 of the Water Services Act from the Minister since the last business plan. The directive details were as follows: Directive Purpose: Prepare a due diligence report for Amatola Water to be realigned into the Southern Regional Water Utility Due Date: 31 March 2014 Date Issued: 3 February 2014 The organisation has complied with the directive and successfully submitted the required Due Diligence Report for the Southern Regional Water Utility to the Minister of Water and Environmental Affairs on 31 March 2014.

31 28 Chapter 6 Participation in Companies, Trusts or Joint Ventures and Transactions Amatola Water does not envisage participating in any separate company, trust, joint ventures or similar transactions for the next five year period in the implementation of its strategy. However should such an arrangement be required it will be developed in accordance with the organisations materiality and significance framework discussed in Chapter 15.

32 29 Chapter 7 Water Resource Development and Inter-Basin Transfer Schemes Water resources development and inter basin transfers is part of the organisations primary business. The organisation makes a contribution in this regard through the annual dam management contract with the Department of Water Affairs. This contract has a direct impact on the organisation s primary business in terms of raw water adequacy and quality control. Contractual Obligations with the Department of Water Affairs Amatola Water s contractual relationship with the Department of Water Affairs (DWA) relates to arrangements concerning the bulk supply of raw water to Amatola Water and the operation and maintenance of state dams. Raw Water Supply Agreement During 2001/02 Amatola Water and the DWA entered into negotiations to conclude a formal Raw Water Supply Agreement. The seventh draft generic agreement was produced during the 2007/08 financial year. This agreement has not been concluded to date because the detail in terms of water quality standards is still to be agreed upon. The current arrangement of raw water consumed by Amatola Water being billed by DWA according to the monthly volumetric consumption will continue for the foreseeable future. Operating and Maintenance Management Agreement of Dams The Operation and Maintenance Management Agreement that Amatola Water entered into with the DWA to manage dams in its area continues on an annual basis. This agreement shall remain in effect until terminated by mutual agreement or through changes in legislation. The contract requires Amatola Water to maintain 21 dams within its supply area on behalf of DWA. Projected Demand Description of Ma jor Consumers or Consumer Groups and Projected Demand The following table indicates the raw water extracted and the projected water demands to the Amatola Water s Water Treatment Works (WTW) and the related dams which are maintained by the organisation:

33 30 Water Treatment Works Nahoon Laing Sandile Rooikrantz Debe Nek Peddie Regional Masincedane Dabi Binfield Upper Mnyameni Glenmore Boesmans River m3/annum Dam & Registered 06/07 Abstractions 2014/ / / / /19 Nahoon Laing Sandile Rooikrantz Debe Sandile Mnyameni Dabi Binfield Park Mnyameni Lower Fish Albany Coast RO Plant + Wells Table 1 A key initiative for the 2014/15 financial year will be to apply to DWA for increased abstractions from the abovementioned dams to cater for the current and projected demands where these exceed current registrations.

34 31 Water Resource Conservation Amatole Bulk Water Supply System: Nahoon / Laing / Wriggleswade / Bridle Drift / Rooikrantz/Maden/ Gubu Dams The above mentioned dams form part of the Amatole System. Amatola Water had been monitoring water losses within this bulk treatment and distribution systems on a continued basis since the inception of the water boards activities within the region. Amatola Water has been assisting DWA in the control of growth/spread of water hyacinth on the Laing and Wriggleswade Dams. These activities will continue for the next five years. Keiskamma Catchment Sandile /Debe/Mnyameni/Cata/ / Pleasant View/ Binfield Park Dams The above listed dams are located within the Keiskamma River Catchment. Water conservation interventions per dam are detailed below. Sandile Dam Sandile Dam supplies raw water to the Sandile and Peddie Regional water treatment works (WTW) for potable use. Raw water is released from Sandile Dam via the Keiskamma River to Craighead Weir, from where it is pumped to the Peddie WTW. In terms of ensuring sufficient amount of water available at Craig Head Weir, Amatola Water releases a constant stream of 210l/s (6,6 Million cubic meters per annum, or cubic meters per month) from Sandile Dam. Between Sandile and Craighead weir, there are significant water losses caused mainly by farmers on route, abstracting water from the Keiskamma River. Craighead Weir is approximately 143 km downstream of Sandile Dam. As none of the farmers are monitored for abstractions by DWA it is difficult for Amatola Water to determine what the correct release should be for the system. The monitoring of the abstraction of the farmers by DWA would enable the release to be accurately defined and implemented. Amatola Water has been investigating the option of piping potable water directly from Sandile Water Treatment Works to the Peddie Scheme and Port Alfred. This would provide a suitable solution to DWA to minimize the conveyance loss of about 4 million cubic meters per annum (approximately 11Ml/day) from Sandile Dam to the Craighead Weir. Studies undertaken by Amatola Water during 2012 to 2014 years shows that the supply of potable water from the Sandile Water Treatment Works to the existing BCMM, ADM and Ndlambe Municipalities will be the most economical way to do this. A cost comparison was done between the Sandile WTW augmentation option and various alternative options within Ndlambe to address the Ndlambe long term water needs. This included water supply options such as ground water, and or, abstraction from the lower Fish River inclusive of Reverse Osmosis (RO) processes. The results of the study shows that Sandile WTW augmentation option which will require the raising of Sandile Dam by a further 10m to be the cost beneficial option. At a stakeholder meeting held between all affected parties in March 2014 it was decided that Amatola Water must prepare a prefeasibility report which is to be submitted to DWA for revue and consideration. The result of the implementation of such a regional scheme will lead to major raw water savings and optimization of water use.

35 32 Debe Nek Dam Debe Nek Dam supplies raw water to the Debe Nek water treatment works for potable water production. Amatola Water is managing water losses on bulk conveyance systems on a continued basis and there are no significant water conservation issues at this resource. Mnyameni Dam Mnyameni Dam supplies raw water to the Masincedane and Upper Mnyameni water treatment works. A portion of the available yield of Mnyameni Dam is allocated for irrigation purposes, supplying the high laying agricultural lands within the Keiskamma valley in conjunction with Cata Dam. Amatola Water is monitoring water losses on a continued basis within the two schemes. There appears to be a number of illegal connections causing water losses on the bulk distribution side to be on the high side. Through continued water loss management processes Amatola Water is taking action to reduce these losses to the minimum. Cata Dam Cata Dam is only supplying irrigation water to the farmers within the Keiskammahoek valley and there are no significant water conservation issues at this resource. Pleasant View and Binfield Park Dams Pleasant View Dam Pleasant View Dam is currently only utilized as an irrigation scheme and actually not in use at the moment. There are no significant water conservation issues at this resource. Binfield Park Dam Binfield Park Dam provides raw water for irrigation, domestic and industrial use. Raw water is treated at the Binfield Park WTW and the Alice WTWs. Potable water is supplied to Alice and villages within the Gaga Tyume area. Amatola Water is monitoring water losses on a continued basis within the Binfield scheme. As it has been agreed between ADM and AW during 2013/14 year to move the bulk billing points for the Binfield scheme to the outlet of the works and not at each village any more, it has now become the responsibility of ADM to monitor the bulk water use/losses within the bulk network. The reason for this decision has mainly been due to the fact that all bulk distribution infrastructure belongs to ADM. The volume raw water abstracted by farmers for irrigation purposes from the raw water pipe line between Binfield Park Dam and Alice is not monitored. A raw water meter has been installed at the dam to monitor total monthly raw water abstractions. Raw water losses can be reduced, if DWA decides to request that the farmers abstractions for agricultural use be monitored through a proper bulk water metering system. There are no raw water meters on these agricultural off- takes on route, thus bulk raw meters need to installed on the system. Funding would be required to do this. The situation of uncontrolled abstraction by irrigators is not a healthy situation. The installation of raw water meters and implementing a monthly raw water abstraction monitoring system for irrigators is a necessity. Amatola Water needs guidance from DWA officials on how DWA wants to deal with this matter. A proper monitoring system on all raw water abstraction could promote ma jor raw water savings.

36 33 Glenmore System The Glenmore WTW abstracts water from the Glen Boyd Dam irrigation pipeline which forms part of the Lower Fish Government Water Scheme. Annual water use is in the order of cubic meters per annum and losses minimal. The bulk distribution system is under management of ADM. Bushmans River System The Bushmans River Reverse Osmosis water treatment works abstracts water from sea wells (boreholes within the river mouth dunes) as well as some inland boreholes. All the abstraction points are metered to ensure the resources are not over abstracted. Amatola Water has also created a water balance monitoring system to monitor the operational efficiency of the RO plant to ensure that the brine discharge volume remains within design parameters. Raw Water Supply to Local Municipalities Raw water is managed and supplied on behalf of the DWA to the following consumers or groups of consumers, with the projected water demands being shown in the next three tables: Buffalo City Municipality m3/annum Water Treatment Works 2014/ / / / /19 Rooikrantz dam (to King William s Town WTW) Table 2 Nkonkobe Municipality (ADM) m3/annum Water Treatment Works 2014/ / / / /19 Binfield Dam (to Alice WTW) Table 3 Amahlathi Municipality (ADM) m3/annum Water Treatment Works 2014/ / / / /19 Gubu dam (to Stutterheim WTW) Table 4 The raw water is utilised by the respective municipalities to produce potable water for consumers.

37 34 Industry Da Gama Textiles is the only ma jor industry to be supplied with raw water by Amatola Water. This industry is supplied from the Rooikrantz dam. Expected demand is shown in the following table: m3/annum Water Treatment Works 2014/ / / / /19 Rooikrantz dam Table 5 Da Gama used about cubic meters per month in the past financial year. This equates to a reduction of approximately cubic meters per month due to the re-use process as well as a decrease in demand for material from the textile factory. Individual / Industrial / Irrigation consumers Individual customers on route of the Nahoon rising main are supplying a number of farmers with potable water. A small volume of the potable supply is also supplied to nearby industry. Further two farmers are utilizing a small volume per month for micro irrigation use. The expected demand is outlined in the following table. m3/annum Water Treatment Works 2014/ / / / /19 Nahoon dam Table 6 Amatola Water does not foresee significant growth in supply to individual consumers in the future. Growth in Water Demand General In determining projected demands as discussed above, cognisance has been taken of growth arising from: New water supplies to communities in terms of backlog elimination; The need for higher levels of service from communities; and Natural population growth. The Amatola Water Infrastructure Master Plan (IMP) projects a modest water demand growth in Amatola Water s schemes from 107Ml/day in 2014/15 to 128Ml/day in 2018/19. Water demand growth is based on an annual growth at 1% per annum.

38 35 A key future consideration that will impact on demands is the requirement of higher levels of service. The National Development Plan encapsulates this requirement and provides a vision of access to running water in every household by Amatola Water has referred to the Guidelines for Human Settlement Planning and Design to determine an appropriate level of supply to support the 2030 vision. The organisation is therefore positioning itself to be able to supply a minimum bulk supply of 750l per household per day over the next five year period. This will be achieved in part through the augmentation of water treatment, bulk infrastructure distribution and storage capacities. This augmentation is an absolute necessity as a number of the water treatment plants are operated on a daily basis above 100% of its treatment capacities. At the same time Amatola Water will continue to have a key focus on improving water demand management and conservation interventions. Amatole Bulk Water Supply System Nahoon / Laing / Wriggleswade / Bridle Drift / Rooikrantz/Maden/ Gubu Dams Growth in water demand for the Amatole System is discussed under the Water Resources Inter-Basin Transfer Supply Scheme Supply Capacity and Development section. Keiskamma Catchment Sandile /Debe/Mnyameni/Cata/ / Pleasant View/ Binfield Park Dams The above listed dams are located within the Keiskamma River catchment. Sandile Dam The Planning Review Report of the Sandile Regional Water Supply Scheme of 1987 reports the safe yield of Sandile Dam is regarded as 18 million cubic meters per annum of which 11.6 million cubic meters per annum at an assurance of 98% for domestic use and the balance earmarked for irrigation at an assurance of 90%. It further states that the Sandile WTW has been designed and constructed in such a way for future doubling up in treatment capacity at the same site. The Sandile and Peddie Regional Water Treatment Works are operated/utilized at 100% and above their treatment capacities, thus the need to increase treatment capacities at both these works. At the same time various options of augmenting potable water supply to the Ndlambe Municipal area have been under investigation. Sandile dam has been identified as potential source of water to augment the existing water supply system within the Ndlambe municipality. The study undertaken considered sufficiency of yield from the Sandile dam to meet the estimated future water demands of the end users. It further considers the potential benefit to both Ndlambe Local Municipality (NLM), as well as the current users of the Sandile and Peddie regional schemes( Amatola District Municipality (ADM) and Buffalo City Metropolitan Municipality (BCMM)) if the new proposed Sandile-Ndlambe bulk supply scheme is combined with the existing Sandile and Peddie regional supply schemes. The current domestic allocation from the dam is deemed for supply of the current users, such as BCMM and ADM. There is no surplus yield available from the Sandile dam to allocate towards NLM. The proposed initiative entails the establishment of Sandile Regional Supply Scheme that will incorporate

39 36 the current Peddie WTW and extend supply to the Ndlambe LM. The total future (2035) domestic water demand from the Sandile system is expected to be million cubic meter per annum (55.8 Ml/day). The potential dam-raising options are being analysed for Sandile Dam, taking into account expected long term water demand requirements. The historical firm yield for Sandile Dam is estimated to be 20 million m3/a. The historical firm yield for Sandile Dam raised if raised by 4m is estimated to be 24.8 million m3/a and if raised by 10m is estimated to be 27.6 million m3/a. It was decided at a meeting held with all stakeholders during April 2014 that a preliminary design report in terms of the Sandile Dam augmentation to be submitted to DWA for further consideration. A critical intervention for the next five year period will thus be the consideration of the augmentation of the Sandile Dam to meet this expected future long term demands. Debe Nek Dam The current demand from Debe Dam for domestic use is in the order of million cubic meters per annum. To meet the expanded medium to long term potable water requirements Amatola Water has appointed consultants to do a feasibility study considering the options of increasing treatment capacity from 1.5Ml/d to 5.0Ml/d. This action will increase the demand on raw water supply from the current million cubic meters per annum to million cubic meters per annum for domestic purposes from Debe Dam. Debe Dam has sufficient capacity to accommodate this increase in demand as it has a safe yield of 2.15 million cubic meters per annum. Mnyameni Dam The current demand from Mnyameni Dam by the Upper Mnyameni WTW and Masincedane WTWs for domestic and industrial use is in the order of 1.39 million cubic meters per annum. To meet the expanded medium to long term potable water requirements Amatola Water has appointed consultants to do a feasibility study considering to increase treatment capacity from 4.0 Ml/d to 6.0 Ml/d. This action will increase the demand on raw water supply from the current 1.39 million cubic meters per annum to 2.15 million cubic meters per annum for domestic purposes from Mnyameni Dam. The current irrigation allocation out of Mnyameni dam is 0.7 million cubic meters per annum, while the Ciskei Development plan indicates the safe yield is in the order of 2.3 million cubic meter per annum, thus materialising in a possible shortfall, however recent operating rules checking the safe yield of the Keiskamma Catchment indicates a yield of 4.0 million cubic meters per annum for Mnyameni Dam; this is however from a draft report, thus the results are still to be accepted by DWA and therefore actual available spare yield is to be confirmed for future development purposes. Cata Dam

40 37 Cata Dam is only supplying irrigation water to the farmers within the Keiskammahoek valley and is therefore not part of Amatola Waters water demand planning at present. Pleasant View and Binfield Park Dams Pleasant View Dam Pleasant View Dam is not in use at the moment and is therefore not part of Amatola Waters water demand planning at present. Binfield Park Dam The current demand from Binfield Park Dam for domestic and industrial use is in the order of 3.2 million cubic meters per annum. To meet the expanded medium to long term potable water requirements Amatola Water is in the process of considering increasing treatment capacity from 4.8 Ml/d to 10 Ml/d. This action will increase the demand on raw water supply from the current 3.2 million cubic meters per annum to 4.3 million cubic meters per annum for domestic purposes from Binfield Park Dam. This is well within the firm yield of 16.5 million cubic meters per annum of the dam. Glenmore System There is very little growth is expected within this scheme. There is however plans to link this scheme with the Peddie Regional Scheme within the next two years. This intervention will have the benefit increasing regional economies of scale thus improving long term sustainability. Bushmans River System The demand on the Bushmans River Reverse Osmosis water treatment works is expected to grow slowly over the next five year period. Shortfalls in available resources is also addressed within the Ndlambe Bulk Water Supply Option Study. Additional ground water sources will be sought should demand begin to rise above projected levels via additional sea wells. Assurance of Supply at which Demand is to be Supplied The Infrastructure Master Plan (IMP) of 2003 indicates that there is a reasonable assurance of supply to all water treatment works, with the exception of the Rooikrantz, Laing and Nahoon schemes. The interbasin transfers that are possible from the Wriggleswade Dam to Laing/Bridle Drift and Nahoon Dams are, however, sufficient to overcome this problem when it arises as reflected in table 7. The recent Reconciliation study undertaken by DWA of the Amatole System that has recently been completed, indicates that with the implementation of the Ecological Water Requirements, it will be necessary to either augment the supply or to implement certain strategies such as water demand management or other measures to address this. If the affected Water Service Authorities and Amatola Water implement these strategies in an aligned and consistent manner then the need to implement the construction of a new scheme can be postponed.

41 38 The strategies have been finalized, and the necessary bodies to manage the process have been put in place by DWA. The Amatole Systems Strategy Steering Committee and the Technical Support Group have been established for this purpose and are supported by consultants appointed by DWA to ensure the Amatole System is managed in a sustainable manner. Projected Water Availability and Resources Development Projected Water Availability Projected water use figures have been registered with the DWA and a water use license was issued to Amatola Water during June These registered volumes have been adjusted over the past financial years. Amatola Water updated the required registered volumes as reflected in Table 7. The application for registration of revised volumes will be done in the 2013/14 financial year. Current registered volumes are contained in Table 1. The table estimates that the Nahoon, Rooikrantz and the Albany Coast systems have projected raw water shortfalls for the 2013/14 financial year onwards while the Sandile system will have shortfall in the 2016/17 financial year taking into account the irrigation allocations as well. The Nahoon shortfall will be provided via transfers from the Wriggleswade dam. The Rooikrantz shortfall will be managed by implementing strict operating rules that ensure that a critical low supply levels that potable water shortfalls are supplied to consumers via the Laing system. The Albany Coast system shortfall is also managed under strict operating rules in combination with consumers being required to provide for onsite water supplies via rain water harvesting installations. Table 7 highlights that the ma jority of dams that Amatola Water uses for raw water supply. Environmental water requirements and allocations have not been finalized on any of the schemes. DWA has completed the determination of the environmental flow requirements and potential environmental impacts of possible future developments on the Amathole System. Guidance is outstanding at present on the how the required environmental releases will be implemented. A drought/system management model has been set up to be used to utilize the water within the systems effectively. The system is monitored on an annual basis to ensure that the proposed strategies are implemented in time. Resource Development Table 7 indicates that there is reasonable assurance of supply in the region if no releases are made for the environment. The Maden/Rooikrantz dams showed a shortfall of million m³/a, which is currently being addressed by DWA. The Department is reviewing the allocations from Rooikrantz Dam in consultation with all relevant stakeholders. The Amatole Reconciliation study provides some guidance on the way forward on the allocations.

42 39 Dam Names Capacity in Mm3 (Live storage) Total firm yield Mm3/a Urban/ Domestic Mm3/a Irrigation Mm3/a Environmental Mm3/a Raw water use in 2014/2015 in Mm3/a Raw water use in 2015/2016 in Mm3/a Raw water use in 2016/2017 in Mm3/a Raw water use in 2017/2018 in Mm3/a Raw water use in 2018/2019 in Mm3/a Surplus (+)/ shortfall (-) for 2014/2015 in Mm3/a Surplus (+) / shortfall (-) for 2018/2019 in Mm3/a Binfield Park Dam Cata Dam Dabi Dam Debe Dam Gubu Dam Laing Dam Mnyameni Dam Nahoon Dam Pleasant View Dam Rooikrantz / Maden Dam Sandile Dam Wriggleswade Dam Glen Boyd Balance Dam Albany Coast Total % of Firm Yield for domestic use 50% 20% 3% 40.1% 40.7% 47.6% 49.7% 51.0% 33.7% 22.7% % of Firm Yield for all uses 74% 63.9% 64.5% 71.4% 73.5% 74.8% 57.5% 46.5% Table 7 - Dam capacity in million cubic meters for ma jor dams

43 40 Water Resources Inter-Basin Transfer Supply Scheme Supply Capacity and Development Amatola Water draws raw water from a number of systems. The Amatole system is however the only inter-basin transfer supply system within Amatola Water supply area. Amatole Water Resource System The Amatola Water Resources Systems supplies the water requirements of the Buffalo City Municipality consisting of East London, Mdantsane, King William s Town and Bhisho urban complex, the town of Stutterheim and Mlungisi, and villages in the surrounding rural areas. The water resources of the Amathole System are regulated by seven dams namely, Gubu, Wriggleswade, Maden, Rooikrantz, Laing, Bridledrift and Nahoon Dams. The main purpose of Wriggleswade Dam, which was built during the period 1990 to 1994, was to supplement the shortfall for industrial and domestic use in the East London area. The Amatole System is expected to have sufficient raw water storage until 2022 taking the effect of HIV/AIDS and migration patterns into account excluding environmental water requirements. This date of 2022 is conditional depending on which scenario and strategy is implemented successfully at a specific time. The Wriggleswade Dam provides an additional safe yield of 31.8million m3/a, of which approximately 18 million m3/a, should be available for domestic or industrial use. The finalisation of the volume of water required for environmental purposes will reduce the available yield for domestic / industrial use and thereby moving the augmentation date forward. Various water demand strategies has been compiled and tabled in the report which needs to be implemented by the relevant stakeholders in the near future. The effective implementation of these strategies will then determine the expected augmentation date within the Amatole System. A study to determine rules to optimise the operation of the System has been initiated by DWA and completed by the Operating Rules Study Team. The operating rules, which have since been approved by DWA, entail a transfer of water from the Wriggleswade Dam to dams downstream in the System, when the water levels in these lower dams drop to predetermined levels. The transfer rates are such that they sustain the requirements on the dams only and are not used to re-fill the dams. The ASATSG has reviewed the system yield, based on the adopted operating rules, using the Water Resources Yield Model. The ASATSG has further reviewed the system yield, based on varying operating rules, the results of which indicate that the system yield could be further increased to million m3/a by adjusting the transfer trigger dam levels of the downstream dams under scenario 1, i.e. transfer water when Wriggleswade Dam is spilling. The yield of the System, when operated as an integrated system in accordance with the current approved operating rules, is some 5.2 million m3/a (5.4%) greater than the sum of the yields of the individual dams. Integrated system operation is therefore an imperative to ensure reconciliation of supply and requirement going forward.

44 41 Agreements have not as yet been concluded with BCMM to facilitate the effective implementation of the new adopted operating rules. Despite the above, the system yield of million m3/a, has been used as the basis for the current reconciliation planning. The higher possible yield of million m3/a (as per ASATSG presentation of June 2012) has however been considered as a scenario in the reconciliation planning. Status of Water Resources and Inter-Basin Transfer Infrastructure The capacity of Wriggleswade Dam can be utilised to supplement either the Bridledrift and or Nahoon Dams. This is made possible by a tunnel and canal system that has the capacity to transport 3m3/ sec ( Kl/day) either into the Buffalo River and/or Nahoon River catchments. Water can be released into the Yellowwoods River that flows into the Buffalo River to supplement Laing and Bridle Drift Dams and/or into the Nkobongo River that flows into the Nahoon River, feeding into the Nahoon Dam. Previous environmental studies on the KwaNkwebu River, a tributary of the Yellowwoods River, recommend limiting the rate of transfer between the Wriggleswade and Laing Dams to a rate lower than that for which the transfer system had been designed, in order to protect an environmentally sensitive reach of the river. It was initially envisaged that this would limit the yield possible from the System, requiring by-pass infrastructure to circumvent the constraint. The new adopted operating rules are however such that transfers are undertaken at lower rates, but over longer periods of time, thereby avoiding the need for by-pass infrastructure to ensure that the system yield is achievable. The Amatole Supply System Operation Co-ordination Committee (ASSOCC) is however still required to review the need for pedestrian bridges across the river. Figure 1 shows the current high- and low-growth water requirement scenarios against supply available from the System, as per the current operating rules. Similar graphs have been provided for system yields based on the individual dams, as well as for various proposed amendments to the current operating rules. Based on the high-growth water requirement scenario, measures to reduce the requirement or to increase the system yield would have to be implemented by: Yield of individual dams (94.9 million m3/a) : 2018 Current operating rules (100.1 million m3/a) : 2021 Maximum yield possible from the System (108.1 million m3/a) : 2026 Based on the low water requirement scenario, the System has adequate yield to meet the requirements inclusive of supplies to the Great Kei area indefinitely

45 42 Amatole Water Supply System Figure 1 The ASATSG has undertaken a conceptual (desktop) review of the Sandile/Binfield Park Dams supply augmentation option, identified in the Strategy Study as one of the more favourable augmentation options due to its low URV and short lead time (no need to construct a dam; it uses surplus yields from these existing dams). The findings of the review however indicated that the surplus yields available from these dams to augment supplies to the AWSS are significantly lower than previously anticipated and that more detailed investigations are required to confirm the dam yields. The need to register and monitor water use from these dams was also identified. It can also be noted that the Department of Agriculture and Rural Development (DoARD) are reviewing the agricultural water requirements from these dams, whilst DWA have initiated processes to develop operating rules for the respective dams. A screening of surface water supply options has been completed. The following schemes/options are considered the most viable of the options identified to date and should be put forward for more indepth study for consideration for implementation: Wesselshoek Dam (Kwelera River) the most favourable of the options at this point in time; Ravenswood Dam (Keiskamma River) only if a large yielding dam is required; and Stone Island Dam (Nahoon River) potential environmental implications.

46 43 Maintenance to Dams All storage infrastructures in the form of dams belong to the Department of Water Affairs and capital improvements and maintenance are planned and funded by the Department. At Rooikrantz Dam ma jor refurbishment on the inlet works is required. Currently the service gate has been removed and scrapped. The Department of Water Affairs Head office is designing a new service gate, and delivery is anticipated in two years, after which the refurbishments of the inlet works will commence. Divers have inspected the outlet structure recently. The overhead gantry crane was installed. One of the gate valves is not working and need to be replaced. Delays in this regard have been the result of non appointment of the maintenance service provider by DWA. The maintenance work undertaken by DWA at Laing Dam is being severely delayed and this has resulted in Amatola Water siphoning raw water over the spillway to the Laing Water Treatment Works. The inability of abstracting raw water at the pre-determined levels of the dam has resulted in poor raw water quality being treated at the works. Consequently this has resulted in higher than normal operating cost. A new pipe line is under construction from the dam wall to the works and will be completed by June Repair work on the Nahoon Dam intake tower by the Department of Water Affairs has commenced but has not been completed; project has been on hold due to Departmental supply chain management hurdles in appointing a suitable maintenance contractor. Operations and Maintenance of Water Resources and Inter-Basin Transfer Infrastructure Amatola Water maintains and operates 21 dams as governed by the agreement entered into with the Department of Water Affairs. The water board compiles an annual budget covering maintenance and operating items for review and approval by the Department of Water Affairs. In the new financial year, the Department of Water Affairs has approved a budget of R11.06 million. The Department of Water Affairs and Amatola Water meet quarterly to facilitate the management contract, through discussion of issues pertaining to normal operations and maintenance, including dam safety and ad hoc work.

47 44 Chapter 8 Bulk Potable Water Supply Plan Planning Infrastructure Master Plan Amatola Water developed an Infrastructure Master Plan (IMP) in 2002 to guide the organisation in terms of upgrading, extending and replacing its water production and distribution infrastructure. This plan has a 20 year horizon and has guided the organisation s capital expenditure programme over the past decade. Amatola Water will revise its IMP in the 2014/15 financial year to align with its new strategy. In particular, emphasis will be placed on ensuring there is sufficient bulk water production capacity to meet the demands for higher levels of service within its supply area. Amatola Water will also continue to offer infrastructure master planning services to its clients. Master planning work has been undertaken for the ORTDM in the 2013/14 financial year. The entire ORTDM will be supplied from three anchor dams including the Mthatha, Ntabelanga and the Mzintlava Dams that make provision for water service provision to every household and provisions for higher levels of service as envisaged in the National Development Plan. Similar Master planning has been completed for the Ndlambe Municipality where bulk water will be provided to the entire area from the Sandile Dam which will need to be raised by 10metres by the Department of Water Affairs in the medium term. High level master planning work has also commenced at a provincial wide level in anticipation of the creation of the regional water utilities envisaged in the National Development Plan. This work has been included in the required Due Diligence Report for the establishment of the Southern Regional Water Utility submitted to the Minister of Water and Environmental Affairs on 31 March Provincial Water Sector Planning The organisation has been involved in various provincial water sector planning activities and forums in the past. This will continue and the organisation intends to position itself as a more significant roleplayer in this regard over the next five year period. Specific interventions will include expanding existing business systems including the GIS and telemetry to provide the basis for developing an Eastern Cape water specific business intelligence system. This system will have linkages with other relevant databases in the province. High level master planning work has also commenced at a provincial wide level in anticipation of the creation of the regional water utilities envisaged in the National Development Plan. This work has been included in the IRR Due Diligence Reportsubmitted to DWA on 31 March Amatola Water will continue to refine this high level planning with relevant stakeholders in anticipation of the creation of a regional water utility that will serve the Eastern Cape Province in the near future.

48 45 Section 29 Business Contractual Obligations with Customers All agreements between customer institutions and Amatola Water are circumscribed by requirements set out in the Water Services Act, the National Water Act, and other relevant local government legislation. The legislation provides for water board business relationships to be concluded with the recognized water services authorities that have been tasked with the administration of water services delivery. Amatola Water regularly reviews its current capacities and assesses the needs of District and Local Municipalities to ensure any opportunity to expand its primary business of bulk potable water production is identified and pursued. Amatola Water regularly invests considerable effort to initiate, deliberate and conclude supply relationships and underlying agreements with both district and local municipal entities. The outcome of this local government partnership activity is outlined below: Amathole District Municipality Amatola Water provides bulk raw and potable water services to the Amathole District Municipality (ADM). The water board had, in line with the SALGA/South African Association of Water Utilities (SAAWU) guidelines, negotiated a two year supply agreement with Amathole District Municipality, signed on 19 March This agreement has been extended a number of times; it is currently valid till June 2014 and discussions to extend it by a further three years is underway. Buffalo City Metropolitan Municipality Buffalo City Metropolitan Municipality became a Water Services Authority in July 2003, following the announcement of powers and functions by the Minister of Provincial and Local Government. At the time of the pronouncement, Amatola Water had already entered into a 30-year supply contract (with an escape clause) with Buffalo City Metropolitan Municipality. This agreement remains valid. Ndlambe Municipality Amatola Water has entered into a bulk water supply agreement with the Ndlambe Municipality to supply the Kenton on Sea and Bushmans River areas with potable water. The agreement was signed on 30 March 2010 and is a 20 year agreement. Projected Demand: Description of Major Consumers or Consumer Groups and Projected Demand The ma jor consumers or consumer groups supplied are: District Municipalities The only district municipality being supplied with potable water is the Amathole District Municipality, (through its local municipalities) as listed in Table 8 below. From the 1st of July 2006 the Amathole District Municipality has been paying all the accounts for water supplied by Amatola Water to the various LM s within Amathole DM. The projected total demands for the District Municipality (responsible for Amahlathi, Ngqushwa and Nkonkobe Local Municipalities) are as follows:

49 46 m3/annum WTW Dam 2014/ / / / /2019 Laing Laing Binfield Binfield Dabi Dabi Debe Debe Glenmore Glen Melville Peddie Regional Sandile Rooikrantz Rooikrantz Sandile Sandile Upper Mnyameni Mnyameni Masincedane Mnyameni Totals Table 8 Local Municipalities Buffalo City Municipality and Ndlambe Municipality projected water demands are as follows: Buffalo City Municipality m3/annum WTW Dam 2014/ / / / /2019 Nahoon Nahoon Laing Laing Rooikrantz Rooikrantz Sandile Sandile Peddie regional Sandile Totals Table 9 Ndlambe Municipality

50 47 m3/annum WTW Dam 2014/ / / / /2019 Kentonon-Sea + Bushmans River Mouth Supply- RO Plant Sea wells & Diaz Cross Boreholes Totals Table 10 Individual Consumers Individual consumers are supplied with potable water directly by Amatola Water only under exceptional circumstances. In principle, contracts should be entered into with the local or district municipality for water supply and not with Amatola Water. There are, however, a number of instances where, for historical or other practical reasons, potable water has been supplied directly to end users by Amatola Water. Amatola Water is in the process of discussing this topic with ADM to transfer all private accounts to the ADM. This transfer of private customers to ADM will take effect from 1 July The respective water treatment works supplying individuals or groups of individuals and their projected water demands are outlined in Table 11. Individuals m3/annum WTW Dam 2014/ / / / /2019 Nahoon Nahoon Laing Laing Rooikrantz Rooikrantz Sandile Sandile Binfield Binfield Peddie Regional & Bhirha Sandile Totals Table 11

51 48 Assurances of Supply to Meet Demand The Amatola Water infrastructure is upgraded to meet demands as required. The upgrading of infrastructure is guided by the Amatola Water Infrastructure Master Plan. The plan provides for a 20 year planning horizon. Amatola Water s intention is to upgrade and extend six of its water treatment works that supply the Nkonkobe, Ngqushwa, Amahlathi and Buffalo City Metropolitan Municipalities over the next three financial years. This will allow for an improved level of service (750l/household/day) which will reduce service delivery backlogs, improve rural livelihoods and support productive use activities as envisaged in South Africa s Constitution and developmentally focused legislation. The additional benefit of extending Blue Drop quality water (SANS 214 Class 1 water) services to a significant portion of the rural communities located in the Amathole District Municipality and the Buffalo City Metro Municipality will also be realized. This will have a significant positive impact on the health of the rural communities to be served by these water supply schemes. Nahoon Water Treatment Works A feasibility study has been conducted at the Nahoon Water treatment Works to determine how the spare capacity can be utilized to serve the eastern portion of the City of East London and this project has been included in the organisation s capital expenditure programme. This project has been planned in consultation with Buffalo City Metropolitan Municipality representatives to ensure that the sub-regions infrastructure capacity is efficiently and effectively used to meet the water demand in the future. The first phase of this upgrade will result in an additional 20Ml/day capacity being provided by the 2015/16 financial year. An additional 20Ml/day will be provided by the 2020/21 financial year. This additional capacity will be utilized to supply the eastern side of East London. Binfield Water Treatment Works The Binfield WTW, which has a capacity of 4.8 Ml/day, was constructed during The Binfield WTW is operated at 100% of its treatment capacity at 4.8Ml/day. This treatment works has reached its design capacity and will be upgraded to 10Ml/day to make provision for the growing demand in the area and to supplement shortfalls in the Sandile Dam supply area. A consultant has been appointed to do the design of this upgrade. Masincedane Water Treatment Works The Masincedane WTW with a current design capacity of 4Ml/day will be augmented to 6 Ml/day to make provision for the growth in water demand in the area due to the implementation of housing projects by the Amathole District Municipality within Keiskammahoek which will increase the current output of 2.3Ml/d to 4 Ml/d in the near future. A consultant has been appointed to do the design of this upgrade.

52 49 Peddie Regional Water Treatment Works Amatola Water will upgrade the Peddie Regional Water Treatment Works to increase the plant s capacity from 6.5 Ml/d to 13 Ml/d and improve the raw water supply and potable distribution infrastructure. The plant supplies water to approximately households. Currently 1563 households in the supply area are not served. The plant is currently supplying above its design capacity and does not have any spare capacity. Sufficient spare yield is available from the water resource to allow for the improved level of service and sustain the water supply in the area. A consultant has been appointed to do the design of this upgrade. Note that this upgrade will be done together with the Sandile augmentation option. Sandile Water Treatment Works Amatola Water will upgrade the Sandile Water Treatment Works to increase the capacity of the plant from 18 Ml/d to 80 Ml/d over the next 10 year period. The plant is currently supplying above its design capacity and does not have any spare capacity. As stated above the Sandile Dam wall will be raised by 10m to empound sufficient water to supply the entire Sandile, Peddie and the Ndlambe water supply areas. The first phase of this upgrade is in progress. This will result in the Sandile works being upgraded to 40 Ml/day and the linkage between the Sandile and Peddie water supply systems being completed. The following phase will simultaneously see the dam wall being raised and a further 40Ml/day of treatment capacity being created at the current Sandile works site. Debe Nek Water Treatment Works Amatola Water will upgrade the Debe Nek Water Treatment Works to increase the plant s capacity from 1.5 Ml/d to 5 Ml/d via the installation of a portable package plant. The associated bulk water conveyance infrastructure will also be upgraded to improve the level of service to some 2847 households that are currently supplied by the scheme and also allow for future developments. Currently, 155 households are not served in the supply area. The plant is currently supplying above its design capacity. Amatola Water has an active water demand management programme in place and has maximized water loss savings at present. Sufficient spare yield is available from the water resource to allow for the treatment works to be upgraded to sustain and improve the water supply to the area. A consultant has been appointed to do the design of this upgrade. Impact of Water Conservation and Demand Projections Various efforts to reduce water losses have been ongoing for a number of years. Routine maintenance and inspections throughout the abstraction, treatment and distribution infrastructure have been invaluable in minimising water losses. Furthermore, monthly water balance reviews are used to identify water losses and to take appropriate action in reducing such losses. One of the tools used in improving loss monitoring is a telemetric network.

53 50 A vigorous programme to combat water losses on the bulk reticulation is pursued by Amatola Water, which includes ensuring that all supply points are appropriately measured and monitored on a monthly basis. The efforts to better manage water demand in the services region are monitored jointly by all relevant parties on a continuing basis. In addition to normal leaks, bursts and overflowing reservoirs, inaccurate or malfunctioning meters result in apparent losses. Amatola Water reviews its own system infrastructure performance regarding water loss control on a continuing basis to minimise wastage of the resource. To promote this effort, it has embarked, during the past years, on the installation and calibration of water meters. Amatola Water carries out relevant repair and maintenance work on these water meters. Further improvement on water metering, there are 6 billing and 22 balancing meters connected to the telemetry system for remote monitoring. Part of the three year telemetry plan is for Amatola Water to identify and connect additional meters to the telemetry system. The financial system is also used together with the meter diagrams to compile a parent-child relationship, as a tool to assist its operations in identifying critical water loss areas. Water balance reports are compiled on a monthly basis. This data is then used to improve metering and increase revenue. Policies affecting water balances that have been approved by the Board are listed below: Illegal Connections Policy; and Meter Calibration and Maintenance Policy. Amatola Water is in frequent communication with customers regarding the implementation of demand management programs. Critical interventions are currently being undertaken that includes the development of a comprehensive metering programme that will incorporate both infrastructure owned by Amatola Water and managed under Right of Use contracts. The organisation s telemetry system will also be expanded and integrated with current monitoring systems to ensure the supply of water is monitored and controlled to minimize unplanned interruptions. Projected Water Availability and Resources Development Description of Ma jor Sources of Water and Abstraction Rights Annexure E lists ma jor dams, and compares expected raw water requirements against respective firm yields, to determine the surplus or shortfall in water supply. A study undertaken by consultants on behalf of DWA for the Amatole System (Gubu, Wriggleswade, Laing, Bridle Drift, Rooikrantz and Nahoon Dams) taking the effect of HIV-Aids into account, indicated that there should be sufficient water available until It is anticipated therefore that no new resource

54 51 development is required in the short-term. With the Amatole Water System Reconciliation Study it is proposed to implement the Environmental Water Requirements, which brings a total new demand into consideration which will have a serious impact on the availability of resources. This will then move the augmentation dates for raw water sources forward, however with the proposed strategy framework to improve water demand management these augmentation dates can be delayed. The registered volumes need to be adjusted, due to the increased levels of demand. As no final decision has been taken on the possible implementation of environmental water requirements and it will be discussed and workshopped during 2014/15 to ensure it is implemented appropriately. A pro-active approach will support long term forward planning on new water resource requirements. Ability of Available Resources and Abstraction Rights to Meet Demand From Annexure E it is clear that most of the schemes will be able to meet the estimated demands. Any shortfall of water at Nahoon Dam could or will be supplemented from Wriggleswade Dam when needed. The Amatole Water Resources Systems Analysis suggested that the available yield at Wriggleswade Dam be split in a 40% to 60% allocation, with 40% of the available yield to Nahoon Dam and 60% of the available yield to Bridledrift Dam. This was also the best option for obtaining the best water quality results. Any shortfall in supply from Rooikrantz Dam needs to be supplied from Laing Dam. This is possible by duplicating the King William s Town water needs at the Laing WTW. Amatola Water is currently not able to provide the full additional demand required from the Laing WTW by King William s Town during times of drought due to constraints in conveyance capacity. Over allocation of water from Rooikrantz and Maden Dams (4.6Million m3/a versus the historical firm yield of 3,3 million m3/a (recent review of the safe yield has increased this number to 4.1 million m3/a inclusive of Maden Dam) need to be addressed by the Department of Water Affairs by reviewing the allocations and operational requirements. It is also to be noted that the Rooikrantz WTW was closed due to the increased treatment capacity of the ADM Kei Road WTW and water is now supplied to the Rooikrantz area from the Wriggleswade dam, thereby reducing demand on Rooikrantz Dam. Amatola Water is operating the Rooikrantz Dam in accordance with the proposed operating rules as set out in the Amatole Water Resources System Analysis phase 2 study. The reconciliation study and the recently initiated generic operating rules study for drought management will provide new guidelines on the existing and future capacity of the systems and optional management requirements. These new operating rules had been finalized and are used in operating the system effectively. The reconciliation study has a different approach from the previous studies undertaken. The adopted strategy of the study has not selected a favoured scenario but was to identify which interventions and

55 52 potential assets should be studied to allow for a range of possible water requirement scenarios to be met through a combination of: Interventions that would reduce water requirements; Interventions that would result in treated waste water being returned to the water courses to augment the yields of the dams or to contribute towards the EWR; Interventions that would result in treated waste water being reused and The creation of bulk water supply assets that would increase the availability of bulk water. A Decision Support Tool (DST) was developed whereby 13 scenarios were identified which were analyzed to determine the desired intervention or asset to be implemented by the earliest date identified in the study. A Strategy Steering Committee was established to roll out and implement the proposed strategies. Impact of Reducing Water Loss or Improving Unaccounted for Water The projections in the Amatola Water Infrastructure Master Plan have confirmed that it is unlikely that any new dams would be needed by 2022, primarily due to the availability of water supply from Wriggleswade Dam. This date of 2022 is also debatable as, according to the new reconciliation strategy document that makes provision for environmental water requirements, this date moves forward to 2012 /2017 depending on which scenario and strategy is implemented successfully at a specific time. Reducing water loss and improving unaccounted for water will delay further resource development by contributing to the availability of supply hence the focus by Amatola Water to assist both the Amathole District Municipality and Buffalo City Metropolitan Municipality with water demand management programs on reticulation networks where possible. New Resource Development Required or Being Undertaken as well as Applications for Water Use Licences Amatola Water reviews its projected water use on an annual basis. Due to a number of changes in demand, Amatola Water will review some of the allocated water users in terms of the existing water use license issued to the water board. Purchasing of additional water rights Amatola Water will be requesting adjustment to certain existing allocations, due to the growth in demand that has increased systematically over the years on certain schemes.

56 53 Bulk Infrastructure Supply Capacity and Development Table 12 provides a broad description of the current bulk water supply infrastructure operated by Amatola Water. Scheme Capacity (Ml/day) Annual Average Daily Demand (Ml/day) Total length of gravity mains (km) No. of reservoirs Size of biggest reservoir (Ml) Number of pumping stations Max. head on rising mains Nahoon Laing (was 27.3 Ml/d) Sandile Peddie regional (includes Bhirha) Binfield Park Bhirha (closed) Masincedane Debe Rooikrantz Dabi Upper Mnyameni Glenmore Albany Coast Total Table 12 Ability of Current Significant Infrastructure Components to Meet Demand Amatola Water is in the process of addressing infrastructure development where schemes are operated at its maximum treatment capacity or even above its maximum capacity. New Infrastructure Planned The Amatola Water Capital Expenditure program for the 2014/15 to 2018/19 financial years is presented in Annexure H. The planned capital expenditure program is funded from revenue generated from primary and secondary services, grant funding and from loans where required. A summary of the capital budgets for the next three years is presented in Table 13:

57 54 Funding Source Amatola Water Reserves Loan Grant Totals Table 13 The planned expenditure programme will result in Amatola Water strengthening its balance sheet and improving long term sustainability of the organisation. An additional initiative in terms of growing the organisation s bulk infrastructure footprint includes engaging DWA to promote the idea of the transfer of bulk water infrastructure to Amatola Water. The Regional Bulk Infrastructure Grant (RBIG) in particular is allocated to DWA for implementation and to make the decision to whom ownership of completed infrastructure shall reside. Amatola Water intends presenting a proposal that it is best positioned to own and ensure appropriate operation and maintenance of bulk water service infrastructure outside the Metropolitan areas in the Eastern Cape Province. Status of Bulk Potable Water Infrastucture The status of the bulk potable water infrastructure is monitored on a time basis against the following industry norms for the functional life of elements: Element Functional Life (Yrs) WTW Buildings and Civil Works 50 Reservoirs 35 Pumping Station Buildings and Civil Works 35 Pipelines 30 WTW Mechanical 20 Pumping Station Mechanical 20 Pumping Station Electrical 15 WTW Electrical 15 Plant Machinery 5 Table 14 Table 15 provides information regarding the construction dates of the original schemes and extensions, if any, that have been implemented: Scheme Year original works were constructed Year extensions implemented Age (years) in 2014 Nahoon ,

58 55 Laing , 2005, Sandile Peddie Regional , Binfield Park Bhirha 1990 Mothballed Masincedane Debe Nek Rooikrantz 1987 Partly decommissioned Dabi Decommissioned Upper Mnyameni Glenmore Albany Coast RO Table 15 The infrastructure elements are also monitored on a performance basis which may be shorter or longer than the time base norms. In general, the condition of the Building and Civil assets is good since the oldest schemes were constructed some 30 years ago (compared with the functional life of the buildings and civil works of 50 years). Electrical assets have been repaired, refurbished or replaced, when necessary. The general conditions status of these assets is therefore generally very good. The functional life of electrical assets is, however, 15 years and it is anticipated that replacement of these assets will need to be undertaken by 2014 at the following schemes: Estimated cost of work stimated cost of work scheduled for: scheduled for: Scheme 2013/ / / / /18 Laing MCC s & LV Switchboards for booster pumping stations R R R0 R0 R0 Nahoon Isolators / Earthing Switches 400A R R R0 R0 R0 Upgrade old pump station panels R R0 R 0 R0 R0 Upgrade switch gear for and panels at new pump station (Electrical) R R1m R0 R0 R0 Masincedane MCC s & LV Switchboards R0 R R0 R0 R0 Debe Replace electrical panels R R 0 R 0 R 0 R 0 Totals R R R0 R0 R0 Table 16

59 56 A similar comment as for the electrical assets applies to the mechanical assets. The functional life of mechanical assets is 20 years and it is estimated that the cost of mechanical assets to be replaced by 2014 is as follows: Estimated cost of work stimated cost of work scheduled for: Scheme 2013/ / / / /18 Nahoon Pump R R R0 R R0 Laing Booster pumps R R R Sandile High lift Pump R R Valves R Craighead 3 High lift Pumps Pump set R R Totals R R R0 R R Table 17 As a result of the intensive refurbishment programmes, water treatment facilities are generally in a good working condition. Networks and reservoirs are generally in good working condition. The identification and location of all critical items in the network has been done and the planned maintenance schedule completed. It is expected that additional capital expenditure in the foreseeable period will be limited to the provision of effective cathodic protection for key bulk lines, as well as for the alleviation of bottleneck flow restrictions in certain networks. Operations and Maintenance of Bulk Potable Water Supply Infrastructure Classes of Water Treatment Works The 10 water treatment plants and their distribution networks have been classified in terms of regulation R2845 of the Government Gazette, 27 December Water treatment works currently categorised as Class A are Laing, Nahoon and Class B Peddie, Binfield, Sandile while Class C water treatment works are Debe, Masincedane, Glenmore and Mnyameni have been evaluated under the same regulations and are listed as Class D water treatment works. The classification of the Albany RO Plant is Class C at present. The Rooikrantz Plant was partly decommissioned and form part of the Kei Road Water Treatment Works.

60 57 Operators It is the water board s practice to ensure that all facilities are operated by suitably qualified personnel in line with draft regulation 17. In order to meet future needs of operating personnel, the board continues to train operators who are recruited from communities within its operational area. To date, Amatola Water has produced plant operators through its annual learnership programme who have achieved the level N3 in Water and Wastewater Treatment. The training programmes are the combination of onjob-training and the study of theory courses at the Buffalo City Further Education and Training College. Amatola Water has been able to employ most of the learners once they have completed their training. Radio Telemetry and Scada One of the enabling factors in operations management is the radio telemetry infrastructure that has been installed over the formative years of the board. The SCADA (Systems Control and Data Acquisition) system has been supplied by Adroit to provide operators with graphic and text interface in control rooms. The SCADA system monitors Amatola Water s bulk purified water reticulation. The reticulation system consists of three large plants and four smaller plants, with the balance of the outstations being reservoirs that require monitoring. The SCADA actively monitors plant operation and reservoir levels and reports back via radio telemetry to a central station operating on Adroit. Remote stopping and starting of all the major pump stations is also possible via the telemetry system. Amatola Water seeks to extend the utilization of the system to other corporate functions such as Planning and Development, Water Resource Management and Finance with the aim to continue to improve the quality and reliability of service. Meter Reading Water meters are read on the 20th of the month and signed by the plant superintendents and senior plant superintendents before they are forwarded to the debtors department for billing. Maintenance The Regional Engineering Manager leads a multi-disciplinary maintenance team comprising civil maintenance, water meters, radio and telemetry, planned maintenance, pipelines, property services as well as the electrical and mechanical maintenance sections. Owing to the relatively small size of Amatola Water, the maintenance team is largely centralised at the Nahoon Regional Complex, with the exception of the pipeline team which is based at the Laing Dam facility. The asset maintenance strategy encompasses a hybrid of proactive and reactive maintenance as guided by failure trends and analysis of the effects of failures. In revising maintenance plans the maintenance planning team consults with supervisors and artisans to ensure maximum effectiveness. Most of the maintenance work is done in-house, while more specialised refurbishment and installations are outsourced. The planned maintenance schedule and the dedicated resources for the entire pipeline network are in place and is in the process of being systematically implemented. Amatola Water is confident that this will further reduce the number of pipeline breakages and bursts and consequently the distribution network water losses will be significantly reduced. The asset maintenance strategy is thus aligned to ensure that service delivery is optimized in terms of efficiency and effectiveness.

61 58 A BAAN Enterprise Resource Package (ERP) is used across all functions of Amatola Water, including asset maintenance. The computerised maintenance management system (CMMS) inclusive of responsibilities is currently being refined to generate reports that provide information on key performance areas of the corporate scorecard. Consequently, asset maintenance performance management reports are generated to monitor performance in the targeted and key performance areas of the asset maintenance. Furthermore, all emergency deviation requests will be channeled through the Control Room which is equipped with qualified and technically skilled staff, appropriate equipment and technology (BAAN and SCADA). This is to improve the response times, quality of service and accuracy of information on breakdowns, emergency work, repairs and general maintenance. Significant Future Changes in Operations and Maintenance Arrangements Amatola Water has adopted a new strategy where the organisational focus will be concentrated on growing its section 29 business. This strategy will see Amatola Water growing the section 29 business from the current 85 to 150 Ml/day production therefore the operation and maintenance will be designed to support this strategy and this will see our secondary business reduce to 30% in relation to 70% primary. International Standards Organisation (ISO) System Amatola Water has embarked on using ISO Systems (ISO 9001, 14001, and OHSAS 18001) within the entire organisation. A roll out program for the full implementation of this ISO System and accreditation will be conducted in phases beginning with OSHAS During the current financial year, Amatola Water has been successful in retaining accreditation for OSHAS Amatola Water are currently embarking on programme to maintain its OSHAS accreditation with SABS. Section 30 Business Amatola Water is engaged in various section 30 business activities related to bulk potable water. Current clients include the Amatole District Municipality, the Makana Municipality, OR Tambo District Municipality and the National Department of Public Works. Amatole District Municipality Amatola Water has been over the past year, as part of the 3-year Bulk Water Service Provision Contract, been operating the ADM bulk water services infrastructure since July This contract has been extended with another 3 years ending 30 June The ADM has decided to undertake the reticulation portion of the water service provision function itself. This contract is currently being phased out and some Amatola Water staff has been employed by ADM for continuity. This will be concluded by 30 June 2014.

62 59 Amatola Water has adopted a new strategy where the organisational focus will be concentrated on growing its Section 29 business.

63 60 National Department of Public Works Amatola Water has signed an annually renewable Operation and Maintenance Agreement with the National Department Public Works for the operations of their water treatment works at the following locations: Treatment Works Process Ml/d 1. Slagboom WTW Pressure filter system 2 2. Fort Brown WTW Pressure filter system Patensie WTW Pressure filter system Kirkwood WTW Pressure filter system with lamina plates Seafields SAPS Borehole System Borehole Various small installations at other police stations, prisons and military bases Total 6.09 Table 18 NA Makana Local Municipality Grahamstown is currently experiencing severe water supply challenges [water outages] emanating from a range of challenges which include (a) institutional capacity and skills to manage the water business (b) drought conditions that currently prevail and (c) old water pipelines and old absolute electrical infrastructure and (d) demands that exceeds the current raw water supply. The current water outages have caused ma jor frustrations to the extent that Rhodes University staff, students and academics, lead a demonstration and handed a petition to the Municipal Manager on 14 August As students are linked to families all over SA, the frustration of this failure is felt by families of students across South Africa. Amatola Water is currently appointed by the Makana Local Municipality to operate and maintain the Waainek, James Kleynhans, Riebeeck East and Alicedale water treatment works. This appointment commenced in October 2013 and will continue until 2018 OR Tambo District Municipality Amatola Water is currently managing 19 water treatment works under the five year Blue Drop Management contract ending June This contract is mainly focusing on Blue Drop management of the entire 19 ORTDM water treatment works, as the others interventions will be dealt with as projects.

64 61 Chapter 9 Bulk Wastewater Treatment and Disposals Primary Business Amatola Water owns one small 0.1Ml/day activated sludge pond system with a final evaporation pond located at the Nahoon dam that is operated by the Primary Business Unit. The works is operated and maintained appropriately to ensure compliance with the required discharge standards. Secondary Business The ma jority of waste water treatment work undertaken by Amatola Water to date is related to secondary business. Amatola Water currently has the Amatole District Municipality and the Department of Public Works as clients for this operation and maintenance service. The goal of these contracts is continuous improvement of effluent quality and reliability for the works. In this regard the organisation has a five year target of achieving an average of 70% effluent quality compliance score for the waste water treatment works it operates. In terms of reliability the five year target is to ensure that the service has a 90% availability. A key initiative in achieving this target is the participation in the Department of Water Affairs Green Drop Certification Programme that promotes excellence in water service provision. Both District and Local municipalities have been made aware of the water board s capabilities with regard to provision of bulk waste water services. Amatola Water actively engages with the municipalities on a regular basis to position Amatola Water as a potential provider for consideration in the future. Amatole District Municipality The water board is currently assisting the Amatole District Municipality (ADM) with management support services in the local municipalities of Mbhashe, Mnquma, Great Kei, Amahlathi, Nkonkobe, Ngqushwa and Nxuba. The contract ends in June Included in this contract is the operation and maintenance of the following WWTW for the ADM:

65 62 Treatment Works Process Ml/d 1. Butterworth Biological Filtration Fort Beaufort Activated Sludge Treatment Komgha Activated Sludge Treatment Bedford Oxidation Ponds Adelaide Activated Sludge Treatment Dutywa Oxidation Ponds Kei Mouth Oxidation Ponds Morgans Bay Transfer Pump Station 9. Cathcart Activated Sludge Treatment Chinsta Oxidation Ponds Peddie Activated Sludge Treatment Seymour Activated Sludge Treatment Keiskammahoek Activated Sludge Treatment Middledrift Activated Sludge Treatment Amabele Oxidation Ponds Cwebe Oxidation Ponds 17. Mrhawulize Oxidation Ponds 18. Mendu Oxidation Ponds 19. Willowvale Oxidation Ponds 20. Elliotdale Oxidation Ponds Total Table 20 National Department of Public Works Amatola Water has signed an annually renewable Operation and Maintenance Agreement with the National Department Public Works for the operations of their waste water treatment works at the following locations: Treatment Works Process Ml/d 1. Middleburg Agricultural College WWTW Biological Filtration 2 2. Middledrift Prison WWTW Oxidation Ponds Healdtown SAPS WWTW Activated Sludge Kwaai Brand Complex WWTW Activated Sludge De Blaar Complex WWTW Bio Rotating Disk Treatment Storms River WWTW Activated Sludge Treatment Grahamstown SANDF WWTW Sewerage System Patensie WWTW Biological Filtration Kirkwood WWTW Biological Filtration 1.0 Total 5.3 Table 21

66 63 Chapter 10 Retail and Industrial Water Retail Water Supply Amatola Water participates on a very small scale as a retail water services provider within the Amathole District Municipality in the Buffalo City, Ngqushwa and Nkonkobe Local Municipalities. This is included in its primary business. No secondary business in the retail or industrial water supply spheres of the water service provision function have been secured to date. Industrial Water Supply Water Service Authority Approvals Amatola Water s industrial clients and current demands are presented in Table 21: No. Water Service Authority Local Municipality Industry Ave. Daily Demand Water Class 1. Amathole District Ngqushwa Fish River Sun 0.48Ml/ day Class 1 Municipality 2. Amathole District Municipality Ngqushwa Mpekweni Beach Resort 0.11Ml/ day Class 1 3. Buffalo City Municipality Buffalo City Da Gama Textiles 3.39Ml/ day Class 1 Total Average Daily Industrial Demand 3.98Ml/ day Table 21 The Amathole District Municipality and Buffalo City Municipality are aware of the supply of water to the abovementioned industrial clients by Amatola Water. Contractual Arrangements Amatola Water has concluded water supply contracts with its industrial clients. The Amathole District Municipality and Buffalo City Municipality have expressed no interest to date in taking responsibility for the industrial supply contracts. Institutional Arrangements The current technical and financial institutional arrangements within Amatola Water cater for its industrial clients due to the very limited number of this type of client. Demand for Service Amatola Water is not currently experiencing a demand for industrial water. Should this occur in the future, Amatola Water will proactively engage with the relevant water service authority to ensure the optimum solution to meeting the prospective clients water demand can be accommodated.

67 64 Chapter 11 Other Activities Other Support Services Procurement and Preferential Procurement Procurement is now a full Supply Chain Management (SCM) Unit, combining both Procurement and logistics unit. The SCM policy was approved in the 2012/13 financial year with daily implementation now taking place. Supply Chain Management Alignment The strategic purchasing objectives introduced include demand, acquisition and contracts management activities such as cost and historical analyses, short term contracts and research into the acquisition of critical items, as well as ensuring effective contracts management. Key high value contracts such as fleet, medical aid and insurance are being researched to determine more suitable alternatives to the business of Amatola Water. Construction procurement guidelines have been implemented as prescribed by the Construction Industry Development Board (CIDB). The construction procurement processes will be aligned on a much larger scale in the coming year. All SCM officials will attend CIDB training from time to time to familiarize themselves with changes that might take place. The implementation of the SCM policy over the current financial year has highlighted the urgency to align the existing SCM staff roles with the policy. A capability assessment has been conducted and was followed by a proposed SCM unit organogram. Existing staff will be retrained and placed in the structure. New staff will be recruited where gaps remain. Supplier performance is monitored to ensure quality of service through a Supplier Performance Management system. A review of the format of data on the ERP system is also being undertaken in order to ensure accurate information for reporting purposes. Supplier performance results intend to serve as a platform from which vendors will receive recognition for their performance going forward. This is the ongoing process. Strategies for critical goods and services have been identified and implemented such as the regionalization of the engineering maintenance contracts. This ensures the availability of services, and the tightening up on control measures through service level agreements. Certain contracts established also allow opportunities for the emerging micro enterprise in line with preferential procurement goals. Opportunities for improved services are explored on a continuous basis.

68 65 An efficient and effective vendor database has been maintained within the past year and has preempted operational expansion by equipping itself with new suppliers, regionalization of supplier data, synchronizing with the CIDB database, BBBEE status updates and a database cleansing exercise all to ensure integrity of information. Procurement has become responsive and proactive in managing supply and demand ensuring adequate information flow for reporting purposes. As part of this process and to ensure quick service turnaround times, the procurement section maintains a flexible and responsive attitude towards servicing its customers and clients and will continue to decentralize geographically within various areas to support operational workflow. Preferential Procurement Amatola Water makes use of the BBBEE procurement recognition levels and goals as contained within the Codes of Good Practice. Definite goals to be achieved are pursued annually and preferences are targeted with each purchase where possible, taking into account the needs of the business. Preferential procurement targets have been included in the Supply Chain Management policy and the organisation endeavours to engage with Level 4 or higher rated BBBEE contributors. Detailed reporting in terms of preferential procurement performance on specific projects is done. The results are used to identify poorly performing areas and to focus on increasing such levels. Results have also become significant to clients who are now able to report on the level of business that has been awarded to previously disadvantaged companies. Two months after the approval of budget, SCM will produce a procurement plan for the entire Amatola water with a target of 20% savings on goods and services against the budgeted amount. The BBBEE targets will be set up front for each business case produced. SMME Development Amatola Water has established a SMME Development policy to formalize its commitment to small business development. A full time development facilitator facilitates the various activities associated with developing suppliers such as supplier education and information sessions. The focus is targeted on increasing the capacity of suppliers on the database and also the development of skills within critical supply areas in order to provide more opportunities and experience to small business and thereby grow a sustainable base of suppliers. The focus of attention has shifted towards certain sectors where there are few suppliers and barriers to entry are vast. This unit within supply chain is also responsible for setting up the panel of pre approved service providers and maintain the list.

69 66 Logistics Stores Amatola Water operates three other main stores at Nahoon Dam and Laing Dam. The store at Nahoon Dam keeps certain emergency stocks of chemicals and a wide variety of smaller items and consumables that are either required on short-notice or more convenient to have on site. The Laing Store supports holds pipes, couplings and related items to support the pipeline teams based at Laing and Sterkspruit respectively. The overall stock-holding value and quantity remains low with the focus on only holding the necessary minimum stocks. The remainder of items is obtained directly from suppliers, who also hold critical stock in certain cases depending on the nature of the item and their contract with Amatola Water. Various chemical stocks is also held at the relevant works in a combination of consignment stock from the supplier and Amatola Water owned stock. Smaller offline stores of engineering spares are also in place at and Butterworth. These hold stock for quick access of key critical spares used in the greater area. In the year coming forward similar arrangements are to be rolled out in Albany Coast and Mthatha as well. Fleet With the geographically spread out nature of Amatola Water a reliable fleet of vehicle is crucial for Operations to be able to consistently deliver on their mandate. As such, ensuring the reliability of the fleet, with minimum downtime on vehicles continues to be an area of focus and continuous improvement. This includes reducing turnaround times on repairs, accident claims and streamlining the service process. Good governance of the fleet is also paramount, highlighted further by the costs of running such as fleet and the ease of abuse if proper controls are not put in place. This starts with regular inspection of the vehicles and ensuring the good general care and condition of the vehicle. Detailed analysis of fuel consumptions is done monthly with any ma jor abnormally in usage reported immediately for further investigation. The vehicles are also fitted with a vehicle tracking system which provides details of the locations and use of the vehicles to allow supervisors to monitor the usage. The tracking system also monitors green zone driving by drivers, which equates to encouraging drivers to drive at the correct speeds, breaking and revving to ensure safe and economical driving. Vehicle accidents are all investigated in turn and as appropriate action put in place to reduce the chances or re-occurrences. In certain cases the vehicle tracking system assists with these investigations. The fleet has continued to consistently in-line with the growth in the organisations operations with 132 standard vehicles, 9 trucks, 1 bus and 34 trailers and alternate vehicles totalling 176. The ma jority of these vehicles are 4X4 single cab bakkies. Many of the vehciles are on a Full Maintenance Leases basis and where economically appropriate Amatola Water owns the vehicles. This approach has continued to prove beneficial by providing better pricing through having larger buying power, better turnaround times on vehicle maintenance, smooth cash flow management and better overall reporting on fleet activities.

70 67 The Fleet section continues to monitor the progress of Administrative Adjudication of Road Traffic Offences (AARTO) legislation and has made various preparations for the implementation of this legislation. Once the final dates of the roll-out are released Amatola Water will be well positioned to put in place the required processes. Government garage has been approached analyzing the possibility of sourcing all the fleet from the G-fleet. The possibility agreement has been reached however Amatola Water has to produce and detail specification for fleet of which G-Fleet is voluntarily assisting in that regards. Upon finalization of the new fleet specification, market and industry analysis will have to follow business case which will be the determining factor for the method, then embark to official acquisition following the SCM policy. Information and Communication Technology Information and Communication Technology (ICT) supports and assists the corporate strategy by making use of appropriate ICT technology. ICT Governance Overseeing ICT investments, risk and the allocation of related resources in Amatola Water is the Information and Communication Technology Steering Committee which includes all senior management. The review of the Terms Reference for this Committee to be in line with the Corporate Governance of ICT Policy Framework (CGICT) is underway. Amatola Water will adopt the Corporate Governance of ICT Policy Framework (CGICT) as its ICT Framework. Also in the 2014/2015 reporting year, Amatola Water will develop and adopt a 5 year ICT Strategic Plan. Infrastructure Amatola Water operates a wide area network (WAN), connecting to the main operating schemes using a combination of radio frequency links and Telkom lines as appropriate. Future plans for Amatola Water WAN are to steadily grow the network to include all earmarked primary sites as well as to upgrade existing infrastructure which will improve network performance and accessibility. Disaster Recovery and Business Continuity remain key initiatives and there are ongoing plans in place to provide additional systems / procedures and enhance current techniques in accordance with Corporate Governance. To guarantee business continuity, Amatola Water is in the process of implementing an offsite backup solution for disaster recovery into the cloud. This solution uses the internet as a means for outsourced offsite data storage which is the current ICT trend. To further facilitate business continuity, Amatola Water has initiated the process of procuring a generator which will sustain client access to the servers and network during planned /unplanned power outages. To align Amatola Water s server room environment and controls to industry standards, certain criteria

71 68 will be introduced. These will include amongst others: a more efficient Access Control System to improve security, an Environmental Monitoring System, improved Fire Suppressant System, etc. Measures are constantly reviewed to ensure that data remains secure via firewalls and perimeter security. This is all managed and monitored by an industry leading service provider. Virus, malware and related unauthorized access and software measures are in place, which continue to be highly successful. Software Development A combination of in-house and outsourced expertise are used to effect delivery of customized systems solutions which facilitates the operational requirements of the organisation. Outsourced expertise is only required for specialist applications / systems (namely the ERP system and LIMS) where configurations / development cannot be done in-house. New systems required by the business are developed (as a standard) in the.net framework, interfacing with a Microsoft SQL database. Future projects planned, which are aligned with the company s strategic goals are: A Document Management System to improve and enhance document versioning and provide a more efficient electronic central repository for user access. The ongoing enhancements of the Operations Efficiency System which currently assists the Operations Department with reporting requirements as well as identifying problem areas as they arise within Amatola Water s network. On-going enhancement of the organisations Enterprise Resource Planning System (ERP) to effectively report off business information required by stakeholders etc. are undertaken regularly to ensure that information is accessed quickly and new methods of enhancing end user experiences are implemented when required. Configure additional functionality within LIMS which will assist the laboratory s effectiveness. The Integrated Management System is enhanced regularly to ensure that it aligns itself with new requirements needed to maintain compliance with Safety and Quality measures. On-going improvements are planned for the Budget Management System which was first launched in This system effectively ensures that all information is stored in a central location thus preventing out dated documents from being utilised. It also assists Finance and Cost Centre managers to report off of historical information should the need arise. Database web-hosting to facilitate remote access to systems, which will entail modification of current systems to encompass this change.

72 69 Corporate Head Office Amatola Water s Head Office space has been fully allocated. Amatola Water has purchased a house adjacent its current Head Office to renovate into additional office space. This has been rezoned for business purposes and will be refurbished in the 2014/15 financial year to provide additional office space for Head Office staff. Long-term options include relocating Head Office to Nahoon Dam depending on operational requirements. Social Responsibility The provision of sufficient and safe supplies of water to the various communities in our area of operation ranks as Amatola Water s principal and most effective avenue of corporate social investment. This stance is founded on the understanding that, an improvement in water services provision is a vital enabler of broader local, regional and national socio-economic development and advancement. Guided by this prioritization of services provision, Amatola Water seeks, by all practical means, to contribute positively to the well-being of the communities in which it operates. In this regard, Amatola Water channels its social investing efforts into areas where it can deploy its internal resources and facilities effectively by collaborating together with community stakeholders in securing maximum social benefit. Drop of Hope Under the Drop of Hope initiative, Amatola Water aspires to bring a drop of hope to the many communities in its area of operation that are in need of assistance, hence contributing to the upliftment of these communities. Through the programme, the organisation endeavours to entrench a passion to help, have fun and make a difference. Amatola Water employees are encouraged to get involved in the communities, to put their skills to good use and do something meaningful for the respective communities through the following initiatives: Community outreach Fundraising Awareness/ Educational Each year, a specific theme that is aligned with the Amatola Water corporate strategy is selected and all the projects supported are required to fit within that specific theme.

73 70 The Drop of Hope programme is designed to bring about some positive spin-offs for Amatola Water. These include: raising the utility s profile both internally and externally creating an broader awareness about our business positioning the brand at the apex of organisations with regard to provincial water services a renewed sense of team-spirit in the organisation an increasingly socially empathetic workforce. Educational Tours Educational tours are part of the organisation s community outreach initiative. Approximately 500 learners and students from various local schools and tertiary institutions are hosted annually at the various Amatola Water schemes. Emphasis is placed on encouraging participants to seek careers in the water sector while promoting broader awareness about water and environmental related issues. Bottled Water Amatola Water continues to demonstrate its commitment for community upliftment by sponsoring branded bottled water in support of various community, educational and sporting programmes. Scientific Services Amatola Water has a laboratory located at Nahoon Dam. Sampling and analysis services for raw water, potable water and waste water effluent are offered from this facility. The organisation also runs a satellite laboratory service under contract to the Joe Gqabi District Municipality in the town of Barkley East. The Scientific Services is responsible for monitoring the water quality in the organisation for compliance to the potable water standard (SANS 241), the general waste water limits, the Blue drop and Green drop standards as required by DWA. Analysis is done in the laboratory that is based at Nahoon Dam. The laboratory now consists of a newly renovated Microbiology laboratory and is currently validating the methods. It makes use of the LIMS for its day to day activities which improves traceability of its results,ensure an audit trail and security of the data produced. The key initiative over the next five year period is for the laboratory at Nahoon Dam to achieve ISO 1702 accreditation. A submission to the South African National Accreditation System (SANAS) will be made in the 2013/14 financial year for the some of the metals, anions and physical parameters it performs (10 methods). An accreditation application for a further 7 methods will be submitted in the 2014/15 financial year. Stakeholder Management Amatola Water realizes that in order to improve access to water, particularly in the marginalized rural communities in the periphery of the Province, a more integrated and collaborative approach needs to be adopted in order to manage its engagement with its stakeholders.

74 71 Maintaining an active and constructive dialogue with stakeholders ensures that the organisation s strategy is aligned to the needs of the communities it serves, aiding it to anticipate risks and prospective opportunities, while also creating a conducive environment for it to achieve it mandate. In this regard, the organisation has developed a Stakeholder Relationship Management Framework as part of its concerted efforts to improve stakeholder sentiment, restore stakeholder confidence and to ensure the effective and efficient profiling of Amatola Water and its deliverables in the Province. Importantly, the framework is aimed at guiding the organisation in its quest for a high-quality and coherent stakeholder participation and engagement programme. Through the Stakeholder Relationship Management Framework and the accompanying Implementation Plan, Amatola Water hopes to mobilize resources and form strengthened strategic inter-governmental partnerships which will ensure coordination of service delivery by bringing together the various/ relevant groups of stakeholders. Amatola Water stakeholders are classified into three categories comprising statutory, contracted and non-contracted stakeholders. Among these are Water Services Authorities, the Department of Water Affairs, the media, suppliers, employees and various water sector partners. The establishment of different forums and Amatola Water s participation therein at national, provincial and local levels in an effort to improve cooperation in delivering services to the Province s rural communities is an intrinsic element of the plan. Looking ahead, the organisation believes that these engagements, if executed effectively, can deliver strong outcomes for Amatola Water, way beyond what it can achieve in isolation. Research Amatola Water has signed Memorandums of Agreement (MOU s) with the Fort Hare and Rhodes Universities for the purpose of research collaboration. The MOU with Rhodes University has resulted in the collaboration on two research projects to date. The first project is the application of water accounting techniques in the international water sector and the Monash University of Australia is the lead entity on this project. Rhodes University and Amatola Water are participating in the South African chapter of the final document. The final report was completed in August Amatola Water, Rhodes University and Bloem Water were allocated funding from the Water Research Commission to study the impact of climate change on medium sized water boards in South Africa. The project was completed in March 2013.

75 72 Further funding has been requested for the next phase to consider the impact of climate change on water quality within the study area. This is in alignment with the organisations strategy to increase participation in research activities over the next five year period. Secondary Business Activities Amatola Water offers separate primary and secondary business services. Primary business centers on services provided through infrastructure owned by Amatola Water or through Right of Use (ROU) contracts. Secondary business activities include all other infrastructure related income generating activities that include operation and maintenance contracts, project implementing agent services, institutional and social development services, infrastructure planning and design services. Amatola Waters limited primary business base has forced the organisation to aggressively pursue secondary business opportunities over the past 5 years. The secondary business opportunities have generally been short term in duration with less predictable cash flows and higher risk profiles. The Board has taken the strategic position of stabilizing the business over the next five years through the shifting of emphasis away from secondary business to growing the primary business. This is shift will align the organisation s primary business with the National Development Plan vision of providing each household with running water and improving rural livelihoods. The five year target set by the Board is to achieve a 75/25 split between primary and secondary business revenue. This will be achieved in the primary business by expanding current bulk water infrastructure capacity and through the securing of long term ROU contracts with strategic customers. It is envisaged that these interventions will result in daily bulk potable water sold increase from the present 85Ml/day to an estimated 150Ml/day within five years. Primary infrastructure capacity will be increased at the Sandile, Peddie, Binfield, Nahoon, Masincedane and Debe bulk water supply schemes over the next three financial years by a total of 42Ml/day. ROU contracts will be sought in the Chris Hani, Joe Gqabi, Amathole and O.R. Tambo District Municipalities. Alternative ROU contract options with other water service authorities (WSA) in the Eastern Cape Province may also be considered where the cost benefit analysis yields real value for Amatola Water and the WSA. Secondary business activities will continue over the five year planning horizon. It is envisaged that the approximate current secondary business rand value will remain constant over this period. Emphasis will be placed on regional infrastructure planning, infrastructure development and specialist services. Operation and maintenance contracts will be replaced over this period with ROU contracts.

76 73 Current Secondary Business Contractual Arrangements Amatola Water undertakes numerous secondary activities within the water sector. All activities are formalized contractually via a service level agreement or a formal contract document. Amatola Water s current contractual arrangements linked to secondary activities are presented in Table 22. Alignment with the Department of Water Affairs Ministerial Outcomes and Strategic Objectives are indicated. The organisation has considered the secondary business workload as per the table below and has committed to securing additional contractual resources to ensure the projects are implemented efficiently and effectively in the coming three financial years. Strategic Alignment Client Project Government Outcomes DWA Strategic Objective Budget for 14/15 Budget for 15/16 Budget for 16/17 PRODUCT - O&M CONTRACTS Makana O.R. Tambo District Municipality Department of Public Works Water Service O&M R R R Maintenance Support R R 0 R 0 Water Service O&M R R 0 R 0 Sub Total R R R PRODUCT - PIA DWA Rapid Response Unit R R 0 R 0 Joe Qgabi District Municipality O.R. Tambo District Municipality Sundays River Valley Municipality Sterkspruit WTW Upgrade R R R 0 KSD Presidential Intervention Project R R R Paterson Bulk Supply R R 0 R 0 Ndlambe Municipality Bulk Water Supply R R R O.R. Tambo District Municipality MWIG Program R R R

77 74 Strategic Alignment Client Project Government Outcomes DWA Strategic Objective Budget for 14/15 Budget for 15/16 Budget for 16/17 O.R. Tambo District Municipality O.R. Tambo District Municipality Sidwadweni Water Supply R R 0 R 0 Coffee Bay Water Supply R R R 0 Sub Total R R R PRODUCT - PLANNING & DESIGN Koukamma Municipality Sundays River Valley Municipality Amatola Water / BCMM Ikwezi Municipality Misgund Water Supply Feasibility Study R R 0 R 0 Kirkwood Water Supply Feasibility Study R R 0 R 0 Nahoon Dam East Coast Supply R 0 R 0 R Jansenville Water Supply Feasibility Study R R 0 R 0 Sub Total R R 0 R Annual Totals R R R MTEF Total R Table 22 Table 23 clearly indicates the substantial need for secondary water services in the Eastern Cape Province. This business is inherently short term but will continue to be utilised by Amatola Water to develop relationships with the water service authorities. These relationships will be used as the foundation to develop longer term ROU arrangements with the authorities. Secondary business activities also strongly support the Ministerial Outcomes and Strategic Objectives of DWA as detailed in the Share Holders Compact.

78 75 Chapter 12 Human Resource Development Plans The Human Resources Department coordinates the flow of people into, through and out of the organisation. Human Resource (HR) initiatives support this flow of human capital, and are grouped into key functions including, but not limited to: attraction, retention, capacity building and performance management. The alignment and effectiveness of these functions ensures that Amatola Water has the right people in the right positions at the right time. This in turn enables the organisation to deliver on its mandated services. Human Capital As an organisation, Amatola Water, has survived turbulent times and lost a number of key staff. The organisation continues to face skills shortages but despite this challenge it has continued to deliver the required services. Amatola Water maintains four divisions under the leadership of the Chief Executive Officer and the Executive Team comprising of 4 Divisional Directors. This team is responsible for the implementation of the organisation s business plan. The current workforce profile, according to the various Divisions is as follows: Division % No. Operations Planning & Development Finance Corporate Services CE s Office Total Table 23: Divisional staff percentage: July March 2014 The staff turnover figures together with the reasons for termination for the period July 2013 March 2014 are indicated in Table 24 below. Termination Reason No. Labour Turnover Rate Resignations Dismissals Retirement Contract Expiry 0 0 Death Total Table 24: Service terminations: July 2013 March 2014

79 76 A Recruitment Plan for 2014/2015 will be developed to meet the demands of additional/new business and in line with the approved budget for 2014/2015. Table 25 shows that thirty two (32) employees were recruited in the 2013/14 financial year to date: Placement No. Permanent 18 Fixed term contracts 14 Total 32 Corporate Services 6.7 CE s Office 3.5 Total 100 Table 25: New recruits July 2013 March 2014 The organisation strives to continually assess present and future workforce needs and align these with business objectives in an effective manner. Future recruitment practices will continue to focus on the effective attraction, retention and engagement of staff with the necessary expertise, experience and skills, within a framework that ensures equity and diversity. This approach is encapsulated in the organisation s Employment Equity Plan that is reviewed annually. The Board has set a minimum target for the next five year period for management to ensure that 80% of critical posts are constantly filled. Critical HR Interventions The HR Department will continue to focus on internal service delivery, through the development and implementation of strategies, initiatives and policies to enable the achievement of Amatola Water s corporate objectives. The approach of the Balanced Scorecard s Learning and Growth focus area and the envisaged inputs, activities and outputs will ensure that the following outcomes are progressively realised: 1. Improve Organisation Behaviour and its Functionality: Future interventions: Entrenching the appropriate corporate culture: inspirational leadership; managing organisational politics; and effective conflict management. Aligning people, skills, systems, policies and procedures for strategy implementation.

80 77 2. Ensure effective Organisation Planning, Design & Development Future Interventions: Facilitate organisational development processes and focus on identified priority areas to enhance the effectiveness of individuals, business units and the organisation as a whole. Align Amatola Water s structure with the Business Strategy. Communicate and create awareness of the organisation s structure. Communicate the vision, mission and corporate scorecard. Develop and implement an HR Strategy and Plan. 3. Ensuring the alignment of skills mix available to future requirements Future interventions: Develop and implement an HR Strategy and Plan. 4. Ensure Effective Employment Practices & Personnel Administration Future interventions: Ensure compliance to policy and implementation through effective communication and monitoring. 5. Consolidate and implement a Reward Management Policy Future interventions: Develop clear processes and procedures regarding reward management. Develop a realistic and user-friendly Remuneration Policy. Finalize the Performance Management Policy. 6. On-going consultation, participation & communication with Employees Future interventions: Quarterly HR road shows and staff briefs to create an engaged workforce and enhance cohesiveness. Schedule Team building activities. The achievement of organisational corporate objectives will contribute towards ensuring that Amatola Water has a skilled, competent, motivated and engaged workforce.

81 78 HR Policy Development The organisation has a comprehensive range of policies that focus on human resource attraction, retention, development, performance management and as employee wellness. These policies are reviewed every two years to ensure they remain relevant to the organisation s business strategy and add value to the brand in the labour market. Critical outputs of these policies are Leadership and Employee Development. The policy framework is dedicated to continual staff learning and improvement, the recruitment and retention of a workforce that is competent, a motivated and adaptive workforce, staff health and safety, the retention and sharing of institutional knowledge. The policy framework also provides opportunities for professional and leadership development. Remuneration Amatola Water reviewed its Remuneration Policy in 2012 to ensure the organisation remunerates and rewards its staff in a competitive manner. Progressive remuneration and rewards are however held in line with the social and business imperatives of equity and cost effectiveness. In this regard the Board has set modest year on year salary increase targets of CPI plus a nominal real percentage increase for the next five year period. This is in line with the intent of the New Growth Path of National Government with regards to salary increases. The Board has resolved that the current Remuneration Policy be reviewed further to ensure the organisations reward system is inclusive of non-monetary rewards. This will ensure the policy is holistic and applicable to a broad range of circumstances. Performance Management System Individual staff performance contracts are aligned with the organisational objectives to ensure that the strategies formulated by the Board and Senior Management are operationalized. Performance is reviewed on a quarterly basis to ensure progress is monitored, challenges are identified and appropriate solutions developed. Divisional Business Plans are assessed quarterly by the Management Committee and senior managers. This enables divisions to obtain objective reviews of progress in contributing towards the achievement of the organisations corporate scorecard. The divisional scorecards are used to present progress reports to the Board concerning the implementation of the corporate scorecard on a quarterly basis. The Board has set average annual performance targets for the entity over the next five years. The 2014/15 financial year target is 75% achievement and escalates to 90% by the 2018/19 year.

82 79 Employment Equity Profile Amatola Water subscribes to the principles of employment equity and the staff profile as at 31 March 2014 is reflected in the following table : Occupational levels Male Female Disability A C I W A C I W Male Female Total Top Management Senior Management Professionals & Mid-Management Skilled technical workers & Junior Manage Semi- Skilled Unskilled Totals Permanent Table: 26(a) Amatola Water Staff Profile Amatola Water subscribes to the principles of employment equity and the staff profile as at 31 March 2014 is reflected in the following table : Workforce Profile per Occupational Level and Economically Active Population Blacks Female Occupational Level AW EAP GAP AW EAP GAP Top Management 0% 94.2% 94.2% 0% 46.2% 46.2% Senior Management 75% 94.2% 19.2% 25% 46.2% 21.2% Professionally Qualified & Middle Management 76% 94.2% 18.2% 24% 46.2% 22.2% Skilled Technical or Junior Management 90% 94.2% 4.2% 25.7% 46.2% 20.5% Semi-Skilled 98% 94.2% 0% 29.4% 46.2% 16.8% Unskilled 100% 94.2% 0% 9.4% 46.2% 36.8% Table: 26 (b) Gap analyses between EAP targets and Amatola Water workforce profile

83 80 Amatola Water currently has 1% of its staff with disabilities out of the 342 staff complement. It is recommended that if progress continues as depicted by the trends, equitable representation in terms of gender can be reached by ensuring that the recruitment process, skills development initiatives and succession plan are aligned with Amatola Water numerical goals within the next employment equity plan. Employment Equity The Employment Equity Plan of Amatola Water has been reviewed in November 2009 and is valid until The new business plan will require a review on employment equity plan with special focus on the numerical goals which will cover the period. The reviewed Employment Equity Plan will be for the period The reviewed plan is due for approval by 31 November The following represents Employment Equity developments within the organisation and highlights of future tasks necessary to ensure that equity exists in all levels and categories of employment at Amatola Water: Increased employment of women, especially at management levels. Amatola Water makes efforts to attract qualified and skilled women at these levels. Policies such as recruitment procedures are some of the strategies adopted and implemented by the organisation to fulfill this endeavour. Preferential recruitment is one other strategy employed to address these areas of improvement and concern in reaching the numerical goals. Retention of employees strategies aimed at technical, scarce and critical skills of employees. Development of a Promotion Policy aligned to the organisation s Succession Plan. Review of the Terms of Reference for the Employment Equity Committee. The alignment of training and development and the Succession Policy in ensuring effective implementation of the EE Plan. Improve commitment from the management in ensuring the effective implementation process of employment equity. Steadily stride in increasing the representation of people with disabilities from 1% in 2013 to 2% in next five years as required by the Department of Labour. Commitment to align employment equity targets with BBBEE. Training and Development In response to the National Skills Development Strategy III ( ), Amatola Water will develop a five year training and development framework. This is in line with the commitment to grow and strengthen leadership capacity to sustain a high performing organisation.

84 81 Amatola Water s training priorities are dictated by its Workplace Skills Plan, which is the product of a detailed performance development plan and a skills needs audit. In conjunction with the Energy & Water SETA and the organisation s own strategic plan, Amatola Water will maintain its focus on the following training interventions: Technical Training i.e. Engineers, Technicians & Artisans ABET Supervisory/ Management & Executive Development Programmes Safety, Health & Environment Life Skills Training Induction Information Technology In-service training Learnerships in Water & Waste Water Purification Apprenticeships in the Engineering disciplines Multi-skilling, Coaching/Mentoring & Job rotation Financial Study Assistance : Scarce and Critical Skills Recognition of Prior Learning (RPL) Graduate Placement Training and development endeavors by Amatola Water form part of the principles that guide the approach adopted to ensure the success of the business strategy in supplying quality water. The development and provision of competencies central to the achievement of the business goals remains a priority for Amatola Water s strategic role. Personal development plans (PDPs) are annually developed to assess employee s interest in management and professional advancement, and to help in career planning. Linkage between the organisational framework and the individual will be detailed in each employee s PDP. The PDP is part of each employee s annual performance contract and is aligned with the organisation s Skills Development Plan. Learnership Programme: Water and Wastewater Purification The Amatola Water Learnership programme forms part of a number of interrelated initiatives, which are intended to ensure the success of Amatola Water as a business to provide water services of a world class standard. Amatola Water has contracted 10 general workers on an in-house learnership programme (for 12 months) on Water and Wastewater Process Controller NQF Level 4; Water and Wastewater Treatment (NQF Level 2) courses. The development strategy has been underway for several years and is guided by the Skills Development Committee. With a competency-based approach, Amatola Water aims to build a workforce through a wide array of formal, informal and networking development opportunities for employees. Each year the

85 82 organisation will offer opportunities for development to expand employee s skills and knowledge. This is expected to stimulate innovation and collaboration among employees in the work place. Amatola Water together with the Department of Water Affairs signed a Memorandum of Understanding for coaching and mentoring of 24 DWA employees in water service treatment. The duration of the programme is three months and will be conducted at various sites. Amatola Water has trained 17 learners from the community of Shixini in Dutywa in a 12 month Water and Wastewater Treatment learnership. The programme for Shixini learners is coming to term on 30 April Learning Academy Amatola Water has been awarded full accreditation by the Energy & Water SETA as a training provider to facilitate Water & Wastewater Treatment Process Control Supervision at NQFL 2 & 4 as well as a Skills Programme. The success achieved in past learnership programmes and the full accreditation by the EWSETA has led to Amatola Water seeking to establish a Learning Academy. The aim is to address high unemployment, skills shortage, poverty and other related challenges, which require an integrated and holistic approach to knowledge management and skills development, over and above programme level. The project will initially cater for the critical skills issues within Amatola Water and for the skills challenges that affect the South African water and sanitation sector, as well as on the continent. Looking ahead, the focus will incorporate various other models that include technology development, research platforms and the establishment of centers of competence and excellence. The programme will be launched in June Phase 1 of the programme will target municipalities and other stakeholders committed to water service delivery. The trainee target group will primarily be unemployed youth especially from the previously disadvantaged, employees from strategic partners and municipal officials. The Academy will be able to assist in combining certain courses required across municipal boundaries. This will promote cost savings and enable trainees from different areas to exchange experiences. Graduate Placement Amatola Water will at all times strive to support students with options to maximize their learning and personal growth in order to achieve their academic qualifications. The programme is a structured opportunity for students to apply the knowledge and skills gained through the course of their studies in a workplace context. It provides invaluable exposure to new and interesting career options, opportunities for networking and the experience of supervision. The programme is assisting Amatola Water to create a pool of employees to recruit from, especially with scarce and critical skills. The organisation recognizes the need to expand its current employment profile and has committed itself to make internship and placement opportunities available within workplaces.

86 83 The Internship Programme is aimed at unemployed graduates wishing to gain practical workplace experiential learning and theoretical learning which will be integrated to provide a solid foundation of skills for employment opportunities. The programme will focus on the development of key skills needed in support of operational requirements within the company. Financial Study Assistance Amatola Water strives to attract skilled and competent employees. It is committed to continuously developing its qualified and skilled staff as part of the endeavors towards staff development and staff retention. Continuous learning opportunities shall be provided to employees through accredited courses. Executive dialogue sessions on current leadership topics will be regularly offered. Financial Study Assistance: Scarce and Critical Skills Amatola Water engages in the development of the scarce and critical skills by providing financial study assistance to students who meet the determined criteria. This will assist the company to address the scarce skills shortage by creating a pool of competent employees and non-employees for recruitment purposes. SUPERVISORY, MANAGEMENT AND SENIOR MANAGEMENT PROGRAMMES These programmes provide skills necessary to enhance the efficiency and effectiveness supervisors, administrative and operational staff. There is a focus on the development of middle managers and professionals in support of succession planning. This will be done through identifying and accelerating the development of high-performing employees who have the potential for leadership and other critical roles. Support to Assist Staff to Register with Professional Bodies A key initiative for professional and management development over the next five year period is to increase the number of staff with professional registration. The organisation will embark upon assisting the pool of qualified staff in the fields of engineering and science to register as candidates with professional bodies. The organisation will continue providing this programme, as it has helped supervisors and managers in implementing their day to day activities and management of their subordinates. Recognition of Prior Learning When an individual believes that they have equivalent competencies to one or more of those delivered by the trade which they wish to undergo, as a result of their previous learning experience (formal or informal), the Recognition of Prior Learning becomes the assessment process required to provide evidence of their competencies. There is currently a strong pool of experienced Artisan Aids who have been providing support to qualified Artisans for a number of years. The Human Resources Development Unit, working in conjunction with the Operations Division has recognized a need to support these Artisan Aids through Recognition of Prior

87 84 Learning (RPL) until such time that they attain full trade certificates. The skills gaps have been identified in the engineering fields, where artisan aids will be assisted and developed until they qualify. Amatola Water has assessed 26 Artisan Aids in both the electrical and fitting fields. The suggested intervention plan is based on the findings/recommendations by the training provider, that these artisan aids over a period of 12 to 18 months must undergo a structured training programme that covers the different required modules of that specific trade. In the 2013/2014 financial year, four Plumbing candidates who have been assessed through recognition of prior learning are due for placement for a Trade Test. Training and Development Policy The Training and Development Policy is intended to advance and complement all Human Resources interventions relating to training and development of employees. The policy will be reviewed and the intention is to have one training and development policy which will incorporate all HR intervention areas. Amatola Water recognizes that the competence of its human capital is a critical factor for its current and future progress, competitiveness and sustainability. It further recognises that in order to meet the skills challenges in the organisation, it is strategically necessary to invest in the education, training and skills development of its employees, especially with regards to scarce and critical skills. The policy also intends to contribute meaningfully to human talent attraction and retention. Dual Career Tracks will be explored as a way to retain and energize talented professionals who may not have an interest in management roles. Dual career tracks provide more scope for management and specialist development and progression. The organisation will examine best practices and effective models in other organisations to determine the feasibility of this approach in the next five years. Succession Plans will be implemented in all departments and to ensure a continuous flow of qualified candidates to fill critical positions. Strategies include the development of internal talent pools, knowledge transfer from current employees to successors, and recruitment of new professionals to fill gaps. Employee Relations and Employee Wellness Amatola Water values its employees as one of the key assets in pursuit of its business goals. With over 80% representation, the South African Municipal Workers Union remains the sole bargaining agent for the purposes of collective bargaining. Through the Local Labour Forum, Amatola Water continues to foster a culture of participation and consultation in all critical issues of the organisation. The Organisational Rights Agreement signed between worker representatives and the employer remains the guiding document for engagement and consultation. Amatola Water is also a role player in the Amanzi Bargaining Council processes with other water utilities.

88 85 Employee Wellnes and Life-Style Management Amatola Water places importance to compliance with the Occupational Health and Safety Act as a way of ensuring a workforce that is safe from occupational injuries and diseases. To this end, in-house occupational health services aimed at ensuring proper placement of employees as well as continuous health monitoring and routine surveillance for the employees are in place. Beyond occupational health and safety compliance, Amatola Water recognizes the importance of keeping employees happier, healthier and more productive. To this end, regular wellness activities aimed at educating and creating awareness to employees about healthy life-styles and general management of personal health continues on a regular basis. Through the services of contracted doctors Amatola Water s chronic health care management program remains a key factor in minimizing prolonged absences from work and ensuring that employees remain healthy. Early diagnosis, identification of response plans and diseases management awareness is the cornerstone of the programme. Amatola Water subscribes to the Department of Health s strategy of Getting to zero: zero new HIV infections. Zero discrimination. Zero AIDS- related deaths. In collaboration with service providers in the field of HIV and AIDS and our Peer Educators, the organisation continues to champion awareness to employees with a view of ensuring good support and care both to affected and infected employees and their families. The general wellbeing of employees is also a key focus in the wellness programs. Programs aimed at general health awareness as well as early identification and management of chronic conditions like diabetes, TB, high blood pressure and obesity will be ongoing for the year ahead, as well as the foreseeable future.

89 86 Chapter 13 Environmental Management Programme and Plans The focus of the environmental management function is to ensure that both Amatola Water owned (primary) business and secondary business (including right-of-use business) comply with environmental and relevant water legislation, standards, regulations and norms. Environmental management remains a complex and challenging concept based, in part, on the complexities of the definition of environment. Based on the National Environmental Management Act (1998) and the White Paper on which it is based, environment should be defined broadly and should promote constitutional values, safeguard the health and well-being of people, advance economic development and ensure that the required level of ecological protection is afforded without compromising the natural, financial and social resource bases. The scope of environmental management continues to evolve, and is merging with concepts of sustainability, triple bottom lines, corporate governance and corporate social and environmental investment. With an ever increasing pressure on freshwater and other environmental resources, there exists a large challenge to integrating social, economic and environmental factors in to planning, implementing and decision-making so that resource development and use is able to serve both current and future generations sustainably. While Amatola Water has made significant inroads into the people aspect of the definition of environment through the development and implementation of the Integrated Management System and associated policies and procedures, much remains to be done regarding the green (or ecological) aspect of the definition. In its Environmental Policy, implemented in November 2002, Amatola Water committed itself to minimising the impact of its operations on the environment through the application of sound environmental management based on best practice. The goals of the policy are to integrate environmental considerations in the day to day business activities of the organisation and at the same time provide strong community leadership on environmental issues as well as contribute to broader community understanding of environmental issues. While many of these are focused towards issues pertaining to water, water resources and water management, broader environmental issues are not excluded from the scope of the policy. These goals were incorporated in the development of the Environmental Sustainability Strategy and are being given effect through interventions and initiatives that are aligned with the organisational scorecard and both short and long-term strategic objectives. The strategic interventions outlined in the Environmental Sustainability Strategy provide the overarching framework to guide Amatola Water in supporting and achieving environmental sustainability. Broadly, the interventions have been identified as:

90 87 monitor, assess and evaluate effect of, and on, Amatola Water activities through the development of environmental monitoring programmes; manage and mitigate environmental impacts; promote environmental awareness, creating an awareness of scarce natural resources and the need to reduce environmental stress; support co-operative governance; enhance organisational sustainability (social and financial) through environmental initiatives; participate in relevant environmental technology research. Although aspects of these initiatives are currently being undertaken across the organisation, formalising these interventions within the strategy provides stronger motivation and support for ensuring that principles of environmental sustainability are clearly incorporated in the entire life-cycle value chain of the organisation. A key driver in implementation of the strategy is to review the Integrated Management System in order to fully integrate environmental sustainability and develop relevant environmental management plans to monitor and assess organisational activities, and ensuring compliance with all relevant legislation. This is particularly important as Amatola Water embarks on upgrading and expanding production capacity at six water treatment works supplying various supply schemes. In order to give effect to the Environmental Policy and Environmental Sustainability Strategy, Amatola Water continues to work with relevant necessary National, Provincial and Local government as well as seeking out other relevant organisations that are committed to ensuring a sustainable environment for the future. These include ensuring ongoing relationships with existing research partners (e.g. tertiary institutions) and monitoring partners (e.g. undertaking raw water monitoring on behalf of the Department of Water Affairs, various municipalities and assisting the Working for Water programme in the control of water hyacinth) and establishing new research partnerships. A number of environmental projects underway provide necessary environmental support for various projects across the organisation both for Amatola Water owned business (such as increasing WTW production capacity) as well as secondary and right-of-use business. These provide good working examples of how to integrate environmental issues comprehensively into future projects and serve to better position Amatola Water as a leader in environmental sustainability in the region. Environmental awareness and education campaigns have been identified as being able to effectively reach communities, not only Amatola Water staff, to think green as a routine. This should affect the day to day business of the organisation to ensuring that Amatola Water contributes to not only achieving environmental sustainability but strives to become an environmental leader within the Eastern Cape. This is not limited to education with regards to water but includes broader environmental issues in the region. Key environmental initiatives aligned with the organisations 20 year goals and 5 year objectives are presented in table 27:

91 88 20-Year Goals 5-Year Objectives Environmental Initiatives Blue drop: minimum score 90%. Blue and Green Drop achievement in entire service area. Increased customer base and penetration (delivery options / services). Ensure environmental sustainability is incorporated in planning and development for projects from inception (EAs and WULs). Contribute towards decent standard of living of communities in the EC. Achieve Statutory Quality compliance at All AW Owned and RoU plants. Provide support to DWA and DEA. Contribute to decent standard of living in support of rural livelihoods. Develop and implement Environmental Management Plans. Provide support to DWA and DEA. Develop environmental enhancement / mitigation initiatives. Provide services and invest in technologies / systems in an environmentally responsible and sustainable manner. Be aware of and participate in relevant research projects (e.g. WRC, tertiary institutions). Investigate renewable energy options. Strengthen and deepen relationships with statutory, contracted and nonstatutory stakeholders. Ensure environmental sustainability is incorporated in planning and development for projects from inception (EAs and WULs). Develop and implement Environmental Management Plans. Ensure environmental sustainability is incorporated in planning and development for projects from inception. Ensure environmental sustainability is incorporated in planning and development for projects from inception (EAs and WULs). Sustain existing and grow environmental network.

92 89 20-Year Goals 5-Year Objectives Environmental Initiatives 80% of households in EC being served at 750l/ household/day. Have a sustainable and reliable infrastructure to supply quality water for all. Increase sales volume by 20% year-on-year to reach entire province by On-going strengthening of Balance Sheet to sustainable services (Ratios). Implement electricity consumption efficiency measures. Undertake environmental footprint studies (e.g. carbon, water). WCDM plans. Implement water recycling at WTW (where appropriate). Water loss 6%. Water provision at 750l/ household/day. Reduce environmental footprint. Adequate water security and assurance in support of water supply. Upgrade plants to provide minimum 5 Ml/day. Minimise production and distribution water losses. Develop adequate systems, structures, policies and processes to enable strategy implementation. Ensure environmental sustainability is incorporated in planning and development for projects from inception (EAs and WULs). Ensure environmental sustainability is incorporated in planning and development for projects from inception (EAs and WULs). WCDM plans. Undertake environmental footprint studies (e.g. carbon, water). Integrate environmental sustainability into existing IMS. * Renowned knowledge hub for water services in the EC. Improve organisational behaviour and its functionalit. Develop and implement EMPs. Develop environmental awareness initiatives. Ensure effective organisation planning, design & development. Ensure environmental sustainability is incorporated in planning and development for projects from inception (EAs and WULs). Table 27

93 90 Chapter 14 Water Conservation and Demand Management Primary Business Water Conservation and Demand Management Policy Throughout its own internal operations the water board strives to reinforce principles of water conservation covering all stages of the production chain. In water treatment works, water losses are minimized through process improvement and optimization of backwashing and de-sludging processes, while measures are also in place to ensure that other losses (such as leaks) are monitored and attended to without delay. Reclaiming of water disposed of during the desludging process is also part of Amatola Water s operating culture. This emphasis on prudent water usage is also maintained externally through the limiting of wastage in distribution and storage networks, where more detailed water balances are conducted on a monthly basis to identify any anomalies. Water demand is managed with the aid of a comprehensive parent child metering system that is guided by a policy on meter calibration and maintenance. Illegal connections pose a problem in some distribution networks. Amatola Water has a policy in place to manage illegal connections and ensures that the local and district municipalities are informed throughout all interventions approved in terms of the policy. Institutional Arrangements The maintenance and reading of all water meters is under the control of the Operations Division. All meter readings are taken on a monthly basis and are used by the finance department to ensure all customers receive an account for raw and or potable water used. The Planning and Development Division is responsible for water loss and demand management monitoring in the organsation. The separation of the operations and maintenance from the monitoring function ensures accountability is not compromised. Programme Amatola Water compiles a water balance report on a monthly basis in terms of its metered water. From its enterprise resource management programme (BAAN) reports it is possible to draw three-monthly consumption reports that indicate specific areas of loss. Using this as a tool, it is possible for supervisors to trace specific water loss areas quickly. Amatola Water achieved a 4.8% production loss and distribution loss 9.5% on average for the previous financial year. Continued focus on reducing these losses will occur over the next five year period. The organisation intends reducing total losses from the current 14.3% to 8% by minimizing illegal connections, providing more rapid responses to leaks and the replacement of certain portions of its infrastructure that has exceeded its design life. The water meter calibration programme also assists in curtailing demands.

94 91 During the drought period restrictions in supply, consumption and outputs are monitored on a daily basis to ensure demands are limited to the levels as was set out in the Amatole Water Resources System analysis operating rules. The status of the level of the dams will be monitored during May each year and the applicable operating rules will then be applied depending on the projected annual demand and available resource. Good progress has been made in the management of non-revenue water. This has been based on the production of schematic lay-outs of meters on all schemes, showing the relative positions of the meters including both billing and balance meters. This enables Amatola Water to establish overall losses on each scheme as well as losses at particular points in the schemes. Such losses can be due to real water loss or apparent loss. Inaccurate meters or illegal connections are detected as apparent losses but by tracking balances between sub-sections of schemes, suspect meters or areas with illegal connections can be isolated, identified and appropriate corrective action can be taken. These schematics of meter line diagrams are continuously updated when required by the GIS section in cooperation with the Operations Division. Water balances are done on a monthly basis for all schemes operated by Amatola Water. These balances are communicated between the various divisions to ensure that appropriate actions are taken to reduce the losses identified. Amatola Water has also changed to an electronic meter reading recording and barcode identification system to ensure that less recording mistakes are made during the meter reading process. The management of illegal connections is undertaken in consultation with clients by inviting ward councilors to community meetings where particular problems are discussed and where a permanent solution can be agreed to and implemented. Projects Amatola Water has planned several capital expenditure projects over the next five year period that will result in improved water conservation and demand management. These projects focus on water infrastructure operated by Amatola Water and include the following: Scheme Project Budgets (Rx 000) 2014 / / / 17 Nahoon Replacing Rising Main Pipeline R 1,195 R65 R0 Laing Replace Ndevana Pipeline R3,000 R3,000 R3,000 Replace Raw Water Main R1,585 R770 R0 Peddie Upgrade Bulk Distribution R22,420 R1,120 R0 Binfield Upgrade Bulk Distribution R6,270 R43,217 R2,150 Sandile Upgrade Bulk Distribution R13,860 R138,550 R6,900 Masincedane Upgrade Bulk Distribution R7,080 R49,266 R2,450 Debe Upgrade Bulk Distribution R0 R8,260 R2,100 Totals R55,410 R244,248 R16,600 Table 29

95 92 Secondary Business Water Demand Management services are also currently offered under the secondary business to municipalities in the Eastern Cape Province. This service is currently being rendered in Kouga Municipality. Kouga Municipality Amatola Water was appointed by the Kouga Municipality to assist with a WCWDM intervention in January The project value was R 1,5 million and was funded by DWA. The focus of the project was meter installation, meter calibration, a database review and valve maintenance. This first phase of this project was successfully completed during Amatola Water has obtained a further R1 million from DWA to assist Kouga Municipality further with WCWDM during the 2013/2014 financial year (Phase2). Specific problematic pipelines, air valves, reservoir control valves and scour valves were serviced and or replaced as well as an annual water balance been drawn up. All work was completed during Phase 2 and it is planned to do a Phase 3 for continuity and to achieve further improvements and savings. Amatola Water is however still waiting to get an allocation of additional money from DWA for Phase 3.

96 93 Chapter 15 Financial Plan The Financial Plan is for the five-year period (2014/ /19). The following assumptions have been made, and it must be noted that any material change in the assumptions will have an effect on the longterm view expressed: Macro Economic Assumptions ( Source Bureau for Economic Research (BER); National Treasury and Investec) Parameter Note F'13 (Baseline) F'14 F'15 F'16 F'17 F'18 F'19 CPI 5.3% 5.5% 5.6% 5.8% 5.6% 5.6% 5.6% PPI 4.80% 5.30% 5.50% 5.70% 5.70% 5.70% 5.70% Interest on borrowings Short term 7.16% 7.78% 8.21% 8.51% 8.51% 8.51% 8.51% Long term 10.87% 10.92% 10.99% 10.99% 10.99% 10.99% 10.99% Interest on Investments 5.16% 5.78% 6.21% 6.51% 6.51% 6.51% 6.51% Employee Costs 7.90% 7.90% 7.70% 7.60% 7.60% 7.60% 7.60% Number of Employees Elecricity Increase 8% 16% 16% 16% 16% 16% 16% Chemicals 6.80% 7.20% 6.90% 6.90% 6.90% 6.90% 6.90% Maintanance 6.80% 7.20% 6.90% 6.90% 6.90% 6.90% 6.90% Raw Water Purchase 8% 8% 8% 8% 8% 8% 8% Water research Levy 1% 1% 1% 1% 1% 1% 1% Business Model ( Engegement in Secondary Business) Net Profit % Table 29 The financial model has been developed using the 2011/12 audited and 2012/13 year to date data. The capital expenditure programme is driven by the organisational strategic objective to make sure that Amatola Water plants are producing at least 5Ml/day. This figure has been determined as the breakeven point for a viable water treatment plant in the Amatola Water context. Amatola Water has secured

97 94 funding of R500 million from the national fiscus over the next two years. This funding was sourced to enable the organisation to become financially viable and self sustaining into the future. The funding will be used for the organisation s capital expenditure programme. The capital expenditure programme will result in the organisation s bulk potable water production and distribution infrastructure to increase from the current 112Ml/day to Ml/day. Amatola Water will contribute approximately R20 million co-funding from its reserves to fund this capital expansion. Amatola Water Board Financial Plan for Consolidated Year 0 F14 Year 1 F15 Year 2 F16 Year 3 F17 Year 4 F18 Year 5 F19 Assumptions CPIx 5.5% 5.6% 5.8% 5.6% 5.6% 5.6% Increase in water sales (Percentage) 8.7% 1.0% 1.5% 20.0% 3.2% 3.1% Volume of water billed (Potable) Volume of water billed (Raw Water) AW Volume Sold (Inc ROU) Right of use Total Water Sold (exc ROU) Proposed tariff increase % (Potable) 9.8% 9.0% 9.0% 8.8% 8.8% 8.6% Raw Water tariff increase by DWA % 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% Water Loss % 8.5% 8.5% 8.6% 7.3% 7.0% 6.6% Volume raw water purchases Cashflow Budget Revenue (Primary Sec 29) Potable Raw Less: Provision for non-payment (@3-5% of Sales) Less: Raw water cost Less: Direct scheme costs Less: Overheads

98 95 Consolidated Year 0 F14 Year 1 F15 Sub-balance 1: Operating Cashflow surplus or (loss) before interest charges Less: Net interest charges Sub-balance 2: Operating Cashflow surplus or (loss) after interest charges Capital expenditure comprising capital expansion and refurbishment Changes in working capital Depreciation Dividends Sub-balance 3: Net borrowing requirements Accounting Surplus Operating cashflow or (loss) after interest charges (Sub-balance 2) Depreciation Sub-balance 4: Accounting surplus or loss Other Revenue Right of Use (ROU)/Blue Drop Advisory Revenue (Secondary Sec 30) Sundry Revenue Total Other Total Revenue (Sec 29$30) Percentage of the Secondary Business to Total Revenue 48% 27% 26% 21% 23% 26% Percentage of the Primary business to Total Revenue 52% 73% 74% 79% 77% 74% Total Revenue (Sec 29$30) Year 2 F16 Year 3 F17 Year 4 F18 Year 5 F19 Table 30

99 96 The organisation s continued balance sheet weakness necessitates that secondary business pursuits continue for the interim period to build up equity. Long term sustainability will however be secured through the improved economy of scale in the primary business once the abovementioned capital expenditure programme has been implemented. The expected outcome of the capital expenditure programme is increased production and sales of potable bulk water. Current production capacity on most plants is at or over 100% indicating there is unmet demand on the organisation s supply area at present. Analysis of the Financial Forecast 2014/ /19: Positive Expectations Projected growth in operating primary revenue linked to inflation ; Projected growth in secondary revenue projects; Growth in costs in line with expected inflation rates; Growth in net surplus; Projected increase in reserves; Increase in the asset base; Negative Expectations Decline in cash reserves in year 1 to 5 due primarily to the funding of capital expansion; Funding required to grow the bulk supply to ensure long term sustainability and asset replacement reserves. Major Costs Drivers Ma jor cost drivers for Amatola Waters primary business includes raw water purchases, electricity, chemicals and staff (overheads). Our Major Costs Drivers (K/l) Raw water cost Direct scheme costs (Electricty and Chemicals) Overheads Table 31

100 97 Ma jor Cost Drivers (k/l) Rand Values Overheads Direct scheme costs Raw water cost Figure 2 Raw and Potable Water Tariff Amatola Water is estimating that the raw water tariff will increase at 8% over the next five years while the potable water tariff is projected to increase at an average of 8.5% per annum. The potable water tariff increase will be at a decreasing rate over the next five years to ensure tariffs are affordable and sustainable. This will be achieved by increasing the production capacity of Amatola Water supply systems resulting in increased potable water sales. This increased sales volume will improve the organisation s economy of scale resulting in a reduction in the cost per kilolitre because 40% of the plants costs are fixed or semi-fixed. Below is the graphic representation of the relationship between raw and potable tariff over the next five year period:

101 98 Tariffs Rand Values Proposed sales tariff Assumed raw water tariff Figure 3 Tariffs Proposed Sales Tariff Assumed Raw Water Tariff Table 32 Profitability Over the Next Five Years The financial model forecasts a low accounting surplus for year one. This is due to high plant costs and low production volumes. The situation improves in year two after completion of the upgrade of some of the Amatola Water treatment plants. Profitability starts to improve due to the sharp increase in production volume versus a lower increase in costs due to fixed and semi-fixed costs remaining relatively stable. Below is the graph showing this trend:

102 99 Profitability over the next five years (Primary Business) Revenue (Primary Sec 29) Primary Business Costs (Sec 29) (Exc Interest) Net Profit Table Rand Values Revenue (Primary Sec 29) Costs (Primary Business) (Exc Support Service) Net Profit Note : this is just primary business Figure 4

103 100 Right of Use Contracts Amatola Water expects to conclude approximately five Right of Use (ROU) agreements with various municipalities within Eastern Cape for the next five year period. These contracts are expected to generate additional revenue of R10 million in year one to R80 million in year five. This revenue is included in the core business revenue. Secondary Business Amatola Water s strategic intent is to decrease focus on the secondary business segment due to its contractual and therefore volatile nature over the long term. The current revenue ratio between the two business segments is currently standing at 52/48 (52 % primary business and 48% secondary business). Over the medium term the organisation intends to have a 70/30 ration between primary and secondary business. Long term this ratio target will be 90/10. The annual revenue from secondary business is currently R150 million and is expected to grow over the medium term to around R250 million. Below is the summary of the data: Section 30 Business Rand Values Revenue (Secondary Sec 30) Total Costs Average Net Profit ( 5%) Figure 5

104 101 Section 30 ( Secondary Business) Revenue (Secondary Sec 30) Total Costs Average Net Profit (5%) Table 34 During the 2013/14 financial year Amatola Water changed its accounting treatment for contracts where it is employed as an implementing agent. A view has been taken that the only portion to be reflected in the statement of financial performance is the implement agent fee not the gross amounts. This is because Amatola Water is the agent in these contracts and not principal client. Capital Expenditures and Funding For the next 5 years the lack of strength of the balance sheet will not allow the organisation to access capital markets. Amatola Water will therefore rely on grant and internal funding to fund capital expenditure programmes. Over and above this the organisation will seek credit accreditation/rating agency views of the financial status of Amatola Water. This will facilitate and understanding of the gaps that Amatola Water will still need to address before a favorable rating can be attained that will enhance the ability to access capital markets in the future. Amatola Water has already started to engage National Treasury about obtaining the borrowing limit in this regard. These two projects are critical and the aim is to finalize them by the end of the 2014/15 financial year. Amatola Water views accessing the capital market as major development in ensuring its sustainability as Sec 3(b) entity and in the positioning as the key role player in provision of water services in the province. The proposed 5 year capital expenditure programme for Amatola Water with the various intended sources of funding is presented in the following table: Capital Expenditure Funding Net borrowing requirements Grant Funding Loans (Capital Market) Remaining requirement Internal Funding ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Table 35

105 102 Materiality and Significance Framework As required by the Treasury Regulations, Amatola Water Board has developed and submitted a framework of acceptable levels of materiality and significance, per incident, with the Minister of Water Affairs. Materiality Having taken into account the following factors: The nature of Amatola Water s business Statutory requirements affecting Amatola Water The inherent and control risks associated with Amatola Water Quantitative and qualitative issues. The Amatola Water Board has assessed the levels of materiality, to be: Any amount which results from criminal conduct R and above which results from irregular, fruitless or wasteful expenditure caused by gross negligence R and above, in respect of irregular, fruitless or wasteful expenditure caused by any other circumstance. Significance Application for approval will be made to the Minister of Water and Environmental Affairs in respect of any individual transaction covered by Section 54(2) of the Public Finance Management Act, where; The acquisition or disposal of any significant Amatola Water Board Asset, which exceeds 10% of Amatola Water Board s Total Assets. Participation, or change in participation, in any significant partnership, trust, unincorporated joint venture or similar arrangement where the net income accruing to Amatola Water Board exceeds 10% of annual gross revenue. Establishment or participation in the establishment, of any entity whose ownership does not include a local authority, another water board or a national or provincial organ of state.

106 103 Chapter 16 Bank Account Details Amatola Water s bank account details are presented in Annexure I.

107 104 Chapter 17 Analysis of Risk Enterprise Wide (Integrated) Risk Management Risk management is crucial to the requirements of the PFMA, NT, King III and COSO reports but even more importantly is good business management and signifies good corporate governance. Amatola Water has developed and adopted an enterprise wide (integrated) framework and policy on risk management. Risk management is defined within Amatola Water as: Understanding the risks that the organisation faces and what their impact would be on the achievability of the organisation s objectives, and then mitigating those risks that would have an unacceptable impact on the organisation. To establish a common understanding of the term risk, Amatola Water has defined risk as follows: The possibility of any event, negative or positive, either internally or externally generated (where the impact may be internal or external), which may critically impact on the achievement of the business objectives. This definition clearly highlights the relationship between risk, implementing business strategy and achievement of objectives. Amatola Water therefore identifies its highest risks as those most likely to have a significant impact on the organisation achieving its key strategic business objectives. The Accounting Authority of Amatola Water, being the Board, is ultimately responsible for ensuring good governance and oversight on risk management and mitigation. The Board has delegated the operational oversight responsibility of Risk to the Audit and Risk Committee. Management has an established Risk Committee and appointed Risk Champions for each division. These Risk Champions assist divisional directors to establish and monitor risk systems throughout the relevant division. Amatola Water categorises its risks into three categories: 1. Strategic Risks 2. Divisional Risks 3. Operational / Process Risks Amatola Water performed its risk identification based on the new integrated risk approach between July and September 2013 with a series of Board and management workshops. A summary of the Strategic Risk Register is included below.

108 105 Risk Reference Strategic Objective 10 Areas Risk Description SR1 Increased customer base and penetration (delivery options/ services). Customer Satisfaction. Inability to increase Primary Revenue resulting in declining financial viability and relevance in the sector and region. SR2 Increased customer base and penetration (delivery options/ services). Leadership and Employee Development. Inability to increase Primary Revenue resulting in declining financial viability and relevance in the sector and region. SR3 Enhanced strategic effectiveness. Build cross-functional excellence/ effectiveness. Develop operational competence (individual). Financial Viability. Shortage of ring fenced grant funding for capital and O&M resulting in Bad Debts and reducing service deliver. SR4 SR5 On-going strengthening of balance sheet to sustainable services (ratios). Surplus per financial year contribution to build reserves and infrastructure investment. Explore sourcing of funding alternatives for infrastructure development. Sustainable and affordable tariff. Strengthen and deepen relationships with statutory, contracted and non statutory stakeholders. Financial Viability. Community/ Environmental Sustainability. Qualified audit resulting in disestablishment (IRR). AW becoming irrelevant in the mind of WSA s, Communities and key water sector roleplayers. SR6 Reliable infrastructure. Upgrade plants to provide minimum 5 megs per day. Influence Provincial Water Infrastructure Sector Planning (Master Planning). Minimise production and distribution losses. Infrastructure Stability. Continuously operating infrastructure above design capacity or standard operating procedures resulting in asset stripping or premature infrastructure obsolescence.

109 106 Risk Reference Strategic Objective 10 Areas Risk Description SR7 SR8 SR9 SR10 On-going strengthening of balance sheet to sustainable services (ratios). Surplus per financial year contribution to build reserves and infrastructure investment. Explore sourcing of funding alternatives for infrastructure development. Sustainable and affordable tariff. Improved customer satisfaction. Strengthen and deepen relationships with statutory, contracted and non statutory stakeholders. Enhanced strategic effectiveness. Build cross-functional excellence/ effectiveness. Develop operational competence (individual). Ensure uninterrupted water supply services to customers. Financial Viability. Stakeholder Relationships and Support. Leadership and Employee Development. Operational Resiliency. Inability to access the capital markets. Misalignment between AW deliverables with that of customers expectations/ needs and inability to manage misperceptions resulting in loss of business. Inability to position AW in the mind of customers and stakeholders as leader on water sector policy and setting the agenda. Business disruptions resulting in financial and image loss. Divisional risk registers with the relevant mitigation are in the process of being completed. Afterwich the operational / process risk registers will be completed. One of the critical risks of any business is Fraud. As such Amatola Water will have a separate Fraud Prevention Committee reporting to the Corporate Risk Committee and at times directly to the Board Committee as required. Amatola Water has various fraud prevention initiatives in place including: anonymous tip-off line, declarations of conflict of interest, educational posters and information sharing, policies and the prevention committee.

110 107 Chapter 18 Declaration of Disclosure Subject to the exceptions listed below, the board members of Amatola Water hereby CONFIRM, VERIFY AND GUARANTEE that: The water board has taken all reasonable steps to comply with all legislation to which it is subject including, but not limited to: The Income Tax Act; The Occupational Health and Safety Act; The Compensation for Occupational Injuries and Diseases Act; The Labour Relations Act; The Basic Conditions of Employment Act; The Skills Development Act; The Employment Equity Act and Policy; The Skills Development Levies Act; The Unemployment Insurance Act; The Unemployment Insurance Contributions Act; The Preferential Procurement Framework Act; The Access to Information Act; The Environmental Conservation Act; The National Water Act; (Water use authorisations with regards to abstraction, storage and discharge rights) The Public Finance Management Act; The Municipal Systems Act; The Broad Based Black Economic Empowerment Act The Pensions Fund Act; The Hazardous Substance Act The Construction Industry Development Board Act The National Environmental Management Act; The Water Services Act; (S9 regulations Norms and standards for water services, S10 regulations Norms and standards for water tariffs and that all significant activities, including other activities, are included in the Business Plan) Undisclosed commercially sensitive information will not significantly affect viability, any projections or any information disclosed. All revenue owing to the water board has been collected or that steps have been taken in accordance with the appropriate credit control policies. Exceptions: None Signed CHAIRPERSON: AMATOLA WATER DATE

111 108 Chapter 19 SHAREHOLDER COMPACT Entered into by and between Amatola Water herein Represented by the Chairperson of the Board and The Government Of The Republic Of South Africa herein Represented by the Minister of Water Affairs

112 109 Agreed Principles 1. Introduction 1.1 In terms of regulation 29 of the Treasury Regulations issued in terms of the Public Finance Management Act, 1999 Act No. 1 of 1999)(as amended) ( the PFMA ), the accounting authority for a public entity listed in Schedule 3b, must, in consultation with its executive authority, annually conclude a Shareholder Compact. 1.2 The Shareholder Compact must document the mandated key performance measures and indicators to be attained by the public entity as agreed between the accounting authority and the executive authority. 1.3 The required Shareholder Compact in the context of Amatola Water and the executive authority comprises: the agreed principles, and; the key performance objectives, measures and indicators. 2. Interpretation In this Shareholder Compact, unless otherwise indicated or contrary to the context, the words and phrases set out below shall have the meanings ascribed to them as follows: Board of Directors means the Board of Amatola Water as appointed by the Minister; Executive Authority or Minister means the Honorable Minister of Water Affairs in his or her capacity as such, or any other Minister of State made responsible for Amatola Water; Amatola Water means the water board deemed to continue in accordance with the Water Services Act, having its principal place of business at 6 Lancaster Road, Vincent, East London; party means either the shareholder or Amatola Water and parties mean both the shareholder and Amatola Water; Shareholder means the Government of the Republic of South Africa, represented by the Minister. Shareholder Compact means this performance agreement between Amatola Water and Shareholder together with all appendices attached hereto, as defined in the PFMA. Water Services Act means the Water Services Act, 1997 (Act No 108 of 1997); PFMA means the Public Finance Management Act, 1999 Act No. 1 of 1999)(as amended) and regulations issued in terms of this Act.

113 Agreed Principles 3.1 The Shareholder Compact is designed solely to regulate the relationship between the Shareholder, on the one hand, and the Board and management on the other. 3.2 The Shareholder Compact is not intended to : Interfere in any way with the normal company law principles and the normal relationship between the Shareholder, on the one hand, and the Board on the other. In giving effect to these principles, the Shareholder would have communicated its expectations to the Board and management Create rights and expectations that third parties may rely upon, it being specifically recorded that this Shareholder Compact does not create, confer or afford any third party any rights or expectations in terms hereof. 4. Period 4.1 As contemplated in terms of the PFMA, the Shareholder Compact will be concluded on an annual basis. 4.2 This Shareholder Compact is effective for the period 1 July 2014 to 30 June It is hereby recorded that the agreed objectives, although subject to review annually, set out matters that are applicable beyond a period of a year. In the event that they are amended, the parties shall take into account initiatives already commenced on the basis of such objectives. 5. Mandate, Vision and Mission of Amatola Water 5.1 The mandate of Amatola Water is set out in Sections 29 and 30 of the Water Services Act. 5.2 In addition to its mandate, the Shareholder acknowledges that Amatola Water has a strategic developmental role that may require decisions that are not always optimal from a commercial perspective, but contribute to National Government s broader objectives and the growth and development in South Africa and Africa. 5.3 The Strategic Intent/Vision of Amatola Water is: To lead sustainable bulk water services in the Eastern Cape. 5.4 The Mission of Amatola Water is: Amatola Water strives to contribute to the public health and community livelihoods by providing bulk potable water, bulk sanitation to Water Service Authorities and managing water resource management infrastructure

114 Strategic Objectives 6.1 In order to attain its strategic intent, Amatola Water has set the following strategic objectives, which will focus and direct the business activities of the organisation over the planning period: Balanced Scorecard Quadrant WSU Area (10 Outcomes) 5 Year Objective(s) SC: Stakeholder and Customer CS: Customer Satisfaction 2 additional Bulk water supply contracts with WSA (3 currently) (ROU) Increase volumes to 160 mega litres per day Improved customer satisfaction 7.5/10 average score Acquire contracts for Water Resource Infrastructure Management Acquire contracts for Waste water works WQ: Water and Waste Water Quality CE: Community / Environmental Sustainability SS: Stakeholder Relationships & Support Achieve Statuary Quality compliance at All AW Owned and ROU plants efficiently Blue drop advisory services Contribute to decent living standards and enhance public health within communities in ADM through quality adequate water services Provide services and invest in technologies / systems in an environmentally responsible and sustainable manner Strengthen and deepen relationships with statuary, contracted and non statutory stakeholders Be centre of new provincial regional bulk utility F: Financial Perspective FV: Financial Viability On-going strengthening of Balance Sheet to sustainable services (Ratios) Surplus per financial year contribution to build reserves for infrastructure investment Explore sourcing of funding alternatives for growth of new infrastructure (excluding replacement) Sustainable and affordable Tariff

115 112 Balanced Scorecard Quadrant WSU Area (10 Outcomes) 5 Year Objective(s) P: Internal Processes WA: Water Resource Adequacy LG: Learning and Growing IS: Infrastructure Stability OR: Operational Resiliency OO: Operational Optimisation ED: Leadership & Employee Development 98% Assurance of supply in ADM, Ndlambe and ORTDM Region (Sandile and Mzintlava Dams) 90% Availability of water supply for all bulk services AW Plant Upgrade and KSD PI Projects Develop and EC water master plan to direct future funding streams Minimise production and distribution water losses Interconnected supply to Amahlathi, Ngqushwa, Nkonkobe, Ndlambe Business continuity system implemented Fully implemented IMS system Accredited laboratory providing services across the entire Eastern Cape Aligning People, Skills, Systems, Policies and Procedures for Strategy Implementation Fully functional governance, compliance, risk and fraud prevention systems for clean audit Continuous improvement system Enhanced Strategic Effectiveness Build Cross-Functional Excellence/ Effectiveness Develop Operational Competence (individual) Entrenching the appropriate corporate culture: Decisive Leadership; resolving Organisational Politics; and Issues of Conflict To be a renowned knowledge hub for the water services sector in the Eastern Cape 6.2 The Amatola Water strategic objectives, as setout in 6.1 above, are underpinned by specific goals, defined key activities and targets. These are broadly categorized as follows: Financial I ncrease the financial turnover and improve the sustainability of the organisation. This will be achieved through growth in the primary business while maintaining secondary business services at there current levels

116 Customer Increase the client base of the organisation and penetration of services with clients. This will be achieved through the provision of legally compliant, efficient and effective service delivery Internal Focus will be placed on ensuring water resource adequacy, improving infrastructure stability, reinforcing operational resiliency and enhancing operational optimization Learning and Growth The organisation will focus on developing the capacity and skills of its staff through targeted training programmes and partnerships. A strong emphasis will also be placed on developing leadership capacity within the organisation. 7. Amatola Water s Developmental Role 7.1 Initiatives in support of Amatola Water s developmental role can be classified into the following categories: Social Development Initiatives such as shareholder projects, BBBEE promotion, water conservation/awareness programmes, donations and social investment Developmental Projects that have a significant developmental impact with a particular focus on improving rural livelihoods will be implemented by Amatola Water Training and Capacity Building initiatives such as developing a learning academy, a graduate placement programme, a bursary scheme and continuing professional development programmes. 7.2 The shareholder hereby confirms that the Board is empowered to develop such high impact projects. As regards any ma jor developmental projects, it is necessary that Amatola Water s developmental role be fulfilled in a manner that is effective and sustainable. 7.3 In the event that the Executive Authority issuing a directive that Amatola Water undertakes shareholder projects, such directive will be issued in accordance with the provisions of relevant sections of the WSA and the PFMA. 8. Business Plan and Strategic Intent 8.1 Amatola Water s Business Plan, incorporating its Policy Statement and related financial plans shall be submitted to the Executive Authority in terms of Section 40 of the WSA and Section 52 of the PFMA. 8.2 Amatola Water shall ensure that its Business Plan and its objectives, goals and targets are aligned with the strategic intent, which will inform the business focus and direction for Amatola Water into the future. 8.3 The strategic business targets, as set out below will be the measure for control and monitoring of the performance of Amatola Water by the shareholder.

117 Roles and Responsibilities 9.1 The Shareholder: Is hereby empowered and hereby reserves the right to determine initiatives, projects or activities that Amatola Water shall undertake or become involved in, in the national interest The key performance measures for Amatola Water shall be adjusted by the Shareholder to take into account Amatola Water s developmental role The Board and the Shareholder shall agree on an amount to be set aside for developmental projects annually referred to in clause The Board: is hereby mandated to oversee and to contribute to development of the strategic intent and furthermore to oversee the management of the business in accordance with such strategic intent, business plan and any applicable legislation; and its members shall exercise their skill and fiduciary duties to ensure that management pursue the objectives and targets as set out in the business plan; commits itself to the achievement of the Strategic Intent, strategic objectives and goals of Amatola Water, and always to act within its powers and the best interests of Amatola Water, the shareholder and customers; accepts responsibility to direct and guide the business in a proper manner in keeping with good governance practices, the Water Services Act, the PFMA, this Shareholder Compact, including the Business Plan and Policy Statement; and recognises the importance of speedy decision-making, and will use its best endeavors to prevent undue delays with regard to critical decisions will ensure that Amatola Water and all its subsidiaries shall, subject to relevant legislation, comply with the policies of the Shareholder, and that they adhere to acceptable governance practices in terms of reporting and accountability. 10. Undertakings by the Shareholder The Shareholder undertakes for the duration of the agreement: 10.1 not to introduce new or additional requirements during the validity of this compact other than through a process of consultation with the Board; 10.2 to provide reasonable notice before the introduction of any new or additional requirements;

118 that, if new or additional requirements are introduced, the parties shall amend the key performance indicators and targets; 10.4 on the specific request of the request of the Board, to provide appropriate strategic leadership, support and direction to Amatola Water, where necessary, to enable the Board to fulfill its fiduciary responsibilities. 11. Key Performance Measures and Indicators The corporate strategic Key Performance Indicators for Amatola Water, as contemplated in the PFMA, are attached hereto, it is hereby recorded that they have been accepted by the Shareholder at the Board Meeting held on 25 April Dated at on this the..day of (Chairperson of the Board of Amatola Water) AS WITNESSES: Dated at on this the day of (Minister of Water Affairs) Shareholder Representative for and on behalf of the Republic of South Africa). AS WITNESSES: 1. 2.

119 116 Annual Shareholder Compact Appendix Amatola Water: Period 2014 To 2018 Shareholder Compact APPENDIX 1 1. Introduction The performance indicators and targets in Appendix 1 to the shareholder compact are aligned with the Strategic Plan of the Department of Water Affairs, as set out below. No Strategic outcome oriented goals 1. An efficient, effective and development oriented sector leader 2. Equitable and sustainable provisioning of raw water 3. Provision of equitable and sustainable water services of acceptable quantity and quality 4. Protection of freshwater ecosystems Government outcomes and Strategic objectives other initiatives 12 (Public service) 1.1. Improve and increase the skills pool and build competencies in the Department and within the sector New Growth Path 2 (job creation) 6 (Infrastructure) New Growth Path Effective and efficient internal control environment 1.3. Implement programmes that create job opportunities 1.4. Improve water resources and water services information 1.5. Coordinate regional and global water cooperation 1.6. Ensure effective performance of water management and services institutions 2.1. Ensure the availability of / access to water supply for environmental and socioeconomic use 2.2. Improve equity and efficiency in water allocation 2.3. Strengthen and implement strategies for water management in the country 2.4. Improve water use efficiency 9 (Local government) 3.1. Ensure compliance to water legislation 3.2. Support the water sector 10 (Environment) 4.1. Ensure compliance to water legislation 4.2. Improve the protection of water resources and ensure their sustainability

120 Key Performance Indicators And Targets: Amatola Water Board Performance Objective Government Outcomes Alignment Outcomes /Impact DWA Strategic Plan Indicators Measure Actual 2013/14 Target 2014/15 Target 2015/16 Target 2016/17 Target 2017/18 Target 2018/19 1. Water Quality Compliance 9 Local Government SO 3.1 Water quality standards met Test results, SANS 241 % compliance Non Revenue Water 6 Infrastructure 10 - Environment SO 2.2 SO 4.1 Reduced levels of unaccounted for water (UAW) Water lost as a % of total water produced % Reliability of supply 6 - Infrastructure SO 22.1 No unplanned interruptions to supply exceeding 24 hours % number of days supply disrupted divided by total number of possible supply days % Financial Reporting Compliance 9 Local Government SO 3.1 unqualified audit report Annual external audit Qualified/ Unqualified Un - qualified Un - qualified Un - qualified Un - qualified Un - qualified Un - qualified 5. Staff Turnover 12- Public Service SO 1.1 Optimal staff retention % staff leaving % Board Member Attendance 12- Public Service SO 1.2 Improved performance of fiduciary duties/ governance Annual performance assessment % Effective Internal Controls And Risk Management 12- Public Service SO 1.2 Internal audit findings dealt with Internal audit reports No repeat and unresolved findings Bulk Supply Agreements Concluded with Municipalities/ Other Customers 12- Public Service SO 1.6 Statutory and service level agreements in place Municipalities/ other customers with bulk supply agreements %

121 118 Performance Objective 9. Improve Financial Ratios 10. Increase BBBEE Spend 11. Manage Costs Within The Approved Budget 12. Capital Expenditure 13. Increased Access to Services 14.Engagement in Secondary Activities 15. Achieve Statutory Reporting Compliance Government Outcomes Alignment Outcomes /Impact DWA Strategic Plan 12- Public Service SO 1.6 Improved viability and sustainability 12- Public Service SO 1.3 % of spend increased and increased new entrants 12- Public Service SO 1.2 No over expenditure/ losses 6 - Infrastructure SO 2.1 Infrastructure available to meet demands 6 - Infrastructure SO 2,1, 2.3 Contribution to national objectives 9 Local Government SO 3.2 Extent of involvement 12- Public Service SO 1.2 Reporting compliance achieved Indicators Measure Actual 2013/14 Target 2014/15 Target 2015/16 Target 2016/17 Target 2017/18 Target 2018/19 Financial ratios Liquidity Gross profit margin % Net profit margin % (primary activity) 0% 3% 4% 4.5% 5% 5% Debt Equity% 0% 1% 1% 1% 1% 1% Return on assets % 0.02% 0.5% 2% 2.5% 3% 3% Debtors days 113 days 60 days 60 days 60 days 60 days 60 days Quarterly reports % increase Financial reports % variance Overall project expenditure within R target % variance Overall project completion dates within targets % variance CAPEX spend /projects CAPEX spend ( 000) R R R R R R % of total turnover Statutory submissions made on time Submission dates met/ missed All dates met All dates met All dates met All dates met All dates met All dates met

122 119 Performance Objective Government Outcomes Alignment Outcomes /Impact DWA Strategic Plan 16. Jobs Created 12- Public Service SO 1.3 Permanent and contract (direct) 12- Public Service SO 1.3 Temporary (indirect) 17. Corporate Social Responsibility Initiatives 12- Public Service SO 1.6 Good corporate citizenship 18. Training And Skills Development 12- Public Service SO 1.3 Skills and capacity building 19. Good Governance 12- Public Service S O 1.2 Improved controls and risk mitigation 20. Other (water board specific objectives) Indicators Measure Actual 2013/14 Target 2014/15 Target 2015/16 Target 2016/17 Target 2017/18 Target 2018/19 Total Number Number Total Number Number Number of initiatives Number and R value Training courses, learner-ships, bursaries Total Number Breaches of materiality and significance framework Number

123 120 Annexure A - Service Area Map Legend Amatola Water s Gazetted Area of Operation (47 515Km2) Local Municipalities Area of Operation 2014 District Municipalities

124 121 Annexure B - Scheme Layout Plan Legend Towns Supply Areas Local Municipalities SEYMOUR A m a h l a t h i M n y a m e n i / M a s i n c e d a n e KEISKAMMAHOEK B i n f i e l d P a r k D a m S u p p l y FORT BEAUFORT ALICE MIDDLEDRIFT N k o n k o b e KING WILLIAM'S TOWN D e b e D a m S u p p l y S a n d i l e D a m S u p p l y M a k a n a G l e n m o r e S u p p l y PEDDIE P e d d i e R e g i o n a l S u p p l y GRAHAMSTOWN N g q u s h w a N d l a m b e BATHURST ALEXANDRIA K e n t o n - O n - S e a S u p p l y PORT ALFRED KENTON ON SEA STUTTERHEIM KOMGA R o o i k r a n t z D a m S u p p l y KEI ROAD G r e a t K e i BHISHO BERLIN N a h o o n D a m S u p p l y L a i n g D a m S u p p l y MDANTSANE B u f f a l o C i t y EAST LONDON HAMBURG JOE GQABI ALFRED NZO O.R. TAMBO CHRIS HANI CACADU AMATHOLE BUFFALO CITY METRO NELSON MANDELA BAY METRO E a s t e r n C a p e L o c a l i t y M a p

125 122 Annexure C - Key Statistics Contact Details CEO Name: M Msiwa Telephone: Fax: Cell: mmsiwa@amatolawater.co.za CFO Name: J Dlamuka Telephone: Fax: Cell: jdlamuka@amatolawater.co.za Postal Address Private Bag X3 Vincent East London 5217 Scheme Name and Responsibility Year 0 (current year) 2014 Bulk Responsibility Retail Responsibility Scheme or supply area 1 Nahoon Y N Scheme or supply area 2 Laing Y N Scheme or supply area 3 Sandile Y N Scheme or supply area 4 Peddie Y N Scheme or supply area 5 Binfield Y N Scheme or supply area 6 Masincedane Y N Scheme or supply area 7 Upper Mnyameni Y N Scheme or supply area 8 Debe Y N Scheme or supply area 9 Glenmore Y N Scheme or supply area 10 Bushmans River / Kenton-on-Sea Y N

126 123 Annexure C - Key Statistics Macro Economic Assumptions Item 2014 Year Year 1 Business Plan Assumptions 2016 Year Year Year Year 5 Raw water tariff increase percentage 12.90% 12.90% 12.90% 12.90% 12.90% 12.90% CPIx (as provided by DWAF / National Teasury) 6.00% 5.90% 5.70% 5.40% 5.40% 5.20% Investment Rates (Fixed) 7.84% 8.10% 8.68% 9.55% 9.67% 9.74% Borrowing Rates (Short Term) 8.50% 8.50% 9.25% 10.50% 10.50% 10.50% Borrowing Rates (Long Term) 7.18% 7.72% 8.10% 8.59% 8.83% 8.98% Emoluments Increases 7.58% 8.15% 8.50% 7.90% 8.00% 7.80% Electrical Power 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% Chemicals 5.90% 5.60% 5.30% 5.50% 5.50% 5.30% PPI 5.90% 5.60% 5.30% 5.50% 5.50% 5.30% Number of Employees Water Research Levy 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% Maintenance 5.90% 5.60% 5.30% 5.50% 5.50% 5.30%

127 124 Annexure C - Key Statistics Regional Socio-economic Statistics (2011 Census) Population Population growth Average Household size % below poverty line Average Household income Percentage Employed Percentage unemployed Eastern Cape % % R % 30.8% OR Tambo % % R % 43.1% Amatole % % R % 42.0% Alfred Nzo % % R % 42.0% Chris Hani % % R % 38.0% Cacadu % % R % 25.0% Joe Gqabi % % R % 34.3% Change in Access to Water Services between 1995 and 2011(Census Data) Piped water inside dwelling Piped water inside yard Communal Piped water <200m. Communal Piped water> 200m. Watercarrier/ tanker/ Water vendor Borehole/ rain-water tank/well Dam/river/ stream/ spring Other/ Unspecified/ Dummy Eastern Cape Cacadu Amatole Chris Hani Joe Gqabi OR Tambo Alfred Nzo (%) Eastern Cape Cacadu Amatole Chris Hani Joe Gqabi OR Tambo Alfred Nzo

128 125 Annexure C - Key Statistics Change in Access to Sanitation between 1195 and 2011 (Census Data) Flush/ chemical Pit latrine Bucket latrine Other 2011 (%) Eastern Cape Cacadu Amatole Chris Hani Joe Gqabi OR Tambo Alfred Nzo (%) Eastern Cape Cacadu Amatole Chris Hani Joe Gqabi OR Tambo Alfred Nzo Human Development Index by district, (Quantec) Eastern Cape Cacadu Amatole Chris Hani Joe Gqabi OR Tambo Alfred Nzo Nelson Mandela Bay Metro

129 126 Annexure D - Strategic Plan and Corporate Scorecard Amatola Water 20 Year Strategy 2013 to Overview Amatola Water has adopted a standard strategy formulation, implementation and monitoring cycle as displayed in the figure below: SWOT and Environmental Analysis Vision, Mission, Strategic Intent, 20yr & 5yr Strategic Goals, Strategic Interventions 5yr & 1yr Corporate Scorecard, Budgets, Activities Divisional Business Plans and Scorecards (Individual Performance Contracts Aligned) Update Business Plan and Shareholders Compact Review Resource Requirements for Successful Implementation: Structure, Financial, Infrastructure Develop Systems and Processes that Support Strategy Implementation Monitoring and Managing Performance against Strategy Quarterly Reporting and Organisational Performance Monitoring Presentations quarterly by managers per division against set objectives Continue Working and Reporting on Existing Scorecard, Business Plan, Shareholders Compact and Performance Contracts until Start of New Financial Year 2. Structure of Amatola Water Corporate Scorecard Amatola Water has adopted the Balanced Scorecard approach with the four quadrants as set out by Kaplan and Norton. As an organ of state and not an organisation which focus on profit the customer quadrant is renamed and placed before the financial quadrant. As delivering on customer and stakeholder expectations in the desired end result and finance a mechanism that enables this, not the end result. This view is supported by Kaplan and Norton for organisations that are not established for financial gain, thus the four quadrants are as follows: 1. Stakeholder and Customer Quadrant 2. Financial Quadrant 3. Internal Processes Quadrant 4. Learning and Growth Quadrant As part of giving appropriate structure to its strategy measures and performance monitoring and management system, Amatola Water has also adopted the Ten Areas for Successful Water Utility Service Provision.

130 127 Effective and Holistic WSP Function Product Quality Customer Satisfaction Employee Leadership/ Development Water Resources Adequacy Community Sustainability Financial Viability Infrastructure Stability Operational Resiliency Operational Optimisation Stakeholder Support These ten fit within the four balanced scorecard quadrants and help ensure Amatola Water focuses on all the relevant areas to be a successful water utility. The ten are as follows: 1. Water and Wastewater Quality: is achieved when Amatola Water produces bulk potable water and wastewater in compliance with statutory requirements and consistent with customer needs at both AW owned and ROU plants. 2. Customer Satisfaction: is the degree to which Amatola Water provides reliable, responsive, and affordable products and services to WSA customers which meet or surpass customer expectations. Timely feedback to customer-agreed service levels to maintain responsiveness to customers needs and to delight these customers. 3. Stakeholder Relationships and Support: As an organ of state Amatola Water has a variety of different stakeholders, most notable is the Department of Water Affairs. This outcome includes managing and building relationships with the various stakeholder groups by aligning initiatives to support key stakeholder programs and informed by the inter-governmental framework, as well as influencing these stakeholders to have common understanding of Amatola Water role and catalytic initiatives within the sector. 4. Infrastructure Stability: is achieved when Amatola Water s infrastructure is consistent with customer service levels, and consistent with anticipated growth and system reliability goals. 5. Financial Viability: is achieved when Amatola Water manages operating expenditures and increasing revenues in a manner that strengthens the balance sheet in a sustainable manner. In addition, the organisation aims at a sustainable tariff that is consistent with customer expectations, recovers costs and provides for future expansion.

131 Water Resource Adequacy: is achieved when Amatola Water assesses the scarcity of freshwater resources, investigates sustainable alternatives, manages water abstractions assiduously and has access to stable raw water resources to meet current and future customer needs. 7. Community / Environmental Sustainability: is achieved when Amatola Water is explicitly cognisant of and attentive to the impacts it has on current and future community sustainability, supports socio economic development and manages its operations, infrastructure, and investments to protect, restore and enhance the natural environment, whilst using energy and other natural resources efficiently. 8. Leadership and Employee Development: is achieved when Amatola Water is dedicated to continual learning and improvement, recruits and retains a workforce that is competent, motivated, adaptive and works safely, ensures institutional knowledge is retained and improved, provides opportunities for professional and leadership development and is led by an integrated senior leadership team. 9. Operational Resiliency: is achieved when Amatola Water proactively and effectively manages business risks across all areas of the business in a manner that ensures sustainability of the organisation even in times of challenges and difficulties. 10. Operational Optimization: is achieved when Amatola Water has ongoing, timely, cost-effective, reliable, and sustainable performance improvements in all facets of its operations, has a culture of accountability and every employee and department striving to improve systems and processes. 3. Strategic Direction, Vision, Mission and Values Vision To lead sustainable bulk water services in the Eastern Cape. Mission Amatola Water strives to contribute to the public health and community livelihoods by providing bulk potable water, bulk sanitation to Water Service Authorities and managing water resource management infrastructure Values Amatola Water values continue as: We are inspired by an unwavering commitment to empower our stakeholders through the consistent demonstration of: Responsibility Excellence Integrity Accountability

132 Year Strategic Goals and Catalytic Initiatives Year Goals Product Quality (Primary): 20 years Blue and Green Drop certification for all bulk works - (owned and ROU) Providing accredited laboratory water services for the entire province Primary Product Quantity: 20 years Increase volumes to 350 mega litres per day Customer Satisfaction: 20 years 80% of WSA s in the province as contracted customers through ownership or ROU Employee / Leadership Development: 20 years Enhanced Strategic Effectiveness Build Cross-Functional Excellence/ Effectiveness Develop Operational Competence (individual) Renowned knowledge hub for water services sector in EC Water Resource Adequacy: 20 years 98% Assurance of Supply at a minimum service level of 750l per household per day Community Sustainability: 20 years Contribute to decent living standards and enhance public health within communities in EC through quality adequate water services Financial Viability: Baseline: current volume 31 million m3 / annum (+-120,000 households) 20 years Improve solvency, liquidity and profitability to achieve a Fitch Investment Grade rating Infrastructure Stability: Baseline: current volume 31 million m3 / annum (+-120,000 households)

133 years 80 % of the infrastructure master plan implemented (investment / needed resources) 98% Availability of Water Supply and 90% reliability of sanitation services Operational Resiliency: 20 years Bulk water utility with interconnected regional schemes in the Eastern Cape Fully implemented businesses continuity system (IMS, Quality systems, Knowledge Management) Operational Optimisation: 20 years Continuous improvement philosophy institutionalized Continuous alignment of People, Skills, Systems, Policies and Procedures for Strategy Implementation Stakeholder Support: 20 years To be the center of a fully-fledged provincial water utility (IRR) Strong and well established relationships with stakeholders internal and external 4.2 Catalytic Initiatives The following are the list of key Catalytic Initiatives which will drive the successful implementation of the strategy and success of Amatola Water: 1. Institutional Realignment and Reform. 2. AW Plant Upgrade and KSD PI Projects. 3. Aligning People, Skills, Systems, Policies and Procedures for Strategy Implementation. 4. Entrenching the appropriate corporate culture: Decisive Leadership; resolving Organisational Politics; and Issues of Conflict. 5. Fully functional governance, compliance, risk and fraud prevention systems for clean audit.

134 Year Strategic Objectives Balanced Scorecard Quadrant WSU Area (10 Outcomes) 5 Year Objective(s) SC: Stakeholder and Customer CS: Customer Satisfaction 2 additional Bulk water supply contracts with WSA (3 currently) (ROU) Increase volumes to 160 mega litres per day Improved customer satisfaction 7.5/10 average score Acquire contracts for Water Resource Infrastructure Management F: Financial Perspective WQ: Water and Waste Water Quality CE: Community / Environmental Sustainability SS: Stakeholder Relationships & Support FV: Financial Viability P: Internal Processes WA: Water Resource Adequacy IS: Infrastructure Stability Acquire contracts for Waste water works Achieve Statuary Quality compliance at All AW Owned and ROU plants efficiently Blue drop advisory services Contribute to decent living standards and enhance public health within communities in ADM through quality adequate water services Provide services and invest in technologies / systems in an environmentally responsible and sustainable manner Strengthen and deepen relationships with statuary, contracted and non statutory stakeholders Be centre of new provincial regional bulk utility On-going strengthening of Balance Sheet to sustainable services (Ratios) Surplus per financial year contribution to build reserves for infrastructure investment Explore sourcing of funding alternatives for growth of new infrastructure (excluding replacement) 98% Assurance of supply in ADM, Ndlambe and ORTDM Region (Sandile and Mzintlava Dams) 90% Availability of water supply for all bulk services AW Plant Upgrade and KSD PI Projects Develop and EC water master plan to direct future funding streams Minimise production and distribution water losses

135 132 Balanced Scorecard Quadrant WSU Area (10 Outcomes) 5 Year Objective(s) P: Internal Processes OR: Operational Resiliency Interconnected supply to Amahlathi, Ngqushwa, Nkonkobe, Ndlambe Business continuity system implemented Fully implemented IMS system LG: Learning and Growing OO: Operational Optimisation ED: Leadership & Employee Development Accredited laboratory providing services across the entire Eastern Cape Aligning People, Skills, Systems, Policies and Procedures for Strategy Implementation Fully functional governance, compliance, risk and fraud prevention systems for clean audit Continuous improvement system Enhanced Strategic Effectiveness Build Cross-Functional Excellence/ Effectiveness Develop Operational Competence (individual) Entrenching the appropriate corporate culture: Decisive Leadership; resolving Organisational Politics; and Issues of Conflict To be a renowned knowledge hub for the water services sector in the Eastern Cape

136 Corporate Scorecard WSU Ob No. Objectives Me No. Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment STAKEHOLDER & CUSTOMER PERSPECTIVE CS CS1 Increased customer base and penetration (delivery options/ services) CS1.1 Number of bulk potable water supply agreements BCMM, ADM & Ndlambe in place CS1.2 Number of ROU agreements in place AW singed a ROU with Makana LM in October 2013 CS1.3 Volume of Water Sold by owned and ROU plants 85 ml/day This is normal during the peak summer months and will drop towards winter time. CS CS2 Improved customer satisfaction CS2.1 Average Customer satisfaction score n/a CS2.2 % Compliance to customer kpa as per customer charter n/a 70% 0 70% 0 Systems to manage this still being implemented WQ WQ1 Achieve SANS at All AW Owned & ROU plants efficiently WQ1.1 % Compliance SANS Class 1 potable water (Owned and ROU) 99% 98% 99.1% 98% 97.9% Newly appointed plant superintendents and changing of chemical suppliers were the cause for the drop in the compliance target

137 134 WSU Ob No. Objectives Me No. WQ1.2 CE CE1 Contribute to decent standard of living and in support of rural livelihoods CE1.1 CE CE2 Provide services and invest in technologies / systems in an environmentally responsible and sustainable manner CE2.1 CE2.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment % Compliance with effluent license standards (Owned and Rou) n/a 60% N/A 60% N/A No agreement in place or owned plants Number AW Schemes with capacity to supply 750l per household per day at terminal reservoir Nahoon & Laing schemes % Compliance with environmental management plans across AW (owned and ROU) n/a 50% 30% 5% 80% 8 of 10 works compliant No of alternative energy technologies introduced Survey was done by UP and the report said that payback period is not viable should reconsider after upgrades at Sandile.

138 135 WSU Ob No. Objectives Me No. Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment CE2.3 No of Permanent jobs created in programs CE2.4 No. of Temporary Jobs Created (indirect) n/a SS SS.1 Strengthen and deepen relationships with statuary, contracted and non statutory stakeholders SS1.1 % Compliance with Executive Authority mandates (MTEF, NDP and DWA Strategy) 100% 100% 100% 100% DWA quarterly reported submitted late SS1.2 SS1.3 % Compliance with contractual commitments (excl customers) 95% 95% 0 95% 0 No of consultative meetings with key interest groups n/a Systems still being set up Still on target for the year FINANCIAL PERSPECTIVE FV FV1 On-going strengthening of Balance Sheet to sustainable services (Ratios) FV1.1 Liquidity Ratios: The current ratio is adverse at the end of quarter 2, the debtors have significantly decreased compared to debtors at year end by almost 59%.

139 136 WSU Ob No. Objectives Me No. Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment FV1.2 Debtors Days The debtors days are adverse as the balance of trade debtors include both primary and secondary debtors where FV1.3 Employee to revenue (R Million) R0.9 R 1 mil 200 K 250 K 420 K Revenue has not grown sufficiently to the level of complementing the number of employees in the organisation. Section 30 revenue is relatively lower than budget while there is a slight movement in the number of employees. FV1.4 Solvency ratio FV1.5 Return on assets % 0.02% 0.1% 1.11% 0.1% 3.99% Solvency ratio is favorable. Return on assets is favorable due to higher than expected profit return for the quarter. FV1.6 FV1.7 Net profit margin % (All) - 3% 7% 3% 13% Gross profit margin % (All) 22% 25% 28% 25% 34% Increases in the volumes sold for potable and raw water has contributed positively to the surplus. Increases in the volumes sold for potable and raw water has contributed positively to the gross profit.

140 137 WSU Ob No. Objectives Me No. Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment FV1.8 Total expenditure R in 000 R550 R80 R138 R159 Expenditure on direct input costs has increase to accommodate the demand for potable water. FV1.9 BBBEE spend - 100% 100% 100% 100% The target has been achieved in the second quarter however there is needs for improvement on BBBEE spend on Qualifying Small Enterprises and Emerging Micro Enterprises in the coming quarters. FV1.10 Electricity Cost (R/KL) Electricity usage is relatively high during the peak demand season (winter). There's a downward trend from October to December 2013 as we move in swiftly in the low demand season. FV1.11 Chemical Cost (R/KL) Actual chemical expenditure and usage has increased in the second quarter due to water turbidity. FV FV2 Surplus per financial year contribution to build reserves for infrastructure investment FV2.1 Revenue in Rands (in million rands) R423 R352 R84 R140 R167 Increases in the volumes sold for potable and raw water has contributed positively to the revenue generated in the second quarter

141 138 WSU Ob No. Objectives Me No. FV2.2 FV2.3 FV2.4 FV2.5 FV FV3 Explore sourcing of funding alternatives for infrastructure development FV3.1 FV3.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment Surplus in Rands (in Million) 0 R10 R6 2.5m R21 Higher than expected surplus due to higher sales of potable water and monthly recognition of project revenues. Amount of targeted surplus placed in reserve fund (in million Rand) 0 R6 R R13 Management targets to put into reserves 60% of the surplus. % Revenue Secondary Business / Total Revenue 55% 45% 33% 55% 34% Section 30 revenue has been generally lower than budgeted due to loss of revenue from the termination of Joe Gqabi contract and other secondary business activities. % Labour costs of total costs 41% 38% 41% 38% 40% The labour costs to total cost ratio is adverse. This ratio is going to improve as some of the employees will be transferred to ADM in third and fourth quarter. Amount of Grant funding secured R0 R0 N/A R0 0 Not scheduled in first year Amount of Lending (capital market) funding secured 0 R0 N/A 0 0 Not scheduled in first year

142 139 WSU Ob No. Objectives Me No. FV3.3 FV FV4 Sustainable & Affordable Tariff FV4.1 WA WA1 Adequate water security and assurance in support of water supply WA1.1 IS IS1 Reliable infrastructure IS1.1 IS1.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment Amount of Development Agency funding secured 0 R0 N/A 0 0 % average increase of tariff (within government targeted inflation) 10% 8% 9.3% 8% 9.3% Not scheduled in first year Tariff negotiations and consultation is progress. The final average tariff increase will be made available in the third quarter. INTERNAL PROCESSES QUADRANT % assurance level (1 in 50 year drought / restriction) 98% 98% 98% 98% 98% No over abstraction from any resource at present supply levels % Infrastructure CAPEX vs. Revenue 0% 4% 1% 1% 0% The target has not been achieved however there is great need to increase revenue generated from operations in order to start with top priority CAPEX projects. Overall capex project completion dates within targets as a percentage 0% 75% 0% 0% 21% Progress is being made with planning and feasibilities on capex projects

143 140 WSU Ob No. Objectives Me No. IS1.3 IS IS1.4 IS IS2 Influence Provincial Water Infrastructure Sector Planning IS2.1 IS IS3 IS IS4 Minimise produced and distributed water to efficiently reduce water losses IS3.1 Upgrade plants to provide minimum 5 megs per day IS4.1 OR OR1 Ensure uninterrupted water supply, with adequate pressure to customers OR1.1 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment Increased access to services measured by Rand spend on Capex Projects R0 R26 Mil R56K R5Mil R4,2 Mil Performance against this measure is improving % Infrastructure Maintenance of Revenue 8% 6% 9% 2.5% 9% The target has been achieved however there is great need to increase revenue generated from operations in order to carry out planned and preventative maintenance. % alignment of water supply schemes to adequate water resources n/a 95% 95.9% 95% 100% Adequate resources at current demand levels % total water loss AW Owned and ROU 15% 12% 11.2% 13% 12% No. of plants commissioned at 5 megs per day Water losses came down and the target was achieved, but still need some attention in the Debe, Peddie and Laing areas Nahoon, Sandile, Laing & Peddie No. unplanned interruptions to supply >24 hours % 99.53% of Assurance of Supply was achieved in Q2

144 141 WSU Ob No. Objectives Me No. OO OO1 OO OO2 Adequate systems, structures, policies and processes to enable strategy implementation OO1.1 As responsible public entity ensure strong Governance, Compliance, Risk and Fraud Prevention systems OO2.1 OO2.2 OO2.3 OO2.4 OO2.5 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment % compliance with predetermined KPA timeframes SCM, HR and SHEQ n/a 75% 0 75% 0 Systems to measure not in place yet Un-qualified Audit Y Y Y Y Y Effective internal controls and risk management Internal audit findings: Number Repeats n/a Effective internal controls and risk management Internal audit findings: Number unresolved n/a During the follow-up audit conducted by the internal auditors, a total of 102 findings were followed up and : 29 were found to have been addressed ; 27 partially addressed and 43 were not addressed. This is currently being prioritised. Information outstanding % Compliance to KING III n/a 50% 67% 50% 67% % Compliance to applicable legislation in Legal register n/a 80% 0% 80% 0% Currently there is no company secretary who leads this process

145 142 WSU Ob No. Objectives Me No. OO2.6 OO2.7 OO2.8 LG LG1 Enhanced Strategic Effectiveness LG1.1 LG1.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment % implementation of Integrated Risk Framework and Fraud prevention plan n/a 60% 20% 20% 25% Draft Strategic Risk register complete. Risk Committee established and functional Board member attendance n/a 80% 83% 80% 67 % Improved controls and risk mitigation, indicated by number of Breaches of materiality and significance framework n/a LEARNING & GROWTH QUADRANT % Achieved of the Corporate Scorecard Targets 75% 68% 65% 63% With increasing targets and information outstanding the performance against scorecard has reduced No. of interactions between Board and Executive Authority National Strategy Session

146 143 WSU Ob No. Objectives Me No. LG1.3 LG1.4 LG2 Build Cross- Functional Excellence/ Effectiveness LG2.1 LG2.2 LG3 Develop Operational Competence (individual) LG3.1 LG3.2 Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment Average Board Committee Rating of adequacy of submissions (Out of 5) n/a n/a Rating not performed for quarter 2 meetings % MANCO resolutions which are implemented in prescribed timeframes n/a 90% 0 90% 0 Average Divisional Performance Review Scores n/a Still setting up measurements Divisional performance and evidence requires continued improvement % identified critical posts filled by predetermined recruitment time n/a 80% 58% 60% 70.8% During the second quarter 3 additional positions were filled adding up to 70.8% of the critical positions filled as at 31 December No. of organisational beneficial schemes developed and successfully implemented n/a Developed draft PDP guidelines; 2. Draft policy gap analysis report and 3. Process flows for learnerships, recruitment, and job evaluation. % implementation of PDPs 70 85% 0 10% 31% 110 employees were trained during the second quarter in line with the PDPs.

147 144 WSU Ob No. Objectives Me No. Measure / Indicator Base line Y1 Target Q1 Actual Q2 Target Q2 Actual Comment LG3.3 % Staff Turnover 9% 6% 3.3% 4% 5.88% There were 9 terminations during the 2nd quarter. LG3.4 DWA Total Number Of staff presently on Training courses, learner-ships, bursaries employees and 17 learners were trained; the full operation of the Learnership Academy has been delayed due to the project charter which is yet to be approved.

148 145 Annexure E - Major Dam Yields Dam Names Capacity in Mm3 (Live storage) Total firm yield Mm3/a Urban/ Domestic Mm3/a Irrigation Mm3/a Environmental Mm3/a Raw water use in 2014/2015 in Mm3/a Raw water use in 2015/2016 in Mm3/a Raw water use in 2016/2017 in Mm3/a Raw water use in 2017/2018 in Mm3/a Raw water use in 2018/2019 in Mm3/a Surplus (+)/ shortfall (-) for 2014/2015 in Mm3/a Surplus (+) / shortfall (-) for 2018/2019 in Mm3/a Binfield Park Dam Cata Dam Dabi Dam Debe Dam Gubu Dam Laing Dam Mnyameni Dam Nahoon Dam Pleasant View Dam Rooikrantz / Maden Dam Sandile Dam Wriggleswade Dam Glen Boyd Balance Dam Albany Coast Total % of Firm Yield for domestic use 50% 20% 3% 40.1% 40.7% 47.6% 49.7% 51.0% 33.7% 22.7% % of Firm Yield for all uses 74% 63.9% 64.5% 71.4% 73.5% 74.8% 57.5% 46.5%

149 146 Annexure F - High Level Organogram Chief Executive Company Secretary Director: Finance Director: Corporate Services Director: Operations Director: Planning & Development

150 147 Annexure G - Financial Model Statement of Comprehensive Income Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Water sold (kilolitres) Raw water sales (kl) Potable water sales (kl) Waste water sales (kl) TOTAL REVENUE (Primary and secondary activities) Revenue (Primary activity) Raw water sales Potable water sales Waste water sales - Industrial water sales - Wastewater management fee Right of use (ROU) Revenue (Secondary activity) (16.37) (4.82) - Retail water operation Waste water management fee - Management fee - consulting - Management fee - other Section 30 activities (16.37) (4.82) TOTAL COST OF SALES (2.23) Cost of sales (raw water purchased) Raw water Cost of sales (secondary activities) (10.62) (6.21)

151 148 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Employee costs (10.00) (10.00) Chemicals and purification (19.87) Energy (10.00) Repairs and maintenance (10.00) (11.36) - General and administration expenses (10.00) Project / WIP costs - Other direct operating activities GROSS INCOME Gross profit % Gross profit % - primary activity Gross profit % - secondary activity (9.32) 1.82 Government grants and other funding Other operating income Commission income and insurance - Game and grazing sales (net of expenses) - House and other rentals - all related income - Other income (scrap, telephone, refurbishment, lab) Project income - Bad debts recovered - Profit Loss) on sale of fixed assets - Profit (loss) on disposal of investments

152 149 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Profit (loss) on sale of biological assets - Profit Loss) on sale of intangible assets - Wastewater - Darville revenue amort TOTAL OPERATING INCOME TOTAL EXPENSES Variable costs (related to cost of sales) Employee costs Directors emoluments ( include in general) Employee salaries - (including leave, annual bonus, 13th cheque) (15.11) Performance bonuses Company contributions - Medical contributions and expenses Company contribution - UIF and SDL Contributions to pension and provident funds OID contributions - Changes in post employment liabilities Chemicals Energy Repairs and maintenance - (cost of sales related) Property and buildings Plant, machinery and equipment

153 150 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Other - to be included in general expenses Depreciation Depreciation property, plant and equipment Amortisation of intangible assets - Impairments of property, plant and equipment - impairments of intangible assets - Impairment of trade receivables - Other direct costs Motor vehicle repairs and running expenses Other direct General expenses (8.37) Advertising and promotions - Amortisation - office intangibles - Amortisation of biological assets Audit fees (33.80) (2.31) Bad debts (53.30) (7.83) Bursaries, donations and gifts - Cleaning - all administration areas - Computer and IT consumables Conferences, seminars and workshops Consultants and professional fees (5.21) 6.46

154 151 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Contractors Courier and postage Depreciation of office assets Directors - performance bonuses Directors emoluments - Employee costs - (related to administration) - Energy - related to administration areas - Impairments of biological assets - Insurance Lease costs (8.87) Legal and contract fees Marketing - not advertising and promotions Motor vehicle expenses (not in direct costs) (28.54) Operating leases - photocopiers etc Other operating expenses Printing and stationery (1.36) Protective clothing and uniforms (1.36) Rates and taxes (1.36) Relocation costs - all items Rent paid - equipment hire and other hiring costs (1.36) Repairs and maintenance

155 152 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Safety and security #REF! Service contracts - Software and other small assets expensed Staff welfare Subscriptions, licences and membership fees Training and development Telephone and fax Travel and entertainment Veterinary services, supplies and biological costs OPERATING PROFIT (LOSS) FOR YEAR Finance income - (enter as positive) (47.28) (4.03) - Trade receivables Extended payment trade receivables - deemed interest - Short term deposits - call accounts (47.47) (4.08) - Held to maturity financial assets - Available for sale investments - Employee advances - SARS Other Finance costs - (enter as negative) (100.98) #NUM! Long term borrowings (100.98) #NUM!

156 153 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Bank overdraft SARS - Finance leases - Borrowing costs capitalised (positive) - Other PROFIT (LOSS) FOR YEAR Other comprehensive income - Gain on revaluation of property, plant and equipment - Gain on revaluation of intangible assets - Transfers (to) from general reserves - Gains / (losses) on retirement benefit plans TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR

157 154 Statement of Financial Position Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ /2013 ASSETS Non-current assets Property, plant and equipment Carrying value - opening balance (36.23) 1.47 Additions - (will be carried to cashflow) Depreciation - ( ex income statement) (91.31) (30.25) Disposals - carrying value (42.22) Impairments - (ex income statement) Revaluations - (ex income statement) Interest capitalised Intangible assets Carrying value - opening balance Additions - (will be carried to cashflow) Amortisation - (ex income statement) Disposals - carrying value Impairments - (ex income statement) Revaluations - (ex income statement) Biological assets Carrying value - opening balance Additions - (will be carried to cashflow) Amortisation - (ex income statement) Disposals - carrying value

158 155 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ /2013 Impairments - (ex income statement) Investments in subsidiaries and associates Opening balance Changes in year Investments - financial instruments Held to maturity Loans receivable Employee loans Other financial assets General Assets held for sale - net Dams Farms Reservoirs Other Current assets Investments Short term Available for sale Inventories

159 156 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Piping Electrical Maintenance spares Water Chemical stores Consumables Miscellaneous Trade receivables (2.03) Trade receivables - bulk and waste water (1.99) Trade receivables - other activities (1.99) less: provision for doubtful debts / impairments - balance b/f Change in prov - doubtful/impairments - ex income statement Sundry debtors Interest receivable Loans and financial receivables Employee loans Other loans Cash and cash equivalents Cash on hand Bank current account Short term deposits

160 157 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Capital Reserves Opening balance Transfers in (out) Accumulated profit (loss) Opening balance (497.88) #NUM! Comprehensive income (loss) for year - (ex income statement) Other Non-current liabilities Long term debt (91.54) (9.75) Bank loan - fixed rate Bank loan - variable rate Bonds - fixed rate Bonds - variable rate (10.00) (6.78) Loans - interest free Settlement agreements (100.00) (100.00) Income received in advance

161 158 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Finance lease obligation (100.00) (100.00) Other non-current liabilities Post retirement benefit obligations Defined benefit and contribution plans - opening Actuarial movement on defined benefit contribution - Healthcare benefits (91.54) (9.75) Current liabilities Current portion of long term loans (70.28) (60.53) Bank loan - fixed rate Bank loan - variable rate Bonds - fixed rate Bonds - variable rate Loans - interest free Settlement agreements (70.28) (100.00) Income received in advance Finance lease obligations Interest payable Trade and other payables Trade payables Trade payables - related parties

162 159 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ /2013 Statutory payables - employees tax / benefits funds SARS - VAT Amounts received in advance Accrual - audit fees Accruals - other Other payables / loans (10.00) (10.00) Provisions Leave pay Bonuses Legal fees - costs and claims Other Bank overdraft Current account 1 Current account 2 Current account (2.17) Total equity and liabilities

163 160 Statement of Cashflow Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / (263000) OPERATING ACTIVITIES Net profit for period before changes Adjustments for non-cash items, interest and other (30.87) (2.13) - Depreciation and amortisation Impairments of PPE, intangibles and biological assets - Retirement benefits provisions - Profit (loss) on sale of fixed, intangible and biological assets (100.00) (100.00) - Interest received - (deduct from profit) (195.98) #NUM! - Interest paid - (add to profit) (114.73) #NUM! - Revaluations of assets - Impairment of trade receivables Adjustments for: Discontinued operations - other non cashflow adjutments ( ) Working capital changes (262.78) (9.56) Inventories (510.66) #NUM! ( ) - Trade debtors (103.77) (24.71) Sundry debtors - Trade and other payables (84.15) (28.28) Provisions (53.45) (28.37) Net cash generated from operating activities

164 161 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ /2013 ( ) ( ) INVESTING ACTIVITIES - NET CASH UTILISED Additions to property, plant and equipment Additions to intangible assets - Additions to biological assets ( ) Proceeds on disposal of fixed and intangible assets Proceeds on disposal of biological assets - Investments in subsidiaries and associates - Interest receivable movement - Movement in assets held for sale - Increase (decrease) in capital FINANCING ACTIVITIES - NET CASH UTILISED ( ) #NUM! - Movement in long term borrowings (35.73) - Movement in investments - Proceeds (repayment) short term borrowings ( ) (45.68) - Movement in loan receivables Interest received Interest paid Movement in retirement benefit obligations - Adjustment for non-cash interest CASH AND CASH EQUIVALENTS

165 162 Actual 2012/2013 Account Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2014/ / Net increase (decrease) in cash utilised for the year (88.46) (28.30) At beginning of year AT END OF YEAR end of year per balance sheet

166 163 Capital Expenditure Program Actual 2012/2013 Capex Category Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2013/ /2013 Immovable capex Augmentation and upgrade Expansion Rehabilitation (100.00) (100.00) Development projects Movable capex Equipment and vehicles (71.85) Information technology communication Laboratory and process services (71.85) Summary Immovable capex Movable capex (71.85) % of total 12.5% 18.1% 20.7% 15.9% 16.4% 16.4% Total forecast period to % 38.7% 36.5% 32.3% 32.9% Reconciliation Capex above Capitalised fixed assets - per fixed assets entry Capitalised intangibles - per intangibles entry Written off to expenses Difference Cumulative difference

167 164 Financial Ratios 0.07 Actual 2012/2013 Category Estimated Actual 2013/2014 Projected 2014/2015 Budget 2015/2016 Budget 2016/2017 Budget 2017/2018 Budget 2018/2019 Growth % 2013/ / Performance indicators - Cost of raw water / primary revenue (16.23) (1.60) - Cost of sales / total revenue (4.50) (0.88) - General expenses / total revenue (17.30) (0.54) - Employees costs / per megalitre (1.45) Employee costs / total costs excl finance costs Operating profit (loss) per employee - Total staff complement - Management - Other Operating risks Debtors days (trade debtors excl VAT/ revenue x 365 days) (11.55) (1.30) 2.0% - Return on assets (EBIT / total assets excluding investments) 6.3% 0.0% 3.6% 4.0% 4.7% Financial risks Current ratio (current assets / current liabilities) (1.55) Gross debt / equity ratio (total debt liabilities / total equity) (79.67) (32.68) - Debt / assets ratio (total debt / total assets) (77.33) (32.03) Business credit risk - interest cover (EBIT / interest paid) (50.471) Surplus ratios - Return on turnover (net profit / turnover )

168 165 Annexure H - 5 Year Capex Programme Projects Proposed Funding Source Growth Strategy Plan Projection Amatola Water Reserves Loan National Treasury Grant Total 2014 Year Year Year Year Year Year 5 Nahoon BWS Upgrade WTW R - R - R R R R Sub-total R - R - R R R R R - R - R - R - Sandile BWS Upgrade Reservoirs R - R - R R R - R - R R R - R - Upgrade Bulk distribution R - R - R R R - R - R R R - R - Upgrade WTW R - R - R R R R R R - R - R - Upgrade pump stations R - R - R R R - R - R R R - R - Sub-total R - R - R R R R R R R - R - Peddie BWS Upgrade Bulk distribution R - R - R R R R R R - R - R - Reservoirs R - R - R - R - R - R - R - R - R - R - Upgrade WTW R - R - R - R - R - R - R - R - R - R - Upgrade pump stations R - R - R - R - R - R - R - R - R - R - Sub-total R - R - R R R R R R - R - R - Debe Nek BWS Upgrade Bulk distribution R - R - R R R - R - R R R - R - Upgrade Reservoirs R - R - R R R - R - R R R - R - Upgrade WTW R - R - R R R R R R R - R -

169 166 Projects Proposed Funding Source Growth Strategy Plan Projection Amatola Water Reserves Loan National Treasury Grant Total 2014 Year Year Year Year Year Year 5 Upgrade pump stations R - R - R R R - R - R R R - R - Sub-total R - R - R R R R R R R - R - Binfield BWS Upgrade Bulk distribution R - R - R R R R R R R - R - Upgrade Reservoirs R - R - R R R R R R - Upgrade WTW R - R - R R R R R R R - R - Upgrade pump stations R - R - R R R - R - R R Sub-total R - R - R R R R R R R - R - Masincedane BWS Upgrade Bulk distribution R - R - R R R - R - R R R - R - Upgrade Reservoirs R - R - R R R - R - R R R - R - Upgrade WTW R - R - R R R R R R - R - R - Upgrade pump stations R - R - R R R - R - R R R - R - Sub-total R - R - R R R R R R R - R - Total R - R - R R R R R R R - R -

170 167 Annexure I - Bank Account Details Bank Accounts Account Number Branch Branch Number Standard Bank Current Accounts Cheque - Current East London Cheque - Current Port Elizabeth Cheque - Salary East London Cheque - DOE Projects East London Call Accounts Daily Call East London Daily Call East London Daily Call East London Daily Call Port Elizabeth Market Link Port Elizabeth Stanlib Call Accounts Daily Call Melrose Daily Call Melrose Nedbank Current Accounts Cheque - Current East London Call Accounts Daily Call East London

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172 Contact Details Private Bag X3, Vincent, 5217 Amatola House, 6 Lancaster Road, Vincent, 5247 Tel: (043) Fax: (043) aw@amatolawater.co.za