CONTENTS Chapter 1 Foreword Chapter 2 Introduction Chapter 3 Policy Statement Chapter 4 Self Appraisal of Business Achievements and Strategic Plan

Transcription

1 BUSINESS PLAN 15/19

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

4 Chapter 1 FOREWORD BY THE CHIEF EXECUTIVE It gives me great pleasure to present the Amatola Water Business Plan for the 2015/ /19 period, after my recent appointment as the Chief Executive Officer in February The Business Plan attempts to put a year ahead programme of action for Amatola Water which shall be improved year on year using the past as a base of continuous improvement and performance. Amatola Water is poised in a position of strategic national importance to deliver on much needed water and sanitation infrastructure for continued socio-economic development and job creation in the Eastern Cape, which is one of South Africa s poorest provinces, but also an area with the most growth potential in the country. It is Amatola Water s vision to lead sustainable bulk water and sanitation services in the Eastern Cape through a mission of striving to contribute to socio-economic development as a Regional Water Utility by providing bulk water and sanitation to Water Services Authorities. Amatola Water embarks on the third year of implementation of its 20 year strategy which gets reviewed annually by the Board, Shareholder and stakeholder representatives. This Business Plan is underpinned by this strategy which has taken into consideration the Department of Water and Sanitation s Institutional Re-alignment and Reform (IRR) strategy. We hereby present to the Shareholder, the Department of Water and Sanitation as lead by the Honourable Minister, Nomvula Mokonyane, our Amatola Water Business Plan which is aligned to the Medium Term Framework of the Department. This Business Plan covers comprehensively 19 Chapters, inclusive of the Policy Statement, Strategy and self-appraisal of Business Achievements relative to the strategic goals and objectives, Directives by the Minister, Water Resources Development and Inter-basin Transfer Schemes, Bulk Water Plan, Bulk Water Treatment and Disposals, Retail and Industrial Water Supply and Other Activities. Amatola Water is currently a rural water utility which has to continue bolstering its secondary business to augment its primary business for sustainability purposes. This Business Plan attempts to keep the organisation focused on its mandate and Shareholder Compact as directed by the Shareholder and is poised to continuously improve the performance of the organisation year on year. Amatola Water shall carry out the execution of this Business Plan with the spirit and commitment of radical transformation and inclusive growth to ensure that the region, through local government performance, achieves reliable supply of bulk water and sanitation service delivery to the communities; and propels local economic development through the creation of jobs and enterprise development. The Amatola Water staff under the leadership of the Chief Executive and the oversight of the Board as directed by the Chairman, looks forward to the support of the Minister and the Department of Water and Sanitation in order to realize the organisations objectives of financial sustainability, capacity provisioning and harmonized labour conditions as they implement this Business Plan over the outward Medium Term Revenue and Expenditure Framework (MTREF) period. 1

5 Chapter 2 INTRODUCTION ESTABLISHMENT Amatola Water is a national government business enterprise (water board) operating in the water sector. As an essential services 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, for public benefit. The organisation was established as a water board in terms of section 108 (2) of Water Act, 1956 (Act No. 54 of 1956), by a 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 provide improved and extended water services so as to enhance the quality of life and socio-economic 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 were vested with Amatola Water in terms of a Transfer Agreement concluded between the water board and the State. VISION, MISSION AND ORGANISATIONAL VALUES Amatola Water s vision, mission and values are reviewed annually to ensure alignment to its mandate and Shareholder s strategic intent. Vision To lead sustainable bulk water services in the Eastern Cape. Mission Amatola Water strives to contribute to socio-economic development as a Regional Water Utility by providing bulk potable water and sanitation to Water Service Authorities. 2

6 Values Amatola Water is inspired by an unwavering commitment to empower its 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 realisation 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 incorporates km² of the Eastern Cape Province, which includes most of the Amathole and Chris Hani District Municipalities, the Ndlambe Municipality and smaller portions of the Cacadu and Joe Gqabi District Municipalities. 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 in which Amatola Water operates. 3

7 Chapter 3 POLICY STATEMENT Amatola Water developed its Policy Statement as a separate document in accordance with the requirements of the Department of Water and Sanitation (DWS). 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 2015/16 year. 4

8 Chapter 4 STRATEGY AND SELF APPRIASEL OF BUSINESS ACHIEVEMENTS STRATEGY Strategic Overview and Direction Amatola Water developed its 20-year National Development Plan (NDP) aligned strategy, with its first year of implementation in 2013/14. The review for the second year of the strategy in 2014/15 focused mainly on how to improve the implementation of the strategy. As Amatola Water plans for its third year of this strategy 2015/16, there have been many changes in the external environment. Most notable are the national general elections (including ruling party election manifesto), a new Medium Term Strategic Framework (MTSF) and the proclamation of a new parent department, the Department of Water and Sanitation(DWS). This led to the theme of this year s strategy workshop to be as follows: Aligning Amatola Water s Contribution to Water Services in the Province The main Strategy Workshop with the Board and Senior Management was held on the 29th and 30th of January Representatives from the DWS, the Office of the Premier and SALGA added their perspective input in helping Amatola Water to align to a coordinated approach to service delivery. As one government, it is essential that national, provincial and local government, in conjuction with government entities, work together in a coordinated manner. The tightening fiscal position of the country, non-performing municipalities and the need for better coordination were some of the key themes within the external environment review. Institutional Reform and Realignment(IRR), reconfirmed in the new MTSF, remains the single biggest game changer for the organisation. The need to develop capacity and increase involvement in sanitation was highlighted. The development of a quality infrastructure master plan for the Eastern Cape Province and finding ways to fund such a plan will be a key area to lead as an institution. The base concepts behind the strategy remain firmly entrenched on focusing on the organisation s primary (Section 29) business and growing this to 90% of the business over the 20-year period, as well as on implementing the 750 liters per household per day standard as a contribution to improving rural livelihoods. This focus on products and services to be provided is closely aligned to Amatola Water s understanding of the Regional Water Utility functions through the IRR process. The upgrade of the Amatola Water plants and increasing volumes remain the corner stone of improving financial sustainability. Amatola Water believes that in considering the 20-year planning cycle and the NDP, it needs to start now in achieving the desired standard for all South Africans. 5

9 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 socio-economic development as a Regional Water Utility, by providing bulk potable water and sanitation to Water Service Authorities Values Amatola Water is inspired by an unwavering commitment to empower its stakeholders through the consistent demonstration of: Responsibility Excellence Integrity Accountability Strategy Framework Amatola Water has adopted the Balanced Scorecard approach as set out by Kaplan and Norton. The following 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 its performance monitoring and management system, Amatola Water has also adopted the Ten Areas for Successful Water Utility Service Provision. 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 6

10 These ten areas 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 areas are as follows: 1. Water and Wastewater Quality (WQ): is achieved when Amatola Water produces bulk potable water and wastewater in compliance with statutory requirements and consistent with customer needs at both Amatola Water owned and Right of Use (ROU) plants. 2. Customer Satisfaction (CS): is the degree to which Amatola Water provides reliable, responsive, and affordable products and services to Water Service Authority 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 (SS): As an organ of state Amatola Water has a variety of different stakeholders, most notable the Department of Water and Sanitation. 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 the Amatola Water role and catalytic initiatives within the sector. 4. Infrastructure Stability (IS): 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 (FV): 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. 6. Water Resource Adequacy (WA): 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 (CE): 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 (LD): 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 (OR): 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 (OO): 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. 7

11 STRATEGIC GOALS AND OBJECTIVES Amatola Water has refined its 20-year goals and has developed 5-year strategic objectives that if achieved, the organisation would have successfully implemented its new strategy. Measures and targets for each of the 5 years have been set and are outlined in Annexure D. WSU Area Customer Satisfaction Water and Wastewater Quality Water and Wastewater Quality Community/Environmental Sustainability Stakeholder Relationships and Support Stakeholder Relationships and Support Financial Viability Water Resource Adequacy Infrastructure Stability Infrastructure Stability Operational Resiliency Operational Optimization Operational Optimization Leadership and Employee Development Leadership and Employee Development Leadership and Employee Development Leadership and Employee Development 20 Year Goal 80% of WSAs in the province as contracted customers through ownership or ROU. Achieve Blue and Green Drop standard at all bulk works - (owned and ROU). Providing accredited laboratory water services to all WSA s that AW has bulk supply contracts with. Contribute to decent living standards and enhance socio-economic development within communities in EC through quality and adequate water services. Strong and well established relationships with stakeholders internal and external. To be the center of a fully-fledged provincial water utility (IRR). Improve solvency, liquidity and profitability to achieve a AAA- Finch rating. 98% Assurance of Supply at a minimum service level of 750l per household per day. 98% Availability and assurance of water supply and 90% reliability of sanitation services. 80 % of the Eastern Cape infrastructure master plan implemented. Fully implemented business continuity system (IMS, Quality systems, Knowledge Management). Continuous alignment of People, Skills, Systems, Policies and Procedures for Strategy Implementation. Continuous improvement philosophy institutionalized. Enhance Strategic Effectiveness. Innovative, nationally recognized water sector leadership. Balanced, skilled work force for Regional Water Utility needs. Renowned knowledge and experience hub in the water sector. Following is a list of the 5-year objectives. These objectives set out what is to be achieved in the first five years, towards the 20 year goals set above. Also included, is the alignment with the National Government s 12 Outcomes and the Department s Strategic Objectives, with numbers to show alignment and contribution therein. 8

12 WSU Area 20 Year Goal 5 Year Objectives Obj No. Stakeholder & Customer Perspective CS 80% of WSAs in the province as contracted customers through ownership or ROU 2 additional Bulk water supply contracts with WSA s (4 currently) CS Increase Revenue volumes to 150 mega liters per day CS CS WQ WQ CE SS SS SS Financial FV FV FV FV Achieve Blue and Green Drop standard at all bulk works - (owned and ROU) Providing accredited laboratory water services to all WSAs AW has bulk supply contracts with Contribute to decent living standards and enhance socioeconomic development within communities in EC through quality & adequate water services Strong and well established relationships with stakeholders internal and external To be the centre of a fully-fledged provincial water utility (IRR) Improve solvency, liquidity and profitability to achieve a AAA- Finch rating Manage key customer satisfaction scores in terms of bulk potable water supply, bulk waste water, raw water and water resource infrastructure management to achieve 8/10 Acquire 2 contracts for waste water works Achieve statutory quality compliance at all AW owned and all ROU plants within 3 years of take over Achieve and maintain accreditation for 30 water quality parameters at laboratory. Increase the number of schemes with capacity at 750l per household per day at treatment works to 7 Increase the contribution to economic transformation and improve overall AW image Collaboration to improve service delivery with other relevant Local, Provincial and National institutions Influence and support the process and model for a Regional Water Utility in the Province On-going strengthening of Balance Sheet to provide sustainable bulk water services (Ratios) Build contribution R100 million from financial surpluses for internal infrastructure investment/capex fund Secure R800 million of funding for infrastructure development Sustainable & affordable tariff increases within 2% of inflation Gov Out Alignment DWS Obj CS1 12 SO2.1 CS2 12 SO2.1 CS3 9 SO2.1 CS4 12 SO2.1 WQ1 9 SO3.1 WQ2 9 SO3.1 CE1 8 SO2.1 SS1 12 & 9 SO1.3 SS2 12 SO2.1 SS3 6 & 12 SO1.6 SO2.1 FV1 12 SO1.6 SO1.2 FV2 12 & 6 SO1.6 SO2.1 FV3 12 & 6 SO1.6 SO2.1 FV4 12 & 8 SO1.6 9

13 WSU Area 20 Year Goal 5 Year Objectives Obj No. Internal Processes WA IS IS IS IS OR OO OO 98% Assurance of supply at a minimum service level of 750l per household per day 98% Availability and assurance of water supply and 90% reliability of sanitation services 80 % of the Eastern Cape infrastructure master plan implemented Fully implemented business continuity system (IMS, Quality systems, Knowledge Management) Continuous alignment of people, skills, systems, policies and procedures for strategy implementation Continuous improvement philosophy institutionalised Until institutional realignment and reform is completed, AW is not responsible for this function and therefore there is no relevant 5 year objective at this time 98% Availability of water supply for all bulk water services Yearly improvement of 20% in bulk sanitation services availability Complete AW plant upgrades and KSD PI Projects Develop a fully integrated Provincial Master Plan including funding considerations Minimize production and distribution losses to 12% Business continuity system implemented Aligning people, skills, systems, policies and procedures for strategy implementation Implement continuous improvement system IMS (Prioritize high risk areas) Gov Out Alignment DWS Obj IS1 6 SO2.1 IS2 8 SO2.1 IS3 6 SO2.1 IS4 6 SO2.1 IS5 6 &10 SO2.2 & SO4.1 OR1 12 SO1.2 SO1.6 OO1 12 & 4 SO 1.1 SO1.6 OO2 12 SO 1.2 SO1.6 OO Improving corporate governance OO3 9 &12 SO3.1 &SO1.2 Learning and Growth LG Enhance strategic effectiveness 80% of strategic implementation LG1 12 SO1.6 LG LG LG LG Balanced, skilled work force for Regional Water Utility needs Innovative, nationally recognised water sector leadership Renowned knowledge and experience hub in the water sector Alignment between staff skills available and job requirements LG2 12 SO1.1 Entrench Batho Pele Principles LG3 12 SO1.1 Research and position papers completed Functional, self-funding technical learning academy LG4 12 SO1.1 LG5 12 SO1.1 SO1.3 10

14 STRATEGY IMPLEMENTATION AND CATALYTIC INITIATIVES With Amatola Water s 20 year strategy in place and refinement occurring each year, full attention is given to the implementation of the strategy. Three additional interventions have been developed in order to facilitate this further: 1. Catalytic Initiatives 2. Divisional Performance Reviews 3. Board Committee Strategy Implementation, Monitoring and Evaluation Below is a list of key Catalytic Initiatives which will drive the successful implementation of the strategy and success of Amatola Water: 1. Influence and support the process and model for a Regional Water Utility in the Province. 2. Develop a fully integrated provincial master plan including funding considerations. 3. Increase the relevance of Amatola Water as an institution and improve overall image. 4. Complete Amatola Water plant upgrades and KSD PI Projects. 5. Entrench Batho Pele Principles. As part of improving its internal strategy monitoring and evaluation Amatola Water has implemented a quarterly internal peer review for assessing divisional effectiveness in implementing the 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 the 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: Area Board Committee Director Responsible Financial Viability FINCO CFO Stakeholder Relationships and 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 11

15 SELF APPRAISAL OF BUSINESS ACHIEVEMENTS The following self-appraisal of Amatola Water business achievements covers the period from July 2014 to December Self-appraisal of the previous financial year is covered in the previous year s business plan and the integrated annual report for 2013/2014. This self-appraisal is done in comparison to the corporate balance scorecard as submitted to the Department of Water and Sanitation in the previous business plan. Performance for Quarter 1 and Quarter 2 is indicated separately, and is as per the quarterly reporting approved by the Board. The second quarter shows a decline in the meeting of targets, from 74% in the first quarter to 69% in the second quarter. With various measures not due yet by the second quarter this is a concerning direction. The main contributor to the decline in meeting targets is the financial quadrant and the financial performance of the organisation. In reality the loss of the Amathola District Municipality (ADM) contract and the OR Tambo District Municipality (ORTDM) Blue Drop assistance contract has resulted in lower secondary revenue. With the staff from these contracts absorbed into other units, Amatola Water has effectively maintained the cost while revenue has reduced and in turn eroding profitability, with the organisation just breaking even for the first six months. The key catalytic initiative for the medium term, which is the sustainability of the Amatola Water plant upgrades is also significantly behind schedule. Efforts are being made to expedite and improve this area. Current primary business continues to perform well with volumes, quality targets and reliability targets all exceeded, while also reducing water losses. Highlights for the Year to Date: The volume of 109Ml/ day versus the target of 101Ml/ day of water sold is positive, resulting in good Primary Revenue. Water losses for the quarter were 8.31% under a target of 12% and down from the previous quarter. Amatola Water received the first tranche payment of R90 million from the Department for the upgrade of its plants. 833 temporary jobs were created mainly through the implementation agency work done on the KSD PI. The internal audit unaddressed repeat findings were reduced from 57 to 20 indicating strong progress in this area. Challenging areas for the Year so far: Achievements of Targets Secondary revenue and profitability are down for the quarter, with a small surplus made. Combined with cashflow, difficulties caused by debtors days were experienced, especially with late payment on projects. This has also resulted in not meeting payment terms for all creditors. Capex and project expenditure especially on the Amatola Water plant upgrades is behind with only 8.8% of the allocation spent versus a 45% target. The consistent challenges in these two areas remain and have worsened, with debtors days having increased from 93 to 102 days and labour costs of total cost at 43%. Amatola Water has written to National Treasury and activated the inter-governmental relations framework process for recovering older debts. 30% 2% 69% Capex spend and various interventions to improve the debtors days are being prioritised. Staff costs are in the process of being reviewed, with the understanding that the current total compliment is higher than the desired levels. FIGURE 1 For the first six months, only 69% of scorecard targets were achieved, compared to 74% in the previous quarter. This indicates a big gap between planned strategy implementation and the current reality within Amatola Water. Measures will be put in place to ensure that this trend does not continue. 12

16 WSU Ob No. Objectives Me No. Measure / Indicator Baseline Y1 Target Q1 Actual Q2 Target Q2 Actual Reasons for performance / Corrective Interventions Stakeholder and Customer Perspective CS CS1 2 additional bulk water supply contracts with WSAs (3 currently) CS1.1 Number of bulk potable with different WSAs (Owned or ROU) BCMM, ADM and Ndlambe bulk supply contracts in place CS1 Increase volumes to 160 mega litres per day CS1.3 Volume of water sold by owned and ROU plants 110 Ml/ day Ml/ day Ml/d CS CS2 Improved customer satisfaction CS2.1 Average customer satisfaction score CS2 CS2.2 % compliance to customer KPA as per customer charter 99% 80% 100% 80% 100% All targets met on the BCMM, ADM and Ndlambe bulk supply contracts WQ WQ1 Achieve statutory quality compliance at all AW owned and ROU plants efficiently WQ1.1 % Compliance to SANS Class 1 potable water (owned and ROU) 98.4% 98% 98.9% 98% 98.4% WQ2 Blue Drop advisory services WQ2.1 No of Blue Drop advisory service contracts Makana ROU includes BDS advisory services CE CE1 Contribute to decent living standards and enhance public health within communities in ADM through quality adequate water services CE1.1 Number AW schemes with capacity to supply 750l per household per day at terminal reservoir Laing and the Masincedane / Upper Mnyameni schemes compliant 13

17 WSU Ob No. Objectives Me No. Measure / Indicator Baseline CE CE2 Provide services and invest in technologies / systems in an environmentally responsible and sustainable manner CE2.1 % compliance with environmental management plans across AW (owned and ROU) Y1 Target Q1 Actual Q2 Target Q2 Actual Reasons for performance / Corrective Interventions 50% 60% 60% 60% 60% All contracts have EIA and EMP compliance. DWS Measure CE2.3 No. of permanent and contract employees (direct) (Jobs created) Moratorium on Recruitment DWS Measure CE2.4 No. of temporary jobs created (indirect) KSD contracts have assisted with temporary job creation, impact of new projects awarded towards the end of 2014 to impact Q3 job creation figures SS SS1 Strengthen and deepen relationships with statutory, contracted and non-statutory stakeholders SS1.1 % Compliance with Executive Authority mandates (MTSF, NDP and DWS Strategy) SS1.2 % Compliance with supplier open tender contractual commitments 0% 100% 100% 100% 100% 78% 95% 72% 95% 65% The target has not been achieved in the second quarter due to the delayed collection of amounts due from debtors, leading to late payments of suppliers. Amatola Water is in discussions with the Department of Water and Sanitation to find a means to alleviate the contractual conundrum experienced by AW on payment of suppliers. 14

18 WSU Ob No. Objectives Me No. Measure / Indicator Baseline SS2 Be center of new provincial regional bulk utility (IRR) SS2.1 No of consultative meetings with key interest groups effected by IRR Y1 Target Q1 Actual Q2 Target Q2 Actual Reasons for performance / Corrective Interventions Minister Provincial meeting during conference week Financial Perspective FV FV1 On-going strengthening of Balance Sheet to sustainable services (Ratios) FV1.1 Liquidity Ratios: Current ratio The slow collection of amounts due from debtors has resulted in a significant reduction in cash funds. Amatola Water will strategically focus on means of decreasing its debtors which will assist in increasing cash reserves as well as decreasing its current liabilities. FV1.2 Debtors Days The target has not been achieved. Debtors collection remains a permanent agenda item in MANCO and AW intends to lodge dispute claims against government entities who are defaulting to make payment. FV1.3 Employee to revenue (R Million) R0.75 mil R1.1 mil R0.19 Mil R0.5 mil R0.4 mil There is a slight increase in the revenue generated in Secondary Business. AW employee costs are high and the loss of secondary contracts (ADM) has exacerbated the ability of AW to meet the target. 15

19 WSU Ob No. Objectives Me No. Measure / Indicator Baseline Y1 Target Q1 Actual Q2 Target Q2 Actual FV1.4 Solvency ratio Reasons for performance / Corrective Interventions FV1.5 Return on assets % 4.8% 0.5% -0.01% 0.50% 0.22% Although there is slight improvement, this target has still not been achieved. A focused approach to cost cutting needs to be implemented by Amatola Water. FV1.6 Net profit margin % (All) 9% 3.5% -0.03% 3.50% 0.89% Slight improvement in the second quarter. FV1.7 Gross profit margin % (All) 34% 30% 35% 30% 27% Slight improvement in the second quarter. FV1.8 Total expenditure R in 000 R312 R600 R82 R300 R167 Total expenditure is within budget and target has been achieved. FV1.9 BBBEE spend 100% 100% 100% 100% 107% The target has been achieved. The focus in the months ahead is to increase BBBEE spend on Black Women Owned Enterprises. FV1.10 Electricity Cost (R/KL) Although there has been improvement, the target has not been achieved. FV1.11 Chemical Cost (R/KL) The target has been achieved. FV FV2 Surplus per financial year contribution to build reserves for infrastructure investment FV2.1 Revenue in Rands (in million rand) R338 R401 R81 R200 R166 Secondary revenue is significantly below budget 16

20 WSU Ob No. Objectives Me No. Measure / Indicator Baseline FV2.2 Surplus in Rands (in Million rand) Y1 Target Q1 Actual Q2 Target Q2 Actual Reasons for performance / Corrective Interventions R31 R30 R (0.03) R15 R1.47 There is improvement but still significantly below target due to decline in revenue. FV2.3 Amount of targeted surplus placed in reserve fund (in million rand) FV2.4 % Primary Revenue / Total Revenue R18.9 R10 R0 R5.0 R0.9 A result of significantly below budget surplus 67% 68% 77% 68% 73.1% The target has been achieved. FV2.5 % Labour costs of total costs 39% 37% 41% 37% 43% The target has not been achieved. Management s efforts in the next quarter will focus on containing spending on discretionary items such as overtime and related allowances. With increased vigilance and maximised efficiency on other costs, the target will be difficult as labour costs are generally fixed and discretionary spend accounts for only 10% of total labour costs. FV FV3 Explore sourcing of funding alternatives for growth of new infrastructure (excluding replacement) FV3.1 Amount of Grant funding secured R0 R150 mil 0 R50 mil R90 mil Transfer of R90 million received 17

21 WSU Ob No. Objectives Me No. Measure / Indicator Baseline FV Sustainable & Affordable Tariff FV3.4 % average increase of tariff (within government targeted inflation) Y1 Target Q1 Actual Q2 Target Q2 Actual Reasons for performance / Corrective Interventions 9% 8% 8% 8% 8% Target has been achieved. Internal Processes Quadrant WA WA1 98% Assurance of supply in ADM, Ndlambe and ORTDM Region (Sandile and Mzintlava Dams) WA1.1 % assurance level (1 in 50 year drought / restriction) 98% 98% 98% 98% 98% All schemes compliant at AW IS IS1 90% Availability of water supply for all bulk services IS1.1 % availability of water supply for all bulk services - 80% 99.8% 80% 99.7% IS2 AW plant upgrades and KSD PI Projects IS2.1 % annual grant allocation spend on AW plant upgrades - 100% 3.36% 45% 8.7% Some delays experienced on projects challenged by unsuccessful contractors but expenditure started to accelerate in Q2 with improved performance expected in Q3 IS2.2 % annual grant allocation spend KSD (RBIG & MIG) - 90% 8.2% 40% 41.8% Court interdicts and poor performance by several contractors impacts addressed. IS2.3 % Infrastructure CAPEX vs. Revenue (Internal funded) 3% 4% 5% 4% 10% 18

22 WSU Ob No. Objectives Me No. Measure / Indicator Baseline IS2.4 Overall capex project completion dates within targets as a percentage Y1 Target Q1 Actual Q2 Target Q2 Actual Reasons for performance / Corrective Interventions 63% 85% 34% 85% 40% Court interdicts and poor performance by several contractors has resulted in target being missed. Court action has been opposed and non performing contractors appointments have been terminated IS2.5 Increased access to services measured by Rand spend on Capex Projects IS IS2.6 % Infrastructure Maintenance of Revenue R8.7 Mil R150 Mil R5,04 mil R50 mil R13,05 mil Masincedane, Binfield, Debe and Sandile / Peddie schemes design work complete. First tenders expenditure commenced. 8% 6% 7% 6% 10% Target has been achieved. IS IS3 Develop an EC water master plan to direct future funding streams IS3.1 % alignment of water resources master plan to the water supply master plan 98.97% 50% 25% 25% 25% Base documentation for province has been secured, ORTDM, Ndlambe conceptual planning done. IS IS4 Minimise produced and distributed water to efficiently reduce water losses IS4.1 % total water loss on AW owned and ROU 10% 12% 10.73% 12% 8.31% OR OR1 Interconnected supply to Amahlathi, Ngqushwa, Nkonkobe, Ndlambe OR3 Accredited laboratory OR1.1 No of individual schemes connected to system OR3.1 Number of elements accredited for Upgrade of AW infrastructure has commenced but not yet complete Accreditation application submitted and awaiting SANAS audit. 19

23 WSU Ob No. Objectives Me No. Measure / Indicator Baseline OR OR4 Ensure uninterrupted water supply, with adequate pressure to customers OR4.1 No. unplanned interruptions to supply >24 hours Y1 Target Q1 Actual Q2 Target 99.32% Q2 Actual Reasons for performance / Corrective Interventions OO OO1 Aligning people, skills, systems, policies and procedures for strategy implementation OO1.1 % alignment of skills set to strategy - 60% 10% 20% 20% OO1.2 Number of policies reviewed and aligned with strategy OO1.3 Number of reviewed systems and procedures aligned with strategy OO OO2 Fully functional governance, compliance, risk and fraud prevention systems for clean audit OO2.1 Un-qualified Audit Y Not a target for this quarter. OO2.2 Effective internal controls and risk management Internal audit findings: Number Repeats Consistent effort in this area has seen management address many of these items which are currently being re-audited OO2.3 Effective internal controls and risk management Internal audit findings: Number unresolved New internal audit reviews have contributed additional items 20

24 WSU Ob No. Objectives Me No. Measure / Indicator Baseline OO2.4 % Compliance to KING III Y1 Target Q1 Actual Q2 Target Q2 Actual 88% 60% 88% 60% 88% Reasons for performance / Corrective Interventions OO2.5 % Compliance to applicable legislation in Legal register 100% 80% 100% 80% 100% OO2.6 % Implementation of Integrated Risk Framework and Fraud Prevention Plan 60% 70% 90% 60% 90% OO2.7 Board member attendance 72% 80% 84% 80% 73% OO2.8 Improved controls and risk mitigation, indicated by number of breaches of materiality and significance framework Learning and growth Quadrant LG LG1 Enhanced Strategic Effectiveness LG1.1 % Achieved of the Corporate Scorecard Targets 63% 75% 74% 65% 69% LG1.2 Average Board Committee Rating of adequacy of submissions (Out of 5) LG1.3 % Manco resolutions which are implemented in prescribed timeframes 85% 90% 86% 90% 85% LG2 Build Cross- Functional Excellence/ Effectiveness LG2.1 Average Divisional Performance Review Scores

25 WSU Ob No. Objectives Me No. Measure / Indicator Baseline LG3 Develop Operational Competence (individual) LG2.2 % Identified critical posts filled by predetermined recruitment time LG3.1 % of annual approved training plan implemented Y1 Target Q1 Actual Q2 Target Q2 Actual Reasons for performance / Corrective Interventions 80% 80% 0% 80% 40% CEO and SCM filled. Progress is underway with the Director posts. - 80% 20% 40% 40% LG3.2 % Staff Turnover 13% 7% % 1.8% LG3.3 Total number of staff presently on training courses, learnerships, bursaries (DWS Measure) LG4 Entrenching the appropriate corporate culture: Decisive leadership; resolving organisational politics; and issues of conflict LG4.1 Average rating of Corporate Culture Survey (Out of 5) n/a 3.5 n/a n/a n/a LG5 To be a renowned knowledge hub for the water services sector in the Eastern Cape LG5.1 % implementation of the knowledge management program n/a 50% 0% 0% 0% 22

26 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 complied with the directive and successfully submitted the required Due Diligence Report for the Southern Regional Water Utility to the then Minister of Water Affairs on 31 March Under the above directive, the following action items have been identified in the Institutional Realignment and Reform Consolidation of Water Boards Roadmap document as Amatola Water s priorities from March 2015, going forward: Action Responsibility Timeframe Ownership of assets and financial implications Analysis of service delivery challenges, potential ownership of bulk assets in the new area and revenue implications for Amatola Water and the development of business case based options for Amatola Water s involvement. DWS/Amatola Water Completed by 30 October 2015 Recommendation on the nature and extent of the involvement of Amatola Water Following the due diligence process outlined above specific recommendations are made for the involvement of Amatola Water in the region for consideration by all relevant stakeholders. Due Diligence DWS/Amatola Water 30 September 2014 Conduct comprehensive due diligence (financial, technical, operational, legal and HR). Amatola Water 28 March 2015 Preparation of contractual arrangements between Amatola Water and relevant municipalities regarding ownership, operation and maintenance of infrastructure. Amatola Water February 2016 Contractual Agreements Identify all external contractual agreements/commitments and inform of intention to review/revise. Including banking and related matters. Amatola Water April 2016 Review/revise relevant contractual agreements Amatola Water May

27 Action Responsibility Timeframe Transfer of staff Identify relevant unions and conduct negotiations regarding staff transfer. Identification of all staff to be transferred Complete records for staff to be compiled i.e. years of service, conditions of service, leave outstanding, disciplinary record, job grading and functions, etc. Amatola Water 1st meeting to be held with unions by 31 June 2016 Amatola Water, relevant municipalities, June 2016 Amatola Water, relevant municipalities, June 2016 Organogram and budget to be amended to include new functions and staff Amatola Water, July 2016 Identified staff to be transferred Amatola Water August 2016 Policy Statement, Business Plan and Shareholder Compact Revised Policy Statement, Business Plan and Shareholder Compact to be prepared Amatola Water May

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 in the implementation of its strategy for the next five years. However, should such an arrangement be required, it will be developed in accordance with the organisation s materiality and significance framework as discussed in Chapter

29 Chapter 7 WATER RESOURCES DEVELOPMENT AND INTER-BASIN TRANSFER SCHEMES Water resources development and inter-basin transfers are part of the organisation s primary business. Amatola Water contributes in this regard through the annual dam management contract with the Department of Water and Sanitation (DWS). 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 and Sanitation Amatola Water s contractual relationship with the DWS 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 DWS 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 and being billed by DWS, 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 DWS to manage dams in its area continues on an annual basis. This agreement shall remain in effect until terminated by mutual agreement by both parties or through changes in legislation. The contract requires Amatola Water to maintain 21 dams within its supply area on behalf of DWS. 26

30 PROJECTED DEMAND DESCRIPTION OF MAJOR CONSUMERS OR CONSUMER GROUPS AND PROJECTED DEMAND The following table indicates the raw water extracted and the projected water demands to Amatola Water s Water Treatment Works (WTW) and related dams which are maintained by the organisation: m³/annum Water Treatment Works Nahoon (+ Wrigglewade Dam) Laing Sandile Rooikrantz Debe Nek Peddie Regional Masincedane Dabi Binfield Upper Mnyameni Glenmore Boesmans River TABLE 1 Dam and Registered 06/07 Abstractions 2015/ / / / /20 Nahoon + Wriggleswade * Laing Sandile Rooikrantz Debe Sandile Mnyameni Dabi Binfield Park Mnyameni Lower Fish Albany Coast RO Plant + Wells A key initiative for the 2015/16 financial year will be to complete applications to DWS for increased abstractions from the above-mentioned dams to cater for the current and projected demands where these exceed current registrations. 27

31 WATER RESOURCE CONSERVATION Amatole Bulk Water Supply System: Nahoon / Laing / Wriggleswade / Bridle Drift / Rooikrantz / Maden / Gubu Dam The above mentioned dams form part of the Amatole System. Amatola Water has been monitoring water losses within this bulk treatment and distribution system on a continued basis since the inception of the water board. Amatola Water has been assisting DWS in the control 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 Dam 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 WTWs for potable use. Raw water is released from Sandile Dam via the Keiskamma River to Craighead Weir, from there it is pumped to the Peddie WTW. To ensure that sufficient amounts of water are available at Craighead Weir, Amatola Water releases a constant stream of 210 l/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 by DWS for abstractions, it is therefore difficult for Amatola Water to determine what the correct release should be for the system. The monitoring of the abstraction by the farmers would enable the release to be accurately defined and implemented. Amatola Water has been investigating the option of piping potable water directly from Sandile WTW to the Peddie Scheme and Port Alfred. This would provide a suitable solution to DWS 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 period show that the supply of potable water from the Sandile WTW to the existing Buffalo City, Amathole 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 the reverse osmosis processes. The results of the study show the Sandile WTW augmentation option, which will require the raising of Sandile Dam by a further 10 meters, as the most cost effective option. At a stakeholder meeting held between all affected parties during March 2014 it was decided that Amatola Water prepare a pre-feasibility report to be submitted to DWS for review and consideration. The result of the implementation of such a regional scheme would lead to major raw water savings and optimization of water use. DWS has given the go-ahead to do a preliminary design of the pipeline, but Amatola Water was requested to consider the option of conveying water from Glen Boyd Dam to Port Alfred. A further comment by the Eastern Cape Project Coordinating Committee (EC PCC) was that the request of this pipeline be referred to DWS Head Office for their inputs. 28

32 Debe Nek Dam Debe Nek Dam supplies raw water to the Debe Nek WTW for potable water production. Amatola Water is managing water losses on the bulk conveyance system 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 WTWs. A portion of the available yield of Mnyameni Dam is allocated for irrigation purposes, supplying the high-lying 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. Through ongoing water loss management processes, Amatola Water continues to take action to reduce these losses to the minimum. Cata Dam Cata Dam is only supplying irrigation water to farmers within the Keiskammahoek valley. None of the off-takes to farming units are metered. Pleasant View and Binfield Park Dams Pleasant View Dam Pleasant View Dam is currently only utilized as an irrigation scheme and is currently not in use. 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 and Alice WTWs providing potable water to Alice and villages within the Gaga Tyume area. Monitoring distribution losses is now a function of Amathole District Municipality (ADM) as the bulk distribution infrastructure belongs to the municipality. The volume of raw water abstracted by farmers for irrigation purposes from the raw water pipeline 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 by the installation of bulk raw water meters on farmer offtakes. A proper monitoring system on all raw water abstraction could promote major raw water savings. 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 with minimal losses. The bulk distribution system is under the management of ADM. Bushmans River System The Bushmans River Reverse Osmosis WTW 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 remain within design parameters. 29

33 RAW WATER SUPPLY TO LOCAL MUNICIPALITIES Raw water is managed and supplied on behalf of DWS 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 Source 2014/ / / / /19 Rooikrantz Dam (to King William s Town WTW) TABLE 2 Nkonkobe Municipality (ADM) m³/annum Source 2014/ / / / /19 Binfield Dam (to Alice WTW) TABLE 3 Amahlathi Municipality (ADM) m³/annum Source 2014/ / / / /19 Gubu Dam (to Stutterheim WTW) TABLE 4 The raw water is utilised by the respective municipalities to produce potable water for consumers. Industry Da Gama Textiles is the only major 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 Source 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 the decrease in demand for material from the textile factory. 30

34 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. Furthermore, two farmers are utilising small volumes per month for micro irrigation use. The expected demand is outlined in the following table: m³/annum Source 2014/ / / / /19 Nahoon Dam TABLE 6 Amatola Water does not foresee any 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 128 Ml/ day in 2018/19. Water demand growth is based on an annual growth of 1% per annum. A key future consideration that will impact on demand is the requirement of higher levels of service. The National Development Plan (NDP) encapsulates this requirement and provides a vision for 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 750 liters 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 action 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 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. 31

35 Sandile Dam The Planning Review Report of the Sandile Regional Water Supply Scheme of 1987 reports the safe yield of Sandile Dam as 18 million cubic meters per annum, with 11.6 million cubic meters per annum as 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 sa way that ensures future doubling up in treatment capacity at the same site. The Sandile and Peddie Regional WTW are operated/utilised at 100% and above their treatment capacities, thus the need to increase treatment capacities at both these works. At the same time, various options for augmenting potable water supply to the Ndlambe Municipal area have been under investigation. Sandile Dam has been identified as a 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 considered the potential benefit to both Ndlambe Local Municipality, as well as the current users of the Sandile and Peddie regional schemes (ADM and 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 Ndlambe Municipality. The proposed initiative entails the establishment of Sandile Regional Supply Scheme that will incorporate the current Peddie WTW and extend supply to the Ndlambe Municipality. The total future domestic water demand from the Sandile system is expected to be million cubic meters per annum (55.8 Ml/ day) by The potential dam-raising options are being analysed for Sandile Dam, taking into account the expected long term water demand requirements. The historical firm yield for Sandile Dam is estimated to be 20 million cubic meters per annum. The historical firm yield for Sandile Dam if raised by 4 meters is estimated to be 24.8 million cubic meters per annum, and if raised by 10 meters is estimated to be 27.6 million cubic meters per annum. 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 DWS for further consideration. A critical intervention for the next five years will thus be the augmentation of the Sandile Dam to meet this expected future long term demand. Debe Nek Dam The current demand from Debe Nek 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 1.5 Ml/d to 5.0 Ml/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 from Debe Nek Dam for domestic purposes. The 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 and Masincedane WTWs for domestic and industrial use is in the order of 1.39 million cubic meters per annum. 32

36 To meet the expanded medium to long term potable water requirements, Amatola Water has appointed consultants to do a feasibility study considering increasing 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 from Mnyameni Dam for domestic purposes. 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 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 indicate 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 DWS and therefore actual available spare yield is to be confirmed for future development purposes. Cata Dam Cata Dam is only supplying irrigation water to the farmers within the Keiskammahoek valley and is therefore not part of Amatola Water s 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 Water s 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 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 from Binfield Park Dam for domestic purposes. 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 expected within this scheme. There are 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 WTW is expected to grow slowly over the next five years. Shortfalls in available resources are also addressed within the Ndlambe Bulk Water Supply 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 inter-basin 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 recently completed Reconciliation Study of the Amatole System undertaken by DWS indicates that with the implementation of the ecological water requirements, it will be necessary to either augment the supply or to 33

37 implement certain strategies such as water demand management or other measures to address this. If the affected Water Services 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. The strategies have been finalised, and the necessary bodies to manage the process have been put in place by DWS. The Amatole System s Strategy Steering Committee and the Technical Support Group have been established for this purpose and are supported by consultants appointed by DWS to ensure the Amatole System is managed in a sustainable manner. PROJECTED WATER AVAILABILITY AND RESOURCES DEVELOPMENT Projected Water Availability Projected water use figures were registered with the DWS 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 and is in the process of applying for increased registration volumes for all its water treatment schemes. 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 a shortfall in the 2016/17 financial year, taking into account the irrigation allocations as well. The Nahoon shortfalls are provided via transfers from the Wriggleswade Dam. The Rooikrantz shortfall will be managed by implementing strict operating rules that ensure that critical low supply levels of 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 the majority of dams that Amatola Water uses for raw water supply. Environmental water requirements and allocations have not been finalised on any of the schemes. DWS has completed the determination of the environmental flow requirements and potential environmental impacts of possible future developments on the Amatole System. Guidance is outstanding at present on how the required environmental releases will be implemented. A drought 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 on 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 Mm³/a, which is currently being addressed by DWS. 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. 34

38 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% 25% 1% 40.0% 40.4% 45.9% 48.8% 52.5% 33.8% 21.3% % of Firm Yield for all uses 76% 66.2% 66.6% 72.1% 75.0% 78.7% 60.0% 47.5% TABLE 7: Dam capacity in million cubic meters for ma jor dams 35

39 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 the Amatola Water supply area. Amatole Water Resource System The Amatola Water Resources System supplies the water requirements of the Buffalo City Metropolitan Municipality (BCMM) consisting of East London, Mdantsane, King William s Town and Bhisho urban complex, the town of Stutterheim and Mlungisi, as well as villages in the surrounding rural areas. The water resources of the Amatole 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 31.8 million cubic meters per annum, of which approximately 18 million cubic meters per annum, 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 have 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 was initiated by DWS and completed by the Operating Rules Study team. The operating rules, which have since been approved by DWS, 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 refill the dams. The Amatole Systems Analysis Technical Steering Group (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 cubic meters per annum 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 cubic meters per annum (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. BCMM has recently accepted the proposed system operating rules which will enhance the system s yield capacity. Despite the above, the system yield of million cubic meters per annum, has been used as the basis for the current reconciliation planning. 36

40 The higher possible yield of million cubic meters per annum (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 Inkobongo River that flows into the Nahoon River, feeding into the Nahoon Dam. Previous environmental studies on the Kwa-Nkwebu 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. 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 Amatola Water Supply System 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 Rural Development and Agrarian Reform (DRDAR) are reviewing the agricultural water requirements from these dams, whilst DWS 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 a more in-depth study for consideration for implementation: 37

41 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. Maintenance to Dams All storage infrastructures in the form of dams belong to the DWS and capital improvements and maintenance are planned and funded by the Department. At Rooikrantz Dam major refurbishment on the inlet works is required. Currently the service gate has been removed and scrapped. DWS 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. The overhead gantry crane was installed. One of the gate valves is not working and needs to be replaced. Delays in this regard have been the result of non appointment of a maintenance service provider by DWS. The maintenance work undertaken by DWS at Laing Dam is being severely delayed and this has resulted in Amatola Water siphoning raw water over the spillway to the Laing WTW. The inability of abstracting raw water at the predetermined 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 from the dam wall to the works was completed in June Repair work on the Nahoon Dam intake tower by DWS 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 DWS. The water board compiles an annual budget covering maintenance and operating items for review and approval by DWS. In the new financial year, DWS approved a budget of R11.06 million. The Department 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. 38

42 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 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 2015/16 financial year so as to align with its new strategy. Particular emphasis will be placed on ensuring that there is sufficient bulk water production capacity to meet the demand 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 was undertaken for the ORTDM in the 2013/14 financial year. The entire O.R. Tambo District Municipality (ORTDM) will be supplied from three anchor dams including the Mthatha, Ntabelanga and the Mzintlava Dams that make provision for water services to every household and allows for higher levels of service as envisaged in the National Development Plan. The Master Plan will be presented to ORTDM during the 2015/16 financial year for approval. Similar master planning has been completed for the Ndlambe Municipality where bulk water will be provided to the entire municipality from the Sandile Dam which will need to be raised by 10 meters by the Department of Water and Sanitation in the medium term. The Master Plan has been presented to Ndlambe Local Municipality. A Due Diligence Report for the establishment of the Southern Regional Water Utility was submitted to the Minister of Water and Sanitation on 31 March This report will form the basis of Provincial Master Planning which will be undertaken during the 2015/16 financial year. Provincial Water Sector Planning The organisation has been involved in various provincial water sector planning activities and forums in the past. This will continue as the organisation intends to position itself as a more significant role player in this regard over the next five years. Specific interventions will include expanding existing business systems, including the Geographical Information System (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. 39

43 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 recognised 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, in line with the South African Local Government Association (SALGA) / South African Association of Water Utilities (SAAWU) guidelines, negotiated a three year supply agreement with ADM, signed on 26 June 2014 and valid till 30 June 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 Buffalo City Metropolitan Municipality (BCMM) signed on 30 May This agreement remains valid till 30 May 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 valid till July PROJECTED DEMAND: DESCRIPTION OF MAJOR CONSUMERS OR CONSUMER GROUPS AND PROJECTED DEMAND The major consumers or consumer groups supplied are: District Municipalities The only district municipality being supplied with potable water is the ADM through its local municipalities as listed in Table 8. From the 1st of July 2006 ADM has been paying all the accounts for water supplied by Amatola Water to the various local municipalities within the Amathole District. The projected total demands for the district municipality (responsible for Amahlathi, Ngqushwa and Nkonkobe Local Municipalities) are as follows: 40

44 m³/annum WTW Dam 2015/ / / / /20 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: m³/annum WTW Dam 2015/ / / / /20 Nahoon Nahoon Laing Laing Rooikrantz Rooikrantz Sandile Sandile Peddie Regional Sandile Totals TABLE 9 Ndlambe Municipality m³/annum WTW Dam 2015/ / / / /20 Kenton-on-Sea and Bushmans River Mouth Supply- RO Plant Sea wells and Diaz Cross Boreholes Totals TABLE 10 41

45 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 has transferred all private customers to ADM with effect of 21 November 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 2015/ / / / /2020 Nahoon Nahoon 76,486 77,251 78,024 78,804 79,592 Laing Laing 30,958 31,267 31,580 31,896 32,215 Rooikrantz Rooikrantz Sandile Sandile 12,920 13,049 13,180 13,311 13,445 Binfield Binfield Peddie Regional and Bhirha Sandile 28,709 28,996 29,286 29,579 29,875 Totals 149, , , , ,126 TABLE 11 ASSURANCE OF SUPPLY TO MEET DEMAND The Amatola Water infrastructure is being upgraded to meet the demand as required. The upgrading of infrastructure is guided by the Amatola Water Infrastructure Master Plan. The plan provides for a twenty year planning horizon. Amatola Water s intention is to upgrade and extend six water treatment works with associated distribution infrastructure that supply the Ndlambe, Nkonkobe, Ngqushwa, Amahlathi and Buffalo City Metropolitan Municipalities over the next three financial years. This will allow for an improved level of service (750 l/household/ day), will reduce service delivery backlogs, improve rural livelihoods and support productive use activities as envisaged in the South Africa s Constitution and developmentally focused legislation. Through National Treasury funding, Amatola Water has started with five of the intended plant upgrades. Amatola Water and BCMM are busy with an application to source funding for the Nahoon WTW upgrade. 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 Ndlambe Municipality, the ADM and the BCMM will also be realised. This will have a significant positive impact on the health of the rural communities to be served by theses water supply schemes. 42

46 Nahoon Water Treatment Works A feasibility study has been conducted at the Nahoon WTW to determine how the facility can be utilized to serve the eastern portion of the City of East London. This project has been included in the organisations 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 2019/20 financial year. An additional 20Ml/ day will be provided by 2028/29 depending on the realization of demand from the BCMM. This additional capacity will be utilized to supply the eastern side of Buffalo City. Binfield Water Treatment Works The Binfield WTW, which has a capacity of 4.8Ml/ day, was constructed during The Binfield WTW is operated at a 100% of its treatment capacity at 4.8Ml/ day. This treatment works has reached its design capacity is currently being 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 contractor has been appointed to do the upgrade and the work will be complete by June Masincedane Water Treatment Works The Masincedane WTW with a current design capacity of 4Ml/ day and is currently being augmented to 6Ml/ 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 6Ml/d in the near future. A contractor has been appointed to do the upgrade and the work will be complete by June Peddie Regional Water Treatment Works The 6.5Ml/ day 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 at approximately 9Ml/ day 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. Amatola Water has undertaken an assessment of the Keiskamma River system and the associated demands for water supply in the area. The organisation has engaged with the relevant stakeholders on the preferred approach and it was agreed that the optimum solution would be to raise the Sandile Dam to impound sufficient water to supply an upgraded Sandile WTW to supply the entire region from one works. This implies that the Peddie works will not be upgraded but rather allowed to continue under present operating conditions until the Peddie supply system can be supplied from the Sandile works in the 2016/17 financial year. Thereafter the Peddie works will be retained at a minimal operating level for system resiliency purposes. Sandile Water Treatment Works Amatola Water will upgrade the Sandile WTW to increase the capacity of the plant from 18Ml/ day to 90Ml/ day 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 impound 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 60Ml/ 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 30Ml/ day of treatment capacity being created at the current Sandile works site. 43

47 Debe Water Treatment Works Amatola Water will upgrade the Debe WTW to increase the plant s capacity from 1.5Ml/ day to 5Ml/ day 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 development. 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 an improved the water supply to the area. A contractor has been appointed to do this upgrade and the work will be complete by June 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 telemetry network and GIS line diagrams. 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. 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 24 billing and 29 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. 44

48 PROJECTED WATER AVAILABILITY AND RESOURCES DEVELOPMENT Description of Major Sources of Water and Abstraction Rights Annexure E lists major dams, and compares expected raw water requirements against respective firm yields, to determine the surplus or shortfall in water supply. A study undertaken by DWS 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 development is required in the short-term. With the Amatole Water System Reconciliation Study it is proposed to implement the Environmental Water Requirements (EWR), which brings a total new demand into the 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. Various discussions and reviews have taken place over the past year around the possible implementation of the EWR. The impacts of the implementation of EWR is still under review. 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 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 is 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 allocations of water from Rooikrantz and Maden Dams (4.6Million m³/annum versus the historical firm yield of 3,3 million m³/annum (recent review of the safe yiled has increased this number to 4.1 million m³/annum) inclusive of Maden Dam) need to be addressed the DWS 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 have been finalised 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 potential assets should be studied to allow for a range of possible water requirement scenarios to be met through a combination of: 45

49 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 analized 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 IMP 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, depending on the successful implementation of various scenarios which forms part of the strategy. 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 ADM and BCMM 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 is in the process of applying for new water use licences for all schemes where existing allocations are not meeting the increased demand. A revised water use licence has been issued to Amatola Water for raw water supplied from Nahoon and Wriggleswade Dams. A licence application for increased water needs from Mnyameni Dam has been submitted to the regional office of DWS. 46

50 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 at 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 2019/20 financial years is presented in Annexure H. The planned capital expenditure program is funded from revenue generated from primary and secondary services or grant funding where required. A summary of the capital budgets for the next five years is presented in Table13: Funding Source Amatola Water Reserves R R R R R Grant R R R R - R - Totals R R R R R TABLE 13 47

51 The planned expenditure programme will result in Amatola Water strengthening its balance sheet and improving long term sustainability of the organisation. The capacity of the bulk treatment and distribution infrastructure will also be enhanced to support the National Development Plan intention of providing water as an enabler of strengthening rural livelihoods and promoting economic development in the region of supply. 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 Table15 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 , 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 48

52 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 at the following schemes: Laing Estimated cost of work scheduled for: 2013/ / / / /18 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 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 is as follows: Estimated cost of work scheduled for: Nahoon 2013/ / / / /18 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 49

53 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 while Class B includes Peddie, Binfield, Sandile and Class C are Debe, Masincedane and Glenmore. Mnyameni has been evaluated under the same regulations and are listed as Class D water treatment works The classification of the Albany Reverse Osmosis Plant is Class C at present. The Rooikrantz Plant was partly decommissioned and form part of the Kei Road WTW. 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 on-job-training and the study of theory courses at the Buffalo City Further Education and Training College. Amatola Water has been able 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 water board. The Systems Control and Data Acquisition (SCADA) 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 six 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 has extended the utilization of the system to other corporate functions such as Planning and Development, Water Resource Management and Finance with the aim of continuing to improve the quality and reliability of service. Meter Reading Water meters are read on the 20th of the month and signed for correctness by the plant superintendents and senior plant superintendents before they are forwarded to the debtors department for billing. 50

54 Maintenance The Water Services Asset 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 and a satellite workshop at Albany Coast. 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. An Enterprise Resource Package (ERP), BAAN 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. Furthermore, all emergency deviation requests are channelled through the Control Room which is equipped with qualified and technically skilled staff, appropriate equipment and technology (BAAN and SCADA). This has improved the response times, quality of service and accuracy of information on breakdowns, emergency work, repairs and general maintenance on all work undertaken within Amatola Water. Significant Future Changes in Operation and Maintenance Arrangements Amatola Water has adopted a new strategy where the organisational focus will be concerted on growing its Section 29 business. This strategy will see Amatola Water growing the Section 29 business from the current 85 to 150Ml/ day production therefore the operation and maintenance will be designed to support this strategy and this will see 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 Amatola Water has been successful in retaining accreditation for OSHAS Amatola Water has been audited and has successfully maintained its OSHAS accreditation with SABS until Currently the organisation is embarking on obtaining accreditation for ISO for the Laboratory Services. SECTION 30 BUSINESS Amatola Water is engaged in various Section 30 business activities related to bulk potable water. Current clients include the Makana Municipality, ORTDM, Ndlambe Local Municipality and the National Department of Public Works. Makana Local Municipality Grahamstown experienced 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) demand that exceeds the current raw water supply. 51

55 The current water outages have caused major frustrations to the extent that Rhodes University staff, students and academics, led to 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 was felt by families of students across South Africa. Amatola Water has been appointed by the Makana Local Municipality to operate and maintain the Waainek, James Kleynhans, Riebeeck East and Alicedale WTW. This appointment commenced in October 2013 and will continue until Amatola Water is currently busy preparing a business proposal to Makana Municipality to include entire management bulk water services for the municipality. OR Tambo District Municipality Amatola Water is currently involved in the ORTDM on implementing the KSD Presidential Intervention, Municipal Infrastructure and Municipal Water Infrastructure Grant funding as a project implementing agent. Ndlambe Local Municipality Amatola Water has been appointed as an implementing agent to upgrade the bulk infrastructure in Ndlambe Municipality. National Department of Public Works Amatola Water has signed an operation and maintenance agreement with the National Department Public Works for the operations of their water treatment works at the following locations: 52

56 Plant Name Type of Plant Description Items Included in Service Responsibility Middelburg Agri College Sewage Full sewerage works 1x Sewage works Middelburg Agri College Dams 3 Dams 8 boreholes and water purification plant St Albans Prison Full sewerage works Kirkwood Prison Water treatment 9 boreholes and river water purification plant 3x Earth Dams Category 2 & 5x boreholes 1x Sewage Works & Pump Station and medium A & B pump stations -2x pump stations - 3x Reservoir. 3 x PRVs -= Reservoir - pipeline to prison - 1.8Ml/ day Water treatment plant Monthly maintenance on WWTW - Operating staff for WWTW - Maintain DWS Blue and Green Drop systems. Day-to-day running of works by Amatola Water staff 6 monthly Dam Safety Checks - Preventative maintenance on dam outlet works - Appointment of 5 yearly Dam safety checks Amatola Water Monthly services - Preventative maintenance - Maintain DWS Green Drop system Preventative Maintenance of works - Monthly maintenance = operating staff for WTW- Maintain DWS Blue drop system Day to day running of works Prison staff Day to day running of works by Amatola Water Staff Patensie Prison Water Treatment Canal water with water purification plant Water treatment works Preventative Maintenance of works - Monthly maintenance = operating staff for WTW - Maintain DWS Green drop system Day to day running of works by Amatola Water Staff Patensie Prison Waste Water Full sewerage works Waste water treatment works Preventative Maintenance of works - Monthly maintenance = operating staff for WTW - Maintain DWS Green drop system Day to day running of works by Amatola Water Staff Kirkwood Prison Waste Water Full sewerage plant Waste Water Treatment Works and Booster pump system Preventative Maintenance of works - Monthly maintenance = operating staff for WTW - Maintain DWS Green drop system Day to day running of works by Amatola Water Staff 53

57 Plant Name Type of Plant Description Items Included in Service Responsibility Slagboom SAPS Training College Dam with full water purification plant 1x Large 1 Ml/d Water Treatment Plant - 1x Dam - Borehole system Dam safety inspection on Slagboom Dam Quarterly - Appointment of 5 Year Dam Safety Checks - Pumps and pipe line in dam supplying works - Supply chemicals - Service monthly - Water samples - Storage reservoir - Maintenance of Works - Maintaining DWS Blue Drop System Day to day running of the works SAPS Training Base Fort Brown SAPS River pumping plant and purification plant 1x Medium Water Treatment Plant - 1x Raw water pump station Supply of chemicals - Service monthly - Water samples - Maintenance of works - Maintain DWS Blue Drop System Day to day running of the works SAPS. Sada Prison Municipal and borehole Healtown SAPS Debe Neck SAPS 1x Water Pump Station system Septic tank and small sewerage works 1x Small Sewerage Plant Septic tank and small sewerage works Bulembu SAPS Airwing Sewerage ponds system Cradock Prison - Kitchen Middleburg Prison De Blaar Housing Complex Municipal and softner plant Municipal with pumping plant and overhead tank Septic tank and small sewerage works 1x small sewage works - 1x Water supply system Waste Water Treatment Works and Booster pump system 1x Small Water Softener Treatment Plant 1x Large Water Softener - 1x High lift pump station 1x Small Waste Water Treatment Works - & Borehole and reservoir system Servicing & Monthly - Water samples - Maintenance of works Supply of chemicals - Service monthly - Water samples - Maintain works - Refurbishment - Maintain DWS Green Drop System Monthly preventative maintenance service - Maintain DWS Green Drop system Monthly preventative maintenance of works - operating staff for WTW- Water sample - Maintain DWS Green drop system Supply of salts - Supply of Resin - Monthly servicing of unit - Quarterly water samples - Maintenance of the works Supply of salts - Monthly service unit - monthly samples - Maintenance of works. Supply of chemicals - Service monthly - Water samples - Maintenance of Works - Operating staff - Maintenance DWS Green & Blue Drop system Day-to-day running of works by prison staff Day-to-day running of works by SAPS staff Day to day running by SAPS staff Day to day running by Amatola Water staff Day to day running of the works Cradock Prison Day to day running of the works Middleburg Prison Day to day running of the works Amatola Water staff 54

58 Plant Name Type of Plant Description Items Included in Service Responsibility Kwaaibrand Housing Septic tank and small sewerage works Storms River SAPS Activated Slugs system Grahamstown Military Base Septic tank and small sewerage works Middeldrift Prison Sewerage ponds system 1x Small Waste Water Treatment Works 1 X Small Waste Water Treatment Works and water treatment process with filtration and soda ash dosing for PH correction 1x small sewage works - 1x Water supply system and 2 bore holes Waste Water Treatment Works. New works is been build ü Supply of chemicals - Service monthly - Water samples - Maintenance of works - Operating staff - Maintain Green Drop system Supply of chemicals - Service monthly - Water samples - Maintenance of works - Operating staff - Maintain Green Drop system Supply of chemicals - Service monthly - Water samples - Maintenance of works. Supply of chemicals - Service monthly - Water samples - Maintenance of works - Operating staff - Maintain Green Drop system Day to day running of the works Amatola Water staff. Day to day running of the works Amatola Water staff. Day to day running of the works Amatola Water staff. Day to day running of the works Amatola Water staff. TABLE 18 55

59 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 under Primary Business. The works is operated and maintained appropriately to ensure compliance with the required discharge standards. SECONDARY BUSINESS The majority of waste water treatment work undertaken by Amatola Water to date is related to Secondary Business. Amatola Water currently has the National Department of Public Works as a client for this operation and maintenance service. The goal of these contracts is continuous improvement of effluent quality and reliability of 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. A key initiative in achieving this target is the participation in the Department of Water and Sanitation s Green Drop Certification Programme that promotes excellence in water services 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. National Department of Public Works Amatola Water has signed an operation and maintenance agreement with the National Department Public Works for the operation of 12 of their waste water treatment works at the following locations: 56

60 Plant Name Type of Plant Description Items Included in Service Responsibility Middelburg Agri College Sewage Full sewerage works 1x Sewage works Monthly maintenance on WWTW - Operating staff for WWTW - Maintain DWS Green Drop system. Day-to-day running of works by Amatola Water staff St Albans Prison Full sewerage works 1x Sewage Works & Pump Station and medium A & B pump stations -2x pump stations - 3x Reservoir. Monthly services - Preventative maintenance - Maintain DWS Green Drop system Day to day running of works by prison staff Patensie Prison Waste Water Full sewerage works Waste water treatment works Preventative maintenance of works - Monthly maintenance = operating staff for WTW - Maintain DWS Green Drop system Day to day running of works by Amatola Water staff Kirkwood Prison Waste Water Full sewerage plant Healtown SAPS Waste Water Treatment Works and Booster pump system Septic tank and small sewerage works 1x Small Sewerage Plant Preventative Maintenance of works - Monthly maintenance = operating staff for WTW - Maintain DWS Green drop system Supply of chemicals - Service monthly - Water samples - Maintain works - Refurbishment - Maintain DWS Green Drop system Day to day running of works by Amatola Water Staff Day-to-day running of works by SAPS staff Debe Neck SAPS Septic tank and small sewerage works 1x small sewage works - 1x Water supply system Monthly preventative maintenance service - Maintain DWS Green Drop system Day to day running by SAPS staff Bulembu SAPS Airwing Sewerage ponds system Waste Water Treatment Works and Booster pump system Monthly preventative maintenance of works - operating for- Water sample - Maintain DWS Green Drop system Day to day running by Amatola Water staff De Blaar Housing Complex Septic tank and small sewerage works 1x Small Waste Water Treatment Works Supply of chemicals - Service monthly - Water samples - Maintenance of Works - Operating staff - Maintenance DWS Green Drop system Day to day running of the works by Amatola Water staff Kwaaibrand Housing Storms River SAPS Septic tank and small sewerage works Activated Sludge system 1x Small Waste Water Treatment Works 1 X Small Waste Water Treatment Works Supply of chemicals - Service monthly - Water samples - Maintenance of works - Operating staff - Maintain Green Drop system Supply of chemicals - Service monthly - Water samples - Maintenance of works - Operating staff - Maintain Green Drop system Day to day running of the works by Amatola Water staff. Day to day running of the works by Amatola Water staff. 57

61 Plant Name Type of Plant Description Items Included in Service Responsibility Grahamstown Military Base Middeldrift Prison Septic tank and small sewerage works 1x small sewage works - Sewerage ponds system Waste Water Treatment Works. New works has been build and added to Amatola Water Supply of chemicals - Service monthly - Water samples - Maintenance of works. Supply of chemicals - Service monthly - Water samples - Maintenance of works - Operating staff - Maintain Green Drop system Day to day running of the works by Amatola Water staff. Day to day running of the works by Amatola Water staff. TABLE 19: Dam capacity in million cubic meters for ma jor dams 58

62 Chapter 10 RETAIL AND INDUSTRIAL 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 forms part of the water board s 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 Services Authority Approvals Amatola Water s industrial clients and current demands are presented in Table 20: No. 1 2 Water Service Authority Local Municipality Industry Ave. Daily Demand Water Class Amathole District Municipality Ngqushwa Fish River Sun 0.48Ml/ day Class 1 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 TABLE Ml/ day The Amathole District Municipality (ADM) and Buffalo City Metropolitan Municipality (BCMM) are aware of the supply of water by Amatola Water to the above-mentioned industrial clients. Contractual Arrangements Amatola Water has concluded water supply contracts with its industrial clients. ADM and BCMM 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, the water board will proactively engage with the relevant water services authority to ensure an optimum solution to meeting the prospective clients water demand is accommodated. 59

63 Chapter 11 OTHER ACTIVITIES OTHER SUPPORT SERVICES Procurement and Preferential Procurement The Supply Chain Management (SCM) policy which was approved and adopted in the 2012/13 financial year was developed and implemented to give effect to SCM Regulations. The policy gives effect to the principles of PPPFA and the BBBEE Act. Supply Chain Management Alignment The SCM unit ensures that purchasing or procurement of goods and services are done according to the prescribed legislation. In this regard, the unit adopted a structure that makes provision for demand, acquisition, logistics and supplier performance management. Although risk and performance management functions are not part of the structure but these activities are executed by the head of the department. The SCM unit was established in line with the SCM policy and SCM regulations to align with the strategic objectives of the business. The SCM Policy of Amatola Water is in line with the principles of Procurement as per section 217 of the Constitution. The policy allows for alternative methods of acquisition due to the nature of the business. The policy also complies with the prescribed regulatory frameworks for public sector supply chain and caters for a range of acquisition management processes, including open competitive bidding, quotations and deviations. The supply chain management function aims at supporting the strategic decision of the business thereby ensuring effective and efficient service delivery to its external and internal clients. The policy has further been aligned to the 2011 PPPFA Regulations which introduced the use of BBBEE level scoring for preference points. A major concern on the implementation of the policy is the number of transactions that pass through as deviations and emergencies. Another concern in the policy is the ambiguity when dealing with strip and quote situations. The unit has 19 staff members, with the Supply Chain Manager reporting directly to the Chief Financial Officer. Construction procurement guidelines have been implemented as prescribed by the Construction Industry Development Board (CIDB) and are adhered to. 60

64 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 are intended to serve as a platform from which vendors will receive recognition for their performance going forward. Strategies for critical goods and services have been identified and implemented, such as the regionalisation of the engineering maintenance contracts. This ensures the availability of services, and the tightening of control measures through Service Level Agreements (SLAs). Certain contracts established, also allow for opportunities for emerging micro-enterprises,in line with preferential procurement goals. Opportunities for improved services are explored on a continuous basis. A vendor database is maintained and supplier information updated regularly. The SCM unit has also embarked on proactive planning by focusing on procurement plans for the new financial year. 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 fully adheres to the principles of PPPFA for any purchases above R In doing so, BBBEE scoring of suppliers is requested in the form of a valid BBBEE certificate for any purchase above the prescribed value. Definite procurement goals to be achieved are indicated annually and specified in the tender document in order to reach targets. Detailed reporting in terms of preferential procurement performance on specific projects is done. The results are used to identify poor 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. The BBBEE targets will be set upfront for each business case produced. SMME Development Amatola Water is in the process of compiling an SMME Development Strategy. Another initiative that the organisation is embarking on is collaboration with different public stakeholders to implement a sustainable enterprise development programme in Amatola Water. The SCM structure allows for a full-time Development Facilitator that is responsible for performance and development of SMMEs. Some of the development activities include supplier education and information sessions. The focus of these activities is to increase the capacity of suppliers on the database, as well as the development of skills within critical supply areas in order to provide more opportunities and experience to small business; and thereby growing a sustainable base of suppliers. Focus has shifted towards certain sectors where there are few suppliers and where barriers to entry are vast. Information Technology Information and Communication Technology (ICT) is an enabler to core activities and other support functions to improve and efficiently implement the organisation s strategy. 61

65 The Information Management Steering Committee oversees ICT investment, risk and the allocation of related resources in Amatola Water. The committee includes all senior management. As the organisation aligns itself to National Government policies, Amatola Water will be aligning and implementing the Corporate Governance of ICT Policy Framework (CGICT), which it will adopt and fully implement over the next three years. Infrastructure Disaster recovery and business continuity remain key initiatives for the organisation; and there are ongoing plans in place to provide additional systems / procedures to enhance current techniques in accordance with Corporate Governance. In the 2014/2015 financial year an offsite backup solution for disaster recovery (into the cloud i.e. internet) was implemented. This solution makes use of a hosted, outsourced, offsite data storage facility via the internet, which has proven to be beneficial as part of the organisation s business continuity process. To further facilitate business continuity, Amatola Water has installed a generator which provides access to the servers and network during planned /unplanned power outages. This has proven to be beneficial during periods of load shedding. 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. To align Amatola Water s server room environment and controls to industry standards, certain criteria 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 unauthorised 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 facilitate the operational requirements of the organisation. Outsourced expertise are only required for specialist applications / systems (namely the ERP and LIMS systems) 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 organisation s strategic goals are: On-going enhancement of the organisation s Enterprise Resource Planning System (ERP) to effectively report off business information required by stakeholders are undertaken regularly to ensure that information is accessed quickly and new methods of enhancing end user experiences are implemented when required. The current gap analysis between user needs and current ERP has identified significant additional needs. Investigations into new ERP solutions targeted at improving business efficiency will be conducted in the forthcoming year. Ongoing enhancement of the Operations Efficiency System which currently assist the Operations Department with reporting requirements as well as identifying problem areas as they arise within Amatola Water s network. Configuration of additional functionality within LIMS which will assist in the laboratory s effectiveness. The Integrated Management System (IMS) 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 outdated documents 62

66 from being utilised. It also assists finance and cost centre managers to report off historical information should the need arise. The Timesheet System was implemented in July 2014 to facilitate management reporting within the organisation. The system was developed to enable proper identification of primary and secondary work, thus ensuring a more efficient method of revenue recovery, with the first phase targeting management staff. Database web-hosting will be implemented to facilitate remote access to systems, which will entail modification of current systems to encompass this change. Corporate Head Office Amatola Waters 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 has been refurbished in the 2014/15 financial year to provide additional office space for Head Office staff. Long-term options for the organisation 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 Amatola Water s area of operation ranks as the water board 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 prioritisation 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. 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; and An increasingly socially empathetic workforce. 63

67 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 which falls under Scientific Services. Sampling and analysis services for raw water, potable water and waste water effluent are offered from this facility. Scientific Services is responsible for monitoring water quality for compliance to the potable water standard (SANS 241), the General Wastewater Limits i.e. the Blue Drop and Green Drop standards as required by DWS. Analysis is done in the laboratory based at Nahoon Dam that now consists of a newly renovated Microbiology section. The methods have been validated and included in the current accreditation scope for the laboratory. It makes use of LIMS for its day to day activities which improves traceability of its results, as well as ensure an audit trail and security of the data produced. A key initiative for the next five years is for the laboratory to achieve ISO accreditation. A submission to the South African National Accreditation System (SANAS) has been made in the 2014/15 financial year for some of the microbiological tests which include E.Coli and Total Coliforms and the chemistry methods which include anions (Ammonia, Phosphate, Chloride, Sulphate and Fluoride), physical parameters (ph, Electrical Conductivity and Turbidity), Chemical Oxygen Demand and the Total Alkalinity (12 methods). An accreditation application for a further seven methods will be submitted in the 2015/16 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 Eastern Cape Province, a more integrated and collaborative approach needs to be adopted in order to manage its engagement with stakeholders. 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. 64

68 Amatola Water stakeholders are classified into three categories namely statutory, contracted and non-contracted stakeholders. Among these are Water Services Authorities, the Department of Water and Sanitation, 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 Understanding (MOU) 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 Further funding has been requested for the next phase of the study to consider the impact of climate change on water quality within the study area. This is in alignment with the organisation s strategy to increase participation in research activities over the next five years. 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 entail 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 Water s limited primary business base has forced the organisation to aggressively pursue secondary business opportunities over the past five years. The secondary business opportunities have generally been short term in duration with less predictable cash flows and higher risk profiles. The Board took 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 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. 65

69 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. 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 21. Alignment with the Department of Water and Sanitation 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 DWS Strategic Objective Budget for 15/16 Budget for 16/17 Budget for 17/18 O&M Contracts Makana Department of Public Works Water Service O&M R R R Water Service O&M R R 0 R 0 Sub Total R R R PIA DWS Joe Qgabi District Municipality O.R. Tambo District Municipality O.R. Tambo District Municipality Sundays River Valley Municipality Rapid Response Unit R R R Sterkspruit WTW Upgrade R R 0 KSD Presidential Intervention Project Bulk Water Supply R R R KSD Presidential Intervention Project - Sanitation R R R Paterson Bulk Supply R R0 R 0 66

70 Strategic Alignment Client Ndlambe Municipality O.R. Tambo District Municipality O.R. Tambo District Municipality O.R. Tambo District Municipality Project Government Outcomes DWS Strategic Objective Budget for 15/16 Budget for 16/17 Budget for 17/18 Bulk Water Supply R R R MWIG Program R R0 R0 SiDWSdweni Water Supply R R R 0 Coffee Bay Water Supply R R 0 R 0 Sub Total R R R Planning & Design Koukamma Municipality Sundays River Valley Municipality Amatola Water / BCMM Ikwezi Municipality Misgund Water Supply Feasibility Study R R R 0 Kirkwood Water Supply Feasibility Study R R R 0 Nahoon Dam East Coast Supply R R R Jansenville Water Supply Feasibility Study R R R 0 Sub Total R R R Annual Totals R R R MTEF Total R TABLE 21 Table 21 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 DWS as detailed in the Shareholder Compact. 67

71 Chapter 12 HUMAN RESOURCE DEVELOPMENT PLAN The Human Resources Department coordinates the flow of people into, through and out of the organisation. Human Resources (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. The Executive Management comprises the Chief Executive, five General Managers and the Company Secretary. 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 22: Divisional staff percentage: July March 2015 The staff turnover figures together with the reasons for termination for the period July 2014 March 2015 are indicated in Table 23 below. Termination Reason No. Labour Turnover Rate Resignations Dismissals Retirement Disability Death Total TABLE 23: Service terminations: July 2014 March

72 A Recruitment Plan for 2015/16 will be developed to meet the demands of additional/new business and in line with the approved budget for 2015/16. Table 24 shows that 26 employees were recruited in the 2014/15 financial year to date: Placement No. Permanent 4 Fixed term contracts 22 Total 26 TABLE 24: New recruits July 2014 March 2015 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: decisive leadership; resolving organisational politics; and issues of conflict. Conduct a culture survey (organisational effectiveness study via Rhodes University) Aligning people, skills, systems, policies and procedures for strategy implementation. 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. Cascade Corporate Values to all levels of staff 3. Ensuring the alignment of skills mix available to future requirements Future interventions: Develop and implement an HR Strategy and Plan. 69

73 4. Ensure Effective Employment Practices & Personnel Administration Future interventions: Ensure compliance to policy and implementation through effective communication and monitoring. Percentage critical posts filled by predetermined recruitment time 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. Align Performance Management System with Corporate Strategy 6. On-going consultation, participation and communication with Employees Future interventions: 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. 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 three years to ensure they remain relevant to the organisation s business strategy and add value to the brand in the labour market. 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 operationalised. 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 organisation s 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 2015/16 financial year target is 78% achievement and escalates to 90% by the 2018/19 year. 70

74 EMPLOYMENT EQUITY PROFILE Amatola Water subscribes to the principles of employment equity and the staff profile as at 31 March 2015 is reflected in the following table: Amatola Water currently has approximately 1% of its staff with disabilities out of the 333 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. Occupational levels Male Female Disability A C I W A C I W Male Female Top Management Senior Management Professionals & Mid- Management Skilled technical workers & Junior Manage Total Semi- Skilled Unskilled Totals Permanent TABLE 25(A) : Amatola Water Staff Profile Workforce Profile per Occupational Level and Economically Active Population Designated Female Occupational Level AW EAP GAP AW EAP GAP Top Management 100% 94.3% 0% 0% 46.2% 46.2% Senior Management 66.67% 94.3% 27.3% 67% 46.2% 0% Professionally Qualified & Middle Management Skilled Technical or Junior Management 76.% 94.3% 18.3% 38% 46.2% 8.2% 90% 94.3% 4.3% 25% 46.2% 21.2% Semi-Skilled 98% 94.3% 0% 31% 46.2% 15.2% Unskilled 100% 94.3% 0% 8% 46.2% 38.2% TABLE 25(B) : Gap analysis between EAP targets and Amatola Water workforce profile 71

75 EMPLOYMENT EQUITY The Employment Equity Plan of Amatola Water will be reviewed with special focus on the numerical goals which will cover the periods. 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. Combination of the Employment Equity and Skills Development Committees Review of the Terms of Reference for the Employment Equity and Skills Development Committee. The alignment of training and development and the Succession Policy in ensuring effective implementation of the Employmnet Equity Plan. Improve commitment from the management in ensuring the effective implementation of employment equity. Steadily stride in increasing the representation of people with disabilities from 0.9% in 2015 to 2% in next five years as required by the Department of Labour. Commitment to align employment equity targets with the Provincial Economically Active Population Statistics. TRAINING AND DEVELOPMENT In response to the National Skills Development Strategy III ( ), Amatola Water will develop a 5 year training and development framework. This is in line with the commitment to grow and strengthen leadership capacity to sustain a high performing organisation. 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), and Graduate Placement. 72

76 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 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. 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. Phase 1 of the programme is targeting municipalities and other stakeholders committed to water service delivery. The trainee target group is primarily unemployed youth especially 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. 73

77 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. Amatola Water is financially assisting 41 employees to further their studies in their respective study fields in line with Amatola Water s staff development and retention strategy to continuously develop and upskill its staff. 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 of supervisors, administrative and operational staff. There is 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. Amatola Water has placed 10 supervisors on a Management Development Programme to build the capacity of skilled and competent supervisors in line with the succession planning strategy. 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. Amatola Water has three Technicians registered as Candidate Engineering Technicians with the Engineering Council of South Africa. 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 he or she has equivalent competencies to one or more of those delivered by a trade which they wish to undergo, as a result of his or her 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 Learning and Development Unit, working in conjunction with the Operations Division has recognized a need to support these Artisan Aids through recognition of prior 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. 74

78 In the 2014/15 financial period, 4 employees were placed on training as Plumbers and will be assessed through 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 development 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. We 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 Sound employee relations with organised labour as a key social partner is of paramount importance to the success of our business. 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 continuous engagement 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 participating in the centralised collective bargaining processes through Amanzi Bargaining Council. The bargaining council plays an important role in keeping abreast with matters of common interest in the labour relations environment. Employee Wellness 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 contracted medical services, 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, 75

79 identification of response plans and diseases management awareness is the cornerstone of the programme. Through our Peer Educators, the organisation continues to champion awareness campaigns on HIV and AIDS to employees with a view to 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. 76

80 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 integrate social, economic and environmental factors into planning, decision-making and implementation 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: 77

81 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 the implementation of the strategy is to fully integrate environmental sustainability within the existing Integrated Management System and develop relevant environmental management plans to monitor, assess and improve organisational activities in order to ensure 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 and Sanitation, 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 water treatment works 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 not only Amatola Water staff, but communities as well, 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 initiatives identified for the strategic environmental interventions are shown in the table below. Strategic Environmental Interventions Monitor, assess and evaluate effects of (and on) organisational activities through the development of environmental monitoring programmes Initiatives Review the Integrated Management System to fully integrate environmental sustainability through incorporating an Environmental Management System. Develop and implement Environmental Management Plans for the Amatola Water capital infrastructure projects. 78

82 Strategic Environmental Interventions Manage and mitigate environmental impacts. Initiatives Maintain energy efficiency plans at Amatola Water WTWs and pump stations. Regionalise the Sandile and Peddie water schemes to maximise benefit of gravity fed water supply. Initiate carbon footprint assessment at Amatola Water Head Office and WTW per annum. Formulate organisational WCWDM policy. Promote environmental awareness, thus creating awareness of scarce natural resources and the need to reduce environmental stress. Develop environmental awareness initiatives, with a focus on energy efficiency, water conservation and waste management. Include renewable energy options on the Sandile water supply scheme. Support co-operative environmental governance. Secure relevant environmental and water use authorisations for Amatola Water upgrade projects. Participate in relevant national and regional environmental forums. Provide relevant project specific support to DMs and LMs as required. Enhance organisational sustainability and the green economy through environmental initiatives. Participate in relevant environmental and technology research. TABLE 26 Support environmental enhancement activities and projects, such as alien vegetation control, project specific rehabilitation initiatives and utilise relevant green technology where possible. Be aware of and participate in relevant research projects. 79

83 Chapter 14 WATER CONSERVATION AND DEMAND MANAGEMENT PRIMARY BUSINESS Water Conservation and Demand Management Policy Throughout its internal operations Amatola Water strives to reinforce the principles of water conservation covering all stages of the production chain. At the 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 de-sludging 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, hence Amatola Water has a policy in place to manage illegal connections and ensure 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 Division 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 4.22% production loss and a distribution loss of 5.53% on average for the previous financial year. Continued focus on reducing these losses will occur over the next five years. The organisation intends reducing total losses from the current 9.75% to 8% by minimizing illegal connections, providing more rapid response 80

84 to leaks and through the replacement of certain portions of its infrastructure that has exceeded its design life. The water meter calibration programme also assists in curtailing demands. 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 resources. 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 Geographical Information System (GIS) section in conjuncton 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 bar-code 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 a permanent solution can be agreed upon and implemented. PROJECTS Amatola Water has planned several capital expenditure projects over the next five years. These will result in improved water conservation and demand management. The projects focus on water infrastructure operated by Amatola Water and include the following: Budgets (Rx 000) Scheme Project 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 27 81

85 SECONDARY BUSINESS Water demand management services are also offered under secondary business to municipalities in the Eastern Cape Province. This service was rendered with success to Kouga Municipality over the past three years. It is not certain whether DWS will be providing more funding to Kouga Municipality for this activity. Kouga Municipality Amatola Water was appointed by the Kouga Municipality to assist with a water conservation and water demand management (WCWDM) intervention in January The project value of R 1,5 million was funded by DWS. The focus of the project was meter installation, meter calibration, a database review and valve maintenance. The first phase of this project was successfully completed during Amatola Water has obtained a further R1 million from DWS to assist Kouga Municipality with Phase 2 of the WCWDM during the 2013/14 financial year. Specific problematic pipelines, air valves, reservoir control valves and scour valves were serviced and or replaced, while annual water balances have been drawn up. All work was completed during Phase 2. Phase 3 was successfully completed during 2014/15 and comprised of compiling a water balance for Kouga, reviewing billing (user group brackets) assessing all reservoirs (control valves etc.) as well as assessing and servicing all air valves on the St Francis Bay Cape St Francis bulk lines and implementing a retrofitting programme within Patensie and Hankey. Amatola Water is however still waiting to hear from Kouga or DWS whether money would be made available for a Phase 4. Key in advancing this project would be the installation of air valves on poor distribution networks and installation of more bulk zone meters. 82

86 Chapter 15 FINANCIAL PLAN The Financial Plan is for the five-year period ( ). The following assumptions have been made, and it must be noted that any material change in the assumptions will have an effect on the long-term view expressed: Parameter Note F'12 (Baseline) F'13 F'14 F'15 F' Consumer Inflation (Av: %) 6.1% 4.6% 5.1% 5.3% 5.1% Producer Inflation (Av: %) 7.5% 4.9% 6.2% 5.0% 6.3% Interest rates Prime Overdraft Rate (year-end: %) Short term 9.3% 9.5% 10.5% 11.5% 11.5% SA rand bond (GOV10YR,year-end: %) Long term 7.9% 8.0% 9.2% 10.0% 10.2% Private Credit Extension (Av: %) 9.6% 6.8% 9.9% 10.0% 10.8% Repo Rate (year-end: %) 5.8% 6.0% 7.0% 8.0% 8.0% Salary & wage increases (%) 7.3% 7.4% 7.6% 7.6% 7.8% Number of Employees Electricity tariff increase 16.0% 12.7% 8.0% 8.0% 8.0% Chemicals 7.5% 4.9% 6.2% 5.0% 6.3% Maintenance 7.4% 6.2% 6.9% 6.3% 7.1% Raw Water Purchase 8.5% 14.8% 6.6% 6.6% 6.6% Water research Levy 1.0% 1.0% 1.0% 1.0% 1.0% Average Potable Water Tariff increase 8.0% 7.0% 6.4% 5.8% 5.6% Average Potable Water Tariff (Rands) Average Raw Water Tariff (Rands) TABLE 28 *Information contained in this table has been obtained from the following institutions: Bureau for Economic Research (BER) National Treasury National Energy Regulator of South Africa Amatola Water Business Plan and Annual Reports Department of Water and Sanitation South African Reserve Bank 83

87 The financial model has been developed using the 2013/14 audited and 2014/15 year to date data. The capital expenditure programme is driven by the organisational strategic objective to make sure that Amatola Water plants produce 5Ml/ day or more as this ensures sustainability and allows the entity to recover a cost reflective tariff. The production capacity of 5Ml/ day has been determined as the break-even point for a viable water treatment plant in the Amatola Water context. Amatola Water has secured 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 is being used for the organisation s capital expenditure programme of upgrading six of the water treatment plants. 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 154.4Ml/ day. Amatola Water will contribute approximately R20 million co-funding from its reserves to fund this capital expansion. 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 above-mentioned 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 volumes on most plants are at or are over 100% indicating there is unmet demand on the organisation s supply area at present. ANALYSIS OF THE FINANCIAL FORECAST 2015/ /20 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; and Increase in the asset base. Negative Expectations Decline in cash reserves in year one to five due primarily to the funding of capital expansion. Funding required to grow bulk supply to ensure long term sustainability and asset replacement reserves. MAJOR COSTS DRIVERS Major cost drivers for Amatola Water s primary business include raw water purchases, electricity, chemicals and overheads. The cost factors are affected by exogenous factors such as import price increase in chemicals, energy cost escalations as well as above average labour settlement rates in the South African labour. Below is the illustration of the cost drivers driving the tariff formulation of Amatola Water: Composition of Major cost drivers for Amatola Water Tariff Water Purchases 34% Water Research Levy Chemicals Depreciation 1% 3% 6% Electricity 13% Labour 7% Repairs and Maintenance 10% Overheads 26% FIGURE 2 84

88 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 increasing 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 kiloliter because 40% of the plant 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: Potable Water tariff vs Raw Water Tariff FIGURE Potable water tariff Raw water tariff TABLE 29 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 volumes versus a lower increase in costs due to fixed and semi-fixed costs remaining relatively stable. RIGHT OF USE CONTRACTS Amatola Water has concluded one right of use contract (ROU) with Makana Local Municipality and expects to conclude more ROU agreements with various municipalities within Eastern Cape for the next five year period. These contracts are expected to generate additional revenue and this revenue is included in the core business revenue. 85

89 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 70/30 (70% primary business and 30% secondary business) and has met its medium term objective of having a 70/30 ration between primary and secondary business. In the long term this ratio target will be 90/10. Below is an illustration of the projected profitability of the entity: Projected Profitability of Amatola Water FIGURE 4 Revenue Raw water tariff Operating expenditure Net surplus 86

90 CAPITAL EXPENDITURE AND FUNDING For the next five 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 an understanding of the gaps that Amatola Water will still need to address before a favourable rating can be attained, one 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 2015/16 financial year. Amatola Water views accessing the capital market as major development in ensuring its sustainability as a Section 3(b) entity and in the positioning as the key roleplayer in the provision of water services in the Eastern Cape Province. The proposed five year capital expenditure programme for Amatola Water will be funded using various sources of funding such as Grant funding and internally generated funding, this will be spent in the following manner. Capex Category Estimated Actual Projected Projected Projected Projected Projected 2014/ / / / / /20 Immovable capex Augmentation and upgrade Expansion Rehabilitation Development projects Movable capex Equipment and vehicles Information technology communication Laboratory and process services Summary Immovable capex Movable capex TABLE

91 MATERIALITY AND SIGNIFICANCE FRAMEWORK As required by the Treasury Regulations, Amatola Water has developed and submitted a framework of acceptable levels of materiality and significance, per incident, with the Minister of Water and Sanitation. 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. Amatola Water 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 Sanitation 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 asset, which exceeds 10% of Amatola Water 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 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. 88

92 Chapter 16 BANK ACCOUNT DETAILS Amatola Water bank account details are presented in Annexure I. 89

93 Chapter 17 ANALYSIS OF RISK ENTERPRISE WIDE (INTEGRATED) RISK MANAGEMENT Risk management is crucial to Amatola Water as it is important for good business management and signifies good corporate governance. The requirements of the Public Finance Management Act 1 of 1999, National Treasury Regulations of 2005, King III Report on Corporate Governance and COSO Risk Management Framework have all been encapsulated into Amatola Water s 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 the business strategy and the achievement of objectives. Amatola Water therefore has identified 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 in turn, established Corporate Risk and Fraud Committees, as well as appointed Risk Champions for each division. The Risk Champions assist Divisional Directors to establish and monitor risk systems throughout the respective divisions. Amatola Water has categorised its risks according to the following three categories: 1. Strategic Risks 2. Divisional Risks 3. Operational / Process Risks The organisation performed its risk identification between July and September 2013, based on the new integrated risk approach, with a series of Board and management workshops. A summary of the Strategic Risk Register is included below. Yearly, the management engages with the Board to establish the Strategic Risk Register which would filter into the mitigation strategies and divisional risk registers. At the time of completion of the business plan the current strategic risk workshop was pending. The current risk register for strategies will be updated to be in line with the new strategy. 90

94 Risk Ref. 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 Enhanced strategic effectiveness. Build cross-functional excellence/ effectiveness. Develop operational competence (individual). Leadership and Employee Development. Inability to attract and retain key individuals, talent, skills. SR3 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. Financial Viability. Shortage of ring fenced grant funding for capital and O&M resulting in Bad Debts and reducing service delivery. SR4 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. Financial Viability. Qualified audit resulting in disestablishment (IRR). SR5 Strengthen and deepen relationships with statutory, contracted and non statutory stakeholders. Community/ Environmental Sustainability. AW becoming irrelevant in the mind of WSA's, communities and key water sector role-players. SR6 Reliable infrastructure. Upgrade plants to provide minimum 5 megaliters 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. SR7 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. Financial Viability. Inability to access the capital markets. SR8 Improved customer satisfaction. Strengthen and deepen relationships with statutory, contracted and non statutory stakeholders. Stakeholder Relationships and Support. Misalignment between AW deliverables with that of customers expectations/ needs and inability to manage misperceptions resulting in loss of business. 91

95 Risk Ref. Strategic Objective 10 Areas Risk Description SR9 Enhanced strategic effectiveness. Build cross-functional excellence/ effectiveness. Develop operational competence (individual). Leadership and Employee Development. Inability to position AW in the mind of customers and stakeholders as leader on water sector policy and setting the agenda. SR10 Ensure uninterrupted water supply services to customers. Operational Resiliency. Business disruptions resulting in financial and image loss. S11 Ensure uninterrupted water supply services to customers. Operational Resiliency Frequent and lengthy power outages on the continued operations of the water board. S12 Ensure uninterrupted water supply services to customers. Operational Resiliency. Continuing failure to ensure that the policies and procedures of the water board are being adhered to. S13 Ensure uninterrupted water supply services to customers. Operational Resiliency. Cash flow problems affecting the sustainability of the board operations due to problems in collecting amounts owing to the water board by management. TABLE 31 Respective divisional, operational and process risk registers with the relevant mitigations are in the process of being updated. One of the critical risks of any business is Fraud and as such, Amatola Water, considers the matter of Anti-Corruption and Fraud very serious. In this regard, the organisation has therefore adopted a Fraud Prevention Strategy which nculcates the culture of anti-corruption and fraud. This strategy is currently under review to ensure compliance with the latest benchmark practices and legislation. The Fraud Prevention Strategy establishes a separate Fraud Prevention Committee reporting to the Corporate Risk Committee and at times directly to the Audit and Risk Committee as required. Amatola Water has various fraud prevention initiatives in place including: an anonymous tipoff line, declarations of conflict of interest, educational posters and information sharing, policies and the prevention committee. Amatola Water has further engaged with independent third party reporting which assists management to highlight critical areas that need management s attention through the adoption and implementation of procedures and processes for effective and efficient management. 92

96 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 Value Added Tax Act; The Municipal Finance Management Act; Inter-Governmental Relations Framework 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; 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; 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 93

97 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 and Sanitation 94

98 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 and Sanitation 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); 95

99 PFMA means the Public Finance Management Act, 1999 Act No. 1 of 1999)(as amended) and regulations issued in terms of this Act. 3. 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 The Shareholder Compact is not intended to 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 2015 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 to: Contribute to socio-economic development as a Regional Water Utility by providing bulk potable water and sanitation to Water Services Authorities. 96

100 6. 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. WSU Area 20 Year Goal 5 Year Objectives Obj No. Stakeholder & Customer Perspective CS 80% of WSA s in the province as contracted customers through ownership or ROU 2 additional Bulk water supply contracts with WSA s (4 currently) CS Increase Revenue volumes to 150 mega liters per day CS CS WQ WQ CE SS SS SS Financial FV FV FV Achieve Blue and Green Drop standard at all bulk works - (owned and ROU) Providing accredited laboratory water services to all WSA s AW has bulk supply contracts with Contribute to decent living standards and enhance socioeconomic development within communities in EC through quality & adequate water services Strong and well established relationships with stakeholders internal and external To be the centre of a fully-fledged provincial water utility (IRR) Improve solvency, liquidity and profitability to achieve a AAA- Finch rating Manage key customer satisfaction scores in terms of bulk potable water supply, bulk waste water, raw water and water resource infrastructure management to achieve 8/10 Acquire 2 contracts for waste water works Achieve statuary quality compliance at all AW owned and all ROU plants within 3 years of take over Achieve and maintain accreditation for 30 water quality parameters at laboratory. Increase the number of schemes with capacity at 750l per household per day at treatment works to 7 Increase the contribution to economic transformation and improve overall AW image Collaboration to improve service delivery with other relevant Local, Provincial and National institutions Influence and support the process and model for a Regional Water Utility in the Province On-going strengthening of Balance Sheet to provide sustainable bulk water services (Ratios) Build contribution R100 million from financial surpluses for internal infrastructure investment/capex fund Secure R800 million of funding for infrastructure development Gov Out Alignment DWS Obj CS1 12 SO2.1 CS2 12 SO2.1 CS3 9 SO2.1 CS4 12 SO2.1 WQ1 9 SO3.1 WQ2 9 SO3.1 CE1 8 SO2.1 SS1 12 & 9 SO1.3 SS2 12 SO2.1 SS3 6 & 12 SO1.6 SO2.1 FV1 12 SO1.6 SO1.2 FV2 12 & 6 SO1.6 SO2.1 FV3 12 & 6 SO1.6 SO2.1 97

101 WSU Area 20 Year Goal 5 Year Objectives Obj No. FV Internal Processes WA IS IS IS IS OR OO OO 98% Assurance of supply at a minimum service level of 750l per household per day 98% Availability and assurance of water supply and 90% reliability of sanitation services 80 % of the Eastern Cape infrastructure master plan implemented Fully implemented businesses continuity system (IMS, Quality systems, Knowledge Management) Continuous alignment of people, skills, systems, policies and procedures for strategy implementation Continuous improvement philosophy institutionalised Sustainable & affordable tariff increases within 2% of inflation Until institutional realignment and reform is completed, AW is not responsible for this function and therefore there is no relevant 5 year objective at this time 98% Availability of water supply for all bulk water services Yearly improvement of 20% in bulk sanitation services availability Complete AW plant upgrades and KSD PI Projects Develop a fully integrated Provincial Master Plan including funding considerations Minimize production and distribution losses to 12% Business continuity system implemented Aligning people, skills, systems, policies and procedures for strategy implementation Implement continuous improvement system IMS (Prioritize high risk areas) Gov Out Alignment DWS Obj FV4 12 & 8 SO1.6 IS1 6 SO2.1 IS2 8 SO2.1 IS3 6 SO2.1 IS4 6 SO2.1 IS5 6 &10 SO2.2 & SO4.1 OR1 12 SO1.2 SO1.6 OO1 12 & 4 SO 1.1 SO1.6 OO2 12 SO 1.2 SO1.6 OO Improving corporate governance OO3 9 &12 SO3.1 &SO1.2 Learning and Growth LG Enhance strategic effectiveness 80% of strategic implementation LG1 12 SO1.6 LG LG LG LG Balanced, skilled work force for Regional Water Utility needs Innovative, nationally recognised Water Sector Leadership Renowned knowledge and experience hub in the water sector Alignment between staff skills available and job requirements LG2 12 SO1.1 Entrenched Batho Pele Principles LG3 12 SO1.1 Research and position papers completed Functional, self-funding technical learning academy LG4 12 SO1.1 LG5 12 SO1.1 SO1.3 98

102 6.2 The Amatola Water strategic objectives have been specifically aligned to the strategic Goals of the Department of Water and Sanitation as set out in the Department s Strategic Plan and Annual Performance Plan. 6.3 Each of 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: Stakeholder and Customer Financial Internal Processes Learning and Growing 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 will be regularly identified by Amatola Water. 7.2 The Shareholder hereby confirms that the Board is empowered to develop such high impact projects. As regards any major 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 it s 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 in Appendix 1 hereto, will be the measure for control and monitoring of the performance of Amatola Water by the shareholder. 9. 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. 99

103 9.1.2 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; 10.3 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. 100

104 11. KEY PERFORMANCE MEASURES AND INDICATORS The corporate strategic Key Performance Indicators for Amatola Water, as contemplated in the PFMA, are attached hereto as Appendix 1, it is hereby recorded that they have been accepted by the Shareholder on 28 April Dated at on this the day of (Minister of Water and Sanitation) Shareholder Representative for and on behalf of the Republic of South Africa). AS WITNESSES:

105 SHAREHOLDER COMPACT : APPENDIX 1 (PERFORMANCE OBJECTIVES AND TARGETS) Performance Objective Alignment Outcome/ Impact Ministerial Outcomes DWS Strategic Goals WB Strategic Objectives Indicators/ Calculation Measure Annual Performance Targets Actual- Prior year Estimated Actual - Current Year Projected Target Organisational Effeciency and Effectiveness 1 Bulk potable water quality compliance 9 SO3.1 WQ1 Water quality standards met Test results, SANS 241 Class 1: Class 2: % compliance 98% 98% 98% 2 Manage avoidable water losses 6 &10 SO2.2 & SO4.1 IS5 Reduced avoidable water losses in treatment and distribution systems Avoidable water lost as a percentage of water produced % 10% 10% 12% 3 Reliability of supply 12 SO1.2 SO1.6 OR1 No unplanned interruptions to bulk supply exceeding 24 hours Number of days supply interrupted as a % of possible supply days % 99.00% 99.32% 99.32% 4 Increased access to Services 6 SO2.1 IS3 Contribution to national objectives of extending services Actual CAPEX spend on expansion related projects (initiatives by the Minister) as % of budget % n/a 100% 100% 102

106 Performance Objective Alignment Outcome/ Impact Ministerial Outcomes DWS Strategic Goals WB Strategic Objectives Financial Performance 5 Financial reporting compliance 9 SO 1.2 SO1.6 OO2.1 Unqualified audit report 6 Improve key financial ratios 12 SO1.6 SO1.2 FV1 Improved viability and sustainability Indicators/ Calculation Measure Annual Performance Targets Actual- Prior year Estimated Actual - Current Year Projected Target Annual external audit Unqualified report with no matters of emphasis (Clean Audit) Yes Yes Yes Current Ratio Ratio Gross profit margin % (primary activity) % 34% 26% 30% Gross profit margin (secondary activity) % 34% 26% 30% Net profit margin (primary activity) % 9% 6.68% 9% Net profit margin (secondary activity) % 9% 6.68% 9% Debt equity Ratio 0.89% 0.45% 1% Return on Assets % 5% 2.49% 0.50% Debtors days Number Repairs and maintenance as % of PPE and Investment Property (Carrying Value) % 9% 3% 3% Staff remuneration as % of total operating expenditure % 41% 42% 37% 103

107 Performance Objective 7 Increase BBBEE expenditure in relation to operational projects 8 Manage costs within the approved budget 9 Capital expenditure programme 10 Engagement in secondary activities Alignment Outcome/ Impact Ministerial Outcomes DWS Strategic Goals WB Strategic Objectives 12 SO1.3 FV1.9 Spend increased and increased new entrants awarded contracts in the financial year 12 SO1.6 SO1.2 FV1.8 Actual expenditure compared with budgeted epxenditure for the quarter 6 SO1.2 IS3 Infrastructure available to meet demands 9 SO1.6 SO2.1 FV2.4 Growth in turnover from secondary (other activities) Indicators/ Calculation Measure Annual Performance Targets Actual- Prior year Estimated Actual - Current Year Projected Target Spend % increase 100% 106% 100% New service providers awarded work Number n/a n/a n/a Financial reports % increase Overall project expenditure within R target % variance 63% 100% 100% Overall project completion dates within targets % variance 40% 85% 85% % of total turnover % 33% 28.14% 32% 104

108 Performance Objective Alignment Outcome/ Impact Ministerial Outcomes DWS Strategic Goals WB Strategic Objectives Customer/ Stakeholder Interaction 11 Bulk supply agreements concluded with municipalities/ other customers 12 SO1.6 SO2.1 CS1.1 Statutory and Service Level Agreements in place 12 Implementation of Ministerial directives 12 SO1.6 SO2.1 SS3 New Ministerial directives issued are implemented on time 13 Support Rural Development 12 SO1.6 SO2.1 CS1.1 Total Number of identified rural Municipalities supported 14 Achieve statutory reporting compliance 12 SO1.2 SS3 All statutory reports submitted on time Organisational Capacity 15 Staff levels 12 SO1.1 LG2.4 Optimal staff retention 16 Training and Skills Development 12 SO1.3 LG2.5 Skills and capacity building Indicators/ Calculation Measure Annual Performance Targets Actual- Prior year Estimated Actual - Current Year Projected Target Municipalities/ Other Customers with bulk supply agreements % 100% 100% 100% Progress against implementation plan % 100% 100% 100% Signed contracts, MOUs etc Number Submission dates met % 100% 100% 100% Staff turnover % 13% 1.20% 9% Learnerships Number Bursaries employees Number n/a n/a n/a Graduate Programmes Number n/a n/a n/a 105

109 Performance Objective Alignment Outcome/ Impact Ministerial Outcomes DWS Strategic Goals WB Strategic Objectives 17 Jobs Created 12 SO1.3 CE2 Permanent and contract (direct) Temporary (indirect) General Performance 18 Board Effectiveness 12 SO1.2 OO3.5 Improved performance of fiduciary duties/ governance 19 Effective Internal Controls and Risk Management 12 SO1.2 OO3.2 Internal audit findings dealt with 20 Good Governance 12 SO1.2 OO3.6 Improved controls and risk mitigation 21 Corporate Social Responsibility Initiatives 12 SO1.6 OO3.4 Good corporate citizenship Indicators/ Calculation Measure Annual Performance Targets Actual- Prior year Estimated Actual - Current Year Projected Target Total number Number Total number Number Board Member attendance of all Board/ committee meetings % 72% 80% 80% Decision making: % number resolutions taken by the board vs number of resolutions required % 100% 100% 100% Internal audit reports Number of repeat findings Number of unresolved findings Breaches of materiality and significance framework Number Number of initiatives undertaken Number

110 ANNEXURE A SERVICE AREA MAP 107

111 ANNEXURE B SCHEME LAYOUT PLAN 108