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ANNUAL REPORT PRESENTATION Celebrating a decade of water services delivery in a democracy ANNUAL REPORT PRESENTATION Celebrating a decade of water services delivery in a democracy

ANNUAL REPORT H KASAN TARIFFS K NAICKER WATER BOARD ACCOUNTABILITY P CAMAY ANNUAL REPORT H KASAN TARIFFS K NAICKER WATER BOARD ACCOUNTABILITY P CAMAY

CONTENT • • Rand Water profile Customer Sales profile Sales trend Cost of raw CONTENT • • Rand Water profile Customer Sales profile Sales trend Cost of raw water Projected input costs vs CPIX Gross profit Profitability

CONTENT CONT • Value creation • Return on assets • Business performance Indicators • CONTENT CONT • Value creation • Return on assets • Business performance Indicators • Performance Highlights • Social responsibility trend • Future developments • Decade of Service Delivery - Review

Rand Water profile • • • Largest water utility in Africa Bulk water supply Rand Water profile • • • Largest water utility in Africa Bulk water supply increase to 3 414 M /d (3340 M /d : 2003) Supplies 12 million people daily Sole area of service 18 000 km² 13 000 km² joint area of service with other Water Boards

Rand Water profile cont • Turnover : R 3 258 bn ( R 2 Rand Water profile cont • Turnover : R 3 258 bn ( R 2 884 bn : 2003) • Assets • Staff employed • Corporate ISO 9001 : 2000 accredited • All plants ISO 14001 accredited : R 5 232 bn (R 4 892 bn : 2003) : 3 097 (3 108 : 2003)

CUSTOMER SALES PROFILE CUSTOMER SALES PROFILE

SALES TREND SALES TREND

COST OF RAW WATER COST OF RAW WATER

PROJECTED INPUT COSTS VS CPIX PROJECTED INPUT COSTS VS CPIX

GROSS PROFIT GROSS PROFIT

PROFITABILITY PROFITABILITY

VALUE CREATION VALUE CREATION

RETURN ON ASSETS % RETURN ON ASSETS %

PROFITABILITY Why generate large surplus (profit) ? • • • Capital investment planned for PROFITABILITY Why generate large surplus (profit) ? • • • Capital investment planned for next 5 years = R 2, 5 billion To access funds (debt) at lowest cost to fund capital investment No loans from government No guarantees from government Ensure sustainability Not profiteering but recovering cost of capital

BUSINESS PERFORMANCE INDICATORS KPI Profit Margin Net income per Employee Unit 2001 2002 2003 BUSINESS PERFORMANCE INDICATORS KPI Profit Margin Net income per Employee Unit 2001 2002 2003 2004 % 3, 8 7, 8 9, 7 11. 5 90. 44 121. 08 R’ 000 25. 83 62. 30 Interest cover X 1, 6 2. 1 2. 8 3. 6 Return on Assets % 5. 1 7. 5 9. 0 9. 9 Ave costs of capital % 13. 00 12. 00 13. 45 13. 00

BUSINESS PERFORMANCE INDICATORS CONT KPI Debt/Equity Unit % 2001 2002 2003 2004 98% 84% BUSINESS PERFORMANCE INDICATORS CONT KPI Debt/Equity Unit % 2001 2002 2003 2004 98% 84% 69% AA Credit Rating 99% AA AA AA Assets T/O Ratio X 0. 6 0. 7 0. 8 Current Ratio X 1. 1 1. 2 1. 5 1. 8 Cents 90 98. 9 98 106 Operational costs/kℓ sold

BUSINESS PERFORMANCE INDICATORS Employee Productivity Ratios 2001 2002 2003 2004 Employees 3249 3105 3108 BUSINESS PERFORMANCE INDICATORS Employee Productivity Ratios 2001 2002 2003 2004 Employees 3249 3105 3108 3097 K sold 1, 097, 437, 836 1, 147, 865, 347 1, 216, 342, 585 1, 252, 828, 263 K per employee 337, 777 369, 683 391, 359 404, 530 Revenue R’ 000 2, 180, 150 2, 480, 727 2, 884, 405 3, 258, 055 Income per employee R’ 000 671, 02 798, 95 928, 06 1052, 00 Profit per employee R’ 000 25. 83 62. 30 90. 44 121. 08

PEFORMANCE HIGHLIGHTS • Surplus : R 375 million 33% 13% • Revenue: R 3 PEFORMANCE HIGHLIGHTS • Surplus : R 375 million 33% 13% • Revenue: R 3 258 million • Cash generated from operations 9, 1% • Increase in sales 2, 2%

PERFORMANCE HIGHLIGHTS cont 2003 • • • 2004 Customer SLA evaluation 89% 88% Customer PERFORMANCE HIGHLIGHTS cont 2003 • • • 2004 Customer SLA evaluation 89% 88% Customer Satisfaction Index 77% Training spend ( as % of Total Payroll) 6, 6% 7% 60% 64% 42, 3% 46% • Designated groups at management • BEE spend

SOCIAL RESPONSIBILITY TREND Categories 2002 2003 2004 R 445 692 R 615 503 R SOCIAL RESPONSIBILITY TREND Categories 2002 2003 2004 R 445 692 R 615 503 R 639 279 485 002 505 248 R 637 652 R 325 125 R 361 435 R 548 055 R 18 824 178 R 16 281 989 R 14 840 968 Foundation N/A R 3 000 Total Spent R 20 079 992 R 17 764 175 R 19 665 954 435 648 Schools Programme Health HIV/Aids Community Development CBPD ( Part sourced externally) Jobs created

FUTURE DEVELOPMENTS RAND WATER SERVICES • Providing water services value adding to municipalities in FUTURE DEVELOPMENTS RAND WATER SERVICES • Providing water services value adding to municipalities in South Africa • Back-up supply for SASOL R 40 million pipeline • NEPAD initiatives

FUTURE DEVELOPMENTS cont INFRASTRUCTURE PROJECTS • BRAKFONTEIN/RUSTENBURG 80 KM PIPELINE : R 450 million FUTURE DEVELOPMENTS cont INFRASTRUCTURE PROJECTS • BRAKFONTEIN/RUSTENBURG 80 KM PIPELINE : R 450 million currently doing environmental impact • WESTERN HIGHVELD REGION PROJECT : R 113 million of which R 40 million is from Rand Water

FUTURE DEVELOPMENTS CONT. • A total of R 2, 5 billion capital investment is FUTURE DEVELOPMENTS CONT. • A total of R 2, 5 billion capital investment is planned over the next 5 years • R 962 million in infrastructure development projects in progress

DECADE OF SERVICE DELIVERY - REVIEW DECADE OF SERVICE DELIVERY - REVIEW

DECADE OF SERVICE DELIVERY • Participated in Presidential Lead projects Winterveldt, Bushbuckridge (R 142 DECADE OF SERVICE DELIVERY • Participated in Presidential Lead projects Winterveldt, Bushbuckridge (R 142 m) • The project facilitated supply through 3 500 communal standpipes – benefiting approximately 1 million people • R 215 million worth of projects implemented by CBPD • Winterveldt sanitation project – more than 2 540 toilets for Winterveldt built (R 8, 3 m) benefiting 25 000 people

DECADE OF SERVICE DELIVERY • • Integrated Water Demand Management Interventions: R 60 million DECADE OF SERVICE DELIVERY • • Integrated Water Demand Management Interventions: R 60 million Established Rand Water Services Pty (Ltd) Launched Rand Water Foundation Significant Transformation within the organization • Designated group – Management level 64% (33% : 2000) • Women representation in management, professional and supervisory – 28, 2% (22% : 2000)

RAND WATER IS RAND WATER IS

Tariff Setting & Accountability Rand Water Affairs & Forestry Portfolio Committee October 2004 Tariff Setting & Accountability Rand Water Affairs & Forestry Portfolio Committee October 2004

ISSUES • • Municipal Financial Management Act: 6 months advance notice National Treasury & ISSUES • • Municipal Financial Management Act: 6 months advance notice National Treasury & SALGA: 40 days for consideration Bulk Water Supply Contract: prior consultation and information sharing Core/Primary activity vs. non-core

ISSUES – Core vs. Non-core CORE Bulk Water Bulk Sanitation Rand Water Board NON-CORE ISSUES – Core vs. Non-core CORE Bulk Water Bulk Sanitation Rand Water Board NON-CORE Retail Water Community Projects Business Devt. Farm Operations Pipe Manufacturing Rand Water Services (Pty) Ltd

PROCESS • • DWAF raw water pricing Board prelim. approval Customer Consultation & Information PROCESS • • DWAF raw water pricing Board prelim. approval Customer Consultation & Information Sharing Board prelim. approval Submission to Treasury and SALGA Board final approval Customer Notification Parliamentary approval Aug. 2004 Sept. 2004 Oct. 2004 Dec. 2004 March 2005

Water Board Accountability Presentation to the Portfolio Committee Water Board Accountability Presentation to the Portfolio Committee

Introduction • • Water Board accountability covered by a number of measures Presentation covers Introduction • • Water Board accountability covered by a number of measures Presentation covers the broad requirements of • Water Services Act, 1997 • Public Finance Management Act, 1999 • Other requirements

Water Services Act, 1997 • • Water Services Act, 1997 Water Boards are established Water Services Act, 1997 • • Water Services Act, 1997 Water Boards are established in terms of the Water Services Act, 1997 Executive Authority – Minister of Water Affairs and Forestry Has principal oversight over water boards

Water Services Act, 1997 • • • The Minister must review the provision of Water Services Act, 1997 • • • The Minister must review the provision of water services to water services authorities Makes recommendations to Parliament on the establishment, functions and disestablishment of water boards Must monitor operational and financial performance of water boards

Water Services Act, 1997 • Oversight through: Policy Statement • In terms of Section Water Services Act, 1997 • Oversight through: Policy Statement • In terms of Section 39(1) every water board must prepare and adopt a policy statement • Policy statement must be submitted to the Minister, the relevant Province(s) and must be accessible to the Public • The Minister can issue a directive for a water board to amend a policy statement

Water Services Act, 1997 • Oversight through 5 year Business Plan • Section 40 Water Services Act, 1997 • Oversight through 5 year Business Plan • Section 40 requires water boards to prepare and adopt a five-year business plan • Business plan must be submitted to the Minister • The Minister may require a water board to amend its business plan

Water Services Act, 1997 • Oversight through Annual Statements • Section 44 requires a Water Services Act, 1997 • Oversight through Annual Statements • Section 44 requires a water board to issue an Annual Report and audited financial statements • The Annual Report and audited financial statements must be submitted to Parliament • Numerous other obligations range from: • Ring fencing of additional activities • Discontinuation and limitations of water services

Water Services Act, 1997 • Policy statements, business plans and annual reports appraised annually Water Services Act, 1997 • Policy statements, business plans and annual reports appraised annually by the Department of Water Affairs and Forestry and findings presented to the Minister to inform decision making regarding water boards

Appointment of Board Members • • Board members appointed by Minister of Water Affairs Appointment of Board Members • • Board members appointed by Minister of Water Affairs and Forestry Schedule 1 of the Act provides the procedure for the appointment of Board members • Constitution of a selection panel • • • Consists of Chief Executive, Provincial representative(s), Ministerial representative and Person of good repute within service area Call for public nominations for Board members in water board’s service area Selection panel makes recommendations to the Minister

Appointment of Board Members • Section 35 requires: • That the Board must be Appointment of Board Members • Section 35 requires: • That the Board must be representative of water services authorities that receive services from the water board • Other interests served by the Board are represented • Broad population is represented • Local Government representation determined through consultation by the Minister with relevant organisations in the service area that represent municipalities (the South African Local Government Association etc)

Appointment of Board Members • Previous Rand Water Board consisted of representatives from Municipalities Appointment of Board Members • Previous Rand Water Board consisted of representatives from Municipalities : Women : Men : • Current Board has Representatives municipalities women Municipalities : 7 Women : 7 Men : 12 • One member of Provincial Legislature also included

Public Finance Management Act, 1999 • National Treasury also has oversight over financial performance Public Finance Management Act, 1999 • National Treasury also has oversight over financial performance • Minister of Water Affairs and Forestry given executive authority over water boards

Recent Developments to Monitor Water boards 1. 2. Shareholders compact in terms of Treasury Recent Developments to Monitor Water boards 1. 2. Shareholders compact in terms of Treasury Regulations Act Quarterly reports in terms of Treasury Regulations

1. Shareholders Compact • • • It is a requirement of Treasury Regulations May 1. Shareholders Compact • • • It is a requirement of Treasury Regulations May 2002( Regulation 29. 2 ) It sets parameters of the relationship Includes performance measures and indicators which must be attained by a water board

2. Quarterly Reports • • • Are a requirement of Treasury Regulations May 2002 2. Quarterly Reports • • • Are a requirement of Treasury Regulations May 2002 (Regulation 29. 3) The purpose is to monitor and evaluate performance as contained in the Shareholders Compact To effect timeous corrective action

Other Mechanisms to Ensure Accountability • New National Task Team led by Department of Other Mechanisms to Ensure Accountability • New National Task Team led by Department of Public Enterprises to strengthen regulatory role of government over parastatals • Development of mechanism to monitor Board performance • Ensure good corporate governance • • • Bulk Water Services Model Contract Borrowing Limits set by National Treasury Adherence to King II on Corporate Governance Reporting to Portfolio Committee as and when required CE salary

THANK YOU THANK YOU