LEPELLE NORTHERN WATER BOARD ANNUAL REPORT 201516 DWS

LEPELLE NORTHERN WATER BOARD ANNUAL REPORT 2015/16 & DWS INTERVENTION PROJECTS 24 FEBRUARY 2017 “Water is our passion”

CONTENTS DWS INTERVENTION PROJECTS • Water supply interventions in Giyani & Nandoni • Water supply interventions in Tzaneen Wards ANNUAL REPORT 2015/16 • Part 1: Overview of financial performance • Part 2: Overview of non-financial performance “Water is our Passion”

DWS INTERVENTION PROJECTS Water supply interventions in Giyani & Nandoni

“Water is our Passion” WATER SUPPLY INTERVENTIONS IN GIYANI &NANDONI APPROACH TO MOPANI INTERVENTION The interventions was categorised and prioritised as follows: • Critical/short - term emergency projects milestone • Medium/long – term emergency projects milestone • Other projects milestones

WATER SUPPLY INTERVENTIONS IN GIYANI & NANDONI MOPANI CRITICAL/SHORT-TERM PROJECT MILESTONES Project Status 16 Priority Villages Groundwater Augmentation Completed Nkhensani Hospital Groundwater Augmentation Completed Giyani WWTW 1. 5 Ml/day (package plant) Completed Giyani WWTW (refurb-existing plant) Completed Morogholo Transfer Pumpstation Completed Kremetart Transfer Pumpstation Completed Khanyisa Booster Pumpstation Completed Nsami Water Treatment Plant (Refurb of old plant) Completed Nsami Water Treatment Plant (New) Completed ALL EMERGENCY WORKS COMPLETED AND TO BE HANDED OVER TO THE RELEVANT AUTHORITIES Kremetart High & Low Reservoirs Completed “Water is our Passion”

WATER SUPPLY INTERVENTIONS IN GIYANI &NANDONI MOPANI MEDIUM-LONG TERM PROJECT MILESTONES Project Summary Scope Construction Progress Completion date Pipeline A Length of 37. 9 km (incl branches) 63% 30 June 2017 Pipeline B Length of 81. 8 km (incl branches) 78% 30 June 2017 Pipeline C 1 & D 1 Length of 11. 3 km (incl branches) 98% 30 March 2017 Pipeline C 2 & D 2 Length 24 km (including branches) 10% 31 Dec-2017 Pipeline D outline Length of 107. 7 km (incl branches) 73% 30 June 2017 Pipeline F 1 Length of 45. 3 km (incl branches) 54% 30 September 2017 Pipeline F 2 Length of 21. 8 km (incl branches) 80% 30 June 2017 “Water is our Passion”

WATER SUPPLY INTERVENTIONS IN GIYANI &NANDONI MOPANI MEDIUM-LONG TERM PROJECT MILESTONES Project Summary scope Design Construction progress Progress Completion date Giyani Village Reticulations design Feasibility study, Planning, detail designs, finalize designs, permits and procurement. 100% The construction to commence on To be confirmed confirmation of funds by DWS and upon finalization of Sourcing of Service Provider/ the Contracts Contractor. New (Biological Nutrient Removal) BNR plant Construction of the new 14 ML/d BNR plant. 100% Phase 1 (Movable 1. 5 Ml/d Package plant completed). To be confirmed upon contract Phase 2 construction to commence finalization on confirmation of funds by DWS and Sourcing of Service Provider/ Contractor Nandoni WTW upgrade Upgrading of the existing WTW 100% Construction work to commence on To be confirmed upon confirmation of funds by DWS and contract finalization Sourcing of Service Provider/ Contractor Command Reservoir – Giyani Construction of 35 ML reservoir 100% Construction work to commence on. To be confirmed upon confirmation of funds by DWS and contract finalization Sourcing of Service Provider/ Contractor Distribution Reservoirs Construction of 50 elevated steel tanks to be connected to the bulk pipelines 100% Construction work to commence on. To be confirmed upon confirmation of funds by DWS and contract finalization Sourcing of Service Provider/ Contractor “Water is our Passion”

WATER SUPPLY INTERVENTIONS IN GIYANI &NANDONI OTHER PROJECTS MILESTONES CONT. Project Summary scope Nandoni – Nsami Bulk pipeline Implementation of bulk pipeline from Nandoni – Giyani 100% Namakgale WWTW Upgrade of the Namakgale WWTW 60% Raising of Tzaneen Dam Raising of Tzaneen dam (3 m). 90% Removal and stockpiling of material Removal and stockpiling of from the dam basin and the blasting the material from the dam of the spillway crest in progress. basin to be completed by end March 2017. The blasting of the spillway to be completed by July 2017. New Nwamitwa Dam Planning and design new Nwamitwa dam. 60% The construction to commence on To be confirmed upon contract completion of the designs, finalization availability of funds and procurement of the Contractor. Nkambako/ Bambanana Bulk pipeline Implementation of bulk pipeline in Nkambako/ Bambanana 100% “Water is our Passion” Design Construction progress Progress Completion date Construction in progress – March 2018 Excavation, removal of the old pipes and installation of new pipes in progress. Engineering designs in progress. The designs expected to be completed by end March 2017. The construction to commence on confirmation of funds from DWS. The construction to commence To be confirmed on confirmation of funds by DWS upon contract and Sourcing of Service Provider/ finalization Contractor.

WATER SUPPLY INTERVENTIONS IN GIYANI &NANDONI OTHER PROJECT MILESTONES Project Summary scope Boreholes Revitalization of existing 154 boreholes (with package plants) – Augmentation to the water scheme while the Bulk Pipelines in progress. Design Progress Construction progress 100% 95% As and when required Ongoing Completion date The electrification of boreholes is required to complete the remaining scope of work. Repairs on existing lines ± 270 km’s Operations and maintenance support “Water is our Passion” Pump stations = 9 Reservoirs = 14 Ongoing

Water supply interventions in the Wards To address the challenges at 5 wards in Tzaneen, bigger water supply systems are being installed within municipalities inline with master plan as opposed to the small schemes which were currently in use. Noting: For projects implemented by WSA: MDM, their information were requested from MDM to updated the progress but Nkombako/Bambanana bulk pipeline that is Implemented by LNW

PROGRESS OF WATER SUPPLY PROJECTS AT WARDS 24, WITHIN THE GREATER TZANEEN LOCAL MUNICIPALITY Project Summary scope Design Progress 25, 26, 27 AND 34 VILLAGES Construction progress Anticipated Completion date Responsible 25% 22 June 2017 WSA: MDM Delay was due to technical report approval WSA: MDM Intervention projects done are as follows Tours bulk water Construction of Pre-Treatment supply(upgrading of works, 1 flocculation channels , 2 clarifiers, 3 rapid gravity sand filters , tours treatment 1 new clear water tank , 1 new pump works 100% Tours bulk line 10% (The implementation is moving forward as per implementation plan) station , 1 chlorine room and access road Upgrading of Tours bulk line Thabina bulk water supply Construction of water reticulation in Thabina village 100% Lephephane bulk water scheme Refurbishment of 8 eight boreholes, sitting, drilling and equipping of 5 boreholes, construction of a pump station and a clear water tank and bulk pipe line of 17 km 100% Nkambako bulk pipeline Extension of the Nkambako bulk pipeline 100% “Water is our Passion” 0% 98% To be confirmed upon design finalization 23 December 2016 WSA: MDM Close out report to be submitted Ongoing The Contraction is behind schedule WSA: MDM due to community strike which resulted in the stopping of the project (Planned program of work was delayed and now revised to March 2017) Construction work to To be confirmed upon contract Implementing commence on confirmation finalization Agent – LNW of funds by DWS and Sourcing of Service Provider/ Contractor

ANNUAL REPORT 2015/16 PART 1: OVERVIEW OF FINANCIAL PERFORMANCE

FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 June 2016 Audited Outcome 2015/16 Audited Outcome 2014/15 Variance R'000 % Revenue from exchange transactions ( Primary) 459 199 441 549 3% Revenue from non-exchange transactions ( Secondary) 166 265 97 330 41% Employee benefit costs 245 360 169 460 31% Operating expenditure 241 031 405 758 69% Fair value adjustments 4 067 3639 10% Finance cost 1 601 1416 11% 29 955 28 096 6% 103 450 69 490 32% Expenditure Depreciation, amortisation and impairment Loss on disposal of fixed assets Surplus/(deficit)from operating activities “Water is our Passion”

STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 JUNE 2016 ASSETS Current Assets Cash and cash equivalents Receivables from exchange transactions inventory Non-Current Assets Property, Plant and Equipment Intangible assets Investments Total assets LIABILITIES Current Liabilities Payables from exchange transactions Employee benefits Finance lease liability Financial liabilities: Non-Current Liabilities Employee benefits Financial liabilities Total net assets NET ASSETS Reserves ( Equity) Accumulated surplus Pumping cost reserve ( Reserve) Net assets ( Equity) 2016 R'000 2015 R'000 VARIANCE % 79 996 539 768 6 145 217 796 236 901 5 371 1. 73% 56% 12% 648 699 3 415 68 228 1 346 251 559 886 4 240 59310 1083 504 14% 25% 19% 281 064 169 741 40% 65 558 17 584 73% 346 622 187 325 46% 458 156 541 473 999 629 458 156 438 023 896 179 0% 1420% 11%

“Water is our Passion” RATIOS Liquidity The current ratio : 2. 4 Cash flow from operations The cash and cash equivalent at the end of the year amounted to R 79, 9 m Return on assets The ratio on return on assets is 12%. This illustrates the entity’s effectiveness in using its investment in assets. Debtor days in sales During the period under review, the debtor days’ analysis reflected an increase to 625 days This is due continuous non-payment by our major customer Other ratios applicable Gross Profit Margin is 53% Debt to equity is 32% Net profit margin is 23% 15

EXPENDITURE OUTCOME: 31 JUNE 2016 Programme (R'000) Budget Administration 64 270 Expenditure Variance % Spent 57 205 Water Sector Management 7 065 Dashboard as at 31 June 2016 Working days till FY end 0 11% Total expenditure to date Water Infrastructure Management R 485 156 200000 Regional Implementation and Support % 100000 Water Sector Regulation 0 International Water Cooperation September December Mar Budget June Actual Total Analysis of current payments 1% Expenditure Variance % 35 Compensation of employees on operating expenses 99% % 65 Goods & services on operating expenses 16

“Water is our Passion” IRREGULAR, UNAUTHORISED, FRUITLESS AND WASTEFUL EXPENDITURE Analysis: v No Irregular expenditure reported during the 2015/16 financial year v No unauthorized expenditure reported during the 2015/16 financial year v No fruitless or wasteful expenditure relating to current year 17

“Water is our passion”

CONTIGENT LIABILITIES AND ASSETS 2015/16 R'000 2014/15 R'000 Variance R'000 % Variance 6553 3853 2700 70% Contingent liabilities Total Contingent assets Total Notes Legal claim : A service Provider was ordered to pay R 3. 5 plus interest with legal costs to LNW in respect of lost assets within the organization. The board is of the opinion that this claim is probable to be met in full in the near future. Land claim : LNW purchased a farm in 2003 which became a subject of successful land claim. The value of the farm was R 2. 7 m. Land claim Commissioner took possession of the farm in 2005 and did not pay any money to LNW. The latter is currently under legal dispute. “Water is our Passion”

ANALYSIS: MATTERS RELATING THE AUDIT REPORT PER YEAR 2011/12 2012/13 2013/14 2014/15 2015/16 Qualified (9) Qualified (8) Qualified (3) Qualified (2) Qualified (1) Unqualified Unqualified Emphasis of matter Emphasis of matter The accounting authority did not take effective steps to collect all money due to the Lepelle Northern Water, as required in terms of section 51(1)(b)(i) of the PFMA, as 80% of total accounts receivable was provided as doubtful debt. “Water is our Passion” 20

“Water is our Passion” Trend analysis: Matters relating the audit report 45 40 35 30 25 20 15 10 5 0 2012 2013 2014 2015 2016 21

ACTION PLAN Major Finding Root Cause Action Lepelle Northern Water had receivables for water sales totalling R 410 million at 30 June 2016, of which R 328 million had been outstanding for more than 90 days. The recoverability of these amounts is doubtful. Non payment WSA by • Signing of the settlement agreement with the affected WSA Management is encouraged to continue with their concerted efforts to collecting long outstanding debt “Water is our Passion” 22

“Water is our passion”

EXPLANATORY NOTES PPI no Milestones that were not achieved Comments on deviations 1 Tolerable organisational Residual Risk Certain risks identified during the review required budget and was not available at the point in time but allocated for next financial year. 2 Capital projects DWS did not pay on time the money that was bridgefunded on the directives issued to LNW 3 Debtors day (1102) Mopani’s old debt still a challenges and recently DWS. 4 Compliance to DWS effluent general standards Municipality did not approve the budget that was meant to upgrade some of the wastewater works’ capacity to match the high volumes of the influent. “Water is our Passion” 24

“Water is our Passion” THANK YOU