mhlathuze water presentation of the 2005/2006 annual report to the portfolio committee presented by...
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MHLATHUZE WATER
Presentation of the 2005/2006
ANNUAL REPORT
to the Portfolio Committee
Presented by Vic Botes and Elzette Grierson
20 March 2007
Water must never be a constraint to development, but
a catalyst!
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OPERATIONAL AREA
Mhlathuze Water operational area covers 4½ WSA’s in the Zululand area:
• Umkhanyakude District Municipality.
• Zululand District Municipality.
• uThungulu District Municipality.
• Umhlathuze Local Municipality.
North of Ilembe District Municipality.
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STRATEGIC DIRECTION
• To form strategic partnerships with WSA’s
• To establish strategic networks with all role players
• To support and assist WSA’s to meet their mandates
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STRATEGIC DIRECTION
• Advocacy & Relationship building at provincial level
:DWAF to lead a process of strengthening Tripartite relationship between DWAF region, Water Utilities and Municipalities.
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STRATEGIC DIRECTION
- Internal Alignment: Need to formalise the alignment in order to use Water Utilities as an extension of DWAF to deal with critical challenges such as:
- Regulation – Water Quality
- Service Delivery : MIG
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STRATEGIC DIRECTION
- Catchment Management Agencies
• Knowledge Sharing : Twinning arrangements already happening within NEPAD and Water Utilities : Should be strengthened.
• Empowering Regions : Strengthening of Regional Offices to deal with Water Utilities issues and challenges.
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STRATEGIC DIRECTION
• Intergovernmental Relations and relations with Premier : DWAF to facilitate these relations at provincial level.
• Meeting the targets : DWAF to facilitate brining on board all key stakeholders, develop provincial plans for meeting the targets and assess existing skills in the province.
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BUSINESS PHILOSOPHYA paradigm shift from:
“cherry picking services”
to
“WSA’s will determine services they need from MW”
Moving from:
“providing commodities”
to
“providing complete solutions”
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BUSINESS OBJECTIVES
• MW respects position of WSA’s as responsible for water service delivery in area of jurisdiction
• MW recognises that WSA’s cannot achieve this on their own
• MW to step into this gap to support and co-operate with the WSA’s
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• Mhlathuze Water activities have largely been concentrated around two WSA’s, namely Umhlathuze Local Municipality and Umkhanyakude DM
• Signed key strategic network and partnership agreements and project implementation agreements with:
Umkhanyakude DM uMhlathuze LM University of Zululand uThukela Water Umgeni Water
COVERAGE EFFECTIVENESS OF OPERATIONAL AREA
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OPERATIONAL ACHIEVEMENTS
• MW has never received any subsidies or assets from government
• The Laboratory maintained its International Accreditation ISO 17025
• Investigation into the long-term solution for the Foskor gypsum disposal.
• EMS - ISO 14001:2004 certification achieved
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OPERATIONAL ACHIEVEMENTS [Continued]
• Imported new & innovative project development, institutional and project financing modules (now rolled out to the whole of KZN)
• Played a leading role to promote KwaZulu-Natal Bulk Regional Water Supply projects
• No quantifiable benefits as yet, but laid a firm foundation for building future sustainable partnerships
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IMMEDIATE CHALLENGES AND OPPORTUNITIES
• New coastal developments between Ilembe DM & uThungulu DM
• Water starved rural areas of uThungulu DM, Zululand DM and Umkhanyakude DM.
• Economic development potential around Pongolapoort Dam and Makhathini Flats.
• Value adding opportunities in water resources, water quality, stream flow reduction and wastewater sectors in MW areas.
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WATER VOLUMES INDICATORS
• Demand volumes remained constant from 2005
• The biggest drop in actual supply was in transfer volumes mainly due to favourable water level in Lake Nsezi and Goedertrouw dam (Eshowe)
• A further decrease in water sales due to environmental measurements implemented by customers, such water demand management
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ANNUAL FINANCIAL STATEMENTS 2006
• The Financial Statements were prepared in accordance with provisions of the PFM Act and the Water Services Act.
• The Financial Statements were approved by the Board and accepted by the independent auditors as fairly presenting financial performance of MW for the year ended 30 June 2006.
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FINANCIAL PERFORMANCE• First year adoption of IFRS
(International Financial Reporting Standards)
• There was an increase in Revenue from R143.7 million to R166.4 million mainly due to annual tariff increase and recovery of major maintenance on the B-line
• Operating expenditure increased by R7 million [6.8%] mainly due to:• New pipeline lease [recovered] – R1.4 million • Subsidy Umkhanyakude Management Services - R3.5
million
• Profitability increased to R19 million due to IFRS adjustment. The IFRS adjustment was ±R3.4 million. [MW has to establish a Reserve Policy.]
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PROFITABILITY RATIOS
• Profitability factors were negatively influenced by the long outstanding debtor for Umkhanyakude DM of R10.9 million.
[the balance outstanding as at March 2007 is down to R4.1 million]
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CAPITAL FACILITIES
• An IFRS adjustment has been made due to the extension of the lives of some of our major assets
• These assets were already fully depreciated prior to 2003/4
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COMPARATIVE INDICATORSFinancial indicator 2006 Standard
Current ratio 1.64 >1.75
Working ratio 0.66 <0.75
Operating ratio 0.82 <0.75
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OTHER INDICATORS
All other financial positions such as Profitability and Solvency remain
steady.
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IN CONCLUSIONMW, although financially sound, the short term position (liquidity) will need attention, with the following financial indicators needing specific attention:
• the current ratios• working capital ratios• operating ratios