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Page

Foreword by the Chief Executive 5

Strategy 7
Operating Environment 9
Response to key Strategic Issues by the Chairperson of the Board 13
Strategy Map and Outcomes 16
Mission, Strategic Intent, Vision and Values 19

Business Plan 2010/11 to 2014/15 21

1 Introduction 23
2 Policy Statement 25
3 Directives by the Minister 27
4 Participation in Companies 29
5 Water Resources 31
6 Bulk Potable Water Supply Plan 43
7 Bulk Wastewater Treatment and Disposal 53
8 Other Activities 55
9 Human Resource Development Plan 61
10 Environmental Management Plan 69
11 Water Conservation and Demand Management Plan 73
12 Financial and Capital Expenditure Plan 75
13 Bank Accounts 119
14 Risk Management Plan 121
15 Fraud Prevention Plan 123
16 Other KPIs 125

Performance Scorecard 127

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CoGTA Cooperative Governance and Traditional Affairs
DBSA Development Bank of Southern Africa
DEA Department of Environmental Affairs
DWA Department of Water Affairs
EIB European Investment Bank
TCTA Trans-Caledon Tunnel Authority
UW Umgeni Water
ADWF Average Dry Weather Flow
BWS Bulk Water Supply
Capex Capital expenditure
CPI Consumer Price Index
DMTN Domestic Medium Term Note
MMTS Mooi-Mgeni Transfer Scheme
NPV Net Present Value
PPI Production or Producer Price Index
WDM Water Demand Management
WRM Water Resources Management
WW Water Works
WWW Wastewater Works
c/kl Cents per kilolitre
Ml Million litres
m3 Cubic metre
m3/a Cubic metres per annum
m3/s Cubic metres per second

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This five-year business plan complies with the prescribed requirements and guidelines of the Department
of Water Affairs and National Treasury. The inputs, activities and outputs targeted in the business plan will
ensure that the following outcomes are progressively realised:

1. Product (Bulk Water and Wastewater) Quality

2. Customer Satisfaction
3. Operational Resiliency
4. Operational Optimisation
5. Infrastructure Stability
6. Stakeholder Understanding and Support
7. Financial Viability
8. Water Resources Adequacy
9. Community and Environmental Sustainability
10. Leadership and Employee Development

Taking cognisance of customer water demands and water backlogs, Umgeni Water has committed three
billion rand for bulk water supply infrastructure development, the bulk of which will be spent on:
 Rural development: R 1,091 million,
 Current and future growth (expansion and augmentation): R 992 million,
 Upgrading and rehabilitation of infrastructure: R 756 million,
 Information and communication technology: R60 million

The capital expenditure programme would thus ensure the organisation’s infrastructure is stable, provides
reliable bulk water supply to customers and supports community sustainability.

Through the rural development projects, Umgeni Water will deepen penetration in rural areas increasing its
bulk supply coverage of wards from 228, which represents 61% of the total wards in supply area, to 259,
which represents 69% of the total wards in supply area.

The financial plan will ensure that Umgeni Water contributes to an affordable tariff, maintains optimal debt
levels, improves return on assets and enhances it shareholder value.

Water resources adequacy is paramount to Umgeni Water providing sustainable water services, and in this
regard, Umgeni Water will lobby the Department of Water Affairs for adequate water resources to be timely
planned and developed. In this cycle, this includes the construction of Spring Grove Dam to supplement
the Mgeni system, Smithfield Dam on the Mkomazi River and the raising of Hazelmere Dam on the Mdloti
River. The cost of this infrastructure will be significant, notably the Spring Grove Dam, which will increase
the cost of raw water purchases by 300% in 2011/12.

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Umgeni Water will further continue to manage its existing resource supplies with the utmost care, while
investigating alternative sources, including reuse and desalination, to assist with meeting the long-term
water requirements of the region.

Plans that promote water conservation and demand management as well as environmental and community
sustainability will be further developed and implemented. Research on climate change risks and
development of adaptation strategies will continue.

Umgeni Water will continue to provide ongoing support to municipalities, in particular, as an implementing
agent for the Greater Mbizana Regional Bulk Water Supply Scheme, as well as institutional support and
development for water services in respect of the OR Tambo District Municipality.

Leadership and employee development will be ensured through plans that deepen implementation of the
human resources strategy, notably through learnerships, graduate development and employee and
leadership development plans and programmes.

The Board of Umgeni Water will continue to strengthen corporate governance and risk management and
ensure monitoring in terms of the fraud prevention plan.

Umgeni Water will continue to collaborate with municipalities, such that there are sequential and reciprocal
funding streams between the Municipal Infrastructure Grant and Umgeni Water’s Capital Expenditure
programme, as well as, strengthen the collaboration efforts with the Department of Water Affairs to ensure
that the Bulk Infrastructure Grant targets vulnerable local municipalities, and leverages Umgeni Water’s
Capital Expenditure Programme.

Through this business plan, Umgeni Water will effectively contribute to the realisation of the twelve
outcomes of government.

MZIMKULU MSIWA
CHIEF EXECUTIVE
30 APRIL 2010

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-7-
 Page

Strategy 7
Operating Environment 9
Response to key Strategic Issues by the Chairperson of the Board 13
Strategy Map and Outcomes 16
Mission, Strategic Intent, Vision and Values 19

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SHAREHOLDER’S EXPECTATIONS

The Shareholder’s Expectations are implicitly and explicitly reflected in the following pronouncements:

President Jacob Zuma, made his State of the Nation Address on 11th February 2010, where he affirmed
government’s commitment to five priorities:
 education,
 health,
 rural development and land reform,
 creating decent work, and
 fighting crime.
Sustainable water provision to all remains central to the achievement of government’s development
priorities. Furthermore, in an effort to address the country’s water scarcity situation, the president
indicated that measures will be put in place to reduce water loss by half by 2014. The president further
announced a new way of doing things in government, where work will be measured by outcomes,
developed through the national performance monitoring and evaluation system.

The Minister for Performance Monitoring and Evaluation, Collins Chabane, in a statement on
12th February 2010, announced the twelve Performance Outcomes of Government (i) mentioned by the
President in his State of the Nation Address:
1. “Quality of our basic education”
2. “A long and healthy life for all South Africans”
3. “All people in South Africa are, and feel safe”
4. “Decent employment through inclusive economic growth”
5. “Skilled and capable workforce to support an inclusive growth plan”
6. “An efficient, competitive and responsive infrastructure network”
7. “Vibrant, equitable, sustainable rural communities, contributing towards food security for all”
8. “Sustainable Human Settlements and improved quality of household life”
9. “Responsive, accountable, effective and efficient local government system”
10. “Protect and enhance our environmental assets and natural resources”
11. “Create a better South Africa, a better Africa and a better world”
12. “An efficient, effective and development oriented public service and an empowered, fair and
inclusive citizenship”

The Premier of KwaZulu-Natal Dr Zweli Mkhize in his State of the Province Address to the KwaZulu-Natal
Legislature on 24th February 2010 emphasised that access to basic services (which includes water
services), was vital to government meeting its outcomes.

(i) nine approved outcomes

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ECONOMIC

The National Budget was presented by Finance Minister Pravin Gordhan on 17th February 2010. The
budget responds to South Africa’s economic crisis, where the country is emerging out of its first recession
in seventeen years during which approximately 900,000 people lost their jobs. Aspects of the national
budget include:

 Relatively low economic growth of 2.3 % is projected for 2010, increasing to 3.6 % by 2012;
 Inflation had fallen over the past year and should average 6 % during 2010/11;
 A budget deficit of 7.3 % is projected for 2009/10, 6.2 % in 2010/11 and 4.1 % by 2012/13; and
 Total public sector infrastructure investment of R 845 billion is planned over the next three years.

In the Provincial Budget presented to the KwaZulu-Natal Legislature on 4th March 2010, the MEC for
Finance, Ms Ina Cronjé indicated that KwaZulu-Natal was forecasting an increase in gross domestic
product of between 2.2% and 2.7% in 2010, Inflation is expected to be within the 6.5% to 7% range, and
access to potable water in KwaZulu-Natal has improved steadily over the years, but backlogs remained.

In the Monetary Policy Committee Statement of 25th March 2010, the Governor of the Reserve Bank,
Ms Gill Marcus stated that South Africa’s Actual inflation had dropped to 5.7 % at the end February 2010
and the outlook was an average inflation of 5.3% in 2010, reducing to a low of 4.9% in the 3rd quarter of
2010 and averaging 5.4% in 2011. Despite reduced uncertainty associated with electricity price increase,
electricity and other administered price increases remain a threat to the inflation outlook.

SOCIAL-ENVIRONMENTAL

The Minister of Water and Environmental Affairs, Ms Buyelwa Sonjica, in the Water Affairs Strategic Plan
2010/11 – 2012/13, stated commitment to support government’s development priorities through
ensuring all have access to potable water. The priorities of the Department of Water Affairs include:
Contributing to economic growth and social development, through:
 Ensuring the provision of regional bulk water to support water services and creation of
decent employment through regional bulk programme;
 Reconciliation of water requirements and water availability, through implementation of
desalination and recycling strategies; and
 Ensuring effective water pricing and infrastructure funding.
Contribution to rural development, land reform and food security, through:
 Creating sustainable rural livelihoods, through implementation of the rain water harvesting
programme and creating jobs and establishing SMMEs through Working for Water
programme.

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Ensuring sustainable and equitable water resources management, through:
 Improving equity in water allocation and ensuring sustainable water use, through
improving water use efficiency;
 Improving equity in water services and management, thorough amendment of water
legislation; and
 Protection and improvement of water quality.
Effective support to local government, through:
 Interventions in support of local government and supporting municipalities in
implementing water conservation and demand management programmes.

The Minister of Water and Environmental Affairs, Ms Buyelwa Sonjica, outlined the strategic objectives in
the Environmental Affairs Strategic Plan 2010/11 – 2012/13, including:
 Protecting, conserving and enhancing environmental, natural and heritage assets and resources,
 Proactive planning, management and prevention of pollution and environmental degradation,
 Contributing to sustainable development, livelihoods, green and inclusive economic growth, and
 Responding and adapting to climate change impacts, which would otherwise threaten South
Africa’s ability to realise the Millennium Development Goals.

LOCAL GOVERNMENT

The Ministry of Cooperative Governance and Traditional Affairs (CoGTA, 2009), in its most recent study of
challenges facing local government, has categorised local municipalities in terms of their vulnerability and
developed a turnaround a strategy to address the challenges.

In the Umgeni Water supply area, nine local municipalities have been targeted for turnaround by CoGTA
because of their vulnerability:

 In iLembe DM, the following local municipalities have been classified as vulnerable:
 Ndwedwe and Maphumulo

 In uMgungundlovu DM, the following local municipality has been classified as vulnerable:
 Impendle

 In Ugu DM, the following local municipalities have been classified as vulnerable:
 Vulamehlo, uMzumbe, uMuziwabantu, and eZinqolweni

 In Sisonke DM the following local municipalities have been classified as vulnerable:

 Ingwe and uMzimkhulu.

The water backlog status of the above local municipalities according to Statistics South Africa, Community
Survey 2007, is shown in Table 1.

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Table 1. Water backlog status of local municipalities (Statistics SA, 2007) that have been categorised as
vulnerable by CoGTA.

District Municipality Local Municipality Households 2007 River/stream as water source (%)
Ndwedwe LM 26 408 42.8
iLembe DM
Maphumulo LM 19 934 61.2
uMgungundlovu DM Impendle LM 7 338 4.1
Vulamehlo LM 12 745 34.3
uMzumbe LM 40 579 42.0
Ugu DM
uMuziwabantu LM 20 313 24.4
eZinqoleni LM 10 952 10.6
Ingwe LM 22 289 13.6
Sisonke DM
uMzimkhulu LM 43 545 54.6

The information in Table 1 indicates that, Impendle LM, eZinqoleni LM and Ingwe LM are less vulnerable
from a water backlog perspective.

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Cognisant of the shareholder’s expectations as implicitly and explicitly pronounced in the following
statements and publications:
 The State of the Nation Address by President Jacob Zuma on 11th February 2010,
 The State of the Province Address by KwaZulu-Natal Premier Zweli Mkhize on 24th February 2010,
 The Performance Outcomes of Government mentioned by the President in his State of the Nation
Address and outlined by Collins Chabane, the Minister for Performance Monitoring and Evaluation,
on 12th February 2010,
 The Department of Water Affairs Strategic Plan 2010/11 to 2012/13, prefaced by the Minister of
Water and Environmental Affairs Ms Buyelwa Sonjica,
 The Department of Environmental Affairs Strategic Plan 2010/11 to 2012/13, prefaced by the
Minister of Water and Environmental Affairs Ms Buyelwa Sonjica,
 The National Budget Speech by Finance Minister Pravin Gordhan on 17th February 2010,
 The KwaZulu-Natal Budget address by the MEC for Finance Ms Ina Cronjé on 4th March 2010,
 The Statement of the Monetary Policy Committee of 25th March 2010, made by the Governor of the
Reserve Bank Ms Gill Marcus,
 The State of Local Government in South Africa and the Local Government Turnaround Strategy, by
the Ministry of Cooperative Governance and Traditional Affairs, 2009,
 The 2007 Statistics South Africa, Community Survey for local municipalities,

Umgeni Water has reviewed its strategy and concluded that no major changes are needed to the existing
strategy. However, several key focus areas, as outlined in the section that follows, have been identified to
be addressed in this business plan.

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 Key focus areas to be addressed by Umgeni Water
in this business plan:

 Further increase the coverage of Umgeni Water’s bulk water services, setting
specific ward coverage targets per local municipality to be achieved
progressively over the five year period, notably for the rural wards where
backlogs continue to persist.

 Continue to work together with:

 Statutory stakeholders: National, Provincial and Local Government,
 Contracted stakeholders: Investors, Organised Labour, Employees,
Suppliers and Customers, and
 Non-Contracted stakeholders: Civil Society and Business Formations,
toward coordinated and effective bulk water services delivery in Umgeni
Water’s gazetted area of supply: bounded by the uThukela River in the North,
the Mtamvuna River in the South, Indian Ocean in the East and Drakensberg
Mountains in the West.

 Optimise the timing and sequencing of the implementation of Umgeni Water’s

bulk infrastructure projects, to synchronise with the implementation of the
reticulation infrastructure provided by local municipalities to end users and
communities.

 Collaborate with municipalities, such that there are sequential and reciprocal
funding streams between the Municipal Infrastructure Grant and Umgeni
Water’s Capital Expenditure Programme.

 Collaborate with the Department of Water Affairs to ensure that the Bulk
Infrastructure Grant targets vulnerable local municipalities and leverages
Umgeni Water’s Capital Expenditure Programme.

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  Lobby the Department of Water Affairs to invest in water resources
infrastructure that supports the water for growth and development strategy
and rural development initiatives, such as ‘One Home, One Garden’.

 Support the activities of the Departments of Water Affairs and Environmental

Affairs, as well as the KwaZulu-Natal Department of Agriculture,
Environmental Affairs and Rural Development in targeted environmental and
community sustainability initiatives.

 Deepen our strategic intent to support local government.

 Continue to ensure financial viability of Umgeni Water.

 Continue to promote the objectives of broad-based black economic

empowerment.

 Ensure that there is employee and leadership development at Umgeni Water.

 Furthermore, the Board will continue to uphold the highest standards of

corporate governance for Umgeni Water.

This five year business plan maps out how the organisation intends to deliver on its strategy.

MR ANDILE MAHLALUTYE
CHAIRPERSON OF THE BOARD OF UMGENI WATER

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The organisation’s strategy is indicated in the following strategy map:

How our strategies add value

To provide effective and affordable bulk water,

bulk sanitation and related solutions to local
government in accelerating the water sector’s
national developmental agenda

Customer and Growth

Exceed Manage Growth /
Customer Stakeholder Increase
Expectations Relations Customer Base

Financial
Contribute to an Maintain an Improve Return Enhance
Affordable Optimal on Shareholder
Tariff Debt Level Assets Value

Developmental and Environmental

Contribute to National Conserve Limited
Development Agenda & Natural Resources
Reduction of Backlogs

Organisational Learning and Growth

Maintain Ensure Ensure
Strategic Functional Operational
Effectiveness Excellence Competence

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As indicated in the strategy map, the organisation has twelve strategic objectives for
its four identified perspectives.

1. Exceed Customer Expectations

2. Growth / Increase Customer Base
3. Manage Stakeholder Relations

4. Contribute to an Affordable Tariff

5. Maintain an Optimal Debt Level
6. Improve Return on Assets
7. Enhance Shareholder Value

8. Conserve Limited Natural Resources

9. Contribute to National Developmental Agenda

10. Maintain Strategic Effectiveness

11. Ensure Functional Excellence
12. Ensure Operational Competence

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Umgeni Water’s strategic objectives target ten outcomes:

1. Product Quality (Water and Wastewater Quality)

2. Customer Satisfaction

3. Operational Resiliency

4. Operational Optimisation

5. Infrastructure Stability

6. Stakeholder Understanding and Support

7. Financial Viability

8. Water Resources Adequacy

9. Community and Environmental Sustainability

10. Leadership and Employee Development

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The organisation’s Mission, Strategic Intent, Vision and Values as stated below continue to provide a clear
framework for developing the organisation’s business plan.

The organisation’s business, as articulated in its mission, is the provision of water and sanitation services
to local government.

“To provide effective and affordable bulk water, bulk sanitation and related solutions to local government
in accelerating the water sector’s national developmental agenda”

The organisation wants to be recognised as a strategic and sustainable partner of municipalities, creating
distinct shareholder value through providing bulk water and sanitation services as a catalyst for local
economic development and supporting government’s developmental agenda.

“A key partner in enabling local government to deliver effective water services”

The organisation’s long term aspiration is to become the first-choice water utility in the developing world
and to leave a positive legacy in the areas it serves.

“To be The Number One Water Utility in the Developing World”

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Six core values underpin the organisation’s business.

Partnering with municipalities to proactively identify and provide integrated sustainable solutions to
enhance their capacity to deliver in accordance with their mandates.

We commit ourselves to the highest ethical standards by dealing with all internal and external stakeholders
in an honest and transparent manner in order to engender trust. We appreciate the same integrity from
our customers, suppliers, partners and other stakeholders.

We deliver sustainable and appropriate water and sanitation solutions that improve the quality of life and
contribute to the human development agenda.

We value and respect all people equally.

We are committed to protecting our diminishing natural resources and reducing pollution in all areas of our
involvement.

We value the use of innovation, knowledge and intellectual capital, from our staff, customers, strategic
partners and stakeholders, to enhance our delivery of water and sanitation services.

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 Page

Five Year Business Plan 21

1 Introduction 23
2 Policy Statement 25
3 Directives by the Minister 27
4 Participation in Companies 29
5 Water Resources 31
6 Bulk Potable Water Supply Plan 43
7 Bulk Wastewater Treatment and Disposal 53
8 Other Activities 55
9 Human Resource Development Plan 61
10 Environmental Management Plan 69
11 Water Conservation and Demand Management Plan 73
12 Financial and Capital Expenditure Plan 75
13 Bank Accounts 119
14 Risk Management Plan 121
15 Fraud Prevention Plan 123
16 Other KPIs 125

Performance Scorecard 127

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1.1 Introduction, Establishment and Governance

Umgeni Water was established in June 1974 to supply bulk treated water to municipalities in its designated
operational area. Over the years the organisation has grown into the largest bulk water supplier in
KwaZulu-Natal and has an operational area of 21,155 square kilometres. Umgeni Water’s gazetted area
of supply is bounded by the uThukela River in the North, the Mtamvuna River in the South, the Indian
Ocean in the East and Drakensberg Mountains in the West.

Umgeni Water derives its revenue from the sale of bulk potable water to its customers, which comprise six
Water Services Authorities in KwaZulu-Natal, namely, eThekwini Metropolitan Municipality, iLembe District
Municipality, Sisonke District Municipality, uMgungundlovu District Municipality, Ugu District Municipality
and Msunduzi Local Municipality. A total of 416 million cubic metres of potable water was supplied to
customers in 2008/9.

Umgeni Water operates in accordance with the Water Services Act (Act 108 of 1997) and the Public
Finance Management Act (Act 1 of 1999), amongst others, and its Executive Authority is the Minister of
Water and Environmental Affairs.

The organisation is governed by a Board comprising fifteen members (fourteen non-executives and one
executive, namely, the Chief Executive).

The Board has established three committees to assist it in discharging its responsibilities:
 Audit and Risk committee,
 Capital Expenditure, Procurement and Infrastructure committee, and
 Human Resources and Remuneration Committee.

The Executive Committee comprises the Chief Executive, General Manager Operations, General Manager
Finance, General Manager Engineering and Scientific Services and General Manager Corporate Services.

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- 24 -
There have been no significant changes in Umgeni Water’s policy statement.

- 25 -
- 26 -
In February 2010, the Minister of Water and Environmental Affairs requested Umgeni Water to assist with
the turnaround strategy for the water services function in the OR Tambo District Municipality, in Eastern
Cape.

- 27 -
- 28 -
4.1 Subsidiaries

Umgeni Water has:

 two subsidiaries in which it has 100% shareholding, namely Umgeni Water Services (Pty) Ltd
and Msinsi Holdings (Pty) Ltd, and
 an 18.5 % shareholding investment in Durban Water Recycling (Pty) Ltd.

- 29 -
- 30 -
5.1 Water Availability and Use Rights

Umgeni Water sources water primarily from twelve impoundments on three major water resource systems
namely, the Mgeni System (Mooi and Mgeni rivers), the North Coast System (Mdloti River) and the South
Coast System (Nungwane, Mzimayi and Mzinto rivers). Table 5-1 shows the capacities of these resources.

The Mgeni System comprises four dams on the Mgeni River, namely, Midmar Dam, Albert Falls Dam, Nagle
Dam and Inanda Dam. It is augmented by the Mooi-Mgeni Transfer Scheme (Phase 1) which consists of
the Mearns Weir on the Mooi River, the Mearns Pumping Station with a maximum transfer capacity of
3.2 cubic metres per second and a raw water transfer pipeline that discharges into the Mpofana Stream,
which flows into the Lions River and then into the Mgeni River upstream of Midmar Dam. The system
currently has a stochastic yield (99 %) of 334.5 million cubic metres per annum at Inanda Dam and is the
water resource for the greater Durban - Pietermaritzburg region and a primary source for the
uMgungundlovu District Municipality. This system also contributes to the water supply of the Upper
(Amanzimtoti to Umkomaas) and Middle (Umkomaas to Scottburgh) South Coast regions.

The North Coast System comprises the Hazelmere Dam on the Mdloti River, which serves as a dual-purpose
dam, providing water for both potable and irrigation requirements. The dam has a stochastic yield (98 %) of
19.0 million cubic metres per annum available for treatment and potable usage, provided the reserve
allocation is not imposed. This system serves the coastal strip and adjacent hinterland, from Verulam in
the south to the town of KwaDukuza in the north. Since July 2007 Umgeni Water has also been abstracting
water from the Mvoti River as part of managing the Mvoti Water Works and the supply of bulk potable water
to the town of KwaDukuza on behalf of the iLembe District Municipality.

Table 5-1: Water Resource Systems

System Catchment Impoundment Owner Manager Gross Capacity in million m3
Total for Umgeni Water Systems 822
Mgeni Mooi Mearns Weir DWA UW 5.1
Mgeni Midmar Dam DWA UW 235.4
Mgeni Albert Falls Dam DWA UW 289.1
Mgeni Nagle Dam UW UW 23.2
Mgeni Inanda Dam DWA UW 241.7
Mlazi Shongweni Dam# UW UW 3.8
Msunduzi, Mgeni Henley Dam# UW UW 1.5
Total for Central System 799.8
North Coast Mdloti Hazelmere Dam DWA UW 17.9
Total for North Coast System 17.9
South Coast Nungwane, Lovu Nungwane Dam UW UW 2.2
Mzimayi E J Smith Dam Ugu DM UW 1.0
Mzinto Umzinto Dam Ugu DM UW 0.5
Total for South Coast System 3.7
Other Ixopo Ixopo Dam UW UW 0.6
# not utilised for water supply

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The South Coast System comprises a number of interlinked operational entities. The Upper South Coast
System primarily supports the southern eThekwini Metropolitan area from Amanzimtoti in the north to
Umkomaas in the south. Water resources for this area are obtained from the Nungwane Dam on the
Nungwane River (a tributary to the Lovu River), and is substantially augmented by the Mgeni system via the
South Coast Augmentation Pipeline and the South Coast Pipeline.

The Middle South Coast System comprises the coastal strip from Umkomaas in the north to Hibberdene in
the south. This system further supports the southern-most extremities of eThekwini Metro and the northern
part of Ugu District Municipality. To the south, a sand abstraction system on the Mtwalume River serves
the Mtwalume Water Works. The central portion of this area is partly supplied from the Umzinto Water
Works, which derives its raw water from the Umzinto and EJ Smith dams on the Mzinto and Mzimayi rivers
respectively. The upper portion, as well as a section of the central portion of this region is supported with
potable water from the Mgeni system, conveyed to the region via the South Coast Pipeline.

Registered abstractions are shown in Table 5-2.

Table 5-2: Registered Abstractions 2009/10

System Abstraction Point 103 m3/d
Midmar Dam
Mgeni Nagle Dam (Albert Falls Dam) 1,085
Inanda Dam
Hazelmere Dam 45
North Coast Mdloti River (Ogunjini) 1.4
Mvoti River 16
Nungwane Dam 26.5
E J Smith Dam
12.0
South Coast Umzinto Dam
Mkomazi River Well points 7
Mtwalume River Well points 7
Other Ixopo Dam 1.80

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5.2 Raw Water Quality

Umgeni Water monitors the quality of the raw water it abstracts for water treatment purposes. Water
quality problems associated with these supplies include eutrophication, high suspended solids
concentrations, faecal contamination with associated pathogen risks, and chemical contamination,
particularly elevated concentrations of iron and manganese.

Table 5-3 shows the water quality problems per raw water source. The Department of Water Affairs is kept
appraised of the quality and risks associated with the source water and needs to more rigorously regulate
catchment practices and waste discharges, to continue to ensure the long term sustainability of these
resources.

Table 5-3: Water Quality of Raw Water Sources

System Catchment Impoundment Raw Water Quality Problem Water Quality Status
Mooi, Mgeni Mearns Weir; High algal counts associated with high nutrient Good
Mgeni Midmar Dam concentrations, and iron and manganese problems
have been experienced on occasion.
Mgeni Albert Falls Dam; High algal counts associated with high nutrient Good
Nagle Dam concentrations and high turbidity/suspended solids.
Mgeni Inanda Dam Elevated algal counts, associated with high nutrient Moderate
concentrations, chemical contamination and high
suspended solids.
Mdloti Hazelmere Dam High suspended solids, chemical contamination, Moderate
North Coast
eutrophication and faecal contamination.
Nungwane, Nungwane Dam High iron and manganese concentrations, high algal Moderate
Lovu counts and aquatic weed infestation, and faecal
contamination.
Mzimayi E J Smith Dam Faecal contamination, elevated algal counts, Poor
chemical contamination and high suspended solids
South Coast
concentrations.
Mzinto Umzinto Dam Chemical contamination, faecal contamination, and Poor
elevated algal counts and weed infestation.
Mtwalume River abstraction Faecal and chemical contamination as well as high Moderate
suspended solids concentrations.
Xhobo Ixopo Dam Elevated levels of iron and manganese and high Moderate
Other
algal counts.

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5.3 Water Demands, Planned Developments and Shortfalls

Umgeni Water’s bulk water sales growth has recently slowed, but remains positive, and is expected to
continue with a flatter but positive growth trend in the short term. With the economy having emerged from
the recent recession, there are expectations of continued housing and commercial growth leading up to,
and beyond, the 2010 World Cup event. Furthermore, the long-term water sales growth trend is not
expected to change due to the relative stability of the South African economy.

Umgeni Water, as a bulk water service provider, requires sustainable and cost-effective water resources to
meet its customer’s demands. In view of the significant lead times required to plan, design, construct and
commission major water resource development projects, future medium to long-term water resources from
the Department of Water Affairs (DWA), as the custodian of the country’s water resources, have to be
secured in a timely manner. DWA has to date undertaken regional water resource development
investigations within Umgeni Water’s area of operation in close collaboration with Umgeni Water and its
major customers. A number of these studies were co-funded by Umgeni Water. The status of water
demand within Umgeni Water’s area of supply, however, requires several of these water resource
investigations to be completed as a matter of urgency. Failing which, customers could be faced with severe
water shortages in coming years. A summary of resource needs is shown in Table 5-4 and described
further in the sections that follow.

Umgeni Water will continue to manage its existing resource supplies with the utmost diligence. In addition,
Umgeni Water is investigating alternative sources to assist with meeting the long-term water requirements
of the region, including:
 Completion of a pre-feasibility investigation of a large-scale desalination plant for the
eThekwini region, and initiation of a follow-up detailed feasibility investigation,
 Continuation of the reuse investigation at the Darvill Wastewater Works, and
 Involvement in eThekwini Metro’s reuse investigation with the intention of combining the two
reuse projects into one regional initiative.
Further initiatives are described in the water conservation and demand management plan further in this
Business Plan.

Table 5-4: Summary of Water Resource/Supply needs, timing and estimated cost
Scheme Date Timing Est. Cost Responsibility
Needed (2009)
Phase 2 Mooi-Mgeni Transfer Scheme: Spring Grove Dam 2007 Behind Schedule R 1,700 million DWA
Phase 1 Mkomazi Water Project: Smithfield Dam 2010 Behind Schedule R 4,500 million DWA
North Coast Supply System: Raising of Hazelmere Dam 2012 Behind Schedule R 100 million DWA
Mvutshane Dam 2012 On Schedule R 136 million UW
Mhlabatshane Dam 2010 Behind Schedule R195 million UW
Sikoto Dam 2010 Behind Schedule R 95 million UW
Lower Mvoti Regional Scheme: Welverdient Dam 2020 Behind Schedule R 1,000 million DWA
Lower Mkomazi Bulk Water Supply Scheme 2019 On Schedule R 500 million UW
Upper Mvoti Regional Scheme: Mvoti-Poort Dam 2025 On Schedule R 500 million DWA
Upper Mzimkulu Regional Scheme: Mzimkulu Dam 2030 On Schedule R1,000 million DWA

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5.3.1 Mgeni System: Planned Developments and Shortfalls

Phase 2 Mooi-Mgeni Transfer Scheme: Spring Grove Dam

The Mooi-Mgeni River Transfer Scheme (MMTS) was intended for phased implementation in accordance
with growth needs. Phase 1 of this scheme (MMTS-1) was commissioned in 2003 and comprised the new
Mearns Weir on the Mooi River, the raising of Midmar Dam, the provision of a standby pump for the existing
Mearn’s Pumping Station and the registration of a servitude of aqueduct along sections of the Mpofana,
Lions and Mgeni rivers.

Phase 2 of this scheme (MMTS-2) comprises the proposed Spring Grove Dam (full supply capacity of
141.6 million cubic metres) on the Mooi River, a new pumping station at Spring Grove Dam and a new
pipeline to transfer water directly into the Mpofana River, which is within the Mgeni catchment. The overall
transfer capacity of the MMTS will then be increased to its ultimate rate of 4.5 cubic metres per second.

Over the past few years water demands from the Mgeni System have continued to grow, with this past
financial year showing a decreased growth rate from the previous year (refer to Figure 5-1). The current
financial year is expected to show a further decline in growth rate with an increase in the years thereafter.
Figure 5-1 indicates that demands have already exceeded the 99% assurance of supply level that will be
achieved with the commissioning of MMTS-2, and even further augmentation of the Mgeni System is
already needed. At the end of 2007 the Minister of Water and Environmental Affairs instructed the TCTA to
implement the MMTS-2 project as quickly as possible in order to augment the existing system and reduce
the risk of possible future restrictions. There is one appeal against the environmental Record of Decision,
which is currently being resolved. At this stage construction is scheduled to be completed in September
2012 with the first water delivered in April 2013.

Mkomazi Water Project: Smithfield Dam

It is evident from current and projected water demand trends (refer to Figure 5-1), that the planning of the
next major water resource development, the Mkomazi Water Project, to support the Mgeni system urgently
needs to be brought to a stage of implementation. Without this augmentation of the Mgeni system, Umgeni
Water will be unable to ensure that future water demand can be met timeously and at the appropriate level
of assurance. Therefore, there is now a need to move beyond the findings of the 1998 Pre-Feasibility study
of this scheme and initiate a detailed feasibility level investigation into this augmentation option.

DWA is currently in the process of compiling a terms of reference in this regard to make the necessary
appointments to undertake the investigation. Umgeni Water has undertaken to complete concurrent
detailed feasibility level investigations into the associated bulk water transfer infrastructure. It is envisaged
that these investigations will proceed simultaneously and in an integrated manner.

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Figure 5-1: Long-term demand projection of the Mgeni system

Figure 5-2: Long-term demand projection for the Hazelmere (Mdloti) system

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 Sikoto Dam

Communities within the Ozwathini area are currently supplied with water from a number of boreholes that
are proving to be unsustainable. The long-term solution that has been proposed by Umgeni Water for this
region is to extend the existing Wartburg pipeline to also serve this region. However, current levels of water
demand in the area do no yet warrant the implementation of this project, and a medium to long-term
solution has been developed.

The proposed Ozwathini Bulk Water Supply Scheme project is located in the uMgungundlovu and iLembe
District Municipalities. The scheme will consist of a 5.5 million cubic metre dam on the Sikoto River (a
tributary of the Mvoti River), a raw water pump station and rising main to a 6,000 cubic metre per day water
works and a further pump station and rising main to supply potable water to the existing Nondobula
Reservoir. Potable water can be reticulated through existing networks to the various communities within
Ozwathini.

5.3.2 North Coast System: Planned Developments and Shortfalls

Water demand in the North Coast region (the coastal strip between Veralum, to the north of Durban, and
the town of KwaDukuza) has risen over the past few years and is expected to continue to grow in the future
(refer to Figure 5-2). The drop in demand for the 2008/09 financial year was as a result of a load shift from
the Hazelmere Water Works onto the Durban Heights Water Works, and not due to a drop in demand in the
North Coast area.

DWA recently commissioned the KwaZulu-Natal Coastal Metropolitan Areas Water Reconciliation Strategy
Study, which amongst other things, considered strategies for augmenting the North Coast water supplies.
The augmentation options included:
 Raising of Hazelmere Dam,
 Implementing the Lower Thukela Bulk Water Supply Scheme (BWSS), and
 Building new dams on the Mvoti River (e.g. the Welverdient dam or the iSithundu dam).

Raising of Hazelmere Dam

Raising the full supply level of Hazelmere Dam by seven metres (85.98 masl to 93.00 masl) to increase the
firm yield (98 % assurance) of the resource to approximately 27.3 million m3 per annum, was found to be
the most cost effective and quickest option of augmenting the water supply to the North Coast region.

The environmental Record of Decision for this project has recently been issued. There is an urgent need for
DWA to initiate the necessary processes to ensure the full supply level (FSL) of Hazelmere Dam is raised by
2012 when the upgrade to the associated bulk water supply infrastructure is scheduled to be completed by
Umgeni Water.

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 Lower Thukela Bulk Water Scheme

Following the raising of the Hazelmere Dam, the Lower Thukela BWSS is the most practical scheme to
implement to supply additional water to the area. This scheme would be required to augment the water
supplies of the Mdloti System, as the raising of Hazelmere Dam on its own would not provide sufficient
resources to supply this area. The Lower Thukela BWSS will draw water from the Thukela River and will not
require raw water storage. Umgeni Water is in the process of conducting a detailed feasibility investigation
for this scheme.

Mvoti River: Imvutshane Dam

Communities in the largely rural areas inland from the North Coast region (areas bounded by the Thukela
and Mvoti rivers and extending from Greytown in the west to Maphumulo in the east) currently receive
water from boreholes or small stand-alone surface water supply schemes. Many communities in this area
receive a sub-RDP standard level of service.

Umgeni Water is currently implementing the Ngcebo Bulk Water Supply Scheme that draws water from the
Thukela River to supply potable water to some of these communities. Furthermore, Umgeni Water is in the
process of implementing Phase 1 of the Maphumulo Bulk Water Supply Scheme (BWSS) to supply the
communities of Maphumulo, Maqumbi and Ashville. This scheme will initially draw water directly from the
Imvutshane River, which is a tributary of the Hlambitwa River, which in turn is a tributary of the Mvoti River.
A detailed feasibility investigation of Phase 2 of this scheme has recently been concluded, which entails the
construction of a dam on the Imvutshane River to replace the run-of-river abstraction system. This will
increase the yield from the scheme and ensure a more sustainable supply. A possible later extension to
this scheme is to augment the Imvutshane Dam from the Hlambitwa River.

Upper Mvoti Regional Scheme: Mvoti-Poort Dam

In the long-term the intention is to consolidate the various schemes in the area as well as incorporate other
communities that fall outside of the supply areas. This can be achieved through the development of a
regional bulk water supply scheme that is able to meet the potable water needs of the region on a long-
term sustainable basis. This regional scheme will best be supported by a water resource development on
the upper Mvoti River. Investigations conducted in the past have shown that a small dam at the previously
identified Mvoti–Poort dam site would be a potential solution. Umgeni Water has therefore requested DWA
to undertake appropriate water resource investigations linked to developing a dam at the Mvoti-Poort site
or at another suitable site in its vicinity. It is envisaged that the water resource development and transfer
infrastructure development investigations will proceed in a concurrent and integrated manner.

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 Lower Mvoti Regional Scheme: Welverdient Scheme

DWA and Umgeni Water conducted numerous water resource and supply infrastructure investigations of
the lower Mvoti River catchment during the latter half of the 1990s. At the time, the proposed iSithundu
Dam (serving both irrigation and potable water demands) with a downstream abstraction works located
near the town of KwaDukuza was identified as being the preferred infrastructure development
configuration. However, a number of critical assumptions have since changed. Most significantly,
legislative changes governing national raw water pricing has led to the irrigation sector withdrawing from
the proposed scheme on affordability grounds. The implication is that storage options serving only the
potable water sector now need to be considered.

Umgeni Water has therefore requested DWA to urgently re-institute investigations to review the findings of
the previous investigations and develop detailed feasibility plans for the next phase of water resource
augmentation for the North Coast System – most likely to be the proposed Welverdient Dam option.
Umgeni Water will undertake concurrent detailed feasibility level investigations into the associated bulk
water transfer infrastructure. It is envisaged that both investigations will proceed simultaneously and in an
integrated manner.

5.3.3 South Coast System: Planned Developments and Shortfalls

The water resources that support the Middle South Coast area lack substantial storage capacity, making
them especially susceptible during periods of drought. While the infrastructure linkages between the
Umzinto, Mtwalume and Craigieburn water works’ were able to alleviate localised supply shortages during
short periods, they were not able to sustain supply over longer periods and water restrictions were often
required.

Several localised solutions were investigated, including an assessment by DWA of the feasibility of a low-
level weir on the Mtwalume River to improve abstractions at this point during low flow periods. These minor
water resource developments only solve the problem in the short-term. As with the North Coast area, the
Middle South Coast area is experiencing strong growth in water demand, driven by economic growth in the
region, and it is envisaged that a major water resource development and/or inter-basin transfers will be
required to provide a long-term solution to water scarcity in the area.

Lower Mkomazi Bulk Water Scheme

Umgeni Water has commissioned Phase 1 of its South Coast Pipeline that transfers potable water from the
Mgeni System to the Upper and Middle South Coast areas. It is recognised that the Mgeni System has
insufficient resources to support this region in the medium to long-term and that a local sustainable long-
term scheme needs to be developed to replace it. The Mkomazi River is best suited for this purpose.
Umgeni Water intends initiating a detailed feasibility investigation of the Lower Mkomazi Bulk Water Supply
scheme, which will abstract water from the lower reaches of the Mkomazi River for treatment to feed into
the South Coast Pipeline.

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The availability of a local sustainable source will then allow the extension of this pipeline (Phase 2) further
southwards to increase the area of supply and enable a linkage to other supply systems in the south. It is
unknown at this stage whether storage will be required. The initiation of this investigation can only proceed
once the results from the hydrological study that forms part of DWA’s Mkomazi Water Project Detailed
Feasibility Study are available.

Upper Mzimkulu Regional Scheme: Mzimkulu Dam

The hinterland immediately adjacent to the coastal strip along the South Coast contains largely scattered
rural communities residing at elevations of up to 800 m above sea level. It will not be possible to supply
these inland areas from the South Coast Pipeline and they will therefore have to be served by other water
resources developments.

As a result, Umgeni Water intends to investigate the feasibility of a regional bulk water supply scheme that
utilises the Mzimkulu River as a source of raw water, to meet the water needs of significant portions of both
Sisonke and Ugu district municipalities on a long-term sustainable basis. The proposed Mzimkulu Regional
Scheme entails abstracting water from a dam on the upper Mzimkulu River, treating it at a water works in
the vicinity of Underberg and then conveying potable water under gravity along a south-easterly route
towards the coastline, supplying numerous rural communities along the way. Umgeni Water has, therefore,
requested that DWA undertake appropriate water resource investigations linked to developing a dam near
Underberg on the Mzimkulu River to support this proposed regional bulk supply scheme, and has
undertaken to conduct concurrent investigations into the bulk infrastructure transfer served from the dam
with DWA.

MBulwer Dam

As an interim solution for the inland Bulwer to Donnybrook area, Umgeni Water has, on behalf of Sisonke
District Municipality, completed a detailed feasibility investigation of the proposed Bulwer Dam on the
Luhane River, which is a tributary of the Mkomazi River. The bulk supply component of this scheme still
needs to be undertaken.

Mhlabatshane Dam

Umgeni Water is currently implementing a bulk water supply scheme as part of a larger regional scheme
development by Ugu District Municipality aimed at reducing water services backlogs in certain rural areas in
the uMzumbe and Hibiscus Coast Local Municipalities. This scheme is situated within the Lower South
Coast Sub-Region. Ugu District Municipality is responsible for the reticulation component of the scheme,
which in its entirety, is planned to serve an estimated 101,000 people (approximately 15,300 households)
of which about half are currently classified as having a water service backlog.

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The bulk component of the scheme will initially comprise of a dam on the Mhlabatshane River (a tributary of
the Mzumbe River), from where water will be pumped to a water works situated in close proximity to the
command reservoir. Potable water will then be supplied to Ugu District Municipality from the command
reservoir for reticulation through of an extensive gravity-fed network to the various communities in the area.
Some of the reticulation component currently exists as stand-alone schemes, with the remainder still to be
installed.

When water demands from this scheme exceed the firm yield of the dam, the intention is to develop the
second phase of the project. Water will be abstracted directly from the Mzimkhulu River, pumped to the
existing water works (which will need to be upgraded) and then fed into the reticulation system via the
command reservoir.

5.4 Management Arrangements

Umgeni Water operates the majority of the water resources infrastructure it uses on behalf of the
Department of Water Affairs (as per Table 5-1). This is currently undertaken without a signed agency
agreement. In 2009/10 the Department of Water Affairs indicated its intention to manage the operations
of its water resources infrastructure and will schedule this for 2011/12.

- 41 -
- 42 -
6.1 Potable Water Quantity Demand

Umgeni Water continues to develop water sales volume projections in consultation with its major
consumers. This is undertaken annually to enable Umgeni Water to project revenues and future capital
expenditure. Customer Bulk Supply Agreements require the Water Services Authorities to provide Umgeni
Water with projected demands at set intervals for each sales point, based on expected growth over the
contract period.

Short-Term Bulk Sales Forecast

The projected sales volumes are shown in Figure 6-1. In September 2008 the short-term bulk water sales
forecast for 2009/10 was estimated to be 1.237 million cubic metres per day. Following the recent
discussions with major customers and based on the latest economic and water sector development
information, this value has been revised downward to 1.158 million cubic metres per day (Figure 6-1). This
value is a consolidation of individual customer forecasts and is primarily shaped by the forecast provided by
Umgeni Water’s major customer, eThekwini Metro. This forecast represents a 2.67 % year-on-year increase
in growth, and is lower than the growth of 3.02 % that was achieved in the previous year.

This trend is expected to continue and, similarly, the short-term bulk water sales forecast for 2010/11 is
estimated to be 1.167 million cubic metres per day (Figure 6-1). This represents a 1.95 % year-on-year
increase in growth from 2009/10, which is slightly lower than the previous year, and is again primarily
determined by the forecast provided by eThekwini Metro.

Figure 6-1: Umgeni Water’s Historic and Projected Total Sales Volumes

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Short-Term Demand Drivers

The two major urban areas, the eThekwini and Msunduzi regions, currently account for approximately 92 %
of the water supplied by Umgeni Water. Consequently, they remain the main drivers of demand within
Umgeni Water’s operational area.

It is expected that substantial urban and peri-urban housing growth will continue to occur within the
eThekwini area, with a number of substantial developments already in various stages of implementation.
Coupled with this is the completion of the new King Shaka International airport in 2010 that is expected to
attract significant industrial and commercial development to the region. These factors will continue to drive
growth in water sales in the eThekwini region, particularly to the north of the city of Durban.

The eThekwini Metro is, however, currently implementing an intensive Water Demand Management
programme, which includes a multi-million rand pipe replacement project, in order to reduce its non-
revenue water. It anticipates that this programme will start having a marked impact on its water purchases
from Umgeni Water, starting in the 2009/10 financial year.

Hence, the anticipated growth in bulk water sales to eThekwini Metro (as presented by the Metro) for
2009/10 and 2010/11 is 1.8 % and 1.7 % respectively. This equates to 910,000 cubic metres per day in
2009/10 and 926,000 cubic metres per day in 2010/11 (refer to Figure 6-2). These forecast values are
lower than the 3.4 % actual growth achieved by eThekwini in 2008/09, and the 5.4 % achieved in
2007/08. Actual sales are currently below the revised forecast.

Figure 6-3 shows the sales trends for the Msunduzi Municipality and projections for 2009/10 and
2010/11. The average daily sales, at 30 June 2009, amounted to 155,000 cubic metres per day. This
represents a 1.9% reduction in sales from the 158,000 cubic metres per day sold in the previous year.
There is no obvious explanation for this reduction. Municipal officials indicated that no major leaks were
repaired during this period and there were no aggressive water loss initiatives undertaken. Average daily
sales to the Msunduzi Municipality are expected to grow to 158,000 cubic metres per day by 30 June 2010
and to 161,000 cubic metres per day by 30 June 2011. This growth is lower that what was previously
forecast, with actual sales currently below this revised forecast.

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 Figure 6-2: Total daily sales to eThekwini Metro

Figure 6-3: Total daily sales to Msunduzi Local Municipality

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Long-term Bulk Sales Forecast

The 30-year long term sales forecast for Umgeni Water’s entire supply area has been developed using long-
term growth rates agreed upon between Umgeni Water and its major customers. The base projection was
developed from the short-term forecasts and then extended at a compounded 1.5% growth rate until
2038/2039. This growth rate is considered acceptable for this long-term forecast as it closely matches the
forecast that was independently derived as part of the “Water Reconciliation Strategy Study for the
KwaZulu-Natal Coastal Metropolitan Areas” completed by the Department of Water Affairs, using a
population projection technique. Figure 6-4 depicts this long-term sales projection together with 1 % and
2 % growth rate scenarios for comparison.

The long-term sales projections, present an average view and fluctuations around the mean values can be
substantial, giving rise to localised infrastructure or water resources constraints. Sales would be monitored
on a regular basis to assess actual demand patterns that emerge after the 2010 Soccer World Cup. In the
interim, additional housing and other infrastructural developments are expected to occur which may
translate into significant and sustained water demand growth.

Figure 6-4: Long-term water sales projections, 2038/39

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6.2 Water Quality

Umgeni Water will continue to treat bulk water to ensure all customers are provided with potable water that
is suitable for lifetime consumption. Water quality management programmes will cover the entire reach of
the organisation’s operational system and will comprise:

Water Quality Monitoring Planning, Sampling and Analysis Programmes:

 Monitoring programmes are prepared or reviewed annually for sites in accordance with
legislative requirements, supplemented by requirements of customer bulk supply agreements
and any monitoring associated with water quality risks previously identified for the water works
system.
 Water quality sampling and analyses will be undertaken in accordance with Umgeni Water’s
accredited quality management systems.

Water Quality Auditing, Risk Assessment & Reporting:

 The SANS 241: 2006 Drinking Water Specification will be used for assessing compliance,
 Emergency response protocols will be reviewed and implemented as needed,
 Audit data, information and reports will be disseminated to stakeholders as per statutory
requirements and bulk supply agreements.

Water Safety and Security Plans:

 Risk assessments of the catchments, treatment and distribution systems will be undertaken,
 The risks identified will be prioritised and the effectiveness of control measures assessed.

Water Quality Management of proposed infrastructure:

 Water quality assessments will be undertaken for proposed infrastructure projects,
 These assessments, in partnership with DWA, will include water quality monitoring,
assessment of catchment hazards and risks, predictions of impounded quality to be treated,
and recommendations for design and operation of abstraction and outlet structures that would
optimise raw water quality.

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6.3 Bulk Supply Agreements with Major Customers

Umgeni Water has signed Bulk Supply Agreements with five of the six Water Service Authorities it supplies,
notably eThekwini Metropolitan Municipality, iLembe District Municipality, Ugu District Municipality,
uMgungundlovu District Municipality and Sisonke District Municipality. The agreement with the Msunduzi
Local Municipality is still awaiting council signature.

These agreements cover obligations of both Umgeni Water and its customers for the management of bulk
water in respect of planning and implementation of the quality and quantity of treated water, asset
management and metering. Umgeni Water’s levels of service will continue to be regulated and monitored
at a micro level at the water works where the final treated water is distributed, as well as at a macro level
where regional systems are integrated for water supply. Monitoring frameworks have been formulated in
response to the formal agreement and are incorporated into operating rules, schedules and plans.

Monthly operational liaison meetings with the municipalities will continue to ensure that customer
requirements are continuously met and responses to new requirements are provided. Executive level
appraisal of performance against the requirements of the Bulk Supply Agreement will continue to be held at
quarterly frequency with Water Services Authorities.

Umgeni Water will continue to operate and maintain the thirty-seven water schemes within the iLembe
District Municipality as an interim annexure agreement to the existing Bulk Water Supply Agreement. The
objective is to operate these small stand-alone local water schemes, whilst the regional schemes are being
developed and phased in. In the interim, the small schemes are subject to the same water quality and
quantity standards and this requires ongoing rehabilitation of the existing infrastructure.

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6.4 Bulk Water Supply Capacity, Condition and Development

Umgeni Water operates twelve water works in order to meet the present and forecasted customer water
demands. In addition, for bulk potable water transfer and distribution, the organisation manages
approximately 632 km of bulk pipelines and 118 km of tunnels. The organisation will continue to
implement its asset management plan to ensure assets perform at optimum levels and the costs of
required asset maintenance are quantified and budgeted for. Bulk water works supply capacity and
utilisation is shown in Table 6-1. Some of the smaller works are being operated above their design capacity
in response to customer demands. Upgrades and refurbishments in respect of bulk water works is
described in the section that follows and detailed in the capital expenditure plan in this business plan.

Table 6-1: Bulk Water Supply Capacity as at 31st March 2010

Design Capacity Average Daily Inflow
Waterworks Plant Utilisation
(cubic metres per day) (cubic metres per day)
Durban Heights 614,000 515,760 84%
Wiggins 350,000 255,500 73%
Midmar 250,000 215,000 86%
DV Harris 110,000 60,500 55%
Hazelmere 45,000 36,900 82%
Amanzimtoti 24,000 16,320 68%
Umzinto 12,000 10,560 88%
Mtwalume 7,500 8,175 109%
Ixopo 2,200 2,244 102%
Maphaphetwa 1,130 1,808 160%
Ogunjini 1,000 1,300 130%

6.4.1 Water Works Upgrades and Refurbishments

Current sales projections indicate that the demands will exceed the current capacity of Midmar Water
Works (WW) on a regular basis from 2011/12. An upgrade from 250,000 to 375,000 million cubic metres
per day is therefore planned. The timing and size of this upgrade will be matched to the implementation of
Phase 2 of the Mooi-Mgeni Transfer Scheme (Spring Grove Dam), by the Trans-Caledon Tunnel Authority
(TCTA).

Similarly, Umgeni Water intends upgrading the Hazelmere WW from 45,000 to 75,000 million cubic metres
per day in order to meet anticipated future demands. The timing and size of this upgrade has been
matched to the raising of the full supply level of Hazelmere Dam by the Department of Water Affairs.

With respect to the Durban Heights WW, a booster pump station has been built to maintain an acceptable
pressure within eThekwini Metro’s northern supply network. In addition, roof rehabilitation of a major
reservoir and filter and process upgrades are also scheduled.

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The current demand from the Wiggins System is due to continuous pumping into the eThekwini Ridge
Reservoir System and the new supply to the South Coast region. This increase has pushed the utilisation of
Wiggins WW closer to its capacity. The continuous pumping from the Wiggins WW Ridge has resulted in a
commensurate decrease in the utilisation of Durban Heights WW. eThekwini also draws potable water from
the South Coast Augmentation pipeline which receives water from the Wiggins WW system. The pipeline
together with the South Coast Pipeline delivers potable water to the Ugu District Municipality south of
eThekwini. The combined increased supply to both customers since commissioning has resulted in
increased utilisation of the Wiggins WW. Currently the WW is being optimised to assure response to the
increased demand.

The recent commissioning of the South Coast Pipeline has relieved some of the stress from the water
works’ in the Middle South Coast Region and has enabled the Craigieburn WW to be decommissioned.

6.4.2 Projects Specifically Targeting Rural Development

The following strategic projects have been identified as anchor projects for rural development and
community sustainability:
 Richmond Pipeline –detailed design stage
 Upgrade of Ndwedwe Reservoir 1 and Ndwedwe Reservoir 2 – construction stage.
 Maphumulo Bulk Water Supply Scheme Phase 1 - construction stage.
 Mhlabatshane Regional Bulk Water Supply Scheme - construction stage
 South Coast Pipeline Phase 2 – Scottburgh to Kelso - detailed design and pipe procurement
stage
 Upgrade of Mapaphetwa Water Works - construction stage

All water supply water works, pipeline and storage infrastructure projects that are scheduled to be
implemented by Umgeni Water over the next five years are detailed in the capital expenditure plan of this
business plan. In total, three billion rand will be spent, comprising:
 Rural Development: R 1,091 million,
 infrastructure Expansion and Augmentation: R 992 million,
 Infrastructure Upgrading / Rehabilitation: R 756 million,
 Information and communication technology: R60 million

Through implementation of its capital infrastructure development programme, Umgeni Water will
significantly increase its bulk supply coverage of wards from 228, which represents 61% of the total wards
in supply area, to 259, which represents 69% of the total wards in supply area, over the Five year period, as
shown in Table 6-2.

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Table 6-2: Water Services Authority Bulk Water Supply Coverage 2010/11 to 2014/15

Water Service Authority Ward Coverage 2009/10 Ward Coverage to be achieved by 2014/2015
Overall Coverage of Water Services Authorities 228 of 375 wards (61%) 259 of 375 wards (69%)
Ugu District Municipality 17 of 81 wards (21%) 28 of 81 wards (35%)
iLembe District Municipality 48 of 66 wards (73%) 51 of 66 wards (77%)
Sisonke District Municipality 1 of 47 wards (2%) 5 of 47 wards (11%)
uMgungundlovu District Municipality * 62 of 81 wards (77%) 75 of 81 wards (93%)
Msunduzi Local Municipality 37 of 37 wards (100%) 37 of 37 wards (100%)
eThekwini Metro 100 of 100 wards (100%) 100 of 100 wards (100%)

* Includes Msunduzi LM, which is also shown separately.

6.5 Management and Operations Arrangements

The projects indicated in section 6.4 will be financed by Umgeni Water. The management and operations
arrangements will also be the responsibility of Umgeni Water and will be recovered through the bulk water
tariff.

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- 52 -
7.1 Current and Projected Effluent Volumes

7.1.1 Darvill Wastewater Works

The current average daily flow for the Darvill Wastewater Works (WWW) is 84,000 cubic metres per day.
The permitted discharge is 28.835 million cubic metres per annum or 79,000 cubic metres per day. The
current Average Dry Weather Flow (ADWF) is 66,400 cubic metres per day compared with the works
estimated design capacity of 75,000 cubic metres per day ADWF. Flows are projected to increase at
approximately 1.5 % per annum over the next five years.

7.1.2 Ixopo Wastewater Works

The average daily flow for the Ixopo WWW is 780 cubic metres per day. The permitted annual discharge is
2.233 million cubic metres. The Average Dry Weather Flow for the WWW is anticipated to steadily increase,
but is unlikely to exceed the plant capacity of 1,000 cubic metres per day, over the next five years.

7.2 Condition of Treatment Infrastructure

Overall, the WWWs are in reasonable condition, and no major refurbishments are planned during this
period. However, ongoing capital renewal is expected in order to:
 prevent disruptions to operations,
 accommodate the increasingly high flows entering the works after rains which are above normal
expected peak flows, and
 avoid river contamination.

7.3 Effluent Discharge quality

The percent effluent compliance is currently 81 %. Ongoing effort will be made to improve this to 90 % over
the next 12-month period. For the Darvill WWW most of the non-compliances were due to the storm dam
overflow due to interruption of the power supply and external high inflow volumes during the summer
months. DWA is continuing to assist Umgeni Water in working with the Msunduzi Municipality to resolve
these ongoing problems.

7.4 Sufficiency of Discharge Rights

Umgeni Water holds a permit (2045B) for effluent discharges from the Darvill WWW. This permit expired on
the 1st October 2004. Umgeni Water is still awaiting the granting of a licence from DWA, for which
application was made in 2004. In the interim, the conditions of the old permit are being complied with. All
other WWWs are smaller in volume (below 2,000 cubic metres per day) and are operated under General
Authorisations.

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7.5 Bulk Wastewater Infrastructure Development

7.5.1 Darvill WWW

The current capacity of the Darvill WWW is 75,000 cubic metres per day ADWF and flows are projected to
increase at approximately 1.5 % per annum over the next five years. Challenges are experienced during
wet weather, requiring temporary storage of peak flows in the existing storm containment dam. Membrane
pilot plant investigations are to be undertaken as measures to increase the work’s capacity and improve
the effluent quality.

7.5.2 Ixopo WWW

The current capacity of the Ixopo WWW is 1,000 cubic metres per day ADWF and the projected 2013 inflow
is 950 cubic metres per day. No new infrastructure components will be required over the next five years.

7.6 Agreements with Customers

The Darvill and Ixopo Wastewater Works’ are owned and operated by Umgeni Water. Management fees
and/or tariffs are based on bulk wastewater agreements.

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8.1 Implementing Agent: OR Tambo DM

In February 2008, an Infrastructure Funding Agreement was signed by the Department of Water Affairs
(Eastern Cape Region), OR Tambo District Municipality and Umgeni Water, in which Umgeni Water was
appointed as the Implementing Agent for a number of projects in the OR Tambo DM. Five projects have
been identified, including three feasibility studies, the design and implementation of a regional bulk water
supply scheme, and a bulk water supply intervention project.

Initial funding allocated by DWA through its Regional Bulk Scheme Programme for the five projects over a
three year period was R 62.8 million. Revised cost estimates have been submitted to both DWA and
OR Tambo DM for approval.

The two major projects are as follows:

 Greater Mbizana Regional Bulk Water Supply Scheme, which includes the development of a new
Category 3 dam on the Ludeke River (a tributary of the Mtamvuna River), a pumped raw water
supply system to the existing Nomlacu Water Works (to be upgraded in two phases to
20,000 cubic metres per day), and a bulk treated water supply system within the Mbizana Local
Municipality. Estimated cost: in excess of R 1.1 billion over a multi-year development period (co-
funding from OR Tambo DM will be required in order to link the bulk water supply system to the
village reticulation).

 Mthatha Bulk Water Intervention, which includes the upgrading and refurbishment of a number of
components of the bulk treated water supply system from the existing Thornhill Water Treatment
Plant to Fort Gale, Owen Dam and Signal Hill. Estimated cost: R 36 million (due for completion in
April 2010).

In addition, at OR Tambo DM’s request, two planning studies have been carried out by Umgeni Water in
developing regional bulk water master plans at a reconnaissance / conceptual level of detail, namely, in the
Qaukeni (Ingquza Hill) and Ntabankulu Local Municipalities.

OR Tambo DM has further extended Umgeni Water’s appointment to include the detailed feasibility study
and preliminary design of the Qaukeni (Ingquza Hill) Regional Bulk Water Supply Scheme.

8.2 Implementing Agent: uMgungundlovu District Municipality

The uMgungundlovu District Municipality had appointed Umgeni Water to be an Implementing Agent for the
Greater Eston Project aimed at addressing the backlogs in the Greater Eston area. Available capacity in the
uMbumbulu bulk pipeline is to be used. This work supports the objectives and the targets set by national
government for addressing water backlogs. Feasibility investigations are complete and the detailed design
is currently underway.

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8.3 Implementing Agent: Sisonke District Municipality

In February 2008, the Sisonke District Municipality, appointed Umgeni Water as an Implementing Agent for
the proposed Greater Bulwer/Donnybrook Regional Bulk Water Supply Scheme, to supply water to the
towns of Bulwer and Donnybrook, as well as a number of rural communities in the corridor between the two
towns. The project is expected to be undertaken in a phased manner over the next few years, based on
priorities within the area and the availability of funding. The estimated long-term water demand is
11,000 cubic metres per day.

To date, the detailed feasibility study of the proposed Bulwer Dam has been completed, and an appeal to
the Environmental Record of Decision is being addressed by the Sisonke District Municipality.

In order for work to continue, Sisonke DM is required to allocate funds for:

 the detailed feasibility study for the raw water supply infrastructure (including the raw water pump
station, rising main and water works);

 the detailed feasibility study for the bulk water supply infrastructure (including bulk pipelines and
main distribution reservoirs);

 the detailed design of the dam, raw water and bulk water supply infrastructure; and

 the construction of all the bulk water components of the Greater Bulwer/Donnybrook Regional
Bulk Water Supply Scheme.

8.4 Implementing Agent: Department of Water Affairs Working for Water Programme

Umgeni Water was appointed by DWA in 2003 as its Implementing Agent for the control of terrestrial alien
invasive plants in selected catchments in the Mvoti to Mzimkhulu Water Management Area: Lions River
catchment, Umgeni Valley, Nagle Dam catchment, Karkloof catchment and Mvoti catchment.

The programme will hire and train people from within the community as contractors or to be employed as
part of the contractor’s team. Each team comprises eleven general workers who manually clear
demarcated areas. The teams use approved Working for Water clearing methods and apply herbicide as
per the Working for Water herbicide policy. The contractors employed by the programme are provided with
functional and developmental training to ensure that they can either become contractors on exit from the
programme or join the formal job market in other capacities.

The Implementing Agent agreement has a total budget of R 4 million for 2010/11, targeting the clearing of
29.64 square kilometres of land and creation of 900 job opportunities.

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8.5 Water Quality Monitoring Services Support: to Municipalities

Umgeni Water will continue to provide water quality monitoring and related services support to
municipalities and for the business plan period have agreed contracts in place for support to Sisonke, Ugu
and uMgungundlovu District Municipalities:

 Ugu District Municipality: Umgeni Water was awarded a tender by the Ugu District Municipality in
August 2009 to provide sampling, analyses and compliance reporting on water and wastewater
works for the municipality for one year. In addition, a once-off audit of all municipalities water and
wastewater works is required.
The value of the work is: R 1,369,296.

 uMgungundlovu District Municipality: A contract was signed with the uMgungundlovu District
Municipality in October 2009 to provide sampling, analyses and compliance reporting on water
works for the municipality for five years, annually renewable. Implementation commenced on
1st March 2010.
The value of the work is: R 754,385.

 Sisonke District Municipality: Umgeni Water signed a Memorandum of Understanding with the
Sisonke District Municipality in April 2009 to provide sampling, analyses and compliance reporting
on water and wastewater works annually for the municipality, as well as, set up a basic water
quality monitoring laboratory for the municipality.
The value of the sampling, analyses and compliance reporting work is: R 220,000 per annum.
The value of the work of setting up the laboratory will be R300,000.

8.6 Operation and Maintenance Contracts for Wastewater works

Umgeni Water has an Operations and Maintenance Contract with the uMgungundlovu District Municipality
for the Howick WWW. The uMgungundlovu District Municipality intends extending this contract for another
five years..

8.7 Implementing Agent: DWA Regional Bulk Programme

The Department Water Affairs has extended Umgeni Water’s project management support for systems
development and enhancement of the regional bulk infrastructure grant to September 2010.

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8.8 Implementing Agent: Reduction of Schools and Households Water and Sanitation Backlogs

Umgeni Water will continue with its Implementing Agent contracts with the Department of Education and
the iLembe District Municipality for the provision of schools and households water and sanitation. The
uMgungundlovu District Municipality is yet to prepare business plans for its new sanitation programmes
and therefore it is not certain at this stage what its targets and budgets are. Planned programmes and
projected budgets over the five year period are shown in Table 8.1. Projected budgets are informed by the
number and size of enrolment and therefore funding requirements may be lower in some years despite a
larger number of schools than the preceding year.

Table 8.1: Schools and Households Water and Sanitation Programmes for 2010/11 to 2014/15
Programme Recipient Municipality 2010/11 2011/12 2012/13 2013/14 2014/15
Provision of iLembe DM Households: Households: Households: Households: Households:
Household 500 units 1000 units 1000 units 1000 units 1000 units
Sanitation Budget: Budget: Budget: Budget: Budget:
R 2.5 million R 5.5 million R 6.1 million R 6.7 million R 7.3 million
Provision of Sisonke DM, 14 Schools 20 Schools 20 Schools 20 Schools 20 Schools
Schools Ugu DM, provided provided with provided with provided with provided with
Sanitation eThekwini Metro, with 190 260 toilet 260 toilet seats 260 toilet seats 260 toilet
iLembe DM, and toilet seats seats Budget: Budget: seats
uMgungundlovu DM Budget: Budget: R 14 million R 14.5 million Budget:
R 9 million R 13 million R 15 million
Boarding Ugu DM, 4 Boarding 4 Boarding 4 Boarding 3 Boarding 2 Boarding
Schools eThekwini Metro, schools schools schools schools schools
Renovation Zululand DM, Budget: Budget: Budget: Budget: Budget:
Amajuba DM R 30 million R 40 million R 45 million R 30 million R 20 million
(Newcastle LM),
uThukela DM, and
uMgungundlovu DM,
Provision of Sisonke DM, 4 Integrated 4 Integrated 6 Integrated 4 Integrated 4 Integrated
Schools eThekwini Metro, Schools Schools Schools Schools Schools with
Buildings iLembe DM, Budget: Budget: Budget: Budget: Budget:
uThukela DM, and R 60 million R 50 million R 50 million R 55 million R 60 million
uMgungundlovu DM
Building of Sisonke DM, Schools: 20 Schools: 20 Schools: 20 Schools: 20 Schools: 20
Schools Ugu DM, Budget: Budget: Budget: Budget: Budget:
laboratories, eThekwini Metro, R 35 million R 35 million R 35 million R 35 million R 35 million
libraries and iLembe DM,
computer uThukela DM, and
rooms uMgungundlovu DM

Labour intensive and developmental approaches will be adopted in implementation of programmes with
special focus on the following:

 Training and Project Placement as part of Household Sanitation Programme: Indigent families will
be identified in consultation with ward councillors and community members and individuals will be
given basic bricklaying and carpentry training and project placements. Unemployed youth will be
trained and placed in projects as health and hygiene fieldworkers, book-keepers, store keepers
and quality assessors. Co-operatives will be established for supply and delivery of building
materials.

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 Learnerships as part of Department of Education Infrastructure Delivery Programmes:
Leanerships in bricklaying, carpentry, electrical work, plumbing as well as project management for
these, will be run in partnership with the Department of Labour. Trainees will be placed in
Department of Education Programmes once they have been certified competent in their
respective fields. Focus will be on unemployed youth with emphasis on women. The first year will
entail planning, administration and initiation of training. The outer years will be practical work
with wages and allowances paid in accordance with Department of Labour guidelines.

- 59 -
- 60 -
9.1 Implementation of Human Resources Strategy

Umgeni Water continues to face skills shortage challenges and in response continues to deepen
implementation of it Human Resources Strategy with the following seven focus areas:

1. Workforce Planning: To continually assess present and future workforce needs and align these
with business needs in an effective manner.

2. Recruitment, Retention and Engagement: To ensure effective attraction, retention and

engagement of staff with expertise, experience and skills, within a framework that ensures
equity and diversity.

3. Reward Management: To implement a pay and reward management system that supports
achievement of goals to ensure the organisation has the skilled, competent, motivated and
committed workforce its needs.

4. Employment Practices and Systems: To ensure that the organisation’s human resources
systems are efficient and effective and respond to its strategies.

5. Work/life Balance: To provide a safe, healthy and supportive working environment which
meets the organisation’s duty of care towards its staff and encourages an appropriate
work/life balance.

6. Staff Skills Development: To develop staff to excel in their individual and organisational roles
and functions in order to deliver on the organisation’s strategy.

7. Communication and Consultation: To ensure effective channels of communication which

enable all views to be heard and considered and information to be gathered that would inform
the organisation’s human resources strategies, plans and service delivery.

The organisation’s Workforce Plan, Employment Equity, Training and Development, HIV/AIDS and Wellness,
and Employee Relations plans are described further in this plan.

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9.2 Workforce Profile

Umgeni Water will continue to maintain and enhance its core business systems, shown in Table 9-1, in
support of implementation of this business plan. The dearth of professionals, notably in the engineering
fields, continues to impact on the organisation’s plans and is being addressed by the training and
development programmes described further in this plan. The current and projected workforce numbers
and diversity in support of this is shown in Table 9-2 and Table 9-3, respectively.

Table 9-1: Umgeni Water Core Business Systems

Umgeni Water Core Business Systems
1. Water and Wastewater Operations
2. Water Quality Management
3. Water Infrastructure Asset Management
4. Water Infrastructure Planning
5. Water Infrastructure Development
6. Billing and Metering
7. Financial and Treasury Management
8. Human Resources Planning
9. Environmental Management
10. Information and Communications Technology
11. Supply Chain Management
12. Governance Continuance
13. Risk Management and Fraud Prevention
14. Strategy and Organisational Performance
15. Stakeholder Relationship Management

Table 9-2: Current Workforce Profile (as at 28th February 2010)

Occupational Levels Male Female Total
A C I W A C I W
Top management 3 0 0 0 1 0 0 1 5
Senior management 3 2 8 3 3 1 4 1 25
Professionally qualified and experienced specialists and
51 6 34 28 36 2 13 6 176
mid-management
Skilled technical and academically qualified workers,
junior management, supervisors, foremen, and 142 11 40 26 79 6 21 8 333
superintendents
Semi-skilled and discretionary decision making 158 1 3 0 3 0 4 0 169
Unskilled and defined decision making 31 0 0 0 6 0 0 0 37
TOTAL PERMANENT 388 20 85 57 128 9 42 16 745

Table 9-3: Projected Workforce Profile: 2010/2011 to 2014/15

Occupational Levels Male Female Total
A C I W A C I W
Top management 3 0 0 0 1 0 0 1 5
Senior management 3 2 8 3 4 1 4 1 26
Professionally qualified and experienced specialists and
51 6 34 23 48 4 15 8 189
mid-management
Skilled technical and academically qualified workers,
junior management, supervisors, foremen, and 142 11 42 26 93 10 26 10 360
superintendents
Semi-skilled and discretionary decision making 158 1 3 0 3 2 7 2 176
Unskilled and defined decision making 31 0 0 0 6 0 0 0 37
TOTAL PERMANENT 388 20 87 52 155 17 52 22 793

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 During this business plan period, five percent of the workforce is anticipated to retire normally from the
organisation (Figure 9-1). The make-up of this component of the workforce has been analysed. The
organisation currently has policies and plans in place, including a succession policy and leadership /
employee development plans and programmes that will mitigate the loss of skills and institutional memory
due to normal retirement.

Figure 9-1: Workforce Age Profile

A ge Pr o fi l e
a t 28 F e b r ua r y 2010

32%
300

250

200 20%
18%
15%
150

9%
100
5%
50 2%

0
0 to 25 26 to 35 36 to 45 46 to 50 51 to 55 56 to 60 61 to 65

9.3 Employment Equity

Umgeni Water will continue to diversify its workforce over the five year period through opportunities
presented by recruitment, retention, staff development, turnover and succession planning. The current and
projected workforce by race and gender are depicted in Figure 9-2 and Figure 9-3, respectively.

 
Figure 9-2: 5-Year Workforce Projection by Race
 
Race Profile, Perm anent Em ployees Race Profile, Perm anent Em ployees
  at 28 February 2010 Projected for 2010/11 to 2014/15

 
A, 516, 69% A, 543, 68%
 
 
 
 
C, 29, 4% C, 37, 5%
  W, 73, 10% W, 74, 9%
I, 127, 17% I, 139, 18%
 
 
 

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Figure 9-3: Gender Profile

 
Gender Profile, Perm anent Em ployees Gender Profile, Perm anent Em ployees
 
at 28 February 2010 Projected for 2010/11 to 2014/14
 
Male, 550,
Male, 547,
  74%
69%

 
 
 
  Female, 195, Female, 246,
26% 31%
 
 

Development and Advancement of Women Employees

It is intended to develop and advance women employees in the organisation, and increase the women
complement over the next five years from 26% to 31% (Figure 9-3). Higher targets are set for the more
skilled workforce categories as indicated below and shown in the graphs in Figure 9-4.

 Top Management + Senior Management: In the combined levels of Top and Senior
Management, it is planned to increase the women complement: from 37% women to 39%
women.

 In the Professionally qualified and experienced specialists and mid-management + Skilled

technical and academically qualified workers, junior management, supervisors, foremen,
and superintendents, it is planned to increase the women complement: from 34% women
to 39% women.

 In the combined levels of Semi-skilled and discretionary decision making + Unskilled and
defined decision making, it is planned to increase the women complement: from 6%
women to 9% women.

Figure 9-4: Current and Projected Gender Profiles by Occupational Level

Gender Profile, Perm anent Em ployees Gender Profile, Perm anent Em ployees
Top Managem ent + Senior Managem ent Top Managem ent + Senior Managem ent
at 28 February 2010 Projected for 2010/11 to 2014/15

Male, 19,
63% Male, 19,
61%

Female, 11, Female, 12,

37% 39%

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 Figure 9-4, continued: Current and Projected Gender Profiles by Occupational Level.

Gender Profile, Perm anent Em ployees
Professionally qualified & experienced
specialists & m id-m anagem ent + Skilled
technical & academ ically qualified w orkers,
junior m anagem ent, supervisors, forem en &
superintendents
at 28 February 2010
M ale, 338, 66%
Gender Profile, Perm anent Em ployees
Professionally qualified & experienced
specialists & m id-m anagem ent + Skilled
technical & academ ically qualified w orkers,
junior m anagem ent, supervisors, forem en &
superintendents
Projected for 2010/11 to 2014/15
M ale, 335, 61%

Female, 171, Female, 214,

34% 39%

Gender Profile, Perm anent Em ployees Gender Profile, Perm anent Em ployees
Sem i-skilled & discretionary decision m aking + Sem i-skilled & discretionary decision m aking
Unskilled & defined decision m aking + Unskilled & defined decision m aking
at 28 February 2010 Projected for 2010/11 to 2014/15

M ale, 193, 94% M ale, 193, 91%

Female, 13, 6% Female, 20, 9%

9.4 Staff Skills Development

Staff skills development is essential to enable staff to excel in their individual and organisational roles and
functions and deliver on the organisation’s strategy. The organisation’s recruitment and retention
interventions are intended to ensure the organisation has sufficient flexibility to obtain the skills that it
needs to implement its business plan. The approach will include options for buying, making, converting
and creating skills, whilst continuing to ensure diversity is increased in under-represented areas. The
convert strategy will focus on core, scarce and critical skills through retraining. This will be achieved
through learnerships, training interventions and recognition of prior learning.

Learnerships

During this business plan period Umgeni Water will:

 Continue to develop and complete thirty-seven external learnerships and fifteen internal
staff learnerships, in Water and Wastewater treatment, and
 Extend its programmes to a total of seventy learners enrolled in the fields of Electrical,
Instruments, Mechanical Engineering and Water and Wastewater Treatment.
The Learnerships programme will utilise forty percent (40%) of the training and development budget.

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Bursary Programme

A create strategy will be used to create a skills pool that would address future skills demands in the
organisation. This will be achieved through:
 Continuing with the current bursary programme and awarding further bursaries to achieve a
total of ten bursaries for skills identified, namely, civil engineering and financial.
 More vigorously ring fencing eighteen positions in the structure for implementation of graduate
development programmes as mechanisms for addressing the core, critical and scarce skills
needed by the organisation.

Training and Development and Assisted Education Programmes

Training and development and assisted education programmes will be improved by better alignment of the
skills and competency needs of the business plan to individual’s development plan, as well as, the
workplace skills plan.

The staff skills development plan for the Five-Year Period is summarised in Table 9-4.

Table 9-4 Staff skills development plan for 2010/11 to 2014/15

Baseline 2010/11 2011/12 2012/13 2013/2014 2014/2015
Learnerships: Learnerships: Learnerships: Learnerships: Learnerships: Learnerships:
• 52 learners enrolled as • 70 learners • 70 learners enrolled • 70 learners enrolled • 70 learners enrolled • 70 learners enrolled
water and wastewater enrolled as water as water and as water and as water and as water and
process controllers and and wastewater wastewater process wastewater process wastewater process wastewater process
artisans. process controllers controllers and controllers and controllers and controllers and
and artisans. artisans. artisans. artisans. artisans.
Graduate Graduate Graduate Graduate Graduate Graduate
development: development: development: development: development: development:
• 18 graduates • 18 graduates • 18 graduates • 18 graduates • 18 graduates • 18 graduates
developed in developed in developed in developed in developed in developed in
engineering, science engineering, engineering, science engineering, science engineering, science engineering, science
and other required science and other and other required and other required and other required and other required
professional fields. required professional fields. professional fields. professional fields. professional fields.
professional fields.
Bursary: Bursary: Bursary: Bursary: Bursary: Bursary:
• 3 students enrolled in • 10 students • 10 students enrolled • 10 students enrolled • 10 students enrolled • 10 students enrolled
engineering fields. enrolled in in engineering and in engineering and in engineering and in engineering and
engineering and financial fields. financial fields. financial fields. financial fields.
financial fields.
Training & Training & Training & Training & Training & Training &
Development Development Development Development Development Development
• 492 Health and Safety Will be determined by Will be determined by Will be determined by Will be determined by Will be determined by
Compliance Training and aligned to and aligned to and aligned to and aligned to and aligned to
• 74 Technical Training Individual Individual Development Individual Development Individual Development Individual Development
• 104 Soft and Generic. Development Plans. Plans. Plans. Plans. Plans.
Assisted Assisted Assisted Assisted Assisted Assisted
Education Education: Education: Education: Education: Education:
• 6 Operational Process • 8 Operational • 10 Operational • 10 Operational • 10 Operational • 10 Operational
Control Process Control Process Control Process Control Process Control Process Control
• 3 Project Management • 5 Project • 7 Project • 7 Project • 7 Project • 7 Project
• 2 Supplychain Management Management Management Management Management
Management • 2 Supplychain • 2 Supplychain • 2 Supplychain • 2 Supplychain • 2 Supplychain
• 10 Water Quality, Management Management Management Management Management
Water Resources, • 12 Water Quality, • 14 Water Quality, • 14 Water Quality, • 14 Water Quality, • 14 Water Quality,
Safety, Health and Water Resources, Water Resources, Water Resources, Water Resources, Water Resources,
Environment. Safety, Health and Safety, Health and Safety, Health and Safety, Health and Safety, Health and
• 1 Information and Environment. Environment. Environment. Environment. Environment.
Communications • 2 Information and • 2 Information and • 2 Information and • 2 Information and • 2 Information and
Technology. Communications Communications Communications Communications Communications
• 1 Finance and Technology. Technology. Technology. Technology. Technology.
Treasury. • 2 Finance and • 3 Finance and • 3 Finance and • 3 Finance and • 3 Finance and
• 17 Management and Treasury. Treasury. Treasury. Treasury. Treasury.
Leadership • 17 Management • 17 Management and • 17 Management and • 17 Management and • 17 Management and
Development. and Leadership Leadership Leadership Leadership Leadership
Development. Development. Development. Development. Development.

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9.5 HIV/AIDS and Wellness Programme

Occupational health remains vitally important for Umgeni Water to ensure effective water service delivery to
customers. Umgeni Water will therefore continue to deliver a comprehensive occupational health service
to employees, which includes a HIV/AIDS programme and employee wellness programme.

The organisation’s HIV/AIDS programmes will continue to include:

 Access to Voluntary, Counselling and Testing programmes.
 Access of HIV positive employees to Anti-retroviral Treatment, enabled through the
Medical Aid Fund HIV/AIDS Programme.
 Strengthening of HIV/AIDS awareness in the organisation.

The programmes are and will continue to be facilitated through two occupational health nursing
practitioners and one part-time occupational health medical consultant. These qualified practitioners will
further perform duties that include regular medical screening along with other medical surveillance
programmes, including, hearing, lung-function testing and biological monitoring.

Umgeni Water’s HIV/AIDS Management Forum plays a significant role and will further be utilised to
encourage employees to participate in the World AIDS day and Wellness Programme events, amongst
others.

Implementation of HIV/AIDS programmes and wellness programmes will be achieved through collaboration
with other organisations and partnerships with Umgeni Water’s medical aid fund and associated
institutions.

Publicly available information (Department of Health), estimates that HIV prevalence levels in the general
adult population in areas of primary operations population is 20%, compared with 7% at Umgeni Water, as
derived from the organisation’s medical aid health profile.

Awareness of HIV/AIDS will be strengthened, by supporting national campaigns including World AIDS Day,
the sixteen days of Activism Campaign for no violence against women and children, as well as all national
health days in the National Department’s of Health Calendar.

Umgeni Water will continuously review its HIV/AIDS Policy to align it with “best practice” and the
developments in HIV/AIDS management. The policy will address issues of stigma and prejudice against
persons living with HIV/AIDS. Umgeni Water will also review its HIV/AIDS risks and ensure relevant
information is captured in risk registers to enable HIV/AIDS to be better managed, monitored and mitigated
through sustainable long term initiatives.

9.6 Employee Relations

Umgeni Water will maintain a sound employee relations environment which will bear positive results and
provide value for the organisation. Formal employee relations are and will continue to be governed by
collective bargaining and recognition agreements underpinned by the applicable legislation.

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Sixty-five percent (65%) of the total workforce are members of the majority union NEHAWU (National
Education Health and Allied Workers Union) and the relationship is subject to a collective bargaining
agreement. Umgeni Water will continue to negotiate salaries and conditions of employment with NEHAWU
in order to maintain a healthy working relationship.

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Umgeni Water will continue to ensure environmental sustainability through the four best practice indicators
it had previously developed and will monitor the pertinent variables that describe these indicators:
 Environmental Systems and Reducing Environmental Stresses,
 Reducing Human Vulnerability to Environmental Stresses,
 Institutional Capacity to Respond to Environmental Challenges, and
 Environmental Stewardship.

Eco—efficiency: Changes in indicators for eco-efficiency will be assessed, such that Umgeni Water can
continue to put in place specific programmes to reduce resource usage over time.
Major eco-efficiency indicators identified include:
 Energy Usage per kilolitre of water produced.
 Water treatment Chemicals Usage per kilolitre of water produced.

Climate Change and Energy: Umgeni Water will continue to develop several initiatives in parallel in
response to climate change, including: researching future risk and developing adaptation strategies for
potential increases in floods, droughts, water quality and environmental threats; investigating energy
efficiency improvements; investigating switching to alternative energy sources; and Management of the
organisation’s carbon footprint.
Specific plans include:
 Using the results of the Carbon Footprint Mapping exercise to set Emission Reduction Targets to
manage high impact areas,
 Optimising Water Resource Systems Operation (operating rules) with regards to both securing
availability of raw water supplies and Reducing Electricity Utilisation/Loading incurred through
Pumping Inefficiency.
 Annual evaluation and improvement of Power Factor Corrections at major installations.
 Investigating alternative energy sources, including Use of Methane as part of the energy mix at the
Darvill Wastewater Works, use of turbines in raw water canals at major waterworks, and
identification of office energy management systems.

Water Stress: Umgeni Water will improve efficiency through identifying and reducing wasteful processes,
and engaging in water demand management and reuse practices.

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Specific plans include.
 Continuous assessment and Refinement of Water Balances of raw and potable water conveyance
and distribution systems.
 Maintaining / Reducing Water Losses.
 Other plans have been described in the section on Water Conservation and Demand Management.

Water Quality Deterioration: Umgeni Water has set resource quality objectives for abstractions for water
treatment that it will continue to use as alert triggers for mitigation against increased public health risks
and higher treatment costs.
Specific plans include.
 Continuing to Monitor Quality of Raw Water Resources in order to assess source quality as well as
mitigate risks associated with the raw water abstracted.
 Continuing to assess the risks associated with trends in eutrophication, chemical contaminants,
pathogens and suspended solids, and effectiveness of Raw Water Quality Objectives.
 Engaging Catchment Management Stakeholders to further influence resource quality and quantity
objectives to safeguard consumer water quality.
 In addition, Umgeni Water will continue to Improve Quality of Waste Discharges from its own sites
and will further quantify the impact of the Darvill waste discharge.

Environmental Health and Reducing Environmental Related Natural Disaster Vulnerability: Umgeni Water
will continue to safeguard public health as well as protect the natural environment, through its water,
health and hygiene education awareness programmes and through implementing its disaster management
programmes for floods, drought and water quality and environmental incidents.
Specific plans include:
 Running Water Classrooms for Learners of all age groups at the Midmar, Darvill and Durban
Heights sites.
 Implementing planned Rural Community Outreach programmes, targeting vulnerable communities.
 Growing Awareness through Collaboration with Municipalities, DWA, DEA, Community and Civil
Society Groupings, Business Groupings, and others, for events coinciding with special
environmental days, including, Wetlands Day, Arbor Day, Water Week, Environmental Week,
Biodiversity Day, Marine Week, and others.
 Improving Management of Servitudes.

Reducing Waste and Consumption Pressures: Umgeni Water has waste management plans for all
operational sites and will continue to implement these.
Specific plans include:
 Waste Separation and Paper Recycling at all sites.
 Collaboration with Municipalities, IT industry, responsible suppliers, retailers and other institutions,
to Improve Management of Electronic Waste (e-Waste).

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Environmental Governance: Umgeni Water will maintain its institutional capacity and knowledge to ensure it
adequately responds to environmental sustainability challenges, as well as continues to implement its
environmental management system for the organisation.
Specific plans include:
 Improved Integration of Quality Management Systems for environmental management, product
quality management, occupational health and safety management over the business plan period,
aligned to OHSAS 18001, ISO 9001 and ISO 14001, amongst others.

Biodiversity, Land Degradation and Reducing Ecosystem Stress:

Umgeni Water interacts with the water value chain from source-to-tap and will continue to ensure its Bulk
Water Infrastructure is Developed and Maintained in a Sustainable Manner. At a project level, Umgeni
Water will continue to apply Integrated Environmental Management (IEM) principles to its projects to
ensure it undertakes environmentally responsible planning, design, construction, operation,
decommissioning and maintenance of its assets and activities.
Specifically this would entail:
 Undertaking relevant Environmental Impact Assessments and required mitigation during project
planning, design, construction and commissioning phases,
 Development and implementation of sound Environmental Management Plans, and
 Undertaking Environmental Monitoring and Auditing at all relevant project life-cycle phases.

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- 72 -
Umgeni Water has been an advocate of water conservation and water demand management for many
years, and has had a Water Conservation Policy in place since 1999. The organisation recently developed
a Water Demand Management Strategy that provides direction to the initiatives that the organisation will
embark upon in the future in terms of promoting water demand management practices within its region.
The Water Demand Management (WDM) Strategy identifies thirteen WDM initiatives (both internal and
external) which have been prioritised in terms of their potential effectiveness. An internal WDM committee
has been formed to co-ordinate the activities around these initiatives.

In the past eighteen months the eThekwini Metropolitan Municipality had made significant investments in
various water loss reduction projects, with further spending planned in the future. Among their sixteen
dedicated interventions for curtailing water loss is the Asbestos Cement Pipe Replacement Programme
costing around R 1.6 billion to implement. A new pressure management system and an improved customer
billing system have also been introduced. The reduction in water purchases from Umgeni Water has
already become evident in the 2009/2010 financial year and has also influenced Umgeni Water’s capital
expenditure programme by deferring some of the augmentation projects to later dates.

Umgeni Water will continue with its education and public awareness programmes through the
environmental education unit targeting schools and encouraging learners and educators to visit our works.

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- 74 -
The Financial Plan reflects that the projected operating performance for the period 2010-2015 although
positive, has been primarily affected by the following:

 Reduction in projected volume growth

The projected bulk water revenue has been revised downward, reflecting a combined reduction in
revenue of R153 million, in years F’10 and F’11.

 Above inflationary increases in energy and raw water costs

The estimated 30% increase in energy costs in the periods F’10 to F’13, has resulted in the total
energy costs being projected to increase from R 45.2 million in F’09 to R 64.7 million in F’10 and to
double to R 90.1 million in F’11.

The above inflationary increases for raw water costs are driven by the adoption of the Raw Water
Pricing Strategy as well as the recovery of 0.444 cents per kilolitre of capital unit charge for the
Spring Grove Dam from F’12 onwards. The latter represents an overall increase of 186 % on the total
raw water cost for that year.

 Impairment of assets
F’12 reflects a significant reduction in operating profit due to the R 331 million impairment for rural
development projects. This impairment could be reversed or reduced should Umgeni Water’s
application to the Department of Water Affairs for Bulk Infrastructure Grant Funding be successful.

The operating cashflows are projected to remain strong, albeit with small annual reductions in the next
three years due to the lower revenue and increase in operating expenses.

The R 3,078 million capital expenditure programme reflects the organisation’s commitment to water
services delivery with R 1,091 million or 35 % to be spent on rural development projects.

From a debt management point of view Umgeni Water has successfully provided for the full repayment of
the UG65 bond of R 974 million in F’10 whilst successfully raising an eleven-year bond, UG21, for
R 600 million. The funding strategy also includes a R 350 million loan to be accessed from the European
Investment Bank (EIB). Umgeni Water will meet its gearing target ratios of 0.7 in F’10 and is expected to
remain below the approved R 1.8 billion borrowing limit during the next five years.

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12.1 Financial Planning Assumptions

Tables 12-1 to 12.4 show the assumptions used in the financial planning process.

12.1.1 Macroeconomic Assumptions

Table 12-1: Macroeconomic Factors

Approved
Actual Budget Forecast
F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15

CPI * 11.50% 6.90% 6.01% 5.10% 5.70% 5.50% 5.40% 5.40% 5.40%

PPI **
Average 14.30% -4.10% 5.95% 5.90% 6.10% 5.20% 5.20% 5.00% 5.00%
% Adjustment 2.50% 0.00% 2.50% 2.50% 2.50% 2.50% 2.50%
Revised average 14.30% -4.10% 8.45% 5.90% 8.60% 7.70% 7.70% 7.50% 7.50%

Interest Rate ***

Short-term 10.93% 7.58% 7.27% 6.75% 6.53% 6.92% 7.34% 7.60% 7.84%
Spread 0.35% 0.35% 3.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%
11.28% 7.93% 10.27% 9.25% 9.03% 9.42% 9.84% 10.10% 10.34%

Long-term 8.48% 8.47% 8.06% 8.84% 9.08% 9.56% 9.80% 10.28% 10.28%
Spread 0.65% 1.50% 2.90% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
9.13% 9.97% 10.96% 10.84% 11.08% 11.56% 11.80% 12.28% 12.28%

* Consumer price index (CPI) levels are based on information received from the Bureau for Economic
Research (BER), as at March 2010.
** The forecast production or producer price index (PPI) rates, per the BER, have been adjusted upward
by 2.5 % from F’11.
*** Interest Rate:

(a) The short-term (three-month) rates are based on the average of:
(i) Banker’s Acceptance (BA) forecast by the Bureau for Economic Research, and
(ii) The Local Money Market average, obtained from the mid-rate between 3m Banker’s
Acceptance (BA) from Forward Rate Agreement (FRA) (bid), and 3m BA from FRA (offer),
converted to NACM and the Swap rates per inet bridge.

(b) The long-term (ten-year) rate was based on the forecast of the R157 obtained from the Bureau
for Economic Research.

The 70 % fixed to 30 % floating interest ratio was applied to all new debt.

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 12.1.2 Staff Costs

Table 12-2: Employee Costs

Approved
Actual Forecast
Budget

F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15

Annual Salary Increase (%) # 7.5% 8.5% 8.0% 8.0% 7.8% 7.3% 7.6% 7.6% 7.6%

Staff Complement (Number) 785 825 895 895 910 910 910 910 910

- Permanent staff 715 733 838 734 808 808 808 808 808

- Contract staff 40 74 35 67 81 81 81 81 81

- Trainees 29 16 18 18 18 18 18 18 18

- DWA staff 1 2 4 1 3 3 3 3 3

- Vacant posts - - - 75 - - - - -

Staff Costs (R’000)

- Gross Salaries 206,896 238,182 281,355 272,198 316,707 339,827 365,484 393,260 423,148

- Less Recoveries (3,637) (8,806) (15,695) (15,309) (18,756) (20,126) (21,645) (23,290) (25,060)
- Normal staff costs
(less recoveries) 203,259 229,376 265,661 256,889 297,951 319,701 343,838 369,970 398,088
- % Increase 14.4 15.1 18.1 14.3 16.4 7.3 7.6 7.6 7.6

- Retirement benefit costs 45,690 38,062 31,828 33,053 52,125 40,000 40,000 40,000 40,000

- Post retirement medical aid 31,646 24,640 19,870 25,000 25,000 25,000 25,000 25,000 25,000

- Pension 14,044 13,422 11,958 8,053 27,125 15,000 15,000 15,000 15,000

Total staff costs 248,949 267,438 297,488 289,942 350,076 359,701 383,838 409,970 438,088

- % Increase 10.6 7.4 11.2 16.5 20.7 2.7 6.7 6.8 6.9

# Based on nominal wage rate forecast by the Bureau for Economic Research.

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12.1.3 Operating Costs

Table 12-3: Operating Costs

Approved
Actual Forecast
Budget

Operating costs F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15

Energy

- Forecast Price increase* 27.0% 25.0% 30.0% 30% 30% 10% 10%

- Cost (R’000) 39,442 45,400 76,181 64,732 90,127 117,166 152,315 167,547 184,302

-Total Increase in cost % 31.0 15.1 67.8 42.6 39.2 30.0 30.0 10.0 10.0

- Cost per kilolitre (c/kl) 9.8 10.9 17.3 15.2 20.9 26.6 33.9 36.6 39.5

-Total Increase in cost per kilolitre % 21.3 11.7 58.5 38.9 37.9 27.5 27.5 7.8 8.0

Chemicals

- Forecast Price increase 20.0% 15.0% 20.0% PPI

- Cost 25,175 32,751 35,163 30,668 33,947 37,291 40,966 44,919 49,186

- Total Increase in cost % 18.8 30.1 7.4 (6.4) 10.7 9.9 9.9 9.6 9.5

- Cost per kilolitre (c/kl) 6.2 7.9 8.0 7.2 7.9 8.5 9.1 9.8 10.5

-Total Increase in cost per kilolitre % 10.0 26.3 1.4 (8.8) 9.6 7.7 7.7 7.5 7.5

Maintenance

- Forecast Price increase 20.0% 10.0% 7.5% PPI

- Cost 106,983 138,783 160,189 156,687 166,872 179,721 193,559 208,076 223,682

- Total Increase in cost % 31.9 29.7 15.4 12.9 6.5 7.7 7.7 7.5 7.5

- Cost per kilolitre (c/kl) 26.5 33.3 36.4 36.7 38.7 40.8 43.1 45.4 48.0

- Total Increase in cost per kilolitre % 22.2 25.9 9.0 10.0 5.4 6.3 6.4 5.6 5.7

* As per the Bureau for Economic Research.

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12.1.4 Raw Water Purchases

Significant increases are projected in the cost per kilolitre of raw water from F’12 due to the impact of the
capital unit charge for the funding of the Spring Grove Dam development.

The normal cost increases are based on the Raw Water Pricing Strategy. However, Umgeni Water’s
component of the tariff is expected to increase by only 5.5 % in line with projected consumer price index
levels.

Table 12-4: Raw Water Purchase Costs

Approved
Actual Forecast
Budget
Raw Water Cost F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15

Raw Water Volumes (million kl)

Volume Mgeni System 381 386 393 401 410 418
Volume Mdloti System 26 26 26 27 27 28
Volume Other 20 20 20 20 20 20
Total Volume 427 432 439 448 457 466

Raw Water Consumption Charge per System

Mgeni System
Tariff existing infrastructure (c/kl) 15.64 15.64 15.79 15.64 17.66 21.83 22.23 22.65 23.10
% Increase 12.9% 23.6% 1.8% 1.9% 2.0%
Tariff Spring Grove Dam (TCTA levy) (c/kl) 44.40 46.80 49.50 52.20
Total Tariff (c/kl) 15.64 15.64 15.79 15.64 17.66 66.23 69.03 72.15 75.30
Volume (million kl) 381 386 393 401 410 418
Mgeni System Consumption Cost (R’000) 60,652 62,407 65,239 61,777 70,482 284,211 302,546 322,930 343,734
% Increase 2.9% 4.5% -1.0% 14.1% 303.2% 6.5% 6.7% 6.4%

Mdloti system
Tariff existing infrastructure (c/kl) 58.24 69.95 81.00 81.00 91.45 107.82 127.23 149.74 176.25
Cost Raising Hazelmere Dam Wall (R’000) 4,222 4,222 4,222
Volume (million kl) 26 26 26 27 27 28
Mdloti System Consumption Cost (R’000) 8,424 9,777 19,193 20,864 23,791 28,617 38,645 45,526 53,719
% Increase 16.1% 96.3% 113.4% 14.0% 20.3% 35.0% 17.8% 18.0%

Total Consumption Costs (R’000) 69,077 72,185 84,431 82,642 94,273 312,828 341,191 368,456 397,452
% Increase 5.1% 4.5% 17.0% 14.5% 14.1% 231.8% 9.1% 8.0% 7.9%

Water Resource Management (WRM) Charge (based on registered volume)

Tariff - existing (c/kl) 1.25 1.33 1.41 1.49 1.73 1.83 1.93 2.04 2.15
Water Resource Management Cost (R’000) 5,092 5,560 6,365 6,361 7,460 8,043 8,655 9,322 10,027
% Increase 9.1 9.2 14.5 14.4 17.3 7.8 7.6 7.7 7.6

Total Raw Water Costs R'000

Total Consumption Costs 69,077 72,185 84,431 82,642 94,273 312,828 341,191 368,456 397,452
Water Resource Management Cost 5,092 5,560 6,365 6,361 7,460 8,043 8,655 9,322 10,027
Total Raw Water Costs 74,169 77,744 90,796 89,003 101,733 320,871 349,846 377,778 407,480
Effective unit cost (c/kl) 18.4 18.7 20.6 23.9 23.9 73.8 78.9 83.6 88.5
% Increase (2.5) 1.8 10.2 12.7 13.4 209.2 6.9 5.9 5.9

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12.2 WATER SALES PROJECTIONS

Table 12-5: Volume sales

Approved
-------- Actual ------- Budget Forecast
Sales Volume
F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15
- Bulk
403,964 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447
(kl’000)

- % Increase 8.05 2.97 5.88 1.62 0.78 2.00 2.00 2.00 1.86

- Wastewater
211 273 273 273 273 277 281 285 289
(kl’000)

- % Increase 17.22 29.38 0 0 0 1.47 1.44 1.42 1.40

Figure 12-1: Bulk water sales volume

Bulk Water Sales Volumes

500 9 .0 %

450 8.1% 8 .0 %

400
7 .0 %

Percent Grow th (Y ear on Y ear)

350
Kilolitres (m illion)

6 .0 %
300
5 .0 %
4 6 9 .3

250
4 6 0 .4
4 5 2 .0
4 4 3 .2
4 3 4 .5
4 2 6 .0
4 2 2 .7
4 1 6 .0

4 .0 %
4 0 4 .0
3 7 3 .9

200
3.4%
3.0% 3 .0 %
150

100
2.0% 2.0% 2.0%
1.9% 1.9% 2 .0 %
1.6%

50 1 .0 %
0.8%

0 0 .0 %
F '0 7 F '0 8 F '0 9 F '1 0 F '1 1 F '1 2 F '1 3 F '1 4 F '1 5 F '1 6
Actual Actual Actual F orecast F orecast F orecast F orecast F orecast F orecast F orecast

Revenue 3 7 3 .9 4 0 4 .0 4 1 6 .0 4 2 2 .7 4 2 6 .0 4 3 4 .5 4 4 3 .2 4 5 2 .0 4 6 0 .4 4 6 9 .3
Grow th Y oY 3 .4 % 8 .1 % 3 .0 % 1 .6 % 0 .8 % 2 .0 % 2 .0 % 2 .0 % 1 .9 % 1 .9 %

The significant increase in F’08 was due to additional sales to iLembe District Municipality.

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 Table 12-6: Sales Volume per Customer
Actual Budget Forecast
F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15 F'16
Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth Vol Growth
Customer kl’m % kl’m % kl’m % kl’m % kl’m % kl’m % kl’m % kl’m % kl’m % kl’m %
eThekwini 315.5 6% 326.2 3.4% 342.9 4.0% 327.9 0.5% 329.5 0.5% 336.1 2.0% 342.8 2.0% 349.7 2.0% 356.2 1.9% 363.0 1.9%
Msunduzi 57.7 12% 56.5 -2.1% 61.8 4.0% 57.3 1.4% 58.2 1.5% 59.3 2.0% 60.5 2.0% 61.7 2.0% 62.9 1.9% 64.1 1.9%
uMgungundlovu 9.3 12% 10.6 13.4% 11.0 5.0% 10.9 3.0% 11.1 2.0% 11.3 2.0% 11.6 2.0% 11.8 2.0% 12.0 1.9% 12.2 1.9%
Siza Water 3.8 8% 3.8 1.4% 4.5 12.8% 3.9 3.0% 4.1 3.0% 4.1 2.0% 4.2 2.0% 4.3 2.0% 4.4 1.9% 4.5 1.9%
Ugu 5.6 16% 6.0 8.0% 6.8 13.0% 7.8 30.0% 8.0 2.0% 8.1 2.0% 8.3 2.0% 8.5 2.0% 8.6 1.9% 8.8 1.9%
iLembe 2.6 -2% 2.9 11.9% 9.6 15.0% 3.5 20.0% 3.1 -12.5% 3.1 2.0% 3.2 2.0% 3.2 2.0% 3.3 1.9% 3.4 1.9%
iLembe T/Over 5.7 - 5.7 -0.3% - - 8.4 49.2% 9.2 8.7% 9.4 2.0% 9.5 2.0% 9.7 2.0% 9.9 1.9% 10.1 1.9%
Sisonke 0.8 7% 0.8 2.5% 0.8 1.8% 0.8 3.0% 0.9 2.0% 0.9 2.0% 0.9 2.0% 0.9 2.0% 0.9 1.9% 1.0 1.9%
Other 3.0 -17% 3.4 14.3% 3.0 -0.2% 2.1 -38.8% 2.1 -0.5% 2.1 1.7% 2.1 1.7% 2.2 2.0% 2.2 1.9% 2.3 1.9%
Total 404.0 416.0 440.4 422.7 426.0 434.5 443.2 452.0 460.4 469.3

Figure 12-2: Sales Volume per Customer, F’11

F'11 Customer Base

eThekw ini - 77%

Msunduzi - 14% eThekwini - 77%
uMgungundlovu - 3%
Siza Water - 1%
iLembe - 1%
iLembe Other - 2%
Ugu - 2%
Sisonke - 0.2%
Other - 0.5%

Msunduzi - 14%

Figure 12-3: Sales Volume per Customer, F’10

F'10 Customer Base

eThekw ini - 78%

eThekwini - 78%
Msunduzi - 14%
uMgungundlovu - 3%
Siza Water - 1%
iLembe - 1%
iLembe Other - 2%
Ugu - 2%
Sisonke - 0.2%
Other - 0.5%

Msunduzi - 14%

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12.3 TARIFF PROJECTIONS

The F’11 tariff increase has been approved at 6.2 % which is 0.5 % higher than the 5.7 % forecasted CPI
level for F’11.

From F’12 onwards, tariff increases will be affected by the capital unit charges arising from the
implementation of water resources infrastructure, which will result in tariff increases above CPI levels.

Table 12-7: Bulk Water Tariff Projections

Approved
Actual Forecast
Bulk Water Sales Tariff Budget
(Rand per kilolitre) F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15
- Bulk Tariff 1

- Base Tariff 2.820 2.960 3.079 3.079 3.279 3.482 3.674 3.872 4.081

- Tariff Increase 0.141 0.118 0.200 0.200 0.203 0.192 0.198 0.209 0.220

- New Tariff - Umgeni Water 2.960 3.079 3.279 3.279 3.482 3.674 3.872 4.081 4.301

- % Increase – Umgeni Water 5.0 4.0 6.5 6.5 6.2 5.5 5.4 5.4 5.4
Add capital unit charge

- Spring Grove - - - - - 0.444 0.468 0.495 0.522

- Mkomazi - - - - - - - - -

Adjustment - over recovery - - - - - - - - -

- Total Tariff 2.960 3.079 3.279 3.279 3.482 4.118 4.340 4.576 4.823

- % Increase -Total 5.0 4.0 6.5 6.5 6.2 18.3 5.4 5.4 5.4

- Bulk Tariff 2 - eThekwini

- Base Tariff 2.820 2.960 3.019 3.019 3.215 3.414 3.602 3.797 4.002

- Tariff Increase 0.141 0.059 0.196 0.196 0.199 0.188 0.195 0.205 0.216

- New Tariff - Umgeni Water 2.960 3.019 3.215 3.215 3.414 3.602 3.797 4.002 4.218

- % Increase - Umgeni Water 5.0 2.0 6.5 6.5 6.2 5.5 5.4 5.4 5.4
Add capital unit charge

- Spring Grove - - - - - 0.444 0.468 0.495 0.522

- Mkomazi - - - - - - - - -

Adjustment - over recovery - - - - - - - - -

- Total Tariff 2.960 3.019 3.215 3.215 3.414 4.046 4.265 4.497 4.740

- % Increase -Total 5.0 2.0 6.5 6.5 6.2 18.5 5.4 5.4 5.4

- 82 -
12.4 SUBSIDY PROJECTIONS

Umgeni Water’s business plan includes a number of projects with a focus on rural development.

Umgeni Water has made written request and has had discussion (in December 2009 and February 2010,
respectively) with the Department of Water Affairs (DWA) regarding Bulk Infrastructure Grant funding /
financial support for the rural development projects. To date, DWA has not provided a firm commitment of
financial support and this financial plan therefore does not reflect the receipt of any grant funding. As a
consequence of this, Umgeni Water’s Net Profit has been negatively impacted by the impairment values
reflected below.

Table 12-8: Subsidy Requirement for Rural Development Projects

Total Construction Commissioning
capital Interest Total Economic Social Commencement Year and Value of
Project cost capitalised Escalation project value Value NPV Date Impairment
Richmond Pipeline R 177m R 30m R 27m R 234m R 136m R 98m -R 254m 2012/03/31 F'16: R 98m
Mhlabatshane
BWS Scheme R 155m R 22m R 15m R 192m R 42m R 150m -R 350m 2010/09/30 F'12: R 150m
Ozwathini BWS
Scheme R 105m R 19m R 18m R 142m R 57m R 85m -R 218m 2010/03/31 F'15: R 85m
Maphumulo BWS
Scheme (Phase 1) R 188m R 7m R 16m R 211m R 30m R 181m -R 421m 2009/09/30 F'12: R 181m
Maphumulo BWS
Scheme (Phase 2) R 131m R 5m R 11m R 147m R 21m R 136m -R 293m 2009/09/30 F'17: R 136m
TOTAL R 756m R 83m R 87m R 926m R 286m R 650m

- 83 -
 The anticipated tariff projections and proportion of each cost driver for the forthcoming six year period are shown in Table 12-9.

Table 12-9: Tariff cost per component

F'08 F'09 F'10 F'11 F'12 F'13 F'14 F'15 F'16
Components % % % % % % % %
R.c/kl R.c/kl R.c/kl R.c/kl R.c/kl R.c/kl R.c/kl R.c/kl R.c/kl
Change Change Change Change Change Change Change Change
Direct costs
- Chemicals 0.056 0.070 26.7 0.065 (8.2) 0.072 11.0 0.078 8.3 0.084 7.9 0.090 7.7 0.097 7.7 0.105 7.7
- Depreciation 0.123 0.138 12.4 0.154 11.6 0.195 27.0 0.206 5.6 0.218 5.6 0.229 5.4 0.242 5.5 0.255 5.5
- Energy 0.084 0.092 9.4 0.128 39.6 0.178 39.3 0.230 29.0 0.293 27.5 0.316 7.9 0.341 8.0 0.360 5.5
- Maintenance 0.175 0.219 25.2 0.244 11.4 0.247 1.3 0.264 6.6 0.279 5.6 0.294 5.4 0.310 5.6 0.327 5.5
- Raw water 0.184 0.187 1.8 0.211 12.7 0.239 13.4 0.738 209.2 0.789 6.9 0.836 5.9 0.885 5.9 0.940 6.2
- Staff costs 0.161 0.176 9.6 0.192 9.3 0.217 12.7 0.238 9.9 0.251 5.5 0.265 5.5 0.280 5.7 0.296 5.6
- Other direct costs 0.020 0.008 (59.7) 0.021 158.0 0.022 5.6 0.026 21.9 0.028 5.9 0.029 4.9 0.033 11.4 0.036 10.4
Total direct costs 0.801 0.890 11.1 1.014 13.9 1.170 15.4 1.781 52.2 1.942 9.1 2.060 6.1 2.189 6.3 2.319 6.0
% of Total Costs 39.7% 46.8% 48.5% 50.2% 48.0% 61.0% 62.2% 60.1% 59.6%
Indirect costs
- Overheads 0.260 0.158 (39.4) 0.259 64.0 0.310 19.9 1.176 279.2 0.440 (62.6) 0.459 4.5 0.670 45.8 0.720 7.6
- Staff costs 0.315 0.338 7.2 0.375 10.8 0.438 17.0 0.474 8.1 0.500 5.4 0.527 5.5 0.557 5.6 0.588 5.6
- Depreciation 0.031 0.030 (2.6) 0.034 12.9 0.044 30.2 0.047 6.9 0.050 5.6 0.052 5.4 0.055 5.5 0.058 5.5
- Amortisation 0.227 0.225 (0.9) 0.231 3.0 0.218 (5.6) - (100.0) - - - - - - - -
Total indirect costs 0.833 0.751 (9.9) 0.898 19.7 1.011 12.5 1.697 67.9 0.989 (41.7) 1.039 5.0 1.282 23.4 1.366 6.6
% of Total Costs 41.2% 39.5% 43.0% 43.4% 45.7% 31.1% 31.4% 35.2% 35.1%

Finance costs 0.386 0.260 (32.6) 0.178 (31.4) 0.149 (16.1) 0.234 56.9 0.251 7.0 0.214 (14.8) 0.171 (19.9) 0.204 19.0
% of Total Costs 19.1% 13.7% 8.5% 6.4% 6.3% 7.9% 6.5% 4.7% 5.2%

Cost - Bulk water 2.020 1.900 (5.9) 2.090 10.0 2.330 11.5 3.712 59.3 3.182 (14.3) 3.313 4.1 3.642 9.9 3.890 6.8
Contribution
-Wastewater (0.007) (0.012) 88.1 (0.018) 49.1 (0.015) (18.7) (0.021) 42.7 (0.019) (9.0) (0.019) (1.2) (0.019) (1.6) (0.019) 2.9
-Section 30 Activities (0.018) (0.060) 240.5 (0.030) (49.4) (0.017) (42.9) (0.004) (78.0) (0.004) 2.3 (0.004) (2.1) (0.005) 40.5 (0.007) 27.9
Total cost 1.995 1.828 (8.4) 2.042 11.7 2.298 12.5 3.687 60.4 3.159 (14.3) 3.289 4.1 3.617 10.0 3.863 6.8

F’12 indirect costs include the impairment of rural development projects, equal to 76 cents per kilolitre.

- 84 -
12.5 FINANCIAL STATEMENT PROJECTIONS

Table 12-10: Consolidated Income Statement

Income Statement (in R'000)
For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15
CONSOLIDATED Actual Actual Actual Budget Forecast

Volume of Bulk treated water sold (in kl'000) 373,857 403,965 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447

Revenue 1,180,260 1,280,747 1,485,496 1,617,089 1,616,236 1,614,484 1,848,658 1,986,476 2,133,673 2,288,096
Water Sales - Bulk 1,048,012 1,190,798 1,259,187 1,422,165 1,364,989 1,460,849 1,765,035 1,897,669 2,040,905 2,191,173
Water Sales - Reticulation - - - - - - - - - -
Water Sales - Raw Water 179 246 368 26 356 384 418 453 487 523
Wastewater Sales 1,092 1,348 1,814 1,729 1,950 2,071 2,218 2,372 2,538 2,715
Wastewater Management Fee 43,158 33,736 40,116 42,724 42,724 45,372 49,229 53,364 56,246 59,283
Section 30 activities 87,819 54,619 184,012 150,447 206,218 105,808 31,759 32,616 33,497 34,402

Cost of sales 381,959 393,265 545,025 603,269 641,130 619,304 837,556 930,305 1,004,956 1,085,317
Changes in water inventory (1,509) (122)
Chemicals 21,194 25,175 32,751 35,163 30,668 33,947 37,291 40,966 44,919 49,186
Depreciation 53,727 52,033 59,848 67,477 67,509 85,684 92,281 99,387 106,841 114,854
Energy 28,625 37,291 43,145 72,238 61,028 85,213 110,778 144,011 158,412 174,253
Maintenance 59,232 77,262 100,825 114,790 112,190 115,047 123,905 133,446 143,454 154,213
Raw Water 70,391 74,169 77,744 90,796 89,003 101,733 320,871 349,846 377,778 407,480
Staff Costs 72,836 79,497 82,666 93,441 91,848 104,436 112,060 120,521 129,680 139,536
Section 30 activities 70,751 38,461 141,132 119,812 178,404 82,119 26,995 27,724 28,473 29,241
Other direct operating activities 5,203 10,885 7,035 9,552 10,481 11,125 13,375 14,405 15,399 16,554

Gross profit 798,301 887,482 940,471 1,013,820 975,106 995,180 1,011,102 1,056,171 1,128,718 1,202,779
Gross profit % 68% 69% 63% 63% 60% 62% 55% 53% 53% 53%
Other operating income 6,476 6,756 30,826 5,834 7,132 7,370 7,579 7,795 8,023 8,264

Administration Expenses 334,223 337,680 329,163 388,473 394,149 446,352 742,828 444,593 476,392 597,531
Staff Costs 108,026 127,399 146,710 172,220 165,041 193,514 207,641 223,318 240,290 258,552
Energy 1,487 2,151 2,255 3,943 3,705 4,914 6,388 8,305 9,135 10,049
Depreciation 10,180 12,628 12,869 11,144 14,871 19,309 20,795 22,397 24,076 25,882
Amortisation 95,479 91,627 93,504 93,791 97,828 93,075 - - - -
Impairments - - - - - - 331,000 - - 85,000
Other operating & administrative expenses 119,052 103,874 73,825 107,376 112,705 135,540 177,004 190,574 202,890 234,339

Operating income before interest 470,554 556,559 642,134 631,180 588,089 556,198 275,852 619,373 660,349 613,512

Net interest and finance charges 219,803 165,439 116,496 161,002 82,736 70,574 108,151 116,805 101,485 81,978
Interest Paid 309,417 270,735 267,571 249,093 234,541 140,466 155,296 151,116 137,751 128,735
Interest Received (89,614) (105,296) (151,075) (88,091) (151,805) (69,892) (47,145) (34,311) (36,266) (46,757)

Net Profit (Loss) 250,752 391,119 525,638 470,178 505,353 485,623 167,702 502,568 558,864 531,533

- 85 -
Table 12-11: Income Statement (S29)
Income Statement (in R'000)
For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15
PRIMARY (S29) Actual Actual Actual Budget Forecast

Volume of treated water sold (in kl'000) 373,857 403,965 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447

Revenue 1,092,441 1,226,128 1,301,484 1,466,642 1,410,018 1,508,676 1,816,899 1,953,859 2,100,176 2,253,695
Water Sales - Bulk 1,048,012 1,190,798 1,259,187 1,422,165 1,364,989 1,460,849 1,765,035 1,897,669 2,040,905 2,191,173
Water Sales - Raw Water 179 246 368 26 356 384 418 453 487 523
Wastewater Sales 1,092 1,348 1,814 1,729 1,950 2,071 2,218 2,372 2,538 2,715
Wastewater Management Fee 43,158 33,736 40,116 42,724 42,724 45,372 49,229 53,364 56,246 59,283

Cost of sales 299,672 344,157 396,386 477,208 455,965 529,544 809,091 901,176 975,076 1,055,422
Changes in water inventory - (1,509) (122) - - - - - - -
Chemicals 21,158 25,141 32,650 35,072 30,546 33,816 37,274 40,949 44,901 49,167
Depreciation 53,727 52,033 59,848 67,477 67,509 85,684 92,281 99,387 106,841 114,854
Energy 28,275 36,905 42,620 71,311 60,223 84,135 110,602 143,835 158,231 174,067
Maintenance 56,505 75,936 98,365 114,115 111,181 113,911 123,777 133,378 143,417 154,193
Raw Water 70,391 74,169 77,744 90,796 89,003 101,733 320,871 349,846 377,778 407,480
Staff Costs 64,795 70,936 78,587 89,257 87,465 99,599 111,265 119,724 128,861 138,693
Section 30 activities - - - - - - - - - -
Other direct operating activities 4,821 10,546 6,694 9,180 10,038 10,666 13,021 14,057 15,048 16,969

Gross margin/profit 792,769 881,970 905,098 989,435 954,054 979,131 1,007,808 1,052,683 1,125,100 1,198,273
Gross profit % 73% 72% 70% 67% 68% 65% 55% 54% 54% 53%
Other operating income 5,770 6,155 30,023 5,427 6,562 6,750 7,579 7,795 8,023 8,264

Administration Expenses 338,566 338,692 317,958 384,130 385,361 437,075 741,192 442,835 474,501 595,496
Staff Costs 108,017 127,399 140,676 165,164 158,345 186,765 206,016 221,570 238,409 256,529
Energy 1,487 2,151 2,255 3,943 3,705 4,914 6,388 8,305 9,135 10,049
Depreciation 10,180 12,575 12,801 11,090 14,624 19,062 20,785 22,386 24,066 25,871
Amortisation 99,831 91,627 93,504 93,791 97,828 93,075 - - - -
Impairments - - - - - - 331,000 - - 85,000
Other operating & administrative expenses 119,052 104,939 68,723 110,141 110,859 133,258 177,004 190,574 202,890 218,048

Operating income before interest 459,973 549,434 617,163 610,732 575,254 548,806 274,194 617,643 658,622 611,040

Net interest and finance charges 219,802 165,436 116,496 161,002 82,736 70,574 108,151 116,805 101,485 81,978
Interest Paid 309,416 270,732 267,571 249,093 234,541 140,466 155,296 151,116 137,751 128,735
Interest Received (89,614) (105,296) (151,075) (88,091) (151,805) (69,892) (47,145) (34,311) (36,266) (46,757)

Net Profit (Loss) 240,172 383,997 500,667 449,730 492,519 478,232 166,044 500,838 557,138 529,062

- 86 -
Table 12-12: Income Statement (S29 - Bulk)
Income Statement (in R'000)
For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15
BULK WATER Actual Actual Actual Budget Forecast

Volume of treated water sold (in kl'000) 373,857 403,965 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447

Revenue 1,048,191 1,191,044 1,259,555 1,422,190 1,365,345 1,461,232 1,765,452 1,898,122 2,041,392 2,191,696
Water Sales - Bulk 1,048,012 1,190,798 1,259,187 1,422,165 1,364,989 1,460,849 1,765,035 1,897,669 2,040,905 2,191,173
Water Sales - Reticulation - - - - - - - - - -
Water Sales - Raw Water 179 246 368 26 356 384 418 453 487 523

Cost of sales 281,408 323,587 370,237 450,606 428,610 498,298 773,627 860,599 931,099 1,007,753
Changes in water inventory - (1,509) (122) - - - - - - -
Chemicals 18,897 22,458 29,294 31,528 27,324 30,559 33,766 37,171 40,839 44,801
Depreciation 51,416 49,554 57,358 64,986 65,018 83,194 89,599 96,499 103,736 111,516
Energy 24,755 33,828 38,105 65,402 54,061 75,878 99,867 129,880 142,881 157,182
Maintenance 52,281 70,761 91,228 109,196 103,246 105,413 114,625 123,522 132,821 142,802
Raw Water 70,391 74,169 77,744 90,796 89,003 101,733 320,871 349,846 377,778 407,480
Staff Costs 59,728 64,842 73,199 83,121 81,280 92,286 103,419 111,285 119,780 128,922
Other direct operating activities 3,940 9,484 3,432 5,576 8,678 9,235 11,479 12,397 13,263 15,050

Gross margin/profit 766,783 867,457 889,318 971,585 936,734 962,934 991,825 1,037,523 1,110,293 1,183,943
Gross profit % 73% 73% 71% 68% 69% 66% 56% 55% 54% 54%
Other operating income 5,770 6,155 26,452 5,427 2,990 3,178 4,007 4,223 4,451 4,692

Administration Expenses 325,338 336,506 312,212 378,616 379,735 430,617 737,238 438,338 469,631 590,222
Staff Costs 108,017 127,399 140,676 165,164 158,345 186,765 206,016 221,570 238,409 256,529
Energy 1,487 1,856 2,255 3,943 3,705 4,914 6,388 8,305 9,135 10,049
Depreciation 10,180 12,378 12,420 10,709 14,243 18,684 20,377 21,947 23,594 25,364
Amortisation 99,831 91,627 93,504 93,791 97,828 93,075 - - - -
Impairments - - - - - - 331,000 - - 85,000
Other operating & administrative expenses 105,824 103,245 63,357 105,009 105,613 127,179 173,457 186,517 198,493 213,281

Operating income before interest 447,215 537,106 603,558 598,395 559,990 535,495 258,594 603,408 645,114 598,413

Net interest and finance charges 212,914 155,764 108,036 155,252 75,265 63,650 101,846 111,202 96,676 78,834
Interest Paid 302,528 261,060 259,111 243,343 227,070 133,542 148,991 145,513 132,942 124,828
Interest Received (89,614) (105,296) (151,075) (88,091) (151,805) (69,892) (47,145) (34,311) (36,266) (46,757)

Net Profit (Loss) 234,302 381,341 495,522 443,143 484,725 471,845 156,748 492,207 548,438 520,341

- 87 -
Table 12-13: Income Statement (S29 Wastewater)
Income Statement (in R'000)
For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15
WASTEWATER Actual Actual Actual Budget Forecast

Volume of treated water sold (in kl'000) - - - - - - - - - -

Revenue 44,250 35,084 41,930 44,452 44,674 47,443 51,447 55,737 58,784 61,998
Water Sales - Bulk - - - - - - - - - -
Water Sales - Reticulation - - - - - - - - - -
Water Sales - Raw Water - - - - - - - - - -
Wastewater Sales 1,092 1,348 1,814 1,729 1,950 2,071 2,218 2,372 2,538 2,715
Wastewater Management Fee 43,158 33,736 40,116 42,724 42,724 45,372 49,229 53,364 56,246 59,283

Cost of sales 18,264 20,570 26,149 26,602 27,354 31,246 35,464 40,577 43,977 47,669
Changes in water inventory - - - - - - - - - -
Chemicals 2,261 2,683 3,357 3,544 3,222 3,257 3,508 3,778 4,061 4,366
Depreciation 2,311 2,479 2,490 2,490 2,490 2,490 2,682 2,889 3,105 3,338
Energy 3,520 3,077 4,515 5,909 6,162 8,257 10,734 13,954 15,350 16,885
Maintenance 4,224 5,175 7,137 4,919 7,935 8,498 9,152 9,857 10,596 11,391
Raw Water - -
Staff Costs 5,067 6,094 5,388 6,136 6,186 7,313 7,846 8,439 9,080 9,770
Section 30 activities - - - - - - - - - -
Other direct operating activities 881 1,062 3,262 3,604 1,360 1,431 1,542 1,660 1,785 1,919

Gross margin/profit 25,986 14,514 15,780 17,850 17,319 16,197 15,982 15,160 14,806 14,330
Gross profit % 59% 41% 38% 40% 39% 34% 31% 27% 25% 23%
Other operating income - - 3,572 3,572 3,572 3,572 3,572 3,572 3,572

Administration Expenses 13,228 2,186 5,747 5,514 5,626 6,458 3,954 4,497 4,870 5,274
Staff Costs - - - - - - - - - -
Energy - 295 - - - - - - - -
Depreciation - 197 381 381 381 379 408 439 472 508
Amortisation - - - - - - - - - -
Impairments - - - - - - - - - -
Other operating & administrative expenses 13,228 1,694 5,366 5,132 5,245 6,080 3,546 4,058 4,398 4,767

Operating income before interest 12,758 12,328 13,605 12,336 15,265 13,311 15,600 14,235 13,509 12,627

Net interest and finance charges 6,888 9,672 8,460 5,750 7,471 6,924 6,305 5,603 4,808 3,907
Interest Paid 6,888 9,672 8,460 5,750 7,471 6,924 6,305 5,603 4,808 3,907
Interest Received

Net Profit (Loss) 5,870 2,656 5,145 6,586 7,794 6,387 9,296 8,632 8,700 8,721

- 88 -
Table 12-14: Income Statement (S30)
Income Statement (in R'000)
For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15
OTHER (S30) Actual Actual Actual Budget Forecast

Volume of treated water sold (in kl'000) - - - - - - - - - -

Revenue 87,819 54,619 184,012 150,447 206,218 105,808 31,759 32,616 33,497 34,402
Other 87,819 54,619 184,012 150,447 206,218 105,808 31,759 32,616 33,497 34,402

Cost of sales 82,287 49,107 148,639 126,061 185,166 89,760 28,465 29,129 29,879 29,896
Changes in water inventory - - - - - - - - - -
Chemicals 36 34 101 91 122 131 17 17 18 19
Depreciation - - - - - - - - - -
Energy 350 386 526 927 805 1,078 176 176 181 186
Maintenance 2,727 1,326 2,460 675 1,009 1,136 128 67 37 21
Raw Water - - - - - - - - - -
Staff Costs 8,041 8,561 4,078 4,184 4,383 4,838 795 797 820 843
Section 30 activities 70,751 38,461 141,132 119,812 178,404 82,119 26,995 27,724 28,473 28,473
Other direct operating activities 382 339 341 372 443 459 354 348 351 354

Gross margin/profit 5,532 5,511 35,373 24,385 21,052 16,049 3,294 3,488 3,618 4,506
Gross profit % 6% 10% 19% 16% 10% 15% 10% 11% 11% 13%
Other operating income 706 601 803 407 570 620

Administration Expenses (4,343) (1,012) 11,205 4,344 8,788 9,277 1,636 1,758 1,891 2,034
Staff Costs 9 - 6,034 7,056 6,696 6,749 1,625 1,748 1,881 2,023
Energy - - - - - - - - - -
Depreciation - 53 68 53 246 246 11 11 11 11
Amortization - - - - - - - - - -
Impairments - - - - - - - - - -
Other operating & administrative expenses (4,352) (1,065) 5,102 (2,766) 1,846 2,282 - - - -

Operating income before interest 10,581 7,125 24,971 20,448 12,835 7,392 1,658 1,729 1,727 2,472

Net interest and finance charges 1 3 - - - - - - - -

Interest Paid 1 3 - - - - - - -
Interest Received

Net Profit (Loss) 10,580 7,122 24,971 20,448 12,835 7,392 1,658 1,729 1,727 2,472

- 89 -
Table 12-15: Balance Sheet
Balance Sheet (in R'000)
As at June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15
Actual Actual Actual Budget Forecast
ASSETS
Non-current assets 2,717,152 2,975,479 2,660,142 3,212,899 3,070,903 3,709,255 3,972,382 4,354,712 4,715,875 4,983,729
Property, plant and equipment 2,251,962 2,305,767 2,471,835 3,119,902 2,958,934 3,682,753 3,950,350 4,337,494 4,703,841 4,971,695
Other non-current assets 287,201 229,031 165,826 92,998 93,347 12,034 12,034 12,034 12,034 12,034
Investments 177,654 440,286 22,481 - 18,622 14,468 9,998 5,183 - -
Employee loans 335 395 - - - - - - - -

Current Assets 513,345 677,421 1,413,580 311,627 1,065,254 968,617 807,407 753,622 852,040 977,697
Inventories 7,461 10,251 9,129 10,251 9,129 9,129 9,129 9,129 9,129 9,129
Accounts receivable 128,500 140,570 174,617 165,205 182,972 191,626 216,990 228,059 240,012 252,552
Sundry Debtors 6,981 7,381 7,781 8,181 8,181 8,181 8,181 8,181 8,181 8,181
Current portion of employee loans 726 456 580 130 653 - - - - -
Short-term investments 346,973 501,029 1,213,416 126,862 859,666 759,030 572,666 507,666 594,666 707,666
Interest Receivable 3,057 5,616 3,282 14 4,365 14 14 14 14 14
Bank balances and cash 19,647 12,118 4,775 985 289 638 427 574 39 156

Total assets 3,230,498 3,652,900 4,073,722 3,524,527 4,136,157 4,677,872 4,779,789 5,108,333 5,567,915 5,961,426

RESERVES & LIABILITIES

Reserves
Accumulated reserves 633,755 1,018,734 1,542,116 1,953,543 2,047,469 2,533,093 2,700,794 3,203,362 3,642,227 4,293,760

Non-current liabilities 2,179,811 2,141,153 1,105,182 1,185,503 1,598,616 1,639,076 1,567,971 1,409,169 1,311,261 1,169,803
Interest bearing borrowings 2,060,323 1,976,784 917,584 1,091,167 1,400,302 1,502,949 1,466,795 1,336,428 1,242,312 1,105,045
Post retirement medical benefit obligations 119,488 164,369 187,597 94,336 198,314 136,127 101,177 72,741 68,949 64,759

Current liabilities 416,932 493,013 1,426,424 385,481 490,072 505,704 511,023 495,802 494,428 497,862
Accounts payable (including accruals & leases) 169,262 232,840 273,818 232,840 273,818 273,818 273,818 273,818 273,818 273,818
Provisions 84,769 118,340 58,120 17,340 58,120 58,120 58,120 58,120 58,120 58,120
Current portion of interest bearing loans 120,268 101,554 1,061,320 117,282 117,282 134,937 143,180 130,367 131,356 137,267
Other payables/loans 42,633 40,279 33,166 18,018 40,851 38,829 35,905 33,497 31,133 28,657
Bank overdrafts

Total reserves and liabilities 3,230,498 3,652,900 4,073,722 3,524,527 4,136,157 4,677,872 4,779,789 5,108,333 5,447,915 5,961,426

- 90 -
Table 12-16: Cashflow Statement

Cash Flow Statement (in R'000)

For the year ended June 30, F07 F08 F09 F10 F10 F11 F12 F13 F14 F15
Actual Actual Actual Budget Forecast

OPERATING ACTIVITIES
Operating profit before working capital changes 660,281 712,456 798,051 803,592 768,296 754,265 719,929 741,156 791,267 839,248
Changes in working capital 63,863 129,871 (54,893) (55,806) (522) (72,444) (62,396) (41,387) (17,404) (18,134)
Net cash from operating activities 724,144 842,327 743,157 747,785 767,774 681,821 657,533 699,769 773,862 821,114

INVESTING ACTIVITIES
Additions to property, plant and equipment (176,720) (108,391) (233,371) (655,215) (556,636) (815,969) 711,674) (508,928) (497,264) (493,591)
Additions to intangible assets (452) (1,043) (2,774)
Proceeds on disposal of Property, plant & equipment 185 1,630 14,157
Transfer to financial asset
Disposal of investments 1,087 3,556 2,389 - - - - - - -
Net cash used in investing activities (175,900) (104,247) (219,600) (655,215) (556,636) (815,969) 711,674) (508,928) 497,264) (493,591)

FINANCING ACTIVITIES
Net change in long-term borrowings (147,488) (112,533) (107,964) (1,086,095) (485,960) 120,301 (27,911) (143,180) (93,127) (131,356)
Net Investments - LTI & RED (148,321) (378,895) (251,882) 812,321 278,180 105,154 190,470 69,815 (81,817) (113,000)
Proceeds from (repaid to) short-term borrowings 24,059 (12,997) (14,222) 291,000 - - - - - -
Interest received 28,387 23,410 102,456 157,166 151,805 69,892 47,145 34,311 36,266 46,757
Deferred (accrued) interest 74,891 (20,385) (479) (525) (705) (1,072)
Interest paid (297,555) (264,593) (259,288) (266,658) (234,541) (140,466) (155,296) (151,116) (137,751) (128,735)
Net cash used in financing activities (540,918) (745,609) (530,900) (92,266) (215,625) 134,497 53,929 (190,695) 277,133) (327,407)

CASH AND CASH EQUIVALENTS

Net increase/(decrease) in cash and cash equivalents 7,325 (7,528) (7,343) 304 (4,486) 349 (211) 146 (534) 116
At beginning of year 12,321 19,647 12,118 680 4,775 289 638 427 574 39
At end of year 19,647 12,118 4,775 985 289 638 427 574 39 156

- 91 -
Table 12-17: Statement of Changes in Equity
Statement of Changes in Equity (in R'000)
For the Year ended June 30, Capital Revaluation Accumulated
Contributions Reserve Profit (Loss) Total

Balance at 30 June 2008 442,847 (31,683) 573,631 1,018,734

Net movement - 31,683 525,638 523,381
Balance at 30 June 2009 442,847 - 1,099,269 1,542,116
Net movement - - 505,353 505,353
Balance at 30 June 2010 442,847 - 1,604,622 2,047,469
Net movement - - 485,623 485,623
Balance at 30 June 2011 442,847 - 2,090,246 2,533,093
Net movement - - 167,702 167,702
Balance at 30 June 2012 442,847 - 2,257,948 2,700,794
Net movement - - 502,568 502,568
Balance at 30 June 2013 442,847 - 2,760,516 3,203,362
Net movement - - 558,864 438,864
Balance at 30 June 2014 442,847 - 3,319,380 3,642,227
Net movement - - 531,533 651,533
Balance at 30 June 2015 442,847 - 3,850,913 4,293,760

- 92 -
12.6 CAPITAL INVESTMENT PROJECTIONS

Table 12-18: Capital Expenditure Programme

CASHFLOWS UNESCALATED
CAPEX SUMMARY Actual Actual Budget CAPEX Total Forecast
by
F08 F09 F10 Function F10 - F15 F10 F11 F12 F13 F14 F15

R'000 R'000 R'000 % R'000 R'000 R'000 R'000 R'000 R'000 R'000

CATCHMENT MANAGEMENT 485 1,331 4,060 0.6% 19,229 4,323 4,500 406 500 9,500
WATER TRANSFER 44,164 204,875 475,030 69.6% 2,141,936 374,193 541,821 347,823 233,518 349,008 295,574
WATER TREATMENT 5,865 42,617 94,180 23.1% 709,971 71,219 192,741 252,588 145,873 5,700 41,850
OFFICE INFRASTRUCTURE 702 14,150 0.9% 28,806 28,556 250
OTHER IMMOVABLE 382 5,000 0.6% 18,000 5,100 3,400 2,000 3,000 4,500
UW IMMOVABLE BUDGET 51,598 248,823 592,420 95% 2,917,942 483,391 742,712 602,817 382,891 359,208 346,924
Business Plan 2009/10 3,271,430 592,420 619,230 418,730 448,330 493,320 699,400
% Increase / (Decrease) -11% -18% 20% 44% -15% -27% -50%

HEAD OFFICE 2,400 0.8% 24,050 16,800 4,750 2,000 500

MOVABLE ASSETS (ICT) 1,717 676 20,900 1.9% 59,951 18,851 11,100 8,150 6,300 10,550 5,000
SCIENTIFIC SERVICES & OTHER EQUIPMENT 1,769 606 26,165 1.5% 47,690 23,381 10,455 2,295 9,519 2,040
PLANT AND VEHICLES 82 13,330 0.9% 29,213 14,213 5,000 10,000
UW MOVABLE BUDGET 3,568 1,282 62,795 5% 160,904 73,245 31,305 12,445 26,319 12,590 5,000
Business Plan 2009/10 147,504 62,795 23,355 12,445 26,319 12,590 10,000
% Increase / (Decrease) 9% 17% 34% 0% 0% 100% 100%

TOTAL CAPITAL BUDGET 55,166 250,105 655,215 100% 3,078,846 556,636 774,017 615,262 409,210 371,798 351,924
Business Plan 2009/10 3,418,934 655,215 642,585 431,175 474,649 505,910 709,400
Increase / (Decrease) -340,088 -98,579 131,432 184,087 -65,439 -134,112 -357,476
% Increase / (Decrease) -10% -15% 20% 43% -14% -27% -50%

CASHFLOWS ESCALATED

SUMMARY OF ESCALATED BUDGET F08 F09 F10 F10 - F15 F10 F11 F12 F13 F14 F15

UW IMMOVABLE BUDGET 3,419,238 483,391 782,967 697,278 476,196 480,425 498,981

UW MOVABLE BUDGET 177,404 73,245 33,002 14,395 32,733 16,839 7,192
TOTAL CAPITAL BUDGET 3,596,642 556,636 815,969 711,674 508,928 497,264 506,172
ESCALATION % 17% 0% 5% 16% 24% 34% 44%

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Table 12-19: Capital Expenditure Allocation
2011 Business Plan 2010 Business Plan
Expenditure Allocation 2010-2015 2010-2015 Increase / (Decrease)
R'm % of Total R'm % of Total
Rural Development Projects 1,091 35% 994 29% 97
Augmentation 886 29% 1,405 41% -519
Expansion 106 3% 50 1% 57
Upgrade 631 20% 630 18% 1
Rehabilitation 125 4% 127 4% -2
Information Communication & Technology 60 2% 52 2% 8
Other 180 6% 161 5% 19
Total Umgeni Water CAPEX 3,079 100% 3,419 100% -340

Figure 12-4: Capital Expenditure Allocation

C apital Ex penditure Sum m ary

Upgrade and
Growth through
Rehabilitation,
Expansion and
R756m, 25%
Augmentation,
R992m, 32%

Other, R180m, 6%
Rural
Development, Information and
R1,091m, 35% Communications
Technology,
R60m, 2%

- 94 -
Table 12-20: Financial indicators

Financial Indicators and Ratios F'07 F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15 F'16
UW Target
Actual Actual Actual Budget Forecast

Return on Asset 17.39% 20.53% 22.63% 18.58% 18.05% 14.25% 6.57% 13.48% 13.28% 11.68% 10.44% 15% to 20%

Asset turnover 0.436 0.472 0.523 0.476 0.496 0.414 0.440 0.432 0.429 0.436 0.397

Fixed asset turnover 0.524 0.555 0.601 0.518 0.546 0.438 0.468 0.458 0.454 0.460 0.417

Figure 12-5: Asset Turnover

0.65

0.60

Asset Turnover
0.55
Fixed Asset Turnover

0.50

0.45

0.40

0.35
F'07 F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15 F'16

Actual Forecast

Figure 12-6: Return on Asset

25%

23%
21%
Return on Asset
19%

17%
15%

13%

11%
9%
7%

5%
F'07 F'08 F'09 F'10 F'10 F'11 F'12 F'13 F'14 F'15 F'16

Actual Forecast

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 Table 12.21: Umgeni Water Five-Year Capital Expenditure Programme showing Schedule of Cashflows for Major Projects
Project Project Cashflows 2010 - 2015
Project Project Total
Project Rural Total Total F'10 - F'15
Project Description Customer Stage Business
Category Development Business Increase / Cashflows F10 F11 F12 F13 F14 F15
Ranking Plan F'10
Projects Plan F'11 (Decrease)
EXP Rural Maphumulo BWS Phase 1 iLembe DM A1 93,010 180,746 87,736 180,746 16,588 100,807 60,241 3,110
AUG Pipeline: Avondale to Honolulu Phase 1 (17km) iLembe DM A1 164,156 157,260 -6,896 81,227 66,915 5,500 8,812
AUG Pipeline: Honolulu to Mvoti Balancing Reservoir (7km) iLembe DM A1 77,300 77,300 77,300 54,241 21,060 1,999
AUG Pipeline (’57): Umlaas Road to eThekwini Offtake Point (M) eThekwini MM A1 128,660 128,660 76,249 56,397 14,852 5,000
AUG Pipeline ('61) : DV Harris to World’s View Reservoir eThekwini MM, Msunduzi LM A1 92,000 92,000 65,093 54,001 11,092
AUG Durban Heights Northern Aqueduct Booster Pump Station eThekwini MM A1 63,715 63,715 26,554 22,206 4,348
EXP Rural Ngcebo BWS Scheme Phase 1 iLembe DM A1 40,001 40,001 20,738 15,240 5,498
AUG Pipeline: South Coast Phase 1 - Amzimtoti to Umkomaas and to Scottburgh eThekwini MM, iLembe DM, Ugu DM A1 31,000 17,205 -13,795 14,742 6,634 6,634 1,474
EXP Rural Mhlabatshane Sub-Regional Scheme Ugu DM A2 55,600 195,000 139,400 155,000 10,000 53,500 83,000 8,500
AUG Pipeline (’61): extension from ED2 to ED4. eThekwini MM, Msunduzi LM A2 78,000 105,000 27,000 101,547 20,876 46,771 28,800 5,100
AUG South Coast Augmentation Booster Pump Station eThekwini MM, Ugu DM A2 58,800 77,812 19,012 74,578 38,566 32,000 4,012
AUG Mapaphetwa WW: Plant Upgrade to 5.0 Ml/d and reservoir eThekwini MM A2 20,300 37,300 17,000 35,941 1,170 28,127 4,760 1,884
EXP Rural Pipeline: to Richmond (30km) uMgungundlovu DM B1 241,318 181,064 -60,255 120,828 1,213 1,213 2,452 42,200 38,750 35,000
EXP Rural Maphumulo BWS Phase 2 iLembe DM B1 125,680 135,955 10,275 73,681 2,907 8,501 25,000 37,274
AUG Pipeline: Hazelmere to Bifurcation (10km) eThekwini MM, iLembe DM B1 97,400 97,400 97,400 13,242 69,031 15,127
UPG Hazelmere WW: Upgrade from 45 to 75Ml/day eThekwini MM, iLembe DM B1 76,390 76,390 76,328 469 38,035 29,850 7,974
AUG Manyavu uMgungundlovu DM B1 25,000 25,000 25,000 25,000
UPG Quarry Reservoir upgrade to 7.5Ml eThekwini MM, Ugu DM B1 21,500 21,500 21,500 450 20,050 1,000
AUG New Raw Water Pipeline ('251/'51) from Midmar Dam to Pumpstation eThekwini MM, Msunduzi LM, uMgungundlovu DM B1 19,940 -19,940
UPG Hazelmere WW Pumpstation upgrade eThekwini MM, iLembe DM B1 19,500 19,500 19,500 1,040 15,710 1,120 1,630
UPG Bruyns Hill Reservoir upgrade to 4Ml uMgungundlovu DM B1 14,970 14,970 14,970 190 12,618 760 1,402
AUG Pipeline ('61): extension from ED4 to Umlaas Road eThekwini MM, Msunduzi LM, uMgungundlovu DM B1 179,500 220,960 41,460 8,879 4,779 4,100
UPG Rural Ndwedwe Reservoir 2 Upgrade to 2Ml eThekwini MM, iLembe DM B1 7,970 7,970 7,970 2,200 4,710 1,060
UPG Rural Ndwedwe Reservoir 1 Upgrade to 2Ml eThekwini MM, iLembe DM B1 7,970 7,970 7,970 2,200 4,710 1,060
EXP Central Ndwedwe BWS Phase 1: Ozwathini pipeline (31km) and 3 reservoirs iLembe DM B2 116,000 116,000
UPG Midmar WW: Upgrade Phase 2 from 250 to 375Ml/d eThekwini MM, Msunduzi LM, uMgungundlovu DM B2 230,100 230,100 230,078 514 1,014 122,950 100,600 5,000
AUG Pipeline: Claridge to Wartburg Phase 1 augmentation uMgungundlovu DM B2 199,572 199,572 122,989 225 1,350 40,836 40,578 40,000
AUG Raw Water Pipeline ('251): Midmar Pumpstation to Midmar WW duplication eThekwini MM, Msunduzi LM, uMgungundlovu DM B2 69,000 -69,000
AUG Raw Water Pipeline to Hazelmere WW eThekwini MM, iLembe DM B2 18,780 18,780 1 18,772 982 982 15,808 1,000
EXP Rural Greater Vulamehlo Sub-Regional Scheme Ugu DM C1 51,000 51,000 6,000 3,000 3,000
EXP Rural Greater Bulwer BWS Scheme Sisonke C1 69,900 69,900 5,000 5,000

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 Project Project Cashflows 2010 - 2015
Project Project Total
Project Rural Total Total F'10 - F'15
Project Description Customer Stage Business
Category Development Business Increase / Cashflows F10 F11 F12 F13 F14 F15
Ranking Plan F'10
Projects Plan F'11 (Decrease)
EXP Rural Lower Thukela BWS iLembe DM C1 340,900 1,000,000 659,100 351,000 5,000 21,100 21,900 101,000 101,000 101,000
EXP Rural Ozwathini BWS Scheme: Sikoto Dam and Pipelines eThekwini MM, iLembe DM C1 147,700 147,700 147,700 2,700 15,000 65,000 65,000
EXP Bhobhoyi Upgrade Ugu DM C1 75,000 75,000 75,000 22,500 50,000 2,500
AUG Durban Heights WW:Process Upgrade to 75 Ml/d eThekwini MM C1 80,000 -80,000
AUG Umlaas Road Reservoir 2 (45Ml) eThekwini MM, Msunduzi LM, uMgungundlovu DM C1 80,650 80,650
UPG Wiggins Highlift Pumpstation (Including Surge Anticipator) eThekwini MM C1 63,800 63,800 63,800 4,500 25,920 27,500 5,880
UPG Durban Heights WW: Filter Upgrade eThekwini MM C1 49,350 80,400 31,050 80,400 5,400 40,000 35,000
AUG Pipeline: South Coast Phase 2a from Scottburgh to Kelso eThekwini MM, Ugu DM C1 96,000 51,000 -45,000 31,000 6,880 22,484 1,636
EXP Pipeline: Blythedale (Shayamoya) (3km) and revervoir iLembe DM C1 9,500 18,000 8,500 18,000 6,000 11,100 900
UPG Groenekloof Reservoir Upgrade to 5Ml Msunduzi LM, uMgungundlovu DM C1 17,000 -17,000
EXP Rural Greater Mpofana Regional Scheme Umgungundlovu DM C1 268,812 268,812 14,369 2,859 5,280 6,230
EXP Pipeline: link to Zinkwazi (10km) iLembe DM C1 9,500 14,000 4,500 13,300 1,000 12,300
REH Durban Heights WW: Reservoir 3 Roof Rehabilitation eThekwini MM C1 12,900 12,900 12,900 6,030 5,000 1,870
AUG Umzinto Water Works.1 eThekwini MM, Ugu DM C1 12,000 11,100 -900 11,100 1,800 8,100 200 1,000
AUG Mkomazi BWS eThekwini MM, Msunduzi LM, uMgungundlovu DM C1 3,209,104 3,308,000 98,896 8,000 3,600 4,000 400
REH Pipeline: Nungwane Raw Water Aqueduct (18km) eThekwini MM, Ugu DM C2 76,220 76,220 76,220 900 900 200 7,640 66,580
AUG Darvill WWW: Plant Capacity Increase to 85Ml/d (NBR - 10Ml/d in 3-5yrs) Msunduzi LM 100,000 100,000 20,000 20,000
OFF Air-conditioner Renewal: Head Office 4,000 23,306 19,306 23,306 23,306
Major Projects 6,873,768 7,971,917 1,098,150 2,687,675 424,090 686,977 565,501 341,526 354,008 315,574
Other Immovable Projects 3,847,614 4,001,611 153,997 230,267 59,301 55,735 37,316 41,365 5,200 31,350
TOTAL IMMOVABLES 10,721,382 11,973,528 1,252,147 2,917,942 483,391 742,712 602,817 382,891 359,208 346,924

OTHER Movables - Head Office 10,300 24,050 13,750 24,050 16,800 4,750 2,000 500
ICT - Information Communication & Technology 52,627 175,627 123,000 59,951 18,851 11,100 8,150 6,300 10,550 5,000
OTHER - Scientific Services 48,264 48,264 47,690 23,381 10,455 2,295 9,519 2,040
OTHER - Plant & Vehicles 42,593 44,213 1,620 29,213 14,213 5,000 10,000
TOTAL MOVABLES 153,784 292,154 138,370 160,904 73,245 31,305 12,445 26,319 12,590 5,000

TOTAL UMGENI WATER CAPEX BUDGET 10,875,165 12,265,682 1,390,517 3,078,846 556,636 774,017 615,262 409,210 371,798 351,924
CASHFLOWS AS PER 2009/10 BUSINESS PLAN 3,418,934 655,215 642,585 431,175 474,649 505,910 709,400
INCREASE / (DECREASE) -340,088 -98,579 131,432 184,087 -65,439 -134,112 -357,476

UPG = Upgrade, EXP = Expansion, REH = Rehabilitation, AUG = Augmentation, ICT = Information and Communications Technology
A1 = In Construction, A2 = In Tender, B1 = In Detailed Design, B2 = In Preliminary Design, C1 = In Detailed Feasibility, C2 = In Pre-Feasibility

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 Figure 12-7: Thirty-Year Capital Expenditure Elements: Water Resources (DWA), Water Transfer and Water Treatment (UW)

Thirty-Year Capital Expenditure Programme by Function

1,800,000
2010-2015 - R3,078m 2016-2022 - R4,583m DWA : R 6,175m
• North Coast Supply System - R 798m • Mkomazi Bulk Water Supply - R1,700m • F'10 to F'14 - Spring Grove Dam R1,604m
1,600,000 • Maphumulo Phase I & II - R254m • North Coast Supply System - R 418m • F'14 to F'21 - Mkomazi Water Resources Project - R 3,300m
• Midmar WW - R244m • Pipeline (’61) Mgeni System - R383m • F'10 to F'12 - Hazelmere Dam Raising - R100m
• Ugu Regional Scheme - R236m • Lower Thukela BWS - R340m • F'20 to F'24 - Lower Mvoti Dam - R550m
• Pipeline (’61) Mgeni System - R175m • Lower Mkomazi BWS Scheme - R325m • F'23 to F'26 - Mvoti Poort Dam - R400m
1,400,000 • Durban Heights System - R169m • Wartburg System - R325m • F'18 to F'20 - Lower Mkomazi Dam - R221m
• South Coast System - R146m
• Wartburg System - R138m
1,200,000 • Richmond Pipeline - R121m
Rand (millions)

1,000,000

800,000

600,000

400,000

200,000

F10 F11 F12 F13 F14 F15 F16 F17 F18 F19 F20 F21 F22 F23 F24 F25 F26 F27 F28 F29 F30 F31 F32 F33 F34 F35 F36 F37 F38 F39

Financial Year
Catchment Management Water Transfer Water Treatment Department of Water Affairs

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 Table 12-22: Summary of Major Movements between 2009/10 and 2010/11 Business Plans
2011 Business Plan
2010 Business Plan Umgeni Water Grant
Project System Customer Increase / Decrease Total Cashflows
2010 - 2015 Funding Funding
2010 - 2015
% R'000's R'000s R'000s R'000s R'000s

IMMOVABLE CAPITAL EXPENDITURE -11% -353,488 3,271,430 2,917,942 2,942,942 -25,000

North Coast Supply System iLembe DM 50% 266,627 531,740 798,367 823,367 -25,000
Ugu Regional Schemes Ugu DM 283% 174,400 61,600 236,000 236,000
Wartburg System uMgungundlovu DM 325% 105,489 32,470 137,959 137,959
Lower Mvoti Supply System iLembe DM 23% 51,785 223,380 275,165 275,165
Durban Heights WW eThekwini MM 24% 32,952 135,650 168,602 168,602
Manyavu uMgungundlovu DM 100% 25,000 25,000 25,000
Mapaphetwa WW eThekwini MM 77% 15,641 20,300 35,941 35,941
Head Office Infrastructure Immovable 76% 12,406 16,400 28,806 28,806
Wiggins WW eThekwini MM 7% 5,400 81,900 87,300 87,300
South Coast System eThekwini MM, Ugu DM 3% 4,220 141,600 145,820 145,820
Midmar WW System eThekwini MM, Msunduzi LM, uMgungundlovu DM 2% 4,178 239,700 243,878 243,878
Hazelmere WW eThekwini MM, iLembe DM 2% 1,930 104,270 106,200 106,200
Security Perimetre Walls 6% 1,000 17,000 18,000 18,000
Nungwane Pipeline eThekwini MM, Ugu DM 0% 76,220 76,220 76,220
Pipeline (’57): Umlaas Road to eThekwini Point eThekwini MM -11% -9,751 86,000 76,249 76,249
Darvill WWW Msunduzi LM -27% -12,400 46,600 34,200 34,200
Groenekloof Msunduzi LM, uMgungundlovu DM -100% -25,700 25,700
Umlaas New Water Project Msunduzi LM, uMgungundlovu DM -87% -48,300 55,300 7,000 7,000
Howick uMgungundlovu DM, Msunduzi LM -97% -53,000 54,500 1,500 1,500
Sisonke/Ixopo System Sisonke -93% -64,900 69,900 5,000 5,000
Raw Water Pipeline: Midmar Dam to DV Harris eThekwini MM, Msunduzi LM, uMgungundlovu DM -76% -89,640 118,080 28,440 28,440
Richmond Pipeline uMgungundlovu DM -49% -116,473 237,300 120,828 120,828
Mkomazi Bulk Water Supply eThekwini MM, Msunduzi LM, uMgungundlovu DM -95% -156,542 164,542 8,000 8,000
Nottingham Road uMgungundlovu DM -93% -184,639 199,008 14,369 14,369
Pipeline (’61) Mgeni System eThekwini MM, Msunduzi LM -63% -295,141 470,660 175,519 175,519
Other Projects 3% 1,969 61,610 63,579 63,579

MOVABLE CAPITAL EXPENDITURE 9% 13,400 147,504 160,904 160,904

Head Office Infrastructure 133% 13,750 10,300 24,050 24,050

Information Communication & Technology 16% 8,151 51,800 59,951 59,951
Scientific Services 1% 616 47,074 47,690 47,690
Plant & Vehicles -24% -9,117 38,330 29,213 29,213

TOTAL CAPITAL EXPENDITURE -10% -340,088 3,418,934 3,078,846 3,103,846 -25,000

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12.7 DEBT MANAGEMENT AND FUNDING REQUIREMENTS

12.7.1 Introduction

Based on the debt maturity profile and cumulative debt curve, the following key issues have been identified
and are taken into account in terms of creating the short, medium and long-term funding strategy:

1. Capital structure
A key principle to managing the outstanding debt is to target the optimum capital structure of 70 %
fixed and 30 % floating so as to minimise volatility of both the tariff and income statement.

2. Asset/liability matching
A further key principle to managing Umgeni Water’s debt is to match the maturity dates and
quantum of debt outstanding in any year to the free cash generated by operations after servicing
interest and operational expenditure. There still exists a mismatch between liabilities and free
cash. This needs to be pro-actively managed on an ongoing basis.

3. Optimal Debt Level

The key driver in determining the optimal level of debt for Umgeni Water was the ability to service
debt given the cashflows generated after capital expenditure. A best-case scenario is that for
every R1 of debt to be repaid, there is R1.40 of operational cash flow after capital expenditure to
fund the repayment.

4. Redemption portfolio
Having debt with large bullet repayments, such as the UG65 bond, exposes Umgeni Water to
forward starting interest rate and refinancing risk. These risks can be eliminated through
redemption portfolio management.

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12.7.2 Funding Strategy

Table 12-23: Funding requirements (2009/10 to 2014/15)

Short term Medium Term Long Term
FUNDING REQUIREMENTS
(R’m) (R’m) (R’m)

Financial Year F10 F11 F12 F13 F14 F15

Operational Cashflows 768 682 658 700 774 821

Capex (Escalated) (557) (816) (712) (509) (497) (494)
Net Operating Cashflow (shortfall) after Capex 211 (134) (54) 191 277 328
Refinance - Capital (existing Debt) (1,182) (113) (119) (121) (108) (112)
UG21 600 - - - - -
EIB* 238 95 (17) 20 (19)
Refinance - Finance costs (existing Debt) (8) (20) (24) (24) (11) 10
UG21 - (64) (64) (64) (64) (64)
EIB (7) (21) (29) (27) (29)
Funding Requirements (379) (101) (186) (65) 86 113
Redemption Portfolio - UG65 640 -
Redemption Portfolio - New bond
Redemption Portfolio – Interest
Net Annual Incremental Funding Requirement 262 (101) (186) (65) 86 113

Net (Funding) Investing requirements

Opening Balance Call investments 370 632 531 345 280 367
Closing Balance 632 531 345 280 367 480
* European Investment Bank

Short term funding strategy: FY10 to FY12

 During F’10 a Three Billion Rand Domestic Medium Term Note programme was established allowing for
short term paper and longer dated debt such as bonds to be issued with relative ease.
 The incremental funding requirement in F’11 and F’12 will be adequately covered from the call
investments on hand, which were primarily derived from the funds obtained on the R 600 million UG21
bond issued in F’10 and R 400 million funding will be obtained from the proposed European
Investment Bank (EIB) loan.
 All surplus cash is to be invested in short term financial assets (three to six-month term deposits).
 The net investing (funding) portion excludes the R 200 million liquidity buffer as reflected in the
balance sheet.

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Medium-term: FY13 to FY15

The medium term funding requirements indicate that Umgeni Water will not require additional borrowings
above the EIB drawdown in F’14 and that it holds sufficient funds to cover any incremental funding.

Table 12-24: Funding requirements (2009/10 to 2014/15)

  Rand (millions) 
FUNDING REQUIREMENTS  L/Term  L/Term  L/Term  L/Term  L/Term  L/Term 
Financial Year    F15  F16  F17  F18  F19  F20 
Operational Cashflows   821  876   976   1,054    1,131    1,210 
Capex (Escalated)  (494)   (1,167)  (1,233)   (942)   (781)  (1,482) 
Net Operating and Capex cash flow  328  (291)   (256)   112    350    (272) 
Refinance ‐ Capital (existing Debt)  (112)  (118)   (117)   (220)   (260)  (4) 
UG21  ‐  ‐  ‐  ‐   ‐   ‐ 
EIB*   (19)   (19)   (19)   (19)   (19)   (19) 
Refinance ‐ Finance costs (existing Debt)  10   (5)   (50)   (85)   86    (90) 
UG21   (64)   (64)   (64)   (64)   (64)   (64) 
EIB   (29)   (27)   (26)   (24)   (22)   (21) 
Funding Requirements  113  (524)   (532)   (300)   71    (470) 
Redemption Portfolio ‐ UG65                   
Redemption Portfolio ‐ New bond         (48)   (155)   (195)   398 
Redemption Portfolio – Interest                  43 
Net Incremental Funding   113  (524)   (580)   (455)   (124)   (29) 
Requirement p.a.                   
                    
Net (Funding) Investing requirements                   
Opening Balance Call investments  367  480   (45)   (625)  (1,080)  (1,204) 
Closing Balance   480   (45)   (625)  (1,080)  (1,204)  (1,233) 
* European Investment Bank

Long-term: FY15 onwards

The current projections reflect that Umgeni Water will in the long term require additional long term funding
to provide for its next phase of high capital expenditure.

12.7.3 Terms and Conditions on which money is borrowed

The terms and conditions on which money is borrowed differ according to loan agreements and bond
issues. Bank committed facilities offered can be for a full twelve months or for a specified seasonal period.
This committed facility would attract a facility fee on any unutilised balances during the agreed period only.
Accessing the uncommitted facility will be subject to Umgeni Water giving the relevant banks at least
forty eight hours notice in order that the bank may obtain the necessary credit approval to make the funds
available to Umgeni Water.

A summary of the various funding facilities that Umgeni Water currently has and major conditions relating
to those facilities are as per Table 12-25.

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12.7.3.1 Bank Funding

Table 12-25: Bank Funding Facilities

Bank Type of facility Committed Uncommitted
FNB Working capital facility R100 million
RMB Multipurpose Treasury Facility R100 million
Standard Bank General banking facility R50 million
Investec General credit facility R50 million
ABSA Overnight facility R65 million
Bridging facility R300 million
Nedbank General banking facility R 49,9 million

First National Bank

Instruments available under the short-term direct facility are:

 Overdraft – prime less 1% up to R10 million, thereafter prime;

 Corporate term loans – negotiable rate;
 Bankers acceptances (Acceptance credits) – negotiable rate;
 Promissory Notes – negotiable rate;
 Offshore Finance – negotiable rate; and
 Call loans – negotiable rate.

Standard Bank
Instruments available under the general short-term bank facility are:

 Overdraft – prime;
 Call loans – negotiable rates;
 Short-term loans – negotiable rates;
 Revolving acceptance credit facility and foreign currency finance facility;
 Offshore trade and working capital loans; and
 Other instruments – as offered by the bank.

Investec Bank
Instruments available under the general credit facility are:

 Bank call facility – negotiable rates;

 Foreign financing facility – negotiable rates; and
 Foreign exchange dealing facility – negotiable rates.

ABSA Bank
Instruments available under the general credit facility are:

 Bank call facility – negotiable rates; and

 Call bonds – negotiable rates.

- 103 -
12.7.3.2 Annuity Loans

Terms, conditions and maturity are specific to each loan agreement. The most significant loans and the
balances as at 30 June 2010 (forecast) are: loan 71, which is the DBSA fifteen-year loan at, R 547million;
and loan 73, which is the DBSA ten-year loan, at R 243 million.

12.7.3.3 Capital Market Bonds

Domestic Medium Term Note (DMTN) Programme

The DMTN Programme was established to fund long term capital expenditure requirements and to fund
short term working capital requirements. The DMTN Programme was completed and signed off on
25 November 2009.

Under this DMTN Programme, Umgeni Water may from time to time issue unsecured or secured registered
notes of any kind, in an aggregate outstanding nominal amount which will not exceed R 3 billion.

Notes may comprise without limitation:

• Fixed rate, floating rate, mixed rate, zero coupon notes or a combination of such foregoing
notes or any other type of notes determined by Umgeni Water and the relevant dealers.

Interest rate
The interest rate will be determined at the time of issuance of notes and will be specified in the Applicable
Pricing Supplement.

Maturity
The Notes are not subject to any minimum or maximum maturity.

Issuance of UG21 bond under the DMTN Programme

On 02 March 2010, after a very successful road show, Umgeni Water issued a R 600 million unsecured
fixed rate bond, the UG21, at an interest rate of 10.70 %, under the DMTN Programme.

The UG21 falls due on 02 March 2021 and interest payments are due on 02 March and 02 September
each year.

The UG21 was oversubscribed at the time of issuance.

12.7.3.4 Development Funding Institutions

Proposed European Investment Bank (EIB) Loan

The due diligence for Umgeni Water was completed during 2009 and the Board of the EIB, in principle,
approved the R 400 million twenty-year loan, on the 7 December 2009. The Contract Agreement is still
being finalised.

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12.8 PROPOSED BORROWINGS

12.8.1 Borrowings Domestic and Foreign

Short-term borrowings consist mainly of the portion of long term debt falling due within one year. In F’09,
there is a significant increase in the short-term borrowings due to the UG65 bond redemption in the
following year (F’10).

Table 12-26: Proposed total borrowings

TOTAL GROSS TOTAL PORTION IN RANDS

DATE OF
BORROWING LONG TERM SHORT TERM
BORROWING
Actual Short-term
Short-term
Actual Actual Total Short portion of long
borrowings
term term debt
2007/2008 2,078,337,303 1,976,783,560 - - 101,553,743 101,553,743 -
2008/2009 1,978,904,300 917,448,873 - - 1,061,320,091 1,061,320,091 -
Projected Projected Proposed Total Projected Projected Projected
2009/2010 1,517,584,209 800,302,212 600,000,000 1,400,302,212 117,281,997 117,281,997 -
2010/2011 1,637,885,541 1,265,365,376 237,583,329 1,502,948,705 134,936,836 134,936,836 -
2011/2012 1,609,974,821 1,359,768,753 107,026,116 1,466,794,869 143,179,952 143,179,952 -
2012/2013 1,466,794,869 1,336,427,700 - 1,336,427,700 130,367,169 130,367,169 -
2013/2014 1,373,668,255 1,205,071,336 37,240,555 1,242,311,891 131,356,364 131,356,364 -
2014/2015 1,242,311,891 1,105,044,774 - 1,105,044,774 137,267,117 137,267,117 -

Table 12-27: Borrowing programme in Rands - Foreign

TOTAL GROSS FOREIGN PORTION IN RANDS

DATE OF
BORROWING LONG TERM SHORT TERM
BORROWING
Actual
Short-term portion Short-term
Actual Actual Total Short
of long term debt borrowings
term
2007/2008 - - - - - - -
2008/2009 - - - - - - -
Projected Projected Proposed Total Projected Projected Projected
2009/2010 - - - - - -
2010/2011 237,583,329 - 225,704,163 225,704,163 11,879,166 11,879,166 -
2011/2012 344,609,451 225,704,163 101,674,816 327,378,979 17,230,472 17,230,472 -
2012/2013 364,619,532 310,148,506 35,378,527 345,527,034 19,092,499 19,092,499 -
2013/2014 345,527,034 326,434,535 - 326,434,535 19,092,499 19,092,499 -
2014/2015 326,434,535 307,342,036 - 307,342,036 19,092,499 19,092,499 -

* The loans are denominated in South African Rands and thus there is no currency risk

- 105 -
Table 12-28: Borrowing programme –Domestic

DATE OF TOTAL GROSS DOMESTIC PORTION IN RANDS

BORROWING BORROWING LONG TERM SHORT TERM
Actual Short-term
Short-term
Actual Actual Total Short portion of long
borrowings
term term debt
2007/2008 2,078,337,303 1,976,783,560 - - 101,553,743 101,553,743 -

2008/2009 1,978,768,965 917,448,873 - - 1,061,320,091 1,061,320,091 -

Projected Projected Proposed Total Projected Projected Projected

2009/2010 1,517,584,209 800,302,212 600,000,000 1,400,302,212 117,281,997 117,281,997 -

2010/2011 1,400,302,212 1,265,365,376 11,879,167 1,277,244,543 123,057,670 123,057,670 -

2011/2012 1,265,365,370 1,134,064,590 5,351,300 1,139,415,890 125,949,480 125,949,480 -

2012/2013 1,102,175,336 1,026,279,194 35,378,527 990,900,666 111,274,670 111,274,670 -

2013/2014 1,028,141,221 878,636,801 37,240,555 915,877,356 112,263,865 112,263,865 -

2014/2015 915,877,356 797,702,738 - 797,702,738 118,174,618 118,174,618 -

12.8.2 Maturity Profile of Debt

The maturity profile (Table 12-29) indicates the short and long term borrowings.

Table 12-29: Maturity profile of debt (Balance Sheet)

Maturity Profiles - Investment and Debt
Investment maturity structure (R'm) F'08 F'09 F'10 F'11 F'12 F'13 F'14 F'15
< 1year 501 1,213 860 759 573 508 595 708
53% 98% 98% 98% 98% 99% 100% 100%
1-5 years 440 22 19 14 10 5 - -
47% 2% 2% 2% 2% 1% 0% 0%
5-10 years - - - - - - - -
0% 0% 0% 0% 0% 0% 0% 0%
+10 Years - - - - - - - -
0% 0% 0% 0% 0% 0% 0% 0%
Total Investments 941 1,236 878 773 583 513 595 708
Debt maturity structure (R'm) F'08 F'09 F'10 F'11 F'12 F'13 F'14 F'15
< 1year 102 1,061 117 135 143 130 131 137
5% 54% 8% 8% 9% 9% 10% 11%
1-5 years 1,433 275 533 593 534 525 417 903
69% 14% 35% 36% 33% 36% 30% 73%
5-10 years 470 417 267 834 769 704 700 119
23% 21% 57% 51% 48% 48% 51% 10%
+10 Years 74 226 600 76 164 107 126 83
4% 11% 0% 5% 10% 7% 9% 7%
Total Borrowings 2,079 1,979 1,517 1,638 1,610 1,466 1,374 1,243
Net Borrowings 1,137 743 639 865 1,027 953 779 535
Long - term debt (>1 year) 1,977 918 1,400 1,503 1,467 1,336 1,243 1,106
Movement -4.0% -53.6% 52.5% 7.4% -2.4% -8.9% -7.0% -11.0%
Short - term debt (<1 year) 102 1,061 117 135 143 130 131 137
Movement -15.6% 945.1% -88.9% 15.1% 6.1% -8.9% 0.8% 4.5%

- 106 -
Table 12-30: Fixed versus Floating Debt
Fixed vs Floating F'08 F'09 F'10 F'11 F'12 F'13 F'14 F'15

Rand 1,561,507,126 1,503,543,294 1,067,585,477 1,237,886,809 1,259,976,089 1,166,658,979 1,123,532,367 1,042,176,003

Fixed
% 74.1% 75.0% 70.3% 75.6% 78.3% 79.5% 81.8% 83.9%

Rand 564,222,400 500,000,000 450,000,000 400,000,000 350,000,000 300,000,000 250,000,000 200,000,000

Floating
% 25.9% 25.0% 29.7% 24.4% 21.7% 20.5% 18.2% 16.1%

Total Rand 2,125,729,526 2,003,543,294 1,517,585,477 1,637,886,809 1,609,976,089 1,466,658,979 1,373,532,367 1,242,176,003

Figure 12-7: Debt Maturity structure

Debt Maturity Structures

2 ,5 0 0

+ 1 0 Y ears
2 ,0 0 0
Rand (m illion)

5 -1 0 years
1 ,5 0 0

1 -5 years
1 ,0 0 0

< 1 year
500

-
F '0 7 F '0 8 F '0 9 F '1 0 F '1 1 F '1 2 F '1 3 F '1 4 F '1 5
F inancial Y ear Ending 3 0 June

- 107 -
12.8.3 Analysis of Funding Against Approved Borrowing Limits

In preparing the funding strategy, cognisance was taken of the level of gross debt against the unconditional
borrowing limit set by the Department of Water Affairs and National Treasury which is R 2,800 million for
F’10 and R 1,800 million for F’11.

Figure 12-8: Analysis of funding against approved borrowing limits

Debt Curve - Funding Against Limits

4,000
Redemption
Portfolio*
3,500

3,000 Borrowing Limit

2,500
Rand (millions)

2,000 funding
requirements

1,500
Net Debt
1,000

500
Gross Debt

0
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Financial Year ending 30 June

Table 12-31: Gross Borrowings (R’m)

Borrowing Limit F10 F11 F12 F13 F14 F15 F16 F17

Gross Borrowings 1,518 1,638 1,610 1,467 1,374 1,242 1,150 1,594

At Peak 973
Contingencies 25 164 161 147 137 124 115 159
TOTAL GROSS BORROWINGS 2,515 1,802 1,771 1,613 1,511 1,367 1,265 1,753
Approved borrowing Limit 2,800 1,800
(Over) Under utilisation 285 (2) 29 187 289 433 535 47

The borrowing limits of R 2,800 million and R 1,800 million were approved by National Treasury as per the
approval letter dated 15 December 2009.

- 108 -
12.8.4 Debt Curve

Figure 12-9: Comparison of gross Debt Budget F’10 to Budget F’11

Gross Borrowings - Business Plan F'11

Borrowing Limit Gross Borrowings - F'11 Gross Borrowings - F'10

4,000

3,500

3,000
Rand (millions)

2,500

2,000

1,500

1,000

500

0
'07 '09 '11 '13 '15 '17 '19 '21 '23 '25 '27 '29 '31 '33
Financial Year ending 30 June

The shift in long-term borrowings arises primarily from the reduction in volumes sales and the thirty-year
increase in Capex.

Figure 12-10: Comparison of net Debt Budget F’10 to Budget F’11

Net Debt Curve: Budget F'10

Borrowing Limit F'10 Budget F'11 Budget

4,000

3,500

3,000
Rand (millions)

2,500

2,000

1,500

1,000

500

0
F'07 F'09 F'11 F'13 F'15 F'17 F'19 F'21 F'23 F'25 F'27
Financial Year ending 30 June

- 109 -
12.9 FINANCIAL RISK

Umgeni Water assumes a low risk tolerance approach to risk. The three risks described in the sections that
follow have been identified as specific treasury risks and are managed proactively to ensure their timely
mitigation.

12.9.1 Sustainable Tariff

An unsustainable tariff will affect Umgeni Water’s ability to fund future capital expenditure programmes and
undertake operational expansion. This risk impacts on the organisation’s ability to deliver on its financial
strategies, namely, ‘Contribute to an Affordable Tariff’.

Mitigation approach
Umgeni Water monitors and reports on cashflow funding requirements and maintains optimal debt levels,
has a transparent and formalised tariff policy, together with a robust tariff model. The organisation
undertakes water demand planning, liaises with stakeholders to obtain commitment to the capital
expenditure programme and subsequently undertakes project evaluation to assess sustainability of the
programme.

12.9.2 Liquidity Risk

Liquidity risk will result in Umgeni Water being unable to raise sufficient funds in the required currency and
at the correct time to meet its financial obligations. This will impact on the organisation’s ability to achieve
its financial strategies, namely, ‘Enhance Shareholder Value’.

Mitigation approach
To mitigate liquidity risk, Umgeni Water has:
 Short-term funding facilities to meet ongoing cash requirements for which facility options are in
place with four banks (FNB, Standard, ABSA, Nedbank);
 A Domestic Medium Note (DMTN) Programme has been established allowing for longer dated debt
such as bonds to be issued with relative ease;
 Provided for a R 200 million cash buffer investment to cater for delayed payments by its
customers;
 A redemption strategy framework, which provides guidelines for managing the risks associated
with refinancing large debt maturities (such as the UG65 bond). The build-up in the redemption
portfolio over a three-year period is: 10 % of the capital redemption value three years before
maturity, 40 % two years before maturity, 75 % a year before maturity, and the balance of 25 % is
funded during the year of maturity; and
 Borrowing limits approved by National Treasury, which are currently: R 2,800 million for F’10, and
R 1,800million for F’11.

- 110 -
12.9.3 Credit Risk

Credit risk concentration will result in Umgeni Water being exposed to counter-party failure. This has the
potential to impact on the organisation’s ability to ‘Maintain an Optimal Debt Level, amongst its other
strategies.

Mitigation approach
Umgeni Water will:
 According to its Investment Policy, mitigate credit risk by conducting transactions only with counter
parties and issuers who satisfy soundly based and acceptable assessment processes, and only
after formal limits have been set. In addition, same-day settlement limits will be set wherever
possible and/or strict settlement procedures set and adhered to, and
 Continue monitoring of the credit quality of counterparties.

- 111 -
 12.10 FINANCIAL RATIO PROJECTIONS

Table 12.32: Financial Ratio Projections

Financial Indicators and Ratios F08 F09 F10 F10 F11 F12 F13 F14 F15 UW
Actual Actual Budget Forecast Target
A Performance criteria/indicators

1 Volume of water sold (kl'000) 403,965 415,956 440,412 422,681 425,978 434,491 443,175 452,039 460,447
eThekwini Municipality(kl'000) 329,723 342,912 331,992 335,310 342,011 348,847 355,824 362,443
Other WSA's(kl'000) 86,233 97,500 90,689 90,668 92,479 94,328 96,214 98,004
2 Total gross revenue (R'000) 1,280,747 1,485,496 1,617,089 1,616,236 1,614,484 1,848,658 1,986,476 2,133,673 2,288,096
3 Total Bulk Revenue (R'000) 1,190,798 1,259,187 1,422,165 1,364,989 1,460,849 1,765,035 1,897,669 2,040,905 2,191,173
eThekwini Municipality(R'000) 995,433 1,102,461 1,067,354 1,148,720 1,311,145 1,468,182 1,655,655 1,861,925
Other WSA's(R'000) 263,754 319,704 297,635 312,129 453,890 429,488 385,250 329,248
4 Weighted average Water tariff (R/kl) (tot bulk revenue/tot bulk vol) 3.000 3.229 3.229 3.429 4.062 4.282 4.514 4.758
eThekwini Municipality 2.960 3.019 3.215 3.215 3.414 4.046 4.265 4.497 4.740
Other WSA's 2.960 3.079 3.279 3.279 3.482 4.118 4.340 4.576 4.823
5 Net profit (loss) for the year 391,119 525,638 470,178 505,353 485,623 167,702 502,568 558,864 531,533
6 Cost of raw water (c/kl) 18.360 18.690 20.616 21.057 23.882 73.850 78.941 83.572 88.497
7 Profit from Operations/Revenue 0.435 0.432 0.390 0.364 0.345 0.149 0.312 0.309 0.268
8 Total expenditure/Revenue 0.700 0.667 0.713 0.692 0.704 0.913 0.751 0.742 0.771
9 Cost of sales/Revenue 0.307 0.367 0.373 0.397 0.384 0.453 0.468 0.471 0.474
10 Total cost/volume (Rand/kl) (Consolidated) 2.219 2.382 2.617 2.645 2.667 3.886 3.366 3.502 3.833
11 Total cost/volume (Rand/kl) (Primary only) 2.100 1.997 2.321 2.186 2.435 3.817 3.296 3.431 3.764
12 Total cost/volume (Rand/kl) (Bulk only) 2.020 1.900 2.235 2.090 2.330 3.712 3.182 3.313 3.640
13 Net Finance costs (Rand/kl) 0.410 0.280 0.366 0.196 0.166 0.249 0.264 0.225 0.178
Personnel cost ratio (Total Personnel costs/Total Costs excl
14 0.283 0.262 0.268 0.248 0.280 0.202 0.250 0.250 0.237 <0.60
finance costs)
15 Personnel cost per kilolitre (Personnel costs/Annual volume) 0.512 0.551 0.603 0.608 0.699 0.736 0.776 0.818 0.865
Personnel cost per kilolitre (Personnel costs/Annual volume)
16 0.491 0.527 0.578 0.582 0.672 0.730 0.770 0.812 0.858
(Primary only)
17 Personnel cost per kilolitre (Personnel costs/Annual vol) (Bulk only) 0.476 0.514 0.564 0.567 0.655 0.712 0.751 0.792 0.837

- 112 -
 Table 12.32, continued: Financial Ratio Projections

Financial Indicators and Ratios F08 F09 F10 F10 F11 F12 F13 F14 F15 UW
Actual Actual Budget Forecast Target

B Operating Risks

Working ratio (total expenses excluding depreciation, amortisation

18 0.449 0.477 0.507 0.529 0.537 0.794 0.631 0.633 0.674 <0.75
and finance costs divided by Total revenue)
Operating Ratio (Total Costs excluding depreciation &
19 0.578 0.555 0.606 0.580 0.581 0.852 0.690 0.680 0.710 <0.75
amortisation/Total Revenue)
Controllable working ratio (total expenses excluding raw water,
20 0.391 0.424 0.451 0.474 0.474 0.620 0.455 0.456 0.496
depreciation, amortisation & interest, divided by total revenue)
Return on assets (income before interest & taxes divided by total
21 20.53% 22.63% 18.58% 18.05% 14.25% 6.57% 13.48% 13.28% 11.68% 15% to 20%
assets excluding investments)
Asset turnover (revenue divided by total assets excluding
22 0.472 0.523 0.476 0.496 0.414 0.440 0.432 0.429 0.436
investments )
23 Gross margin % 69.29% 63.31% 62.69% 60.33% 61.64% 54.69% 53.17% 52.90% 52.57%
Current asset turnover (revenue divided by current assets
24 7.261 7.421 8.752 7.862 7.703 7.875 8.077 8.290 8.473
excluding investments)
25 Fixed asset turnover (revenue divided by fixed assets) 0.555 0.601 0.518 0.546 0.438 0.468 0.458 0.454 0.460
Trade debtors collection period (Trade Debtors divided by revenue
26 35.141 37.636 32.710 36.247 38.002 37.581 36.758 36.016 35.340
times 365) excluding VAT
Accounts receivable turnover (revenue divided by accounts
27 9.111 8.507 9.788 8.833 8.425 8.520 8.710 8.890 9.060 >9.6
receivable) (Excl. VAT)

* Accounts receivable is made up as follows:

- Trade Debtors 140,570 174,617 182,972 191,626 216,990 228,059 240,012 252,552
- Provision for Doubtful debts - - - - - - - -
140,570 174,617 165,205 182,972 191,626 216,990 228,059 240,012 252,552

- 113 -
 Table 12.32, continued: Financial Ratio Projections

Financial Indicators and Ratios F08 F09 F10 F10 F11 F12 F13 F14 F15 UW
Actual Actual Budget Forecast Target

C Financial Risks

28 Current ratio (current assets divided by current liabilities) 1.374 0.991 0.808 2.174 1.915 1.580 1.520 1.723 1.964
Debt service/interest cover ratio (income before interest & taxes
29 3.364 5.512 3.920 7.108 7.881 2.551 5.303 6.507 7.484 > 1.75
divided by interest)
30 Debt ratio (total debt divided by total assets) 0.569 0.486 0.343 0.367 0.350 0.337 0.287 0.247 0.208 <0.40
Gross Debt-equity ratio (total liabilities divided by total
31 2.040 1.283 0.619 0.741 0.647 0.596 0.458 0.377 0.289 < 0.7
accumulated reserves)
Net Debt-equity ratio (Net liabilities divided by total accumulated
32 1.116 0.482 0.554 0.312 0.341 0.380 0.298 0.214 0.125 < 0.7
reserves)
33 Weighted Average Cost of Capital (WACC) (Per AFS) 13.22% 12.63% 10.72% 9.59% 9.51% 9.48% 9.51% 9.56% 9.67%
Weighted Average Cost of Capital (WACC) (Finance costs/Gross
34 13.03% 13.52% 20.61% 15.45% 8.58% 9.65% 10.30% 10.03% 10.36%
borrowings)
Net Weighted Average Cost of Capital (WACC) (Net finance
35 16.82%
costs(excl retic asset interest income)/Net borrowings)
36 Financial Leverage (D/(D+E)) (Net of redemption assets) 0.617 0.449 0.382 0.423 0.391 0.372 0.313 0.274 0.224

D Debt Management
Net Debt
Total Borrowings (as per Balance sheet) 2,078,337 1,978,904 1,208,449 1,517,584 1,637,886 1,609,975 1,466,795 1,373,668 1,242,312
Total Investment (as per Balance sheet) * 941,315 1,235,897 126,862 878,288 773,497 582,664 512,849 594,666 707,666
Net Borrowings (Total Borrowings - Total Investment) 1,137,022 743,008 1,081,587 639,296 864,388 1,027,311 953,946 779,002 534,646

* Includes R 200 million liquidity buffer.

- 114 -
 Table 12.32, continued: Financial Ratio Projections

Financial Indicators and Ratios F08 F09 F10 F10 F11 F12 F13 F14 F15 UW
Actual Actual Budget Forecast Target

E Business Credit Risk

37 EBIT interest coverage (EBIT/interest paid) 2.056 2.495 2.534 2.507 3.960 1.776 4.099 4.794 4.766
38 EBITDA interest coverage (EBITDA/interest paid) 2.633 2.993 3.226 3.276 5.370 2.504 4.905 5.744 5.859
39 Cash from operations/average total debt 0.405 0.376 0.619 0.506 0.416 0.408 0.477 0.563 0.661
40 Return on average total capital 0.546 0.416 0.323 0.287 0.220 0.102 0.193 0.181 0.143
41 EBITDA/Sales 0.557 0.544 0.497 0.475 0.467 0.210 0.373 0.371 0.330
Funds flow net debt pay back (cash from operations before WC
42 0.343 0.403 0.665 0.506 0.461 0.447 0.505 0.576 0.676
adj/total interest bearing debt)

F Surplus Ratios
43 Accounting Surplus (NP)/Fixed Assets (PPE) 0.170 0.213 0.151 0.171 0.132 0.042 0.116 0.119 0.107
44 Return on turnover (NP)/Revenue 0.305 0.354 0.291 0.313 0.301 0.091 0.253 0.262 0.232
45 EBITDA 712,847 808,355 803,592 768,296 754,265 388,929 741,156 791,267 754,248
46 Net Debt/EBIDAR 1.595 0.919 1.346 0.832 1.146 2.641 1.287 0.985 0.709

- 115 -
12.11 SELF EVALUATION STATEMENT ON FINANCIAL RESPONSIBILITY

12.11.1 Operating Performance

Figure 12-11: Operating Performance indicators

Operating Incom e
800
642 660
588 619 614
556
600
R a nd (mi l l i o ns)

400 276

200

-
F09 F10 F11 F12 F13 F14 F15

N et F inance C osts
160

116
a 117
108
Rand (m illions)

120 101
83 82
71
80

40

-
F09 F10 F11 F12 F13 F14 F15

N et Profit

559
600 526 505 532
486 503
R a nd (mi l l i o ns)

400

168
200

-
F09 F10 F11 F12 F13 F14 F15

The forecasted decline in operating profits is due to the low volume growth in water sales combined with
double digit increases in both direct and indirect costs. Net profits are projected to reduce significantly due
to the following impairments:

F'12: Maphumulo BWS Scheme (Phase 1) R 181m

F'12: Mhlabatshane BWS Scheme R 150m
F’12: Total R 331m
F'15: Ozwathini BWS Scheme R 85m
F'16: Richmond Pipeline R 98m

The lower debt levels have however contributed to lower finance costs which has had a positive impact on
net profits

- 116 -
 Umgeni Water has three business segments namely Bulk Potable Water, Bulk Wastewater and Section 30
Activities as described below.

Bulk Potable Water

Table 12-33: Performance Ratios

Umgeni Water F08 F09 F10 F11 F12 F13 F14 F15

Target Actual Actual Forecast

Cost per kilolitre - Bulk water 2.235 2.020 1.900 2.090 2.330 3.712 3.182 3.313 3.640

Net surplus ( R millions) 470 381 496 485 472 157 492 548 520

The cost per kilolitre of bulk potable water is projected to increase from F’10 onwards due to the significant
increases in the direct costs of production and the impairment of rural development projects.

Figure 12-13: Cost per kilolitre – Bulk Water (Cost Components)

Direct Costs Indirect Costs Finance charge

4.0
0. 20
0. 23 0. 17
3.5

0. 21
3.0 0. 25 1. 37
1. 28
1. 70
R a nd p e r k i l o l i tr e

1. 04
2.5 0. 99
0. 15
2.0 0. 18
0. 39
0. 26
1. 01
1.5 0. 90
0. 83 0. 75
2. 19 2. 32
1.0 1. 94 2. 06
1. 78

1. 17
0.5 0. 89 1. 01
0. 80

-
F'08 F'09 F'10 F'11 F'12 F'13 F'14 F'15 F'16
Actual Actual Forecast Forecast Forecast Forecast Forecast Forecast Forecast

Bulk Wastewater

The bulk wastewater section of the business segment is not projected to show growth and will maintain an
average net profit of around R 7 million per annum due to relatively low increases in the management fee
and higher costs.

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Section 30 Activities

The revenue from section 30 activities is projected to increase from R 184 million in F’09 to R 206 million
in F’10. This growth arises from Umgeni Water’s appointment as an implementation agent for the
Department of Water Affairs, the Department of Education and District Municipalities.

12.11.2 Financial Position

Table 12-34: Financial and Solvency Ratios

Umgeni Water F08 F09 F10 F11 F12 F13 F14 F15
Target Actual Actual Forecast
Current Ratio 1.374 0.991 2.174 1.915 1.580 1.520 1.723 1.964
Net Debt : Equity Ratio <0.7 1.116 0.482 0.554 0.312 0.341 0.380 0.298 0.214
Debt : Equity Ratio <0.7 2.040 1.283 0.741 0.647 0.596 0.458 0.377 0.289
Debt Service >1.75 3.364 5.512 7.108 7.881 2.551 5.303 6.507 7.484
Debt : Asset ratio <0.40 0.569 0.486 0.367 0.350 0.337 0.287 0.247 0.208
Return on Assets
(income before interest & taxes divided by total 15% to 20% 21% 23% 18% 14% 7% 13% 13% 12%
assets excluding investments)

Umgeni Water’s gearing, although significantly higher than the sector average, has shown a steady
improvement since 2002 and is now projected to reach an acceptable level of 0.741 in F’10 after the
redemption of the UG65 bond.

The reduction in debt impacts positively on the debt to asset ratio which will reduce from 0.486 in F09 to
0.367 in F’10 which is within the targeted ratio of less than 0.40.

Asset productivity as measured by the return on assets ratio shows a declining trend from 23 % in F’09 to
12 % in F15, due to the capital expenditure programme with lower operating profits.

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Risk management in the organisation is guided by an Integrated Risk Management Framework which
comprises:
 Development of risk profiles at all organisational levels;
 Integration of risk profiles and systematic development of mitigation measures;
 Measurement of responses to risks; and
 Risk Monitoring and evaluation.

Integrated Risk Management is implemented at strategic, divisional and departmental levels. A Priority
Scale guides both the risk accountability and the organisation’s risk appetite:
 The Board, which is ultimately accountable for Risk Management, ensures that risk is
proactively managed in the organisation.
 The Corporate Risk Management Committee, which comprises the Executive, Top
Managers and the Divisional Risk Champions monitor the status of strategic and
operational risks on a quarterly basis.
 The Audit Committee monitors the status of strategic risks quarterly and reports the status
to the Board.
 The Executive, Top Management and the Board review the organisation’s strategic risks
(annual basis) and report these to Audit Committee and the Board.

The organisation’s current Strategic Risks are:

 Water resources availability including climate change,
 Infrastructure availability to meet demand timeously,
 Sustainable Tariff,
 Liquidity risk,
 Credit risk,
 Servitude encroachment, and
 Health, Safety and Environment,

- 121 -
- 122 -

- 122 -
Umgeni Water has in place a fraud prevention committee to effectively manage fraud as prescribed in
Section 29.1.1 of the Treasury regulations in the PFMA.

The committee comprises an independent chairman, the internal auditors and management. The focus of
the activities of this committee is on deliberate misrepresentation which could lead to the prejudice of
others and falsification.

An integrated fraud prevention plan had been established to prevent or respond to incidents of fraud.

Umgeni Water will continue to operate a fraud hotline service, managed by an external service provider,
and made available to all staff members and other stakeholders, including suppliers, to enable all
stakeholders to report suspicions of fraud.

- 123 -
- 124 -
15.1 Other Key Performance Indicators as per Shareholder’s Compact

PERFORMANCE OBJECTIVE OUTCOMES/ OUTPUT INDICATORS MEASURE

1. Water quality
Water quality standards met Test results, SANS 241 % compliance
compliance
Reduced levels of Water lost as a percentage of
2. Water losses %
unaccounted for water total water produced
Number of days supply
No unplanned interruptions
disrupted divided by total
3. Reliability of supply to supply exceeding 24 %
number of possible supply
hours
days
4. Financial Reporting Qualified /
Unqualified audit report Annual external audit
Compliance Unqualified
5. Staff turnover Optimal staff retention Percentage of staff leaving %
6. Board member Improved performance of Annual performance
%
performance fiduciary duties/governance assessment
7. Positive internal audit Internal audit issues dealt No repeat and
Internal audit reports
report with unresolved findings
8. Bulk supply
Municipalities / other
agreements with Statutory and service level
customers with bulk supply %
municipalities/ other agreements in place
agreements
customers
Financial ratios:
9. Improved financial Improved viability and Net Debt: Equity Positive improvement
performance sustainability Debt: Service trend
Debt: Assets
10. Manage costs within No. over expenditure/
Financial reports % variance
the approved budget losses
11. Achieve statutory Reporting compliance Statutory submissions made Submission dates met
reporting compliance achieved on time or missed
12. Dividend / Surplus Targets as per shareholder’s
Financial reports % variance
Targets compact met
Capex spend or
13. Increased access to Contribution to national
Capex spend / projects number of projects per
services objectives
municipality
14. Other water board As per attached
As per attached Scorecard As per attached Scorecard
specific objectives Scorecard

- 125 -
- 126 -
 Strategic Objective Strategy Outcome Performance Indicator
Exceed Customer Product Quality • The extent to which water and wastewater complies with
Expectations (Water and Wastewater Quality) legislated standards.

Targets for Product Quality (Water and Wastewater Quality)

2009/10
Potable water quality: projected to
have met SANS Class 1.
Wastewater quality: projected to
have met discharge permit
requirements.
2010/11
Potable water quality: has met
SANS Class 1.
Wastewater quality: has met
discharge permit requirements.
2011/12
Potable water quality: has met
SANS Class 1.
Wastewater quality: has met
discharge permit requirements.
2012/13
Potable water quality: has met
SANS Class 1.
Wastewater quality: has met
discharge permit requirements.
2013/2014
Potable water quality: has met
SANS Class 1.
Wastewater quality: has met
discharge permit requirements.
2014/2015
Potable water quality: has met
SANS Class 1.
Wastewater quality: has met
discharge permit requirements.

Water quality monitoring Water quality monitoring Water quality monitoring Water quality monitoring Water quality monitoring Water quality monitoring
programmes. programmes. programmes. programmes. programmes. programmes.

Water quality auditing and Water quality auditing and Water quality auditing and Water quality auditing and Water quality auditing and Water quality auditing and
reporting. reporting. reporting. reporting. reporting. reporting.

Water safety and security plans. Water safety and security plans. Water safety and security plans. Water safety and security Water safety and security plans. Water safety and security plans.
plans.

Page 128
 Strategic Objective
Exceed Customer
Expectations
2009/10
Customer volume demand:
projected to have been met 100%
of the time.
Adequate pressure at
consumer supply point:
Projected to have been met
continuously.
Duration of service
interruptions:
Less than 24 hours for supplies
larger than 50,000 cubic metres
per day.
Less than 48 hours for supplies
smaller than 50,000 cubic metres
per day.
Number of liaison meetings:
Quarterly
Strategy Outcomes
Customer Satisfaction
Operational Resiliency
Operational Optimisation
Targets for Customer Satisfaction, Operational Resiliency, Operational Optimisation
2010/11
Customer volume demand: met
98% of the time.
Adequate pressure at consumer
supply point: continuously.
Duration of service
interruptions:
Less than 24 hours for supplies
larger than 50,000 cubic metres
per day
Less than 48 hours for supplies
smaller than 50,000 cubic metres
per day
Number of liaison meetings:
Quarterly
• The extent to which contractual obligations have been met
2011/12
Customer volume demand: met
98% of the time.
Adequate pressure at
consumer supply point:
continuously.
Duration of service
interruptions:
Less than 24 hours for supplies
larger than 50,000 cubic metres
per day.
Less than 48 hours for supplies
smaller than 50,000 cubic metres
per day.
Number of liaison meetings:
Quarterly
Performance Indicator
and structured feedback received.
2012/13 2013/2014
Customer volume demand: met Customer volume demand: met
98% of the time. 98% of the time.
Adequate pressure at consumer Adequate pressure at
supply point: continuously. consumer supply point:
continuously.
Duration of service Duration of service
interruptions: interruptions:
Less than 24 hours for supplies Less than 24 hours for supplies
larger than 50,000 cubic metres larger than 50,000 cubic metres
per day. per day.
Less than 48 hours for supplies Less than 48 hours for supplies
smaller than 50,000 cubic metres smaller than 50,000 cubic metres
per day. per day.
Number of liaison meetings: Number of liaison meetings:
Quarterly Quarterly
2014/2015
Customer volume demand: met
98% of the time.
Adequate pressure at consumer
supply point: continuously.
Duration of service
interruptions:
Less than 24 hours for supplies
larger than 50,000 cubic metres
per day.
Less than 48 hours for supplies
smaller than 50,000 cubic metres
per day.
Number of liaison meetings:
Quarterly
Page 129
 Strategic Objective Strategy Outcome Performance Indicator
Growth / Increase Infrastructure Stability  The extent to which the capital expenditure programme
Customer Base contributes to product quality, customer satisfaction,
stakeholder understanding and support, community
sustainability, operational optimisation and operational
resiliency.

Targets for Infrastructure Stability

2009/10
Stability of supply to customers,
stability of bulk water supply
systems and standards and
norms:
Flexible supply systems
2010/11
Stability of supply to customers,
stability of bulk water supply
systems and standards and
norms:
Flexible supply systems
2011/12
Stability of supply to
customers, stability of bulk
water supply systems and
standards and norms:
Flexible supply systems
2012/13
Stability of supply to customers,
stability of bulk water supply
systems and standards and
norms:
Flexible supply systems
2013/2014
Stability of supply to
customers, stability of bulk
water supply systems and
standards and norms:
Flexible supply systems
2014/2015
Stability of supply to customers,
stability of bulk water supply
systems and standards and
norms:
Flexible supply systems

Page 130
 Strategic Objective
Manage Stakeholder
Relations
Strategy Outcome Performance Indicator
Stakeholder Understanding and • The extent to which feedback on performance has been
Support received from Statutory stakeholders: Executive Authority,
Portfolio Committee for Water Affairs, National Treasury,
Provincial Government, Executive Mayors.

Targets for Stakeholder Understanding and Support – Statutory Stakeholders

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Executive Authority: Executive Authority: Executive Authority: Executive Authority: Executive Authority: Executive Authority:
2 scheduled presentations 2 scheduled presentations 2 scheduled presentations 2 scheduled presentations 2 scheduled presentations 2 scheduled presentations

Portfolio Committee: Portfolio Committee: Portfolio Committee: Portfolio Committee: Portfolio Committee: Portfolio Committee:
1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation

Provincial Government and Provincial Government and Provincial Government and Provincial Government and Provincial Government and Provincial Government and
Executive Mayors: Executive Mayors: Executive Mayors: Executive Mayors: Executive Mayors: Executive Mayors:
1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation

National Treasury: National Treasury: National Treasury: National Treasury: National Treasury: National Treasury:
2 scheduled presentations 2 scheduled presentations 2 scheduled presentations 2 scheduled presentations 2 scheduled presentations 2 scheduled presentations

Page 131
 Strategic Objective Strategy Outcome Performance Indicator
Manage Stakeholder Stakeholder Understanding and • The extent to which feedback on performance has been
Relations Support received from Contracted stakeholders: Investors, Organised
Labour, Employees.

Targets for Stakeholder Understanding and Support – Contracted Stakeholders

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Investors: Investors: Investors: Investors: Investors: Investors:
1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation

Organised Labour: Organised Labour: Organised Labour: Organised Labour: Organised Labour: Organised Labour:
4 scheduled presentations 4 scheduled presentations 4 scheduled presentations 4 scheduled presentations 4 scheduled presentations 4 scheduled presentations

Employees: Employees: Employees: Employees: Employees: Employees:

4 scheduled presentations 4 scheduled presentations 4 scheduled presentations 4 scheduled presentations 4 scheduled presentations 4 scheduled presentations

Page 132
 Strategic Objective Strategy Outcome Performance Indicator
Manage Stakeholder Stakeholder Understanding and • The extent to which feedback on performance has been
Relations Support received from Non-Contracted stakeholders: Civil Society
and Business Formations.

Targets for Stakeholder Understanding and Support – Non-Contracted Stakeholders

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Civil Society and Business Civil Society and Business Civil Society and Business Civil Society and Business Civil Society and Business Civil Society and Business
Formations: Formations: Formations: Formations: Formations: Formations:
1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation 1 scheduled presentation

Page 133
 Strategic Objective Strategy Outcome Performance Indicator
Contribute to an Affordable Financial Viability • The extent to which a constant tariff in real terms
Tariff has been maintained.

Targets for Financial Viability

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Tariff Increase: Tariff Increase: Tariff Increase: Tariff Increase: Tariff Increase: Tariff Increase:
6.5% 6.2% 18.4% 5.4% 5.4% 5.4%
Projected CPI: Projected CPI: Projected CPI: Projected CPI: Projected CPI: Projected CPI:
5.1% 5.7% 5.5% 5.4% 5.4% 5.4%

Total bulk cost/kl: Total cost/kl: Total cost/kl: Total cost/kl: Total cost/kl: Total cost/kl:
Target: R2.235 R2.330 R3.712 R3.182 R3.313 R3.640
Projected: R2.090

Operational cashflow: Operational cashflow: Operational cashflow: Operational cashflow: Operational cashflow: Operational cashflow:
Target: R 638 million R 682 million R 658 million R 700 million R 774 million R 821 million
Projected: R 768 million

Page 134
 Strategic Objective Strategy Outcome Performance Indicator
Maintain an Optimal Financial Viability • The extent to which cashflow supports the debt
Debt Level level.

Targets for Financial Viability

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Net Debt:Equity: Net Debt:Equity: Net Debt:Equity: Net Debt:Equity: Net Debt:Equity: Net Debt:Equity:
Target: <0.7 0.312 0.341 0.380 0.298 0.214
Projected: 0.554

Debt:Equity: Debt:Equity: Debt:Equity: Debt:Equity: Debt:Equity: Debt:Equity:

Target: <0.7 0.647 0.569 0.458 0.377 0.289
Projected: 0.741

Debt Service: Debt Service: Debt Service: Debt Service: Debt Service: Debt Service:
Target: >1.75 7.881 2.551 5.303 6.507 7.484
Projected: 7.108

Debt:Assets: Debt:Assets: Debt:Assets: Debt:Assets: Debt:Assets: Debt:Assets:

Target: <0.4 0.350 0.337 0.287 0.247 0.208
Projected: 0.367

Page 135
 Strategic Objective Strategy Outcome Performance Indicator
Improve Return on Assets Financial Viability • The percentage improvement on return on asset.

Targets for Financial Viability

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
ROA: ROA: ROA: ROA: ROA: ROA:
Target: 18.58% 14.25% 6.57% 13.48% 13.28% 11.68%
Projected: 18.05%

Asset Turnover: Asset Turnover: Asset Turnover: Asset Turnover: Asset Turnover: Asset Turnover:
Target: 0.476 0.414 0.440 0.432 0.429 0.436
Projected: 0.496

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 Strategic Objective Strategy Outcome Performance Indicator
Enhance Shareholder Financial Viability • The extent to which the credit rating has been
Value maintained.

Targets for Financial Viability

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Credit Rating: Credit Rating: Credit Rating: Credit Rating: Credit Rating: Credit Rating:
AA+ Long term. AA+ Long term. AA+ Long term. AA+ Long term. AA+ Long term. AA+ Long term.
F1+ short term. F1+ short term. F1+ short term. F1+ short term. F1+ short term. F1+ short term.

Surplus: Surplus: Surplus: Surplus: Surplus: Surplus:

Target:470 million R 486 million R 168 million R 503 million R 559 million R 532 million
Projected actual: R 505 million

Page 137
 Strategic Objectives Strategy Outcome Performance Indicator
Contribute to National Community and • The percentage water services coverage by Umgeni Water in
Developmental Agenda Environmental each local municipality and metro in gazetted supply area.
Sustainability

Targets for Community and Environmental Sustainability through balanced geographical Service coverage
2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Water service coverage: Water service coverage: Water service coverage: Water service coverage: Water service coverage: Water service coverage:
228 of 375 wards (61%) 228 of 375 wards (61%) 228 of 375 wards (61%) 228 of 375 wards (61%) 238 of 375 wards (63%) 259 of 375 wards (69%)
Ugu DM Ugu DM Ugu DM Ugu DM Ugu DM Ugu DM
17 of 81 wards (21%) 17 of 81 wards (21%) 17 of 81 wards (21%) 17 of 81 wards (21%) 25 of 81 wards (31%) 28 of 81 wards (35%)

iLembe DM iLembe DM iLembe DM iLembe DM iLembe DM iLembe DM

48 of 66 wards (73%) 48 of 66 wards (73%) 48 of 66 wards (73%) 48 of 66 wards (73%) 50 of 66 wards (76%) 51 of 66 wards (77%)

Sisonke DM Sisonke DM Sisonke DM Sisonke DM Sisonke DM Sisonke DM

1 of 47 wards (2%) 1 of 47 wards (2%) 1 of 47 wards (2%) 1 of 47 wards (2%) 1 of 47 wards (2%) 5 of 47 wards (11%)

Umgungundlovu DM * Umgungundlovu DM * Umgungundlovu DM * Umgungundlovu DM * Umgungundlovu DM* Umgungundlovu DM *

62 of 81 wards (77%) 62 of 81 wards (77%) 62 of 81 wards (77%) 62 of 81 wards (77%) 62 of 81 wards (77%) 75 of 81 wards (93%)

Msunduzi LM Msunduzi LM Msunduzi LM Msunduzi LM Msunduzi LM Msunduzi LM

37 of 37 wards (100%) 37 of 37 wards (100%) 37 of 37 wards (100%) 37 of 37 wards (100%) 37 of 37 wards (100%) 37 of 37 wards (100%)

eThekwini Metro eThekwini Metro eThekwini Metro eThekwini Metro eThekwini Metro eThekwini Metro
100 of 100 wards (100%) 100 of 100 wards (100%) 100 of 100 wards (100%) 100 of 100 wards (100%) 100 of 100 wards (100%) 100 of 100 wards (100%)

Page 138
 Strategic Objectives Strategy Outcome Performance Indicator
Contribute to National Community and  The extent to which capital expenditure programmes and
Developmental Agenda Environmental other programmes contribute to skills development, job
Sustainability creation, empowerment and capacity building.

Targets for Community and Environmental Sustainability through the fight against poverty and underdevelopment
2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Alignment to expanded public Alignment to expanded public Alignment to expanded public Alignment to expanded public Alignment to expanded public Alignment to expanded public
works programme. works programme. works programme. works programme. works programme. works programme.

Alignment to preferential Alignment to preferential Alignment to preferential Alignment to preferential Alignment to preferential Alignment to preferential
procurement framework act. procurement framework act. procurement framework act. procurement framework act. procurement framework act. procurement framework act.

Page 139
 Strategic Objectives Strategy Outcome Performance Indicator
Conserve Limited Natural Water Resources  The extent to which Umgeni Water influences timely planning,
Resources Adequacy development and investment in water resources infrastructure

Targets for Water Resources Adequacy

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Joint planning sessions with Joint planning sessions with Joint planning sessions with Joint planning sessions with Joint planning sessions with Joint planning sessions with
Department of Water Affairs: Department of Water Affairs: Department of Water Affairs: Department of Water Affairs: Department of Water Affairs: Department of Water Affairs:
Bi-annual Bi-annual Bi-annual Bi-annual Bi-annual Bi-annual

Page 140
 Strategic Objectives Strategy Outcome Performance Indicator
Conserve Limited Natural Community and  The extent to which negative impacts on the natural
Resources Environmental environment have been mitigated.
Sustainability

Targets for Community and Environmental Sustainability

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015
Environmental sustainability plan Environmental sustainability Environmental sustainability Environmental sustainability Environmental sustainability Environmental sustainability
developed and implemented. plan developed, implemented plan developed, plan developed, plan developed, implemented plan developed, implemented
and reviewed. implemented and reviewed. implemented and reviewed. and reviewed. and reviewed.

Page 141
 Strategic Objective Strategy Outcomes Performance Indicator
Maintain Strategic Stakeholder  The extent to which the operating environment has influenced strategy.
Effectiveness Understanding and
 The extent of alignment of the strategy to mandate.
Support.
 The extent of alignment between the business plan and strategy.
Leadership and
Employee Development  The extent to which corporate performance is aligned to strategy and plans.

Targets for Stakeholder Understanding and Support and Leadership and Employee Development

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015

Annual review of strategy Annual review of strategy Annual review of strategy Annual review of strategy Annual review of strategy Annual review of strategy

Statutory compliance:
Annual Report presentations to
stakeholders
Business /Corporate Plan
approved
Shareholder’s Compact signed
Quarterly reporting to Executive
Authority
Statutory compliance:
Annual Report presentations to
stakeholders
Business /Corporate Plan approved
Shareholder’s Compact signed
Quarterly reporting to Executive
Authority
Statutory compliance:
Annual Report presentations to
stakeholders
Business /Corporate Plan
approved
Shareholder’s Compact signed
Quarterly reporting to Executive
Authority
Statutory compliance:
Annual Report presentations to
stakeholders
Business /Corporate Plan
approved
Shareholder’s Compact signed
Quarterly reporting to Executive
Authority
Statutory compliance:
Annual Report presentations to
stakeholders
Business /Corporate Plan
approved
Shareholder’s Compact signed
Quarterly reporting to Executive
Authority
Statutory compliance:
Annual Report presentations to
stakeholders
Business /Corporate Plan
approved
Shareholder’s Compact signed
Quarterly reporting to Executive
Authority

Page 142
 Strategic Objective Strategy Outcome Performance Indicator
Ensure Functional Leadership and Employee  The extent to which the organisation’s structure is continuously
Excellence Development reviewed and aligned to strategy.

Targets for Leadership and Employee Development

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015

Continuous review of structure Continuous review of structure Continuous review of structure Continuous review of structure Continuous review of structure Continuous review of structure
and roles of divisions. and roles of divisions. and roles of divisions. and roles of divisions. and roles of divisions. and roles of divisions.

Interdivisional collaboration. Interdivisional collaboration. Interdivisional collaboration. Interdivisional collaboration. Interdivisional collaboration. Interdivisional collaboration.

Page 143
 Strategic Objective
Ensure Operational
Competence
Targets for Leadership and Employee Development, Operational Optimisation and Operational Resiliency
2009/10
Organisational systems are in
place and an integrated
management system based on
OHSAS 18001, ISO 9001 and ISO
14001 is being developed:
Strategy Outcomes Performance Indicator
Leadership and Employee Development.  The extent to which the systems, skills and
Operational Optimisation. competencies enable implementation of strategy.
Operational Resiliency.
2010/11 2011/12 2012/13 2013/2014 2014/2015
Organisational systems in place Organisational systems in place Organisational systems in place Organisational systems in place Organisational systems in place
and are aligned to ISO standards and are aligned to ISO standards and are aligned to ISO standards and are aligned to ISO and are aligned to ISO standards
and systems (OHSAS 18001, ISO and systems (OHSAS 18001, ISO and systems (OHSAS 18001, ISO standards and systems (OHSAS and systems (OHSAS 18001, ISO
9001, ISO 14001). 9001, ISO 14001). 9001, ISO 14001). 18001, ISO 9001, ISO 14001). 9001, ISO 14001).
Page 144
 Strategic Objective Strategy Outcomes Performance Indicator
Ensure Operational Leadership and Employee  The extent to which core and distinctive competencies are
Competence Development enhanced.
 The extent to which there is leadership and employee
Operational Resiliency. development in place.

Targets for Leadership and Employee Development and Operational Resiliency

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015

Core competencies to deliver on Core competencies to deliver on Core competencies to deliver on Core competencies to deliver on Core competencies to deliver on Core competencies to deliver on
mandate. mandate. mandate. mandate. mandate. mandate.

Workforce that is competent, Workforce that is competent, Workforce that is competent, Workforce that is competent, Workforce that is competent, Workforce that is competent,
motivated, adaptive, and works motivated, adaptive, and works motivated, adaptive, and works motivated, adaptive, and works motivated, adaptive, and works motivated, adaptive, and works
safely. safely. safely. safely. safely. safely.

Learnerships programme Learnerships programme Learnerships programme Learnerships programme Learnerships programme Learnerships programme
developed. developed. developed. developed. developed. developed.

Professional and leadership Professional and leadership Professional and leadership Professional and leadership Professional and leadership Professional and leadership
training and development development programmes in development programmes in development programmes in development programmes in development programmes in
programmes. place. place. place. place. place.

Page 145