BusinessPlan2012 PDF

Table of Contents
Table of Contents
Volume 1: Policy Statement

Volume 2: Strategy and Business Plan
Strategic Highlights by the Chairperson of the Board of Umgeni Water Page 4
Foreword by the Chief Executive Page 7
Chapter 1: Introduction Page 9
Chapter 2: Strategy Page 11
Chapter 3: Stakeholder Profile and Engagement Plan Page 22
Chapter 4: Marketing Plan Page 24
Chapter 5: Policy Statement Page 26
Chapter 6: Governance and Structure Page 27
Chapter 7: Directives by the Minister Page 34
Chapter 8: Self-Appraisal Page 35
Chapter 9: Participation in Companies Page 41
Chapter 10: Water Resources Page 43
Chapter 11: Bulk Potable Water Supply Plan Page 56
Chapter 12: Bulk Wastewater Treatment and Disposal Page 80
Chapter 13: Retail Supply Page 82
Chapter 14: Other Activities (Section 30) Page 83
Chapter 15: Human Resources Plan Page 86
Chapter 16: Environmental Management Programmes and Plans Page 92
Chapter 17: Water Conservation and Demand Management Plan Page 97
Chapter 18: Financial Plan Page 99
Chapter 19: Debt Management and Funding Requirements Page 142
Chapter 20: Materiality and Significance Framework Page 154
Chapter 21: Financial Ratios Page 155
Chapter 22: Self-Evaluation Statement on Financial Viability Page 160
Chapter 23: Analysis of Financial Risk Page 172
Chapter 24: Bank Accounts Page 174
Chapter 25: Analysis of Risk Page 175
Chapter 26: Fraud Prevention Page 179
Chapter 27: Corporate Social Responsibility Plan Page 181
Chapter 28: Scorecard Page 183
Chapter 29: Signed Declaration Page 188
Umgeni Water Five-Year Business Plan Page 3

2012/2013 to 2016/2017
Version: 31 May 2012 5:29 PM
Strategic Highlights by the Chairperson of the Board of Umgeni Water

Underpinning this business plan are the key government pronouncements made in the following statements
and publications of government, amongst others:
 State of the Nation Address - President Jacob Zuma – 9th February 2012
 National Development Plan for 2030, November 2011.
 National Budget - Finance Minister Pravin Gordhan – 22nd February 2012
 The Twelve Strategic Outcomes of Government and notably those pertinent to the Executive Authority
- the Minister of Water and Environmental Affairs, Edna Molewa.
 The Department of Water Affair’s Strategy Plan 2012/13 to 2016/17 - Minister of Water and
Environmental Affairs, Edna Molewa - 7th March 2012
 State of the Province Address – Dr Zweli Mkhize – 21st February 2012
 Provincial Growth and Development Strategy, October 2011.
 National Climate Change Response White Paper, October 2011.
In response to these the Board has extracted the following key statements for
Umgeni Water:
South Africa’s long term vision:

‘By 2030, all South Africans will have affordable access to sufficient safe water and hygienic sanitation to live
healthy and dignified lives’.
Government’s vision for state-owned enterprises:

‘State-owned enterprises have a key role to play in advancing key national objectives, particularly through
providing economic and social infrastructure. If this is done in an equitable and cost-effective manner, state-
owned enterprises can contribute to both economic growth and overcoming spatial inequalities. In 2030,
South Africa needs to be served by a set of efficient, financially sound and well-governed state-owned
enterprises that address the country’s developmental objectives…’
Emerging water related policy issues:
 There will be differentiation in service provision between densely built-up urban areas and scattered
rural settlements.
 Many small and rural municipalities lack the financial and technical capacity to manage water services
adequately. Regional utilities could provide these services, with arrangements to ensure that
municipalities retain their role as the political authority responsible for service oversight.
 Investments to support economic uses of water should be funded by users through appropriate
pricing measures, which include arrangements for ensuring that basic services are affordable.
 Investments to support rural development will require large amounts of public funding for which
policy is needed to be developed to guide such investments.
Key national government water strategy actions / targets:
 A comprehensive water resources management strategy including an investment programme for

water resources development, bulk water supply and wastewater management.
 Create regional water and wastewater utilities, and expand mandates of the existing water boards.
 In its Strategy and Annual Performance Plan for 2012/2013 to 2016/2017, DWA has stated that as
part of the institutional realignment strategy, DWA will reconsider the mandate of water boards to
ensure that those with high technical capacity are optimally used.
Page 4 Umgeni Water Five-Year Business Plan

2012/2013 to 2016/2017
 The institutional re-alignment process will ensure that all institutions involved in the water value
chain provide an integrated and equity responsive approach to managing water infrastructure and
water resources.
In this regard, and as per the clear message from government and the Executive Authority, the Minister of
Water and Environmental Affairs (Edna Molewa), that institutions of government must converge around the
same agenda, the Board of Umgeni Water has articulated the following strategies to be achieved, within the
context of Umgeni Water’s mandate.
Umgeni Water Strategies
1. Umgeni Water will leverage its bulk water competence and sound industry standing, to embark on a water
services growth strategy through consolidation and expansion of its business, and then grow through further
phased expansion beyond its area.
Mindful of its statutory mandate, the outcome and emphasis will be to extend water services to unreached
areas, as well as, increase Umgeni Water’s footprint.
Umgeni Water will pursue its expansion strategy, through alignment with provincial growth strategies and
plans, municipality growth plans and the state of water service backlogs, and identify and target markets and
specific segments of the water value chain where it can best add sustainable / competitive value.
2. Cognisant of the growth strategy, a sound long-term funding and financing strategy will be developed, which
incorporates aggressive pursuit and channelling of grant and other national funding for rural water
infrastructure.
Umgeni Water will use its bulk water competence to influence development of an objective national tariff
policy.
The funding and financing strategy will ensure sufficient investment to support the strategy, including
covering operational costs, ensuring customer satisfaction, and protection of assets - physical, financial,
human, systems, processes, as well as, ensuring targeted investment for upgrades and new capital
infrastructure to meet future demands.
3. Umgeni Water will develop an asset management strategy and infrastructure growth plan that will also
address obsolete and aging infrastructure and bottlenecks, in the context of its regional growth strategy,
whilst using its experience and commitment to improve skills transfer and people development in the region.
In respect of the latter, Umgeni Water will use a robust procurement strategy to address job creation and
poverty, including through e.g. partnerships, SMMEs, women and SETAs, as an opportunity for skills transfer.
4. Umgeni Water will engage stakeholders, through a focused stakeholder engagement plan, to strengthen
relations, influence provincial and national policy and demonstrate sustainable value propositions per
stakeholder.
Customer satisfaction will be improved by using bulk water competence and experience to drive costs down
and improve efficiencies, and demonstrate the effect of economies of scale and commitment to delivering
affordable and certifiable (Blue Drop / Green Drop) water services to the region.
5. Umgeni Water will aggressively pursue sustainable utilisation of environmental resources, including
alternative energy, technological and process enhancements, and catchment water quality management.
6. Water resources planning for a regional utility will be pursued through a mix of new and renewable options.
7. Umgeni Water will re-energise its workforce to enhance operational effectiveness and improve efficiency,
address skills gaps and its aging workforce, and ensure knowledge management using technology, skills
transfer and the regional expansion opportunity.

2012/2013 to 2016/2017
The organisation will ensure continuous professional development to ensure responsiveness to a fast changing
environment.
8. A focused reputation, marketing and branding plan will be developed which Umgeni Water will use, together
with its industry track record, to protect, retain, develop and leverage capacity, to achieve sustainable
advantage as a regional entity.
9. The feasibility of specialised water services growth in the SADC region will be investigated.
Mr Andile Mahlalutye
Chairperson of the Board of Umgeni Water
31 May 2012

2012/2013 to 2016/2017
Foreword by the Chief Executive

This Five-Year Business Plan covers the period 1 July 2012 to 30 June 2017 and seeks to comply with the
requirements of the Water Services Act (Act 108 of 1997), Public Finance Management Act (Act 1 of 1999), and
associated regulations and prescribed guidelines issued by the Department of Water Affairs and National
Treasury.
This business plan responds to the organisation’s strategies through targeting the resources, planned activities
and outputs to progressively realise the ten organisational outcomes.
Cognisant of the strategic direction provided by the Board this business plan will initially ‘sharpen the saw’,
implement its current plans for consolidation, efficiency and rejuvenation, and lay down the foundation
frameworks and plans for implementation of the organisation’s growth strategies. Zero or low (0% to 1.6%)
volume growth is projected in this business plan period.
Infrastructure expenditure over the five-year period is R4.2 billion (unescalated) and of which 44% will be in
support of rural development, 38% in additional capacity and 18% to improve asset condition. The outcome of
the infrastructure programme will be infrastructure stability which will deliver reliable and safe bulk potable
water supply to customers and vulnerable communities, while ensuring wastewater discharges comply with
environmental requirements.
The major financial risk facing Umgeni Water is being able to maintain a sustainable tariff going forward. The
proposed 2013 tariff at 5.6% is low given that cost per kl is projected to increase internally by 11%. However
the efficiencies and reserves built up over the past few years will enable Umgeni Water to remain financially
viable provided it receives the projected R 1 billion Bulk Infrastructure Grant required to support the Rural
Development programme it has embarked upon.
Based on these assumptions, the financial plan ensures the organisation has sufficient investment and
resources to undertake the activities it needs to achieve the target outputs through covering operational costs
and providing investment for the capital infrastructure programme.
Umgeni will further ensure that it responds to customer service level agreements with particular reference to
supply volumes, pressure and service disruption intervals.
Having recently constructed the Mhlabatshane dam as part of the bulk water supply scheme to secure supply to
a rural municipality in the Ugu region, Umgeni Water will in this business plan period further construct the
Mvutshane dam, as part of ensuring supply security to the Maphumulo bulk water supply scheme serving rural
communities in iLembe DM
Umgeni Water will continue to collaborate with the Department of Water Affairs for adequate water resources
to be timely planned and developed for economic growth, including, completion of the Spring Grove Dam to
supplement the Mgeni system, the Smithfield Dam on the Mkomazi River and the raising of the Hazelmere Dam
on the Mdloti River.
Umgeni Water will further continue to manage its existing water resource supplies with the utmost care, whilst
investigating alternative sources, including embarking on a feasibility study for wastewater reuse from its
Darvill Wastewater Treatment Works and continuing with the detailed feasibility study for sea-water
desalination in the East Coast region, with completion of the latter by 2013.
Mindful of the finiteness and increasing cost of resources, Umgeni Water will invest in initiatives that conserve
resources, including electricity co-generation at its Darvill Wastewater Works.

2012/2013 to 2016/2017
Furthermore, Umgeni Water will collaborate with local government, provincial government and national
government toward development of plans for regional efficiency, through the alignment of its infrastructure
projects and technical skills.
Umgeni Water will continue to deepen implementation of the human resources strategy, notably through
learnerships, graduate development and employee and leadership development plans and through
partnerships with National Treasury, universities, FET colleges, vocational institutions and SETAs.
Umgeni Water will continue to strengthen corporate governance and risk management through adherence to
good corporate governance principles and enhanced systems of internal control.
Ms Nica Gevers
Acting Chief Executive
31 May 2012

2012/2013 to 2016/2017
Chapter 1: Introduction
1.1 Legislative mandate

Umgeni Water is a public entity established in 1974 to provide water services - water supply and sanitation
services - to other water services institutions in its service area. The organisation 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 is categorised as a National Government Business Enterprise. Umgeni Water reports directly to the
Department of Water Affairs, through the Chairman of the Board and the Chief Executive and its Executive
Authority is the Minster of Water and Environmental Affairs.
1.2 Activities of Umgeni Water

The primary activities of Umgeni Water, as pronounced in section 29 of the Water Services Act, is to provide
water services (water supply and sanitation services) to other water services institutions in its service area.
In addition, section 30 of the Water Services Act, enables Umgeni Water to undertake other activities, provided
these do not impact negatively on the organisation’s ability to perform its primary activity. These include:
 Providing management services, training and other support services to other water services
institutions, in order to promote co-operation in the provision of water services;
 Supplying untreated or non-potable water to end-users who do not use the water for household
purposes;
 Providing catchment management services to or on behalf of the responsible authority;
 With the approval of the water services authority having jurisdiction in the area:
o Supplying water directly for industrial use;
o Accepting industrial effluent;
o Acting as a water services provider to consumers;
 Providing water services in joint venture with water services authorities; and
 Performing water conservation functions.
1.3 Supply Area and Customers

Over the years Umgeni Water has grown into the largest bulk water supplier in KwaZulu-Natal and has an
operational area of 21,155 square kilometres. Umgeni Water’s operational area 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.
The organisation derives its revenue from the sale of bulk potable water to its customers:
 eThekwini Metropolitan Municipality

 iLembe District Municipality
 Ugu District Municipality
 Sisonke District Municipality
 uMgungundlovu District Municipality
 Msunduzi Local Municipality.
A total of 415 million cubic metres of potable water per annum is currently supplied to customers who serve an
estimated 4.8 million end consumers, business and industry through reticulation networks.

2012/2013 to 2016/2017
Umgeni Water’s infrastructure assets in support of its primary business comprise:
 Approximately 632 kilometres of pipelines and 118 kilometres of tunnels;

 Twelve (12) dams, of which five (5) are managed on behalf of the Department of Water Affairs and
two (2) on behalf of the Ugu District Municipality;
 Eleven (11) water treatment work, of which two (2) are managed on behalf of the Ugu District
Municipality.
An additional eighteen (18) small water treatment works are managed on behalf of the iLembe District
Municipality; together with nineteen (19) borehole schemes.
The organisation also treats bulk wastewater totalling 25 million cubic metres per annum, and in support of
this operates five (5) wastewater treatment works, of which one (1) is managed on behalf of the
uMgungundlovu District Municipality.

2012/2013 to 2016/2017
Chapter 2: Strategy
Chapter 2: Strategy
2.1 Linkage between DWA Outcomes and Government Outcomes

The Department of Water Affairs has identified six outcome-based goals which are guided by its mandate, and
which goals are aligned to the twelve government outcomes.
Government has agreed on twelve (12) strategic outcomes to focus its work to 2014:
 Outcome 1 (Education) “Quality of our basic education”
 Outcome 2 (Health) “A long and healthy life for all South Africans”
 Outcome 3 (Security) “All people in South Africa are, and feel safe”
 Outcome 4 (Employment)  “Decent employment through inclusive economic growth”
 Outcome 5 (Skills) “Skilled and capable workforce to support an inclusive growth plan”
 Outcome 6 (Infrastructure)  “An efficient, competitive and responsive infrastructure network”
 Outcome 7 (Rural Development)  “Vibrant, equitable, sustainable rural communities, contributing

towards food security for all”
 Outcome 8 (Human Settlement)  “Sustainable human settlements and improved quality of

household life”
 Outcome 9 (Local Government)  “Responsive, accountable, effective and efficient local government
system”
 Outcome 10 (Environment)  “Protect and enhance our environmental assets and natural resources”
 Outcome 11 (International)  “Create a better South Africa, a better Africa and a better world”
 Outcome 12 (Public Service) “An efficient, effective and development oriented public service and an
empowered, fair and inclusive citizenship”
Of these, DWA has indicated seven outcomes  that Water Board’s will respond to in the context of its
legislative mandate.

2012/2013 to 2016/2017
Chapter 2: Strategy
2.2 DWA Performance Objectives for Water Boards

DWA has identified performance objectives for Water Boards that are aligned to seven government outcomes.
Umgeni Water has incorporated all DWA objectives into its scorecard and will align these through the ten
organisational outcomes approved by the Board.
DWA Outcomes linked to government

DWA Performance Objective for Umgeni Water Perspective,
Outcomes and Outputs for Water Boards Water Boards Objective and Outcome
Outcome 10 : Environment
DWA Outcome A: Environmental Assets (1) Water Quality Compliance. SO 1: Increase services and
Customer and Stakeholder

and natural resources that are well customers.
protected and continually enhanced. (20) Wastewater Quality SO 2: Increase customer and
Output 1: Enhanced quantity and quality of Compliance. stakeholder satisfaction.
Perspective
our water resources. (3) Reliability of supply.
• Target (a) Reduction of water losses Customer satisfaction.
from distribution networks from 30% (8) Bulk Supply Agreements
Concluded With Municipalities/ Product Quality.
to 18% by 2014 and; effective water
conservation and water saving. Other Customers Stakeholder Understanding and
• Target (b) Improve current capability (13) Increased Access to Services. Support.
to treat wastewater, 80% of sewage
and wastewater treatment works (14) Engagement in Secondary Community and Environmental
should be upgraded by 2015. Activities. Sustainability.
• Target (c) The percentage of
wastewater treatment works meeting SO 3: Mobilise funds.
Perspective
SO 4: Increase return on assets.
Financial
water quality standards to be
increased from 40% to 80% by 2014. SO 5: Improve Financial Ratios.
(9) Improve Financial Ratios.
Outcome 6 : Infrastructure
Financial Viability.
DWA Outcome B: Contribution to An
efficient, competitive and responsive
economic infrastructure network. (12) Capital Expenditure.
Output 2: Ensuring the maintenance and
supply availability of our bulk water (13) Increased Access to Services. SO 6: Increase infrastructure
infrastructure. (10) Increase BBBEE Spend. for access and additional
• Target (a) Reduce unaccounted for capacity and improve asset
water (non-revenue water) from (16) Jobs Created. condition.
approximately 30% of supply to 18% SO 7: Improve service delivery
Process Perspective
(2) Non-Revenue Water. systems.

Outcome 8 : Human Settlements
DWA Outcome C: Sustainable human (11) Manage Costs Within The
settlements and improved quality of Approved Budget.
household life. Infrastructure Stability.
(4) Financial Reporting Compliance
Outcome 9 : Local Government Community and Environmental
DWA Outcome D: Responsive, accountable, (6) Board Member Attendance. Sustainability
effective and efficient local government
(7) Effective Internal Controls And Operational Optimisation.
system
Risk Management.
• Target (a) The shared output to Operational Resiliency.
improve access to basic services from (15) Achieve Statutory Reporting
the current 92% to 100% by 2014 Compliance.
Outcome 4 : Employment (19) Good Governance.
DWA Outcome E: Decent employment
through inclusive economic growth.
(5) Staff Turnover.
Organisational Capacity
Outcome 11: International SO 8: Develop water resources

DWA Outcome F: Create a better South (18) Training And Skills SO 9: Increase skills and
Africa and contribute to a better and safer
Perspective
Development competency.
Africa and world.
Outcome 7 : Rural Development (17) Corporate Social Water Resources Adequacy.
DWA Outcome G: Vibrant, equitable and Responsibility Initiatives.
sustainable rural communities with food Leadership and Employee
(21) Raw Water Resources. Development
security for all.

2012/2013 to 2016/2017
Chapter 2: Strategy
2.3 Umgeni Water Strategy

Umgeni Water has, overall, a strong competitive position. The market for water services needs to exhibit rapid
market growth to meet government mandate. This situation suggests a strategy of expansion, including the
thrusts of concentrated growth, market development, and vertical and horizontal integration. This strategy of
expansion provides a structured opportunity for various government and development financing institution
investment in initiatives which will both succeed and contribute towards achievement of government
objectives.
Vision
“To be the leading water utility that enhances value in water services
provision”
We will be known in the global water sector as an effectively run, public-oriented and socially accountable
organisation, which has its heart, mind and soul, directed to the provision of water services. We will achieve
leadership based on our technical performance and our sustainable contribution and the value we add in water
services provision, and continue to leave a positive legacy in our region and country.
Mission
“To provide innovative, sustainable, effective and affordable water,

sanitation and related services to meet the National Development
objectives”
Our business is the management and provision of water and sanitation services to support the delivery of
water and sanitation services by government to the people of South Africa. This includes the service provision
of technical know-how in the entire water supply chain, from “source-to-sea”. We are committed to providing
water and sanitation services for life!
Strategic intent
“A Key Partner in enabling government to deliver effective and

efficient water services through the value chain”
Umgeni Water wants to be recognised as a strategic and sustainable partner of government, creating distinct
shareholder value through providing water and sanitation services as a catalyst for local economic
development and support for government’s developmental agenda.

2012/2013 to 2016/2017
Chapter 2: Strategy
Values
Customer focus
Partnering with municipalities and other customers to proactively identify and provide integrated sustainable
solutions to enhance their capacity to deliver in accordance with their mandates.
Integrity
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, strategic stakeholders and partners.
Developmental approach
We deliver sustainable and appropriate solutions that improve the quality of life and contribute to the
development agenda of humanity in need of water and sanitation services.
People-centred
We value and respect all people equally.
Environmentally sustainable
We are committed to protecting our diminishing natural resources and reducing pollution in all areas of our
involvement.
Innovation and Excellence

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.

2012/2013 to 2016/2017
Chapter 2: Strategy
Umgeni Water Strategies
1. Umgeni Water will leverage its bulk water competence and sound industry standing, to embark on a
water services growth strategy through consolidation and expansion of its business, and then grow
through further phased expansion beyond its area.
Mindful of its statutory mandate, the outcome and emphasis will be to extend water services to
unreached areas, as well as, increase Umgeni Water’s footprint.
Umgeni Water will pursue its expansion strategy, through alignment with provincial growth strategies
and plans, municipality growth plans and the state of water service backlogs, and identify and target
markets and specific segments of the water value chain where it can best add sustainable / competitive
value.
2. Cognisant of the growth strategy, a sound long-term funding and financing strategy will be developed,
which incorporates aggressive pursuit and channelling of grant and other national funding for rural
water infrastructure.
Umgeni Water will use its bulk water competence to influence development of an objective national
tariff policy.
The funding and financing strategy will ensure sufficient investment to support the strategy, including
covering operational costs, ensuring customer satisfaction, and protection of assets - physical, financial,
human, systems, processes, as well as, ensuring targeted investment for upgrades and new capital
infrastructure to meet future demands.
3. Umgeni Water will develop an asset management strategy and infrastructure growth plan that will also
address obsolete and aging infrastructure and bottlenecks, in the context of its regional growth strategy,
whilst using its experience and commitment to improve skills transfer and people development in the
region.
In respect of the latter, Umgeni Water will use a robust procurement strategy to address job creation and
poverty, including through e.g. partnerships, SMMEs, women and SETAs, as an opportunity for skills
transfer.
4. Umgeni Water will engage stakeholders, through a focused stakeholder engagement plan, to strengthen
relations, influence provincial and national policy and demonstrate sustainable value propositions per
stakeholder.
Customer satisfaction will be improved by using bulk water competence and experience to drive costs
down and improve efficiencies, and demonstrate the effect of economies of scale and commitment to
delivering affordable and certifiable (Blue Drop / Green Drop) water services to the region.
5. Umgeni Water will aggressively pursue sustainable utilisation of environmental resources, including
alternative energy, technological and process enhancements, and catchment water quality management.
6. Water resources planning for a regional utility will be pursued through a mix of new and renewable
options.
7. Umgeni Water will re-energise its workforce to enhance operational effectiveness and improve
efficiency, address skills gaps and its aging workforce, and ensure knowledge management using
technology, skills transfer and the regional expansion opportunity.
The organisation will ensure continuous professional development to ensure responsiveness to a fast
changing environment.
8. A focused reputation, marketing and branding plan will be developed which Umgeni Water will use,
together with its industry track record, to protect, retain, develop and leverage capacity, to achieve
sustainable advantage as a regional entity.
9. The feasibility of specialised water services growth in the SADC region will be investigated.

2012/2013 to 2016/2017
Chapter 2: Strategy
2.4 Umgeni Water Strategic Objectives (Strategy Map)
Mission
“To provide innovative, sustainable, effective
and affordable water, sanitation and related
services to meet the National Development
objectives”
Vision “To be the leading water utility that enhances value in water services provision”
Strategic Intent “A Key Partner in enabling government to deliver effective and efficient water
services through the value chain”
Strategic Themes: Year 1 - Efficiency and Rejuvenation

Year 2 - Partner with Stakeholders
Year 3 - Regional Conceptualisation
Year 4 - Fund and Implement
Year 5 - Optimise Delivery
Umgeni Water / Core strategic statement:

We will lead the process of providing solutions via an innovative, vigorous
growth path, to increase sustainable water supply, in order to satisfy the
developmental water services requirements in our region, which contribute to
government objectives.
4 Balanced Perspectives 9 Strategic Objectives
Customer and SO1: Increase

SO2: Increase
Stakeholder services and
customer and
stakeholder
Perspective customers.
satisfaction.
Financial SO3: Mobilise funds.

SO4: Increase return SO5: Improve
on assets. financial ratios.
Perspective
SO6: Increase
Process infrastructure for
SO7: Improve service
access and additional
Perspective capacity and improve
delivery systems.
asset condition.
Organisational
SO8: Develop water SO9: Increase skills
Capacity resources and competency.
Perspective

2012/2013 to 2016/2017
Chapter 2: Strategy
Umgeni Water Ten Outcomes
SO 1: Increase services and customers.

SO 2: Increase customer and stakeholder satisfaction.
Customer and
Stakeholder
Outcomes
Perspective
Customer satisfaction.
Product Quality.
Stakeholder Understanding and Support.
Community and Environmental Sustainability.
SO 3: Mobilise funds.
SO 4: Increase return on assets.
Perspective
Financial
SO 5: Improve Financial Ratios.
Outcome
SO 6: Increase infrastructure for access and additional capacity and improve asset
condition.
SO 7: Improve service delivery systems.
Perspective
Outcomes
Process
Infrastructure Stability.
Community and Environmental Sustainability
Operational Optimisation.
Operational Resiliency.
SO 8: Develop water resources
Organisational
SO 9: Increase skills and competency.

Perspective
Capacity
Outcomes
Water Resources Adequacy.
Leadership and Employee Development

2012/2013 to 2016/2017
Chapter 2: Strategy
2.5 Umgeni Water Strategic Objectives, Performance Outcomes and KPIs

Five-Year Targets for 2012/2013 to 2016/2017 are shown in the full organisational scorecard in Chapter 28.
Outcomes
• Customer Satisfaction: achieved when Umgeni Water provides reliable, responsive, and affordable services
in line with explicit, customer-agreed service levels and receives timely customer feedback to maintain
responsiveness to customer needs and emergencies.
• Product Quality (Water and Wastewater): achieved when Umgeni Water produces potable water and
wastewater in full compliance with statutory and reliability requirements and consistent with customer and
environmental needs.
• Community and Environmental Sustainability: achieved when Umgeni Water is explicitly cognisant of and
attentive to the impacts it has on current and future community sustainability, supports socio-economic
development, and manages its operations, infrastructure, and investments to protect, restore, and enhance
the natural environment, whilst using energy and other natural resources efficiently.
• Stakeholder Understanding and Support: is attained when Umgeni Water engenders understanding and
support from statutory, contracted and non-contracted bodies for service levels, tariff structures, operating
budgets, capital improvement programmes, risk management decisions, and water resources adequacy.
Strategy Objectives and KPIs, outcome to be achieved and link to DWA objective for WBs
Strategic Key Performance Indicator (KPI) Strategic Plan Target (2030)
Objective (SO)
SO 1: Increase KPI 1: The extent to which UW has grown its services and Regional expansion.
services and customers.
customers. KPI 2: Per cent bulk potable water volume growth. 65% (670 mil m3)
KPI 3: Per cent bulk wastewater volume growth. 100% (44 mil m3)
KPI 4: Per cent s30 (other services) growth. (14) Expanded water value-chain services.
SO 2: Increase KPI 5: The extent to which there is engagement of statutory, Positive stakeholder engagement and
customer and contracted and non-contracted stakeholders, inputs into policy policy influence for expansion strategy.
stakeholder frameworks and response to queries.
satisfaction. KPI 6: Per cent statutory compliance for bulk potable water with 100%
SANS 241. (1) All systems have Blue Drop certification.
KPI 7: Per cent statutory compliance for bulk wastewater with 100%.
discharge license or general authorisation. (20) All systems have Green Drop certification.
KPI 8: Bulk supply agreements concluded with customers. (8) 100%.
KPI 9: Per cent days’ supply disrupted greater than 24 hours 0%
relative to total number of possible supply days. (3)
DWA Annex 1 KPIs

2012/2013 to 2016/2017
Chapter 2: Strategy
Outcome
• Financial Viability: achieved when Umgeni Water understands the organisational life-cycle costs and
maintains a balance between debt and assets while managing operating expenditures and increasing
revenues. In addition, the organisation aims at a sustainable tariff that is consistent with customer
expectations, recovers costs and provides for future expansion.
Strategic Key Performance Indicator (KPI) Strategic Plan Target (2030)
Objective (SO)
SO 3: Mobilise KPI 10: Funds mobilised for long-term financial sustainability of Optimal funding mix mobilised for
funds. social projects long-term financial sustainability
SO 4: Increase KPI 11: Per cent return on assets. (9) 1.5% above cost of funding
return on assets. KPI 12: Debtors days managed. (9) ≤ 30
SO 5: Improve KPI 13: Debt to Equity ratio (gearing risk) managed. (9) ≤ 60%
financial ratios KPI 14: Interest cover. ≥ 2.5
KPI 15: Liquidity - measured by operating cash flows (R'm) (9) ≥ R600m
KPI 16: Gross profit margin % (primary activity) (9) ≥ 45%
KPI 17: Gross profit margin % (Secondary activity) (9) ≥ 30%
KPI 18: Net profit margin % (primary activity) (9) ≥ 20%
KPI 19: Net profit margin % (secondary activity) (9) ≥ 10%
DWA Annex 1 KPIs

2012/2013 to 2016/2017
Chapter 2: Strategy
Outcomes
• Infrastructure Stability: achieved when Umgeni Water's understands the condition and costs associated
with critical infrastructure assets and maintains and enhances the condition of all assets over the long-term.
This is done at the lowest possible life-cycle cost and acceptable risk levels, is consistent with customer
service and statutory-supported service levels, and consistent with anticipated growth and system reliability
goals. The organisation further assures that asset repair, rehabilitation, and replacement efforts are
coordinated to minimise disruptions and other negative consequences.
• Operational Resiliency: achieved when Umgeni Water's leadership and staff work together to anticipate
and avoid problems and proactively identify, assess, and establish tolerance levels for, and proactively and
effectively manages a full range of business risks, consistent with industry trends and system reliability
goals.
• Community and Environmental Sustainability: achieved when Umgeni Water is explicitly cognisant of and
attentive to the impacts it has on current and future community sustainability, supports socio-economic
development, and manages its operations, infrastructure, and investments to protect, restore, and enhance
the natural environment, whilst using energy and other natural resources efficiently.
• Operational Optimisation: achieved when Umgeni Water has on-going, timely, cost-effective, reliable, and
sustainable performance improvements in all facets of its operations, minimises resource use, loss, and
impacts from day-to-day operations and maintains awareness of information and operational technology
developments to anticipate and support timely adoption of improvements.
Strategic Objective Key Performance Indicator (KPI) Strategic Plan
(SO) Target (2030)
SO 6: Increase KPI 20: Total infrastructure capital expenditure within target cash flows. (12) 100%
infrastructure for KPI 21: Completion dates of infrastructure projects within targets (per cent < 5%
access and variance). (12)
additional capacity KPI 22: Infrastructure capital expenditure for rural access within target cash flows. 100%
and improve asset (13)
condition. KPI 23: Infrastructure maintenance (Opex) within target cash flows. 100%
SO 7: Improve KPI 24: Number of Jobs created. (16) 3% of project spend.
service delivery KPI 25: Per cent increase in BBBEE spend and increased new entrants. (10) 0% (80% spend).
systems 20% new entrants.
KPI 26: Per cent major tender project value (>R1om) awarded to targeted 50%
suppliers.
KPI 27: Corporate Social Responsibility Initiatives. (17) 5
KPI 28: Number of innovations / environmental resource initiatives. 10
KPI 29: Water loss as a per cent of total water produced. (2) ≤5%
KPI 30: Total costs within overall budget (Per cent variance) (11) 0%
KPI 31: External audit report. 4) Unqualified.
KPI 32: Per cent repeat and unresolved internal audit findings. (7) 0
KPI 33: Breaches of materiality and significance framework. (19) 0
KPI 34: Per cent statutory submissions made on time. (15) 100%
KPI 35: Per cent Board member attendance (6) 100%
KPI 36: Number of key business processes, policies and systems improved and are 100%
enabling for strategy implementation (emphasis on: SCM, HR, Financial and
Infrastructure Implementation).
KPI 37: Turnaround time (working days), from date of requisition, for awarding of ≤ 60
open tenders.
KPI 38: Turnaround time (working days) for filling vacant posts. ≤ 45
DWA Annex 1 KPIs

2012/2013 to 2016/2017
Chapter 2: Strategy
Outcomes
• Water Resources Adequacy: is achieved when Umgeni Water assesses the scarcity of freshwater resources,
investigates sustainable alternatives, manages water abstractions assiduously and has access to stable raw
water resources to meet current and future customer needs.
• Leadership and Employee Development: is achieved when Umgeni Water is a participatory, collaborative
organisation dedicated to continual learning and improvement, recruits and retains a workforce that is
competent, motivated, and adaptive and works safely, ensures institutional knowledge is retained and
improved; provides opportunities for professional and leadership development, and creates an integrated
and well-coordinated senior leadership team.
Strategic Key Performance Indicator (KPI) Strategic Plan Target
Objective (SO) (2030)
SO 8: Develop KPI 39: The extent to which the organisation has sustainable water resources Developed a sustainable
water resources to assure supply. (21) mix of water resources.
SO 9: Increase KPI 40: Employee number (18) for Training courses, Learnerships, bursaries, 100% required skills or
skills and etc, number, with emphasis on core and distinctive competencies. access to skills.
competency. KPI 41: Per cent employee turnover. (5) ≤ industry benchmark
DWA Annex 1 KPIs

2012/2013 to 2016/2017
Chapter 3: Stakeholder Profile and Engagement Plan

Umgeni Water is a strategic entity of state, whose core mandated functions ensure that an estimated 4.8 million
consumers within its designated service area have access to safe drinking water, supplied by the organisation
to its six Water Service Authority customers. Consequently, the activities of Umgeni Water underpin social and
economic development and enable good public health. In the course of execution of its primary business
activities, Umgeni Water interacts with a wide array of stakeholders, both in terms of legislative imperatives
and on a voluntary basis. These stakeholders have been categorised by the organisation into three distinct
groups:
Statutory Non-Contractual
• DWA as Shareholder • Communities
• DWA as Regulator • Environment
• National Treasury • Media
• CoGTA and SALGA
• Other Legislators
Contractual
• Customers
• Union, Employees
• Suppliers, Banks,
Eskom
The Minister of Water and Environmental Affairs is the Executive Authority of water boards and therefore
mandated to monitor Umgeni Water’s performance. Table 4.1 shows the full suite of stakeholders with whom
the Accounting Authority (Board), Accounting Officer (Chief Executive) and officials interact and the nature of
this interaction.
Table 3.1: Umgeni Water Stakeholder Profile and Engagement
Stakeholder Basis for Engagement Value Proposition
Statutory: Stakeholders who have a regulatory or oversight function over Umgeni Water, among them the Minister of Water
and Environmental Affairs, Department of Water Affairs, the Portfolio Committee on Water and Environmental Affairs, the
National Treasury and the different tiers of Government, with whom the organisation is required to interact on a regular basis
in order to ensure that statutory reporting requirements are met.
Minister of Water and • Delivery on mandate: Strategy and Business Plan aligned to A highly performing, leading
Environmental Affairs government outcomes and executive authority expectations. and well-governed state-
• Compliance with Water Services Act, Public Finance owned enterprise that
Department of Water Management Act and other pertinent legislation and advances key national
Affairs regulations. objectives in an equitable and
• Compliance with shareholder compact. cost-effective manner.
Portfolio Committee • Value for money, sustainability and corporate governance.
• Adequate resource planning, efficient water usage and
conservation, compliance with standards, raw water quality
management, green and blue drop status, fair payment.
National Treasury • Compliance with Public Finance Management Act and A highly performing, well-
National Treasury Regulations. governed state-owned
• Financial performance and Organisational performance enterprise that mobilises
against predetermined objectives. resources in an equitable and
• Governance, compliance, efficiency, mobilise resources, effective manner for
investment opportunities. advancing key national
objectives.
KZN Provincial • Affordable tariff, growth / catalyst to economic growth, A highly performing and
Planning Lekgotla delivery on mandate / alignment to policy, partner in service sound partner in water
delivery / accelerated service delivery, corporate services delivery providing
CoGTA and SALGA governance affordable services and
contributing to regional
economic growth and
development.

2012/2013 to 2016/2017
Stakeholder Basis for Engagement Value Proposition

Other Legislators • Compliance with all legislation. A compliant, performing and
well-governed state entity.
Contracted: Umgeni Water has contractual obligations with its customers; organised labour; employees, suppliers and
investors.
Customers: eThekwini • Service delivery, assurance of supply, water / service quality, A highly performing, efficient,
MM; Msunduzi LM; care and support / response to needs, Compliance with bulk effective and responsive
Ugu DM; supply agreements. water services provider.
iLembe DM; • Tariff consultation and affordable tariff.
Sisonke DM;
uMgungundlovu DM.
Organised labour • Compliance with Collective Agreement. An equitable company, whose
(National Education, • A relevant organisation that adds value to the sector. policies, practices, systems
Health and Allied • Regular feedback and communication regarding sector and feedback create
Workers’ Union) issues and organisational performance. motivated, engaged and
And Employees • Equitable jobs, fair labour practice, good working conditions aligned employees.
enabling work environment and communication.
• Engaged employees, productivity, delivery and return on
investment.
• Fair-market related compensation and service conditions.
• Sound performance management and recognition system.
Suppliers • Compliance with legislation for fair and equitable An equitable company, whose
procurement; policies, practices, systems
• Supplier engagement; and feedback create
• Supplier development and capacity building toward more responsive and highly
inclusive economic participation. performing suppliers
• Transparency, business opportunities, integrity / fair delivering against
treatment, fair pricing, fair payment terms. contractual agreements.
• Demand management (energy consumption management),
planned requirements for future, payment.
• Business opportunities, payment, risk management.
Non-Contracted: Includes community, the environment, media and all other stakeholders.
Non-Government • Conservation / responsible use of resources. A sustainable entity that adds

organisations; • Clean, safe environment, responsible, transparency in value to society through a
Community-based corporate governance, jobs, information, business and sound balance of economic
organisations; development opportunities. growth social development
Chambers of business • Social licence to operate and recognition for creating value. and environmental
sustainability.
Media and general • Access to information, accountability and transparency. A sustainable entity that adds
public value to society.
Water institutes, • Grow water sector knowledge base. A sustainable entity that
research entities and • Partnerships and collaborative water and wastewater contributes to knowledge and
academia research. skills development for the
• Organisational learning and growth. country, province and local
area.
Water sector utilities • Exchange and expansion of water sector knowledge; A partner in sector
in South Africa and collaboration and knowledge
Africa. sharing.

2012/2013 to 2016/2017
Chapter 4: Marketing Plan
4.1 Water Services Markets

Umgeni Water has the following identified markets for provision of water services (water and wastewater) and
water related services:
1. Umgeni Water’s operational area: for water services and other related activities.
2. Rest of KwaZulu-Natal: water services and other related activities.
3. South Africa: water services and other related activities on demand.
4. Rest of Africa: knowledge management, networking and responding to bi-lateral agreements between
South Africa and other countries.
Umgeni Water’s operational area 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.
The organisation is legislated by section 29 and section 30 of the water services act (refer to Chapter 1). In
terms of section 30, the organisation’s bulk potable water customers are:
 eThekwini Metropolitan Municipality

 iLembe District Municipality
 Ugu District Municipality
 Sisonke District Municipality
 uMgungundlovu District Municipality
 Msunduzi Local Municipality.
A total of 415 million cubic metres of potable water per annum is currently supplied to customers who serve an
estimated 4.8 million end consumers, business and industry through reticulation networks.
An additional eighteen (18) water treatment works are managed on behalf of the iLembe District Municipality;
together with nineteen (19) borehole schemes.
The organisation also treats bulk wastewater totalling 25 million cubic metres per annum, and in support of
this five (5) wastewater treatment works, of which one (1) is managed on behalf of the uMgungundlovu District
Municipality.
4.2 Marketing Growth/Approach

Umgeni Water’s marketing approach responds to its operating environment and mandates, and its overall
value proposition is premised on securing mutually beneficial relationships. During the year, the organisation
will identify / firm up on the geographical markets as well as the segments of the water value chain where it
can add competitive and sustainable value and a formal marketing plan will be developed. The current
approach includes the following:
 Retain customers, through building and maintaining relations utilising a customer management
policy/strategy that responds to customer needs and improves and maintains customer satisfaction.
The foundation for this will be sustainable water services and product quality, ensured through
management of critical assets, effective and efficient operations and through collaborative efforts with
customers to ensure increased Blue and Green Drop certifications.
 Increase sales to existing customers through alignment with customer growth plans and timely
augmentation and upgrades of infrastructure assets.

2012/2013 to 2016/2017
 Extend water provision to new areas and/or increase the share of customer bulk water
purchases, through demonstrable economies of scale, and through development and/or management
of bulk water infrastructure assets aligned to customer needs and plans to ensure access to all.
 Increase regional water services customers, through demonstrating efficiencies to be gained

through regional economies of scale, infrastructure investment for economic growth and rural
infrastructure investment to bridge spatial divides, whilst enabling increased economic participation
and job creation, and incorporating innovation and clean (environmentally sustainable) development
to reduce the cost of extending access.
 Increase water related products to customers, as per section 30, of the Water Services Act,
including laboratory services and catchment water quality management.
 Increase and provide value-add to communities, through a clear and meaningful corporate social
responsibility investment policy.
The focus of the organisation remains entirely South Africa, although it will, on an investigative basis, assess
the viability of providing water services in some parts of SADC on the strength of regional integration
initiatives of the South African government and KwaZulu-Natal Province.

2012/2013 to 2016/2017
Chapter 5: Policy Statement
Chapter 5: Policy Statement

The organisation’s policy statement has been updated and is included as a separate volume to this business
plan.

2012/2013 to 2016/2017
Chapter 6: Governance and Structure
6.1 Umgeni Water’s Structure
Chief Executive: Vacant.

Acting CE: Ms Nica Gevers
GM Operations:
Mr Ednick Msweli
GM Engineering & Scientific Services

Umgeni Water Parent Umgeni Water Board
Mr Steve Gillham
GM Finance: Ms Nica Gevers

Acting GMs: Ms Marsha Philips, Ms Kajal Singh
GM Corporate Services
Ms Prudence Gwala
Msinsi Board Msinsi Holdings (Pty) Ltd (100 %)
Subsidiaries
Umgeni Water Services (Pty) Ltd (100 %)
Umgeni Water Services
Directors
Durban Water Recycling (Pty) Ltd 18.5 %
6.2 Strategic statements
Umgeni Water strategic statement:

We will lead the process of providing solutions via an innovative, vigorous
growth path, to increase sustainable water supply, in order to satisfy the
developmental water services requirements in our region, which contribute to
government objectives.
Board Strategic Statement:

We will consider internal and external factors, consult with Stakeholders, develop
a strategy, authorise implementation, manage resources, manage risks and
oversee implementation to produce a valid and approved strategic plan, deploy
resources, deliver on strategic objectives and provide sound corporate
governance to achieve our vision and mission in order to contribute towards
Government Objectives.

2012/2013 to 2016/2017
Chief Executive Office:

We will position and lead the organisation, plan activities and allocate resources,
implement strategy, manage risk, champion corporate governance, partner with
stakeholder to deliver organisational objectives, to achieve a well governed,
vibrant, committed, sector-relevant and engaged organisation that delivers on its
mandate.
Operations:
We will position ourselves, plan, structure, mobilise resources, source, specify,
operate and maintain our infrastructure, abstract, treat, sell, distribute, monitor,
conserve and re-use water to deliver quality, effective, affordable water services
to our Stakeholders which will deliver on organisational objectives.
Engineering and Scientific Services:

We understand water demand and water technology and will plan, design and
construct infrastructure and manage water resources to provide suitable
capacity and assurance of supply, to achieve efficient and effective infrastructure
and meet demand,
We will manage water quality, optimise treatment processes and drive social and
environmental initiatives to provide water quality and environmental
sustainability and social investment to achieve with appropriate technology,
optimised water quality and cost, and good corporate citizenship
to achieve sustainability and public health, in order to meet organisational
objectives.
Finance:
We will plan, mobilise, account for and report on resources, manage financial
risk and maintain internal control and systems, which result in funding, control,
support and monitoring of the business,
to deliver sound financial management and corporate governance
to contribute towards organisational objectives.
Corporate Services:
We will lead, plan, mobilise, motivate and develop human resources; which will
lead to a competent, efficient and an energised workforce,
and plan, develop, implement and maintain an ICT platform, which will lead to
an efficient and effective ICT service,
proactively implement procurement strategies, which will lead to efficient,
effective and economical supply of requisites,
and optimise and safeguard properties which will lead to an efficient property
and security services,
to support and enable the functions of the business to meet organisational
objectives.

2012/2013 to 2016/2017
6.3 Composition and Functioning of the Board

Umgeni Water has a unitary Board comprised of fourteen (14) non-executive Board members and one (1)
Executive Board member, the Chief Executive. The Chairperson of the Board in a non-executive member and
executes his responsibility with full independence. The list of Board members is shown in Table 6.1.
The Board is accountable for the leadership and control of Umgeni Water. Its responsibilities include the
development, review and monitoring of strategic objectives; the approval of major capital expenditure; risk
management and monitoring of operational and financial performance.
The Board concluded a shareholder compact with the Executive Authority, the Minister of Water and
Environmental Affairs for 2011/2012 and has submitted the 2012/2013 shareholder compact with this
business plan. The Board will continue to actively engage with the shareholder through various forums during
2012/2013.
A Board Charter (approved in November 2009, and reviewed every 2 years) provides a framework for
fiduciary duties, responsibilities and overall functioning of the Board.
The Board Charter, is read in conjunction with the Public Finance Management Act (Act 1 of 1999), as
amended, the Water Services Act (Act 108 of 1997), as amended, Treasury Regulations for Public Entities
(GG 27388 of 2005) and the King Report on Corporate Governance, 2002 (King II). The organisation is
currently finalising alignment of its processes with the 2009 King Code of Governance Principles (King III).
Board Committees
The Board has established three committees to assist it in discharging its responsibilities:
 Audit Committee
 Capital Projects, Fixed Assets and Procurement Committee
 Human Resources and Remuneration Committee

2012/2013 to 2016/2017
Table 6.1: Board and Committee Memberships
Board Member Gender Audit REMCO Capex

1. Mr A Mahlalutye1 M
2. Ms M Lesoma2 F  
3. Prof I Vally3 M 
4. Ms N Afolayan4 F  
5. Ms N Chamane5 F 
6. Dr T Dube F 
7. Mr T Nkhahle M 
8. Ms T Shezi F  
9. Ms Z Mathenjwa F  
10. Mr V Gounden M 
11. Mr V Reddy M  
12. Mr G Atkinson M  
13. Mr I Nxedlana M  
14. Mr Thabani Zulu M  
15. Chief Executive Vacant  
1 Chairman
2 Deputy Chairman
3 Audit Committee Chairman
4 Capex, Fixed Assets and Procurement Committee Chairman
5 Human Resources and Remuneration Committee Chairman
Table 6.2: Scheduled meetings of the Board and Committees for 2012/2013.
2012 2013
Normal Board / Committee Meetings Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total
Wed Wed Wed Wed Wed

Board Meetings 18th 26st 21st 13th 17th
5
Wed
Board Strategy Review Session 1
6th
Wed Wed Wed Wed Wed

HR and Remuneration 15th 17th 20th 3rd 19th
5
Wed Wed Wed Wed Wed

Capex, Fixed Assets, SCM 22th 24th 13th 20th 12th
5
Wed Wed Wed Wed Wed

Audit 5
29th 31st 27th 27th 26th

2012/2013 to 2016/2017
Board Member Details
Mr Andile Mahlalutye Ms Mina Lesoma
MA Financial Management (London); MBL (UNISA); Graduate Diplomas in Public Relations, Local Government Management and
Diploma in Company Direction (GIMT); BSc Quantity Surveying Business Management.
(UCT); Certificate in NGO Development and Management
(Israel); A Project Management Professional (PMP) & Appointed for 3rd Board term in June 2009.
Professional Quantity Surveyor (PrQS). Resigned from the Board with effect 1st April 2012.
Appointed for 1st Board term in June 2009. Deputy Chairman of Umgeni Water Board since 2009; Chairman
of REMCO from 2008 to 2009; Deputy Head of Customer
Non-executive Chairman of Umgeni Water Board since 2009; Services eThekwini Municipality. Chairperson KZN Playhouse
MD Ubudlelwane Capital Investments since 2010; Mvula Trust Company. Member of the KwaZulu-Natal Provincial Housing
CEO from 2007 to 2010; Coega Development Corporation Advisory Committee. Member of the KZN BEE Advisory Council.
Executive from 2003 to 2007; General Manager/Project Leader
with Blue IQ from 2000 to 2003; A member of the Gauteng
Gambling Board since 2011; A member of North West Provincial
Audit Committee since 2009.
Dr Takalani Dube Mr Graham Atkinson
MbchB, Medical (UKZN); Diploma in Anaesthesia (DASA); Diploma BSc Civil Engineering (UKZN); Post-Graduate Diploma in Town
in Health Services Management (UKZN); Certificate in Business and Regional Planning (UKZN).
Development and Management (eThekwini Business
Development); Postgraduate Diploma in HIV Management in the Appointed for 1st Board term in June 2009.
Workplace (Stellenbosch University).
Member of KZN Planning and Development Commission from
Appointed for 1st Board term in June 2009. 1998 to 2004; City Engineer of Pietermaritzburg from 1977 to
1986; Chief Executive of Umgeni Water from 1987 to 1994;
Director of eThekwini Community Church since 2005; Founder Board Member of Umgeni Water from 1978 to 1986; Honorary
and President of Centre of HOPE (HIV and Community Member of the Water Institute of Southern Africa (WISA) since
Development Organisation) since 2000; President of Women of 2002; Honorary member of the former Union of African Water
Virtue (Women Empowerment and Investment Organisation) Suppliers (UADE).
since 2002.
Prof Imtiaz Vally Ms Nompumelelo Chamane
Master of Accountancy; Chartered Accountant (SA); Chartered Appointed for 1st Board term in June 2009.
Management Accountant (ACMA).
Chairman of Umgeni Water Board HR and Remuneration
Appointed for 1st Board term in June 2009. Committee since 2009. Councillor with eThekwini Municipality.
Experienced liaison officer with provincial structures of
Chairman of Umgeni Water Board Audit Committee since 2009; COSATU. Member of Albert Luthuli Hospital Committee. Board
Professor of Management Accounting and Finance at UKZN. member of EU-funded Cato Manor Development Association
Member of Board of Trustees of UKZN Retirement Fund. (CMDA); Chairperson of Finance Committee of St Benedict
Catholic Church.
Ms Thokozile Shezi Mr Visvin Reddy
BSc Social Psychology and Education; MA in Measurement and Educator (Mathematics & Computer Science) by profession.
Evaluation; Management Development Diploma (Wits); Project Various Diplomas and Certificates in Management and
Management Certificate (University of Pretoria). Communications. MBA in progress.
Appointed for 2nd Board term in June 2009. Appointed for 1st Board term in June 2009.
Senior Manager KZN Department of Agriculture, Environment Seventeen years local government experience. Served on the
and Rural Development; Non-Executive Director KZN Playhouse Executive Committee of eThekwini Metropolitan Municipality as
Company. well as Chairman of the Infrastructure Committee. A member of
various community bodies.

2012/2013 to 2016/2017
Ms Nombuso Afolayan Mr Teboho Nkhahle
MBA (Finance) Luton University; Executive Leadership Registered Professional Scientist; MA Stellenbosch University;
Development (UCT); Organisational Development Practitioner. Environmental Auditor (IRCA).
Appointed for 2nd Board term in June 2009. Appointed for 1st Board term in June 2009.
Chairman of Umgeni Water CAPEX Committee since 2009. Owner and MD of Environmental Impact Management Services
Founder and Executive Chairman of FS Capital Investments; (EIMS); Non-Executive Chairman of Lesotho Highlands
Chairman of KwaZulu-Natal Shark’s Board; Non-Executive Development Authority (LHDA) from 2007 to 2011; Board
Director at Ithala Development Finance Corporation; Executive member of US-based Global Decisions Inc. (Development of
at multinational shipping, maritime and petroleum companies in global environment, health and safety regulations and standards
African markets. database) since 2008; Member of Institute of Directors-SA since
2007; Vice Chair IoD Sustainable Development Forum from
2008 to 2009; Environmental Auditor with Eskom from 1998 to
2004.
Mr Vasu Gounden Ms Ziphozethu (Gabsie) Mathenjwa
MA Law (LLM) (Georgetown University); Graduate of Harvard / MBA (UKZN); BSc (UKZN); Post-graduate Diploma in Business
Wits Business School Senior Executive Programme. Management (UKZN); Post-Graduate Diploma in Strategic
Management (ICSA); Post-Graduate Diploma in Corporate
Appointed for 3rd Board term in June 2009. Governance (UNISA); Diploma in Project Management (Executive
Education); Certificate in Financial Management and Investment
Founder and Executive Director of the African Centre for the (UNISA).
Constructive Resolution of Disputes (ACCORD) since 1992;
Member of the International Advisory Board of the International Appointed for 1st Board term in June 2009.
Negotiation Journal since 1996; Member of the Editorial Board
of the Peace and Conflict Studies Journal since 1996; Elected by Founder and Owner of Gabsie’s Business Solutions (GBS). Board
the World Economic Forum as a Global Leader for Tomorrow Member Water Research Commission (WRC); Board Member
(GLT) in 2000. Board Member of the Gandhi Development Trust Mvula Trust; Board Member Denel Pty (Ltd); Chairperson of the
since 2003; Board Member of Finland-based Crisis Management Denel owned Pretoria Metal Processing; Audit Committee
Initiative since 2007; Board Member of the Old Mutual Science Deputy Chairperson of Mpumalanga Province Department of
Education Foundation since 2007 and appointed Chairman of Economic Development, Tourism and Environmental.
the Board since 2009; Board member of the Dutch based Inter-
Church Organisation for Development Cooperation since 2009;
Member of the Governing Council of the Hawaii based Centre for
Global Non-Killing since 2009; Member of the Advisory Board of
the Insight on Africa Journal since 2010.
Mr Ike Nxedlana Mr Thabani Zulu
MBA (Business School Netherlands / International Management Chartered Accountant; B.Comm degree and Post Graduate
Centre); Financial Management Practices Certificate (Royal Diploma in Accounting from UKZN.
Institute of Public Administration London); Diplomas in
Marketing and Sales Leadership Development; Diploma in Appointed for 1st Board term in December 2011.
Business Management; Certificate in Personnel Management;
Graduate of the Wits Business School Executive Development Director of Ngubane & Company (Auditing firm); General
Programme. Manager / Head of Internal Audit for Provincial Treasury;
Member of SAFCOL Audit Committee; Member of UDW Audit
Appointed for 1st Board term in June 2009. Committee; Member of Ndwedwe Audit Committee; CEO of the
KZN Gambling Board. Management Accountant of Unilever SA;
CEO of Richards Bay IDZ since 2009; CEO of Ithala Development Financial Accountant at Mercedes Benz of SA (now Daimler
Finance Corporation from 2008 to 2009; Public Sector Banking Chrysler SA).
Head at Absa Head Office; CFO for Cape Town City; CFO of the
Department of Public Enterprises.

2012/2013 to 2016/2017
EXCO Member Details
Ms Nica Gevers Ms Prudence Gwala
Chartered Accountant (SA); Post-graduate diploma in Cost BA Economics and German; Post-Graduate Bachelor of Philosophy
Management Accounting. in Knowledge Management, Value Analysis and Policy Studies;
Post Graduate Diploma in Health Management.
Appointed as General Manager Finance in 2003.
Acting Chief Executive from September 2011. Appointed as General Manager Corporate Services in 2008.
Board member of Mhlathuze Water from March 2011 to Director Planning and Programme Management Mpumalanga
present; Director of Umgeni Water Services (Pty) Ltd since Department of Roads and Transport, from 2005 to 2008; Deputy
2006; Director of Guznoh Investments (Pty) Ltd since 2010. Director Strategy Planning Mpumalanga Department of Health
from 2002 to 2005.
Mr Ednick Msweli Mr Steve Gillham
B Tech (Civil Engineering); B Tech (Management); Registered Registered Professional Engineer (ECSA); BSc Engineering (Civil);
Professional Engineering Technologist (ECSA) BCom
Appointed as General Manager Operations in 2011. Appointed as General Manager Engineering and Scientific
Services in 2012.
Non-Executive Director of Durban Water Recycling. Deputy
Head (Operations) eThekwini Municipality from 2006 to Planning Manager from 1999 to 2012. Engineer Umgeni Water
September 2011. from 1997 to 1999. Engineer with the Department of Water
Affairs from1984 to 1997.
Ms Marsha Philips Ms Kajal Singh
Chartered Accountant (SA) Registered Chartered Accountant (SA); BCom Honours.
Acting General Manager Finance from September 2011, Acting General Manager Finance from September 2011,
alternating with Ms Kajal Singh. alternating with Ms Marsha Philips.
Trainee Accountant Deloitte & Touche from 2003 to 2005.

2012/2013 to 2016/2017
Chapter 7: Directives by the Minister
Chapter 7: Directives by the Minister

Umgeni Water did not receive any new directives since the last business plan.
In 2010/2011 Umgeni Water was requested to undertake further work to support the OR Tambo District
Municipality. Progress as at 31 December 2011, is summarised below and further details of the project are
provided in Chapter 14 (Other Activities) of this business plan.
1. The Greater Mbizana Regional Bulk Water Supply Development
 Construction work on the raw water pump station and rising main was completed in December
2011.
 Construction work on the Ludeke Dam is progressing well. Expected date of completion is
February 2013.
 Construction work of the first phase of the Nomlacu Water Treatment Works is nearing
completion. Expected date of completion is June 2012.
 Construction work on the first phase of the Bulk Treated Water Supply System started in March
2012. Expected date of completion is September 2013.
2. Mthatha Bulk Water Intervention
 Work was complete in 2010/2011
3. Ingquza Hill Regional Bulk Water Supply Scheme
 Proposed work is included in this business plan.
4. Refurbishment of Water Treatment Works’
• Refurbishment of the four works’ - Mbizana, Libode, Ngqeleni, and Port St Johns - was complete in
2010/2011.

2012/2013 to 2016/2017
Chapter 8: Self-Appraisal (2011/12 Performance against SHC)

Performance against the Shareholder Compact forecast to 30 June 2012 is indicated per perspective,
objective and key performance indicator.
 Good performance trends to be maintained: 84%

 Trends to be corrected and monitored against slippage: 16%
 Negative trends of concern or where action taken to immediately correct: 0%
SO 1. Exceed customer expectations.

Product Quality (Water and Wastewater)
Key Performance Target Performance forecast to 30 June 2012 and action plan to address variances
Indicator 2011/12
Per cent statutory
compliance for bulk
100% 100% compliance with Health parameters.
100% with Operational and Aesthetic parameters for 9 of 11 WTW. 
potable water with 6 Large WTW (≥ 20,000 m3/d, serving a population ≥100,000)
SANS 241. 100% compliance with Health.
100% with Operational and Aesthetic parameters.
5 Medium-small WTW (< 20,000 m3/d, serving a population <100,000)

100% with Health parameters.
Variance: 2 works experienced variance with Operational and Aesthetic parameters.
Mvoti - Operational variance (±3%). A 2,000 m3/d package plant installed in early April 2012
will reduce loading on the plant. In addition iLembe DM has accelerated its water loss
management initiatives to help reduce demand.
Maphephethwa - Operational variance (±9%) and Aesthetic variance (±13%).
The WTW is currently operating above its design capacity. It is a direct filtration plant that
has no pre-treatment process for flocculation and sedimentation. This together with the high
raw water turbidity contributes to the breaches in SANS 241 standard for turbidity. Interim
mitigation comprises increased filter maintenance. The free chlorine control limits were
increased to improve disinfection. The works is being upgraded and quality problems will be
resolved when the new works is commissioned in June 2012.
Boreholes and very small WTWs
iLembe borehole schemes and small WTWs
100% compliance with Health and Aesthetic parameters.
Variance: Operational variance (±11%)
A turnaround strategy is being implemented to address the challenges presented by these
numerous, remote package plants. Focus on improving all sites to meet Blue Drop Compliance
Per cent statutory

compliance for bulk
100% 85% compliance
Variance is mainly attributable to Darvill WWTW from a combination of increased industrial 
wastewater with load, storm dam overflow, and inadequate aeration as well as capacity limitations. These are
discharge license or being addressed through process optimisation and several rehabilitation and upgrade
general projects including a major works upgrade. Discussion on management of trade effluent and
authorisation. storm water ingress is on-going with Msunduzi LM.
Customer Satisfaction
Key Performance Target Performance forecast to 30 June 2012 and action plan to address variances
Indicator 2011/12
Per cent compliance
with service level
100% 100% with supply volumes.
2% interruptions 
agreements with A total of 7.5 days > 24 hours, experienced during quarters 1 and 2 of the annual period,
particular reference but were resolved in quarter 3.
to supply volumes, The most significant interruptions experienced were for Ballito (iLembe DM) due to
pressure, service abnormal peak demand. This was addressed through both short-term and long-term
disruption intervals, sustainable solutions. No interruptions occurred during quarter 3 and plans are forging
and metering. ahead for structural solutions that will ensure long-term sustainability.

2012/2013 to 2016/2017
SO 2. Grow / Increase customer base

Infrastructure Stability
Key Performance Target 2011/12 Performance forecast to 30 June 2012 and action plan to address
Indicator variances
The extent to which
there is planned and
R590m Total Capex R512m (87%)
Variance: -R77m (13%) 
funded infrastructure R220m Rural Areas R190m (86%)
to support economic Capex Variance: -R30m (-14%)
growth and 85% target dates met >85% target dates met.
livelihoods, and asset Capex turnaround strategy successfully implemented
condition is enhanced
and maintained.
Water Resources Adequacy
Key Performance Target Performance forecast to 30 June 2012 and action plan to address
Indicator 2011/12 variances
The extent to which there is 85% project
water resources assurance milestones met.
>85% project milestones met.
Mhlabatshane Dam complete. 
/ supply security Mvutshane Dam in tender.
PSP appointed for desalination project.
Construction of Laboratory Scale Wastewater Reclamation Process complete.
SO 3. Manage Stakeholder Relations
Stakeholder Understanding and Support
Key Performance Target 2011/12 Performance forecast to 30 June

Indicator 2012 and action plan to address
variances
The extent to which there
is engagement of statutory,
Engagement of statutory stakeholders and response to
queries: DWA, NT, SALGA, KZN Provincial Government
Engagements conducted as planned
and responsive to needs. 
contracted and non- and MECs, Municipal mayors and others.
contracted stakeholders
and response to queries
regarding the
Engagement of contracted stakeholders and response
to queries: Employees, Organised labour, Investors.
organisation’s
developments and
performance.
Engagement of non-contracted stakeholders and
response to queries: Media, Academia, Environmental
lobby groups, Community, Other Stakeholders.

2012/2013 to 2016/2017
SO 4. Contribute to an affordable tariff
Financial viability
Indicator variances
The extent to
which there is a
Average 2011/12 Tariff:
R3.638/kl
Tariff: R3.638/kl

tariff that is
constant in real
terms while
Bulk water Total Cost/kl:
R2.456/kl
R2.422/kl
Positive variance due to lower indirect costs (staff and depreciation) and 
net finance costs and higher volume than budgeted.
allowing for the
repayment of debt
and infrastructure
Operational cash flows:
R666m
R733m
Debtors days : 39 days 
Positive variance in operational cash flows: R67m against budget.
funding
Bulk Revenue Growth %: 6.11%
requirements.
5.94% Positive variance due to increase in sales volumes.
Working ratio: 0.637 0.628
Positive variance against due to lower indirect costs (staff and 
depreciation).
SO 5. Maintain an optimal debt level
Financial viability
Indicator variances
The extent to
which there is an
Net debt -equity: 0.114 Net debt-equity: 0.00
Positive variance due to higher investments than budget. UW is currently in a 
optimal debt level. net asset position.
Gross debt-equity:
0.449
Gross debt-equity: 0.440
Positive variance is due to equity being above budget due to higher than 
budgeted surplus.
Interest cover: 4.228 Interest cover: 4.499
Positive variance due to higher operating profit than budget which is due to 
lower indirect costs.
Debt-assets: 0.281 Debt-assets: 0.256
Positive variance mainly due to investments being above budget by R778m. 
SO 6. Enhance shareholder value
Financial viability
Indicator variances
The extent to
which there is
Maintain National
credit rating of: AA+
National credit rating of: AA+ Long term;
F1+ Short term reaffirmed Nov 2011. 
ability to raise Long term; F1+ Short
affordable funding. term
Accumulated reserves:
R3,016m
Accumulated Reserves: R3,034m
The positive variance is mainly attributable to lower indirect costs and net 
finance costs than budget.

2012/2013 to 2016/2017
SO 7. Contribute to developmental agenda and the social economy
Key Performance Target 2011/12 Performance forecast to 30 June 2012 and

Indicator action plan to address variances
The extent to which there is
planned and funded
R220m Rural Areas Capex.
iLembe DM - Maphumulo BWSS.
R190m (86%)
Variance: -R30m (-14%) 
infrastructure to support Ugu DM - Mhlabatshane Regional BWSS. Due to a combination of project delays,
rural development. uMgungundlovu DM - uMshwathi BWSS. cancellations, accelerations and savings.
iLembe DM - Lower Thukela BWSS. Capex turnaround strategy successfully
uMgungundlovu DM - Greater Eston. implemented and >85% target dates met.
Number of jobs created
through infrastructure and
Creation of 607 jobs during bulk water
infrastructure construction.
>607 decent jobs created during bulk water
infrastructure construction. 
other programmes.
The extent to which there is 78% spend on preferential procurement
use of preferentially
±71% spend on preferential procurement
Variance: -7%. 
procured suppliers, Decrease is largely due to the increase in spend
cooperatives, NGOs or within “Unclassified”, “Non-compliant
charities. contributor” and “Other” levels, which do not
contribute at all to the BEE spend.
UW is targeting the top 20 suppliers for
submission of BBBEE certificates to enable
classification and improve UW BBBEE reporting.
4 cooperatives contracted:
Pipeline Maintenance;
Contracts with Co-Operatives finalised.

Reservoir and General Maintenance;
Security;
Cleaning Services.
100% targeted suppliers developed. Supplier development plan prepared and is being
implemented. 
The extent to which there is
support provided to
100% completion of contracted IA
deliverables: 
vulnerable communities Alfred Nzo DM - Greater Mbizana Regional Completion of scheduled milestones for Greater
and municipalities. BWSS. Mbizana Regional Bulk Water Supply Scheme.
OR Tambo DM - Ingquza Hill Regional BWSS. No further progress. Umgeni Water awaiting
instructions from OR Tambo DM to proceed with
finalisation of ToR and tenders process.
DWA - Water Sector Skills project. Completion of contracted milestones as
scheduled.
DWA - Working-for-Water. 100% completion of contracted IA deliverables.
Complete planned interventions for 4

schools adopted.
100% of planned interventions for 4 schools
adopted. 
1. Bazamile (Molweni -eThekwini).
2. Juluka Ndoda (uMgungundlovu).
3. Ndodembi (iLembe).
4. Sarasvati (eThekwini).
90 water education classes taught. 81 (90%)classrooms taught.
End of year exams and the festive break affected 
targets.

2012/2013 to 2016/2017
SO 8. Contribute to the green economy
Indicator variances
Number of
environmental
≤ 3% water losses. <2.5% water losses.

sustainability
initiatives.
Finalise baseline targets for
environmental sustainability
100% complete.
Umgeni Water’s environmental indicators for energy, greenhouse gas, 
indicators. waste and biodiversity have been aligned to GRI sustainability indicators.
Four environmental sustainability initiatives projects are in progress.
Continue energy
cogeneration investigation at
Tender evaluation for PSP awarded in June 2012.

the Darvill WWTW.
Continued modelling of Study underway.
impacts of climate change on The climate change study was extended to include an additional 26 
water resources GCM's (scenarios). The limited number of scenarios investigated in the
initial study could not provide results at a high confidence level. The
additional work and report will be completed by July 2012.
80% implementation of
annual biodiversity
80% implementation of annual biodiversity management plan for alien
plants, game and grasslands. 
management plan for alien
plants, game and grasslands.
SO 10. Ensure Functional Excellence
Leadership and Employee Development
Key Performance Target 2011/12 Performance forecast to 30 June 2012 and action plan to
Indicator address variances
Per cent retention
and development of
64 Learnerships in total enrolled. Experiential exposure provided to 49 learners - comprising process
controllers and artisan trainees. 
core and distinctive Variance: Umgeni Water will maintain its Learnerships at the
competencies current manageable target of 49 for 2011/12.
Artisans and process controllers will be replaced as they qualify on
an annual basis (the first batch to qualify in 2013).
18 additional graduates/ interns Umgeni Water is currently funding and providing 18 graduate
developed trainees with experiential training. 
In addition, a further 43 graduates will be enrolled as part of a
National Treasury training partnership programme.
Although EWSETA has not approved funding for an additional 18
graduate trainees, Umgeni Water will in total develop over 60
graduates per annum.
10 bursary students enrolled in
engineering and financial fields.
10 bursary students enrolled in engineering and financial fields.

60% of assisted education
targeting critical and scarce skills
Panned training interventions conducted

needs.
Human Resource strategic
priorities implemented:
Workforce plan developed.
HR Policies were consulted with NEHAWU and all staff, including, 
Approved Workforce Plan. Performance Management, Leave, and Disciplinary and Grievance
Policy Awareness. policies.
EE Plan EE report submitted to DoL by Feb 2012.
EE Targets are being monitored.
100% implementation of Umgeni Water’s Corporate Wellness Day was held in February
employee wellness programmes 2012. 412 employees attended. 
including HIV/AIDS.

2012/2013 to 2016/2017
SO 11. Ensure Operational Competence
Operational Resiliency
Indicator variances
Number of
systems and
≥ 80% strategic risks
mitigated to ≥ 50%
>80% strategic risks have an overall control strength of ≥50%.

processes that (satisfactory-good) overall 1 risk is outside the risk appetite and tolerance levels – notably wastewater
enable control strength. effluent quality compliance. Progress with interventions to bring this risk
implementation of within the risk appetite level is underway.
strategy
There are 12 risks are outside the risk appetite level but within the risk
tolerance level. These are being mitigated.
100% Implementation of
ICT Strategy.
>95% Implementation of planned ICT Strategy.
Extension of project scope on 2 ICT Projects has resulted in the variance. 
100% statutory
submissions deadlines met.
100% statutory submissions in terms of content and deadline dates met:
All Quarterly Reports. 
Annual Report by 31 Oct 2012.
Tariff by 1 Dec 2011 and 25 Jan 2012. Further rework completed.
Strategy Review complete and 5-Year Business Plan by 31 May 2012.
Key Performance Indicators aligned and SHC by 31 May 2012.
100% procurement plan
aligned to OPEX and CAPEX
Alignment is in progress. A rolling procurement plan, inclusive of key
requirements and spend targets is being developed. 
plans.
60% organisational systems The SABS will undertake a gap analysis in July 2012 to establish the current
reviewed and aligned to ISO status of corporate-wide implementation of ISO 9001. 
system standards.
Operational Optimisation
Indicator variances
Per cent increase in
utilisation of
Staff productivity:
450 cubic metres per
Staff productivity:
>450 cubic metres per employee 
organisational employee.
resources (more Equipment efficiency: Research indicated that OEE is suited for a factory environment and not for a
balanced use) establish baseline for water industry. The OEE indicator will therefore not be pursued further.
overall equipment
efficiency (OEE). Umgeni Water completed a comprehensive energy audit in 2012 and will use
this information, amongst others, to set more appropriate resource efficiency
indicators and targets.

2012/2013 to 2016/2017
Chapter 9: Participation in Companies
9.1 Umgeni Water Services (Pty) Ltd

Umgeni Water has a 100% shareholding in Umgeni Water Services (UWS) (Pty) Ltd. This subsidiary holds an
18.5% investment in Durban Water Recycling.
The financial information associated with Durban Water recycling is contained in the financial plan of this
business plan.
The initiatives undertaken by Durban Water Recycling (Pty) Ltd (through Umgeni Water Services (Pty) Ltd,
contribute to Umgeni Water’s strategy outcome of Water Resources Adequacy, specifically focussing on recycling.
9.2 Msinsi Holdings (Pty) Ltd

Umgeni Water has a 100% shareholding in Msinsi Holdings (Pty) Ltd. The Board of Umgeni Water has reversed
its decision to sell its shareholding in Msinsi Holdings.
Umgeni Water has provided a letter of support to Msinsi Holdings as its going concern status is dependent
upon Umgeni Water’s continued support in terms of contracting/engaging Msinsi to undertake the Water
Resource Management Function for the dams.
The operations of Msinsi break-even as illustrated in the financial plan of this business plan.
Umgeni Water signed an agreement for the O&M of dams with DWA in 2011. These dams are to be managed by
Msinsi, and the relationship between Umgeni Water and Msinsi will thus continue for the duration of the
contract.
The initiatives to be undertaken by Msinsi Holdings support Umgeni Water’s strategy outcome of Community and
Environmental Sustainability:
1. The maintenance and enhancement of the natural environment around Umgeni Water managed dams.
i. Control of alien invasive plants.
ii. Management of game species according to the carrying capacity of each reserve.
iii. Grassland management.
2. The control of pollution inside of the purchase area surrounding Umgeni Water managed dams.
i. Ensuring that infrastructure developments takes place with minimum impacts on the
environment.
ii. Controlling visitor activities on the water surface and within the purchase line.
iii. Ensuring that there is no illegal dumping by industries within the purchase line.

2012/2013 to 2016/2017

2012/2013 to 2016/2017
Chapter 10: Water Resources
10.1 Water Availability

Umgeni Water sources water primarily from ten 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). Two further impoundments are owned and managed by
Umgeni Water, which are no longer used for water supply purposes. Table 10.1 shows the capacities of these
resources.
Table 10.1: Capacity of Water Resource Systems
System Catchment Impoundment Owner Manager Gross Capacity (million m3)

Mgeni Mooi Mearns Weir DWA UW 5.1
Mgeni Midmar Dam DWA UW 235.4
Mgeni Albert Falls Dam DWA UW 290.1
Mgeni Nagle Dam UW UW 24.6
Mgeni Inanda Dam DWA UW 251.6
Mlazi Shongweni Dam# UW UW 3.8
Msunduzi, Mgeni Henley Dam# UW UW 1.5
Total for Central System 812.1
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 0.9
Mzinto Umzinto Dam Ugu DM UW 0.4
Total for South Coast System 3.5
Other Ixopo, Mkomazi Ixopo Dam UW UW 0.6
Total for Umgeni Water Systems 834.1

# not utilised for water supply
Mgeni System
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 yield (at a 99 %
level of assurance) of 334.5 million cubic metres per annum at Inanda Dam.
North Coast System

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 yield (at a 98 % level of
assurance) of 19.0 million cubic metres per annum available for treatment and potable usage, provided the
reserve allocation is not imposed. Since July 2007 Umgeni Water has also been abstracting water from the
Mvoti River as part of managing the Mvoti Water Treatment Works and the supply of bulk potable water to the
town of KwaDukuza on behalf of the iLembe District Municipality.
South Coast System

The South Coast System comprises a number of interlinked operational entities. Water resources for this area
are obtained from the Nungwane Dam on the Nungwane River (a tributary to the Lovu River), the Mzinto and
EJ Smith dams on the Mzinto and Mzimayi rivers respectively, and a sand abstraction system on the Mtwalume

2012/2013 to 2016/2017
Version: 29 May 2012 4:49 AM
River. This system is substantially augmented by the Mgeni system via the South Coast Augmentation Pipeline
and the South Coast Pipeline.
10.2 Water Resource Assurance and Supply Security per Water Services Authority
eThekwini Metropolitan Municipality
The Mgeni system is the primary resource for this municipality. Water in the municipality’s northern areas is
also secured from the Hazelmere Dam on the Mdloti River, as well as from the Tongati River. The Nungwane
Dam on the Nungwane River provides a small portion of the municipality’s water requirements in its southern
areas. Groundwater is also used to a limited extent. Water transfers from the Mkomazi River, wastewater
reuse and seawater desalination are potential future sources of water for this area. Water from the uThukela
River could also be utilised to a limited extent.
Msunduzi Local Municipality
The Midmar Dam on the Mgeni River is the only source of surface water for this municipality. Water transfers
from the Mooi River are used to augment this resource. Groundwater is used to a limited extent.
uMgungundlovu District Municipality
The Midmar Dam on the Mgeni River is the primary source of water for this municipality. A number of minor
abstractions on other rivers and tributaries are also undertaken and groundwater is used extensively for many
of the rural and outlying peri-urban areas. The Mkomazi and Mooi rivers are potential future sources of water
for this area.
iLembe District Municipality
The Hazelmere Dam on the Mdloti River is the primary source of water for this municipality. To a far lesser
extent, water is also abstracted from the Mvoti and uThukela rivers, and groundwater is used extensively in the
outlying rural areas. The Mvoti and uThukela rivers and seawater desalination are potential future sources of
water for this municipality.
Ugu District Municipality
There are a number of rivers that are utilised in this area. The southern areas (not served by Umgeni Water)
utilise water from the Mzimkhulu and Mtamvuna rivers, while the central area primarily receives water from
the Mzinto Dam and EJ Smith Dam on the Mzinto and Mzimayi rivers respectively and from the Mtwalume
River. The northern area primarily receives water from the Mgeni system via Inanda Dam and the Nungwane
Dam on the Nungwane River. Groundwater is used extensively within this municipality to supply many of the
rural areas. The Mkomazi and Mzimkhulu rivers and seawater desalination are potential future sources of
water for this municipality.
Sisonke District Municipality
Numerous small abstractions on the Mkomazi, Mzimkhulu and Mzintlava rivers and their tributaries are
utilised within this area. Groundwater is also used extensively within this municipality to supply many of the
rural areas. The Mkomazi, Mzintlava and Mzimkhulu rivers are potential future sources of water for this
municipality.

2012/2013 to 2016/2017
10.3 Water Quality of Raw Water

The status of raw water quality and problem per supply source/catchment are presented in Table 10.2. The
raw water quality status of each source/catchment is determined by comparing key determinands against
Water Resource Quality Objectives developed for each water supply catchment.
Potential water quality risks associated with Umgeni Water raw water supplies include: eutrophication
(nutrient enrichment and its associated threats including algal blooms, taste and odour problems and aquatic
weed infestation), faecal contamination and associated pathogen risks, suspended solids, and chemical
constituents (including iron and manganese). This in turn has the potential to impact on treatability, chemical
usage and associated treatment cost.
DWA is kept continuously apprised of the quality and risks associated with the source water and needs to more
vigorously regulate catchment practices and waste discharges, to continue to ensure the long-term
sustainability of these water resources.
Table 10.2: Water Quality of Raw Water

Water Quality Status and Trend
System Catchment Impoundment Description of Raw Water Quality Problem
Mar-2009 Mar-2010 Mar-2011 Mar-2012
Mooi, Mearns Weir, Good Good Good Good Good water quality in Mgeni inflow.
Mgeni Midmar Dam Eutrophication in Mthinzima stream inflow.
Mgeni Albert Falls Dam Good Good Good Good Excellent quality in Albert Falls dam, from
where water is stored and released for
abstraction in Nagle dam.
Nagle Dam Moderate Moderate Moderate Moderate Occasional algal blooms in Nagle dam due to
eutrophication in intermediate catchment
Mgeni
(feedlots in Nagle dam catchment area).

Mgeni Inanda Dam Moderate Moderate Moderate Moderate Good quality at the abstraction site, which is
situated near the Inanda dam wall.
Poor quality in upper reaches of the Dam,
where there is high algal count from
eutrophication and high organic carbon
(arising from Msunduzi tributary, which
drains Pietermaritzburg, and Darvill WWTW)
Mdloti Hazelmere Dam Moderate Moderate Moderate Good Good water quality at the abstraction site,
which is situated near the dam wall.
North Coast
Mvoti Run-of-river Moderate Elevated turbidity with river abstractions,

abstractions associated with high intensity rainfall/storm
events.
Boreholes Good Generally good water quality from boreholes.
Nungwane, Nungwane Dam Moderate Moderate Moderate Moderate Generally good water quality.
Lovu Elevated iron and manganese in the raw
water supply, associated with strong
stratification of water column.
Mzimayi E J Smith Dam Poor Poor Poor Poor High algal count and high organic carbon,
associated with eutrophication (Mzinto Town
sewer problems). Algal blooms frequently
South Coast
include those producing toxins, requiring

activated carbon dosing.
Elevated turbidity and faecal contamination.
High iron and manganese concentrations and
odour, which all have to be managed during
the treatment process.
Mzinto Mzinto Dam Poor Poor Poor Moderate Indication of increasing eutrophication.
Some erosion runoff contamination.
Mtwalume River Abstraction Moderate Moderate Moderate Moderate- Faecal contamination.
Poor Increasing turbidity with rain related runoff.
Ixopo, Ixopo Dam Moderate Moderate Poor Poor Chemical and faecal contamination, due to
Mkomazi sewer problems in Ixopo Town.
Ixopo
Eutrophication and elevated organic carbon,

algal blooms and aquatic weed problems.
High iron and associated turbidity.

2012/2013 to 2016/2017
10.4 Water Use Rights, Licences by Resource

Umgeni Water’s registered abstractions and licence applications are shown in Table 10.3.
Table 10.3: Registered Abstractions for 2011/2012 and Status of Licence Applications.
Registered Use for Current Licence Licence Application
System Abstraction Point 2011/2012 (103m3/day) (103m3/day) and date
(103 m3/day) and date issued submitted to DWA
Midmar Dam
1,099 1,096 1,287
Mgeni
Nagle Dam (Albert Falls Dam)

Inanda Dam May 1985 November 2005
Resubmitted 2012
Hazelmere Dam 45 31 92
1985/88 April 2010
North Coast
Mvoti River 16 11 18
April 2008
Imvutshane Dam N/A N/A 10
Submitted 2009
Lower Thukela N/A N/A 110
January 2010
Nungwane Dam 26.5 - -
E J Smith Dam
South Coast
12 - -
Mzinto Dam
Mtwalume River Well points 8.5 3 5
May 2006
Mhlabatshane Dam N/A 4.1 N/A
June 2010
Other
Ixopo Dam 2.3 - -
The information in Table 10.3 indicates that the current registered use is greater than the licenced amount for
a number of resources used. In this regard, Umgeni Water has submitted licence applications, some as far back
as 2006 and 2008. These are however still outstanding.

2012/2013 to 2016/2017
10.5 Water Demands, Planned Developments and Shortfalls

In 2010/2011 the eThekwini Metropolitan Municipality implemented water demand management initiatives
which significantly impacted on Umgeni Water’s volume sales. The effect of this initiative was a reduction in
sales of 5.8%, from 329 million m3 to 310 million m3, between the 2009/2010 and 2010/2011 financial years.
Even with growth in some of the other municipalities this still had a marked impact on Umgeni Water’s overall
sales with a reduction of 3.3% from 426 million m3 to 412 million m3 for the same period. With a cessation of
eThekwini’s Water demand management initiative, growth in sales has recovered with a growth, over the first
eight months of this financial year, of 1% when compared against the same period of the previous year. The
growth in water sales is expected to increase in the medium to long-term, as the economy continues to recover
from the last recession, and with government stimulation to grow the economy.
Umgeni Water, as a bulk water services 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 10.4 and described further in the sections that follow.
Table 10.4: Summary of Water Resource/Supply needs, Timing and Estimated Cost
Scheme Date Needed Timing Estimated Cost Responsibility
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
Mhlabatshane Dam 2012 On Schedule R195 million UW
North Coast System: Raising of Hazelmere Dam 2013 On Schedule R 360 million DWA
Imvutshane Dam 2013 On Schedule R 136 million UW
Lower Thukela Bulk Water Supply Scheme 2014 On Schedule R894 million UW
Lower Mkomazi Bulk Water Supply Scheme 2019 Behind Schedule R 500 million UW
Lower Mvoti Bulk Water Supply Scheme: Welverdient Dam 2020 Behind Schedule R 1,000 million DWA
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 medium and long-term water
requirements of the region, including:
 A detailed feasibility investigation of two large-scale seawater desalination plants for the East
Coast region;
 Feasibility study for wastewater reuse from the Darvill Wastewater Works;
 Participation in eThekwini Metropolitan Municipality’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 later in
this business plan.

2012/2013 to 2016/2017
10.5.1 Mgeni System: Planned Developments and Shortfalls
The long-term water demand projections for the Mgeni system are shown in Figure 10.1. Augmentation
options for the Mgeni system comprise:
 Phase 2 of the Mooi-Mgeni Transfer Scheme: Spring Grove Dam.

 Phase 1 of the Mkomazi Water Project: Smithfield Dam.
Figure 10.1: Long-Term Water Demand Projection for the Mgeni System
Phase 2 of the 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.
Figure 10.1 shows the decrease in demands over the past year as attributed to eThekwini Municipality’s water
demand management initiatives. Cessation of these water demand management initiatives have led to an
increase in demands in 2012, a growth trend that is expected to continue. Figure 10.1 indicates that current
demands are almost equivalent to 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 therefore needed.
At the end of 2007 the Minister of Water and Environmental Affairs instructed the Trans-Caledon-Tunnel-
Authority (TCTA) to implement the MMTS-2 project as quickly as possible in order to augment the existing

2012/2013 to 2016/2017
system and reduce the risk of possible future restrictions. Construction of the dam was initiated in the first half
of 2011 and it is expected that the construction will be completed by 2012, following which impoundment will
commence. The transfer of the first available water is expected in April 2013. The construction of the water
supply pipeline from the dam, which will maximise the transfer capacity from the dam, has been delayed due to
an appeals process relating to environmental record of decision and the completion of this pipeline will now
only occur a year or two after the dam is completed.
Phase 1 of the Mkomazi Water Project: Smithfield Dam
It is evident from current and projected water demand trends (refer to Figure 10.1), 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 demands can be met timeously and at the appropriate level of
assurance. DWA has now initiated a detailed feasibility level investigation into this augmentation option.
Umgeni Water has undertaken to complete concurrent detailed feasibility level investigations into the
associated bulk potable water component and it is envisaged that this investigation will commence in May
2012 to be undertaken simultaneously and in an integrated manner with the DWA water resource component.
An environmental impact assessment of the entire project will also be undertaken as a single co-funded
investigation.

2012/2013 to 2016/2017
10.5.2 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 10.2).
Figure 10.2: Long-Term Water Demand Projection for the Hazelmere (Mdloti) System
The drop in demand for the 2008/2009 financial year was as a result of a load shift from the Hazelmere Water
Treatment Works onto the Durban Heights Water Treatment 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 a new dam on the Mvoti River (either the Welverdient Dam or Isithundu Dam).
Raising of Hazelmere Dam
Raising the full supply level of Hazelmere Dam by seven metres to increase the firm yield of the resource to
approximately 27.3 million cubic metres per annum (at a 98 % level of assurance) is estimated to be the
quickest option of augmenting the water supply to the North Coast region. However, recent preliminary
designs have indicated that the dam wall may not be completely stable, if raised, unless some form of anchoring
is provided. Further geotechnical studies are being undertaken to confirm the founding conditions of the wall
and to prove stability.

2012/2013 to 2016/2017
Following the geotechnical investigations, DWA will assess the financial viability of immediately raising the
dam or deferring the project to a later date in lieu of supply to the North Coast being augmented by the Lower
Thukela Bulk Water Supply Scheme. An environmental record of decision has already been issued for the
project and DWA is currently busy with expropriation procedures so that the project can proceed to
construction without delay if required. The full detailed design of the raising will continue once the stability of
the dam wall has been proved. The dam currently has sufficient yield available to cater for the initial demand
increases that can be expected once the upgrade to associated bulk water supply infrastructure is completed by
Umgeni Water. However, once the demand increases to above 55,000 cubic metres per day, the assurance of
supply will drop below 98% unless the dam wall is raised.
Lower Thukela Bulk Water Supply Scheme
The Lower Thukela Bulk Water Supply Scheme is a practical and cost-effective scheme to implement to supply
additional water to the area. This scheme will be required to augment the water supplies of the Mdloti System,
as the raising of Hazelmere Dam on its own will not provide sufficient resources to supply this area in the
medium term. The Lower Thukela Bulk Water Supply Scheme will draw water from the Thukela River and will
not require raw water storage. Umgeni Water is in the process of undertaking a detailed design of this scheme
and construction of the scheme will be undertaken in a number of work packages. The first construction tender
is due to be advertised in April 2012.
Imvutshane Dam
Communities in the largely rural areas inland from the North Coast region - areas bounded by the uThukela 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 has implemented the Ngcebo Bulk Water Supply Scheme that draws water from the uThukela
River to supply potable water to some of these communities. Furthermore, Umgeni Water has recently
constructed 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 Hlimbitwa River, which in turn is a tributary of the Mvoti River. Phase 2 of this
scheme 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. The detailed
design of this dam has now been completed and construction is expected to commence in the latter part of
2012. A possible future extension to this scheme is to augment the Imvutshane Dam from the Hlimbitwa River.
Lower Mvoti Bulk Water Supply Scheme: Welverdient Dam
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

2012/2013 to 2016/2017
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.
10.5.3 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 as witnessed during the latter part of 2010. While the
infrastructure linkages between the Mzinto, Mtwalume and Craigieburn water treatment works’ were able to
alleviate localised supply shortages for 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 Supply 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.
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.
Mhlabatshane Bulk Water Supply Scheme
Umgeni Water is currently constructing the Mhlabatshane 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 Mzumbe and Hibiscus Coast Local Municipalities. This scheme is situated within the
Lower South Coast Sub-Region. The 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.
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 treatment 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 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. The Mhlabatshane Dam has recently been commissioned although it will take approximately one year
for the dam to impound sufficient water for use by the scheme.

2012/2013 to 2016/2017
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
treatment works (which will need to be upgraded) and then fed into the reticulation system via the command
reservoir.
10.5.4 Alternate Resource Options
As discussed in the previous section, Umgeni Water is highly reliant on surface water resources as a raw water
source. The Mgeni System is now completely utilised and additional storage in the catchment will offer no
additional yield. Augmentation of the Mgeni system resource is now reliant on inter-basin transfers from
adjoining catchment areas, most notably the Mooi Mgeni Transfer Scheme Ph 1 and, with the construction of
the Spring Grove Dam, the Mooi Mgeni Transfer Scheme Ph 2. As alternatives to using surface water as a
resource, Umgeni Water is now committed to investigating other diversified resource options for augmenting
the system with the intention of implementing viable options. These augmentation options include Wastewater
Reuse and Sea Water Desalination.
Wastewater Reuse
Umgeni Water is currently investigating the option of treating domestic sewage from its Darvill Wastewater
Treatment Works to potable standards. The proposal would then be to return the treated water back into the
distribution system at Umlaas Road. The water could then be used to augment the supply to the Western
Aqueduct which will serve the high growth areas along the western corridor of the eThekwini Metropolitan
Municipality. The advantage of this is that water is made available higher up in the system. A full feasibility
study of this scheme will be undertaken before any decision is made on whether or not to proceed with the
project. A study has also been commissioned to investigate the impact of this scheme on the yield of the Mgeni
System as wastewater released from Darvill form a component of the Inanda Dam yield. The feasibility study
for this wastewater reclamation project will be completed in 2014.
Seawater Desalination
Umgeni Water has recently completed a large-scale desalination pre-feasibility study. The objective of this
study was to investigate the viability of constructing a large scale desalination plant in the eThekwini area as a
possible alternative to the proposed Mkomazi Water Project.
A detailed feasibility study has now been initiated by Umgeni water with a revised approach. The detailed
feasibility investigation is considering the option of a 150,000 cubic metres per day plant on both the North
Coast and South Coast. The capacity of these plants is based on the capacity of existing and proposed bulk
water supply infrastructure in these areas, which will be utilised to convey the potable water from the
desalination plants to the various distribution points. eThekwini Metropolitan Municipality, Ugu District
Municipality and iLembe District Municipality will be the beneficiaries of this project. The detailed feasibility
study for this desalination project will be completed in 2013.
Locations for the plants have now been established on both the North and South Coast and a consultant has
now been appointed to undertake a detailed feasibility study of each plant. Components of the study will
include, siting of the inlet and outfall and systems to link these to the plants, Water quality monitoring to
inform pre-treatment techniques, potable water supply infrastructure, economic and financial analysis and
institutional arrangements that would be appropriate for commissioning the project. .

2012/2013 to 2016/2017
10.5.5 Assessing the impacts of climate change on water resources
Research to assess the risk of a changing climate on Umgeni Water’s business has been on-going since 2007
which led to development of a climate change water planning and management framework. Recent work
includes addition of simulations from ten General Circulation Models to a daily hydrological model. The
scenarios that have unfolded are being used in a water resources simulation model to determine the potential
impact on water yield and supply security in Umgeni Water’s largest water supply catchment, the Mgeni
catchment.
To date, the potential impacts on hydrology of the Mgeni catchment and water security at the four main dams
has been modelled using nine models of future climates. Unfortunately these results (typified in Figure 10.3)
are far from conclusive with the potential impact on water yield ranging from -15% to +40%.
Figure 10.3: Water Yield, Predicted Demand and Climate Change Scenarios.
Water Yield, Demand and Climate Change Scenarios

Water demand/yield (thousand cubic
700
90%
600 75%
metres per day)
50%
Projected
35% Water Demand
500
Yield without
25% climate change
400
10%
300
Current 2030
Future 5-year plan

The most up-to-date science has been used in this assessment. However, the discipline of performing impact
studies, such as water resources, based on scenarios of future climates is relatively new. There are also
numerous complexities that are associated with modelling the natural climate – water processes, resulting in
increased uncertainty. The confidence levels in the results of such studies are therefore less than ideal. There
are, however, several improvements that can be made to the modelling process. At the heart of these
improvements is the inclusion of new scientific developments especially with regards to modelling of future
climates such as new improved models to ensure that predicted rainfall and potential evaporation are more
adequately represented. These improvements should greatly reduce uncertainty and enhance the credibility of
the water planning process at Umgeni Water.
In this regard, a further 26 climate scenarios recently became available and are currently being analysed, using
the same methodology as the first nine scenarios. It is hoped that this further analysis will provide a
convergence of results, at the very least, agree on the direction of change. Failing this, at least the spread of
results, which could be summarised using a probabilistic approach, should be more meaningful.
Regardless of the results, which are fundamentally based on uncertainty, it will be important for Umgeni Water
to develop flexible adaptive strategies to cope with these potential impacts. It is undesirable for the utility to be
faced with issues such as unachievable deadlines for water resource development, or loss of supply potential,
hence the results from the process described above will be used to develop sustainable solutions. Water
resource development plans, system operating rules and disaster risk management plans will contain the
means of implementing these strategies.

2012/2013 to 2016/2017
10.6 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 10.1). This is currently undertaken with a signed agency agreement that
Umgeni Water concluded with DWA in 2011.

2012/2013 to 2016/2017
Chapter 11: Bulk Potable Water Supply Plan
11.1 Supply Capacity, Works Condition and Water Quality Produced

Umgeni Water operates eleven bulk water treatment works, for which the works capacities and utilisation are
shown in Figures 11.1 and 11.2 respectively.
Figure 11.1: Water Treatment Works Design Capacity.
Water Treatment Works Design Capacity

(cubic metres per day)
Wiggins,
350,000
Midmar,
250,000 DV Harris, 94,000
Durban Hazelmere, 45,000

Heights, Amanzimtoti,
614,000 24,000
Mzinto,
Mvoti, 12,000 12,000
Mtwalume, 7,500
Maphephethwa,
1,250 Ixopo, 2,300
Figure 11.2: Water Treatment Works Capacity Utilisation.
Water Treatment Works Utilisation

as at 31st December 2011 168.8%
133.0%
123.5%
80.0%
107.0%
95.7%
85.5%
83.3%
79.3%
73.4%
73.2%
69.3%
0.0%
An additional thirty-seven (37), comprising eighteen (18) smaller water treatment works and nineteen (19)
borehole schemes are managed on behalf of the iLembe District Municipality.
Potable water quality compliance, as per SANS 241:2011 ( health, operational and aesthetic requirements), as
well as Blue Drop status, is shown for all water treatment works and schemes in Table 11.1.

2012/2013 to 2016/2017
Table 11.1: Water quality compliance for the period July 2011 to February 2012 and 2011 Blue Drop Status.
Water Treatment Works % Volume Per cent Compliance with SANS 241:2011
Health Operational Aesthetic
Durban Heights 41.1 100 100 100
Wiggins 21.5 100 98 100
Midmar 18.1 100 98 100
DV Harris 7.6 100 99 100
Hazelmere 3.8 100 98 99
Amanzimtoti 4.5 100 100 100
Mzinto 0.9 100 97 100
Mvoti 1.0 100 90 99
Mtwalume 0.3 100 99 99
Maphephethwa 0.1 100 87 75
Ixopo 0.2 100 97 98
iLembe Rural Schemes 0.5 98 83 93
Plans addressing capacity and water quality risks

Several works, as shown in Figure 11.2 are currently operated above their design capacity to meet customer
demands and this also impacts on water quality. In this regard interventions to address this have been put in
place including infrastructure developments in the five-Year Business Plan Period:
 Hazelmere WTW: Capacity constraint will be addressed through a works upgrade from 45,000 to
75,000 cubic metres per day.
 Mvoti WTW: The Lower Thukela BWSS will replace this works by 2014. In the short-term,
refurbishment of the filters is planned and a 2,000 cubic metres per day package plant installed.
 Maphephethwa WTW: The works upgrade is being completed and commissioned and additional
capacity will therefore be available from 2012/2013.
 For the smaller works, operational and process enhancements will alleviate constraints in the short
term. The long-term solution to address the Mtwalume and Ixopo WTWs’ capacity constraints is the
extension of the South Coast Pipeline and related system upgrades.
 The iLembe Schemes, have been assessed in detail in terms of the gaps to achieve Blue Drop
compliance, and gaps will be progressively addressed through both medium-term interventions and
long term sustainable solutions.
Asset Management
Umgeni Water will conduct regular maintenance and inspection of all its assets as an intrinsic part of continued
operations management. This will comprise planned maintenance, which is inclusive of preventative
maintenance, repairs, redesign and modifications, which will be complemented by on-going unplanned,
reactive and corrective maintenance in line with our asset management implementation plan for the year.
Table 11.2: Maintenance Plan 2012/2013

Budget (R'000 )
Internal Maintenance 4,119
External Maintenance 0,458
External Repairs 8,105
Maintenance Contracts 11,298
Materials 1,055
Operating Capital Expenditure 1,183
Renewals 32,399
Total Maintenance 158,159
The asset management strategy further drives the focus of condition assessments of the various components of
key strategic and critical infrastructure to its various sub-components i.e. civil, mechanical, electrical,
instrumentation and control. These specialised assessments are to be conducted by a multi-disciplinary team of
internal specialists and when required specialists are contracted to assist in providing an accurate ranking of
the condition of our assets.

2012/2013 to 2016/2017
A key output of these assessments is establishment of the condition status of our assets. This status is vital in
determining the useful life and future investments required to maintain our level of service to all our
customers. The intention is to ensure there are no assets that pose significant risk to supply and there will be
no major interruptions to its business over the next five years and beyond.
Details of Umgeni Water’s capital infrastructure programme are provided in later sections of the business plan
with the full capital expenditure plan shown in the financial plan.
Water Quality Management
Umgeni Water is strengthening its commitment to assure potable water quality through targeting Blue Drop
certification of all its systems, and to progressively achieve this for all supply systems, well within the five year
business plan period.
For the Blue Drop Assessments undertaken by DWA in May 2012, Umgeni Water increased the systems that
were Blue Drop compliant from 6 to 9 systems, indicating increased drinking water quality management
excellence, together with the relevant Water Service Authorities.
Umgeni Water will continue to manage water quality through its water quality management system, which
includes monitoring programmes, alert level triggers and incident management protocols and system risk
assessments.
Water quality risk assessments associated with abstraction, conveyance, treatment and distribution systems
will be reviewed annually and the effectiveness of control measures assessed.
Monitoring programmes will be reviewed each year. This to be done in accordance with: legislative
requirements, customer bulk supply agreements, process requirements, and to ensure that previously
identified water quality risks in the system can be mitigated. Sampling and analyses will be undertaken in
accordance with Umgeni Water’s ISO 9001 certified monitoring programme and SANAS 17025 accredited
laboratory, respectively. The SANS 241: 2011 Drinking Water Specification will be the compliance standard
used.
Water quality performance data, information and reports will be disseminated to all stakeholders as per
statutory requirements and bulk supply agreements.
Umgeni Water will also continue to provide assistance to its customers to ensure that customer systems can be
progressively improved for all sites.
Water quality assessments will also be undertaken for proposed water treatment infrastructure developments.
This, in partnership with DWA, will include raw water monitoring, assessment of water quality risks,
predictions of impounded quality, and recommendations for design of abstraction, conveyance and water
treatment to mitigate any identified water quality risk.

2012/2013 to 2016/2017
11.2 Demand of Major Consumers by Scheme
11.2.1 Potable Water Quantity Demand
Umgeni Water currently supplies a number of customers in various water service authorities (Figure 11.3).
Figure 11.3: Footprint areas of Umgeni Water current supply together with
proposed future expansion areas
The extent of this supply is shown as a supply ‘footprint’ in the figure. Also shown in the figure are areas of
potential short term expansion as discussed in Section 11.2.3.
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. For
areas within the existing supply ‘footprint’ area, the bulk water 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. The two major urban areas, the eThekwini Metropolitan
Municipality and the Msunduzi Local Municipality, currently account for approximately 91 % of the water

2012/2013 to 2016/2017
supplied by Umgeni Water. Consequently, they remain the main drivers of demand within Umgeni Water’s
operational area.
Descriptions of Umgeni Water’s overall short and long-term sales forecast are provided in the section that
follows, as well as for the Water Service Authorities currently served by the organisation. These forecasts apply
to the current supply ‘footprint’ area.
Umgeni Water Short-Term Bulk Sales Forecast
The economy has shown slow growth following the recent economic slowdown and recession and has yet to
recover fully. Economic growth (and its corresponding translation into growth in water demands) for the
Umgeni Water area of supply is therefore not expected to be significant over the next few years.
eThekwini Municipality’s current water demand management (WDM) initiatives have also had a marked
influence on Umgeni Water’s bulk water sales, and these initiatives are expected to influence future sales in the
short-term.
In September 2010 the Umgeni Water short-term bulk water sales forecast for 2011/2012 was estimated to be
1.184 million cubic metres day and later revised to 1.146 million cubic metres day when it became evident that
sales would fall well short of the projected value due to the unforeseen success being achieved by eThekwini
Municipality’s WDM initiatives.
Whilst eThekwini Municipality do not expect to achieve the same level of success with their WDM initiatives
during the next year or two, the retarded economic growth over this same period is expected to result in a
negative overall growth for 2011/2012 and then turn into an improving situation in the following years as the
economy recovers further. Hence, the Umgeni Water short-term bulk water sales forecast for 2011/2012 and
2012/2013 is estimated to be 1.127 million cubic metres day and 1.142 million cubic metres day respectively.
This represents a 0.22% year-on-year decrease in growth from 2010/2011, which is an improvement on the
previous year, and is again primarily determined by the forecast provided by eThekwini Municipality.
Umgeni Water 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
2040/2041. 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 11.5 depicts this long-term sales projection together with 1 % and 2 % growth rate scenarios for
comparison. The drop in sales in 2016/2017 and 2017/2018, as shown in Figure 11.5, is as a result of the
anticipated commissioning by eThekwini Metropolitan Municipality of its Northern and KwaMashu wastewater
re-use plants which are planned to produce 51,000 cubic metres per day and 65,000 cubic metres per day
respectively. These plants intend to feed potable water directly into the municipality’s bulk supply network,
thereby reducing the requirement from Umgeni Water.
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 are monitored on a
regular basis to assess actual demand patterns.

2012/2013 to 2016/2017
Figure 11.4: Umgeni Water’s Historic and Projected Total Sales Volumes
Figure 11.5: Long-Term Water Sales Projections, 2040/2041

2012/2013 to 2016/2017
eThekwini Metropolitan Municipality: Short-Term Bulk Sales Forecast

In the 2009/2010 financial year the year-on-year growth in sales to eThekwini Municipality increased by 1%.
In 2010, it was predicted that substantial growth would still occur in the northern eThekwini area with the
proposed development of formal housing projects and the industrial development of the Dube Trade Port.
eThekwini Municipality did, however, predict that their continuing water demand management initiatives
would completely offset the expected growth in the northern areas. The impact of the water demand
management initiatives, implemented over the last year, caused a greater than expected reduction in sales to
eThekini Municipality. This is shown in Figure 11.6, where the twelve-month moving average of sales
decreased from 900,000 cubic metres per day in July 2010 to 860,000 cubic metres per day in June 2011 and
further to 848,000 cubic metres per day in October 2011.
As at October 2011, the total sales to eThekwini were approximately 830,000 cubic metres per day.
eThekwini Municipality does not believe that its water demand management initiatives will further reduce
these sales and have predicted an increase in demand from 830,000 cubic metres per day to 839,000 cubic
metres per day over the 2011/2012 financial year and to 843,000 cubic metres per day in 2012/2013. The
historical sales and future demand projection for eThekwini Municipality are presented in Figure 11.6.
eThekwini Municipality have predicted an increased demand from the Hazelmere Water Treatment Works, due
to proposed development on the KwaZulu-Natal North Coast. If possible, this demand will be shifted to the
Durban Heights Water Treatment Works. This load shift will occur via the eThekwini Northern Aqueduct and
the Hazelmere to Verulam Pipeline.
Figure 11.6: Total Daily Sales to eThekwini Metropolitan Municipality

2012/2013 to 2016/2017
Msunduzi Local Municipality: Short-Term Bulk Sales Forecast
The water sales to Msunduzi Municipality increased by 10% from 157,000 cubic metres per day in the
2009/2010 financial year to 173,800 cubic metres per day in 2010/2011. Although this amounts to significant
growth for the municipality, it is not expected that this growth will be maintained over the short-term. The
projected demands for 2011/2012 and 2012/2013 are expected to increase by 0.8% and 1.1% respectively.
This equates to sales forecasts of 175,200 cubic metres per day and 177,100 cubic meters per day for
2011/2012 and 2012/2013 respectively. The following significant factors influenced this short term forecast:
 Demand growth has been negligible since March 2011. This is evident in Figure 11.7 which indicated
a flat 12-month moving average over this period.
 There are no significant developments (housing, commercial and industrial) that will result in a
steeper increase.
 Msunduzi Municipality has embarked on an aggressive water demand strategy that will offset the
natural growth that will take place in the region.
Msunduzi municipality have recently appointed a service provider to initiate a range of water demand
management (WDM) initiatives throughout the entire municipal area. The initiatives include, inter alia,
reducing operating pressures, replacing ageing pipelines and investigating and repairing leakages. Much of the
reconnaissance work has been conducted and the service provider is now moving into the implementation
phase. The programme anticipates making significant gains into reducing water losses in Msunduzi
Municipality. This requires that these demand projections be reviewed at least every six months so that
revisions can be made, based on the anticipated success of the WDM project.
It is anticipated that WDM initiatives together with natural growth in demand will have the net effect of
reducing demand growth to around 1% for the 2011/2012 financial year.
Figure 11.7: Total Daily Sales to Msunduzi Local Municipality

2012/2013 to 2016/2017
uMgungundlovu District Municipality: Short-Term Bulk Sales Forecast

The total sales to the uMgungundlovu District Municipality (UMDM) increased by 1% from 10,959 cubic metres
per day in the 2009/2010 financial year to 11,039 cubic metres per day in 2010/11. The projected sales for
2011/2012 and 2012/2013 are expected to be 31,200 cubic metres per day and 32,200 cubic metres per day
respectively.
The water demand in the uMshwati Local Municipality is constrained by the limited capacity of the existing
Umgeni Water infrastructure to support further developments. The projection for uMshwati Municipality,
which is supplied from DV Harris WTP, has therefore been restricted to a 1% annual growth.
uMgungundlovu District Municipality have recently embarked on a water demand management initiative in
their area. The project is in its conceptual stage with the appointed consultants currently busy with desktop
work. Water demand management initiatives are not expected to influence projections for this municipality
over the short term.
iLembe District Municipality: Short-Term Bulk Sales Forecast
Sales to iLembe District Municipality can be described as follows:
 Sales to the Coastal Area of iLembe through Sembcorp Siza Water.

 Sales to the Coastal Area of iLembe through iLembe District Municipality.
 Sales to iLembe District Municipality through schemes owned by the district municipality and managed
by Umgeni Water.
Urban and peri-urban growth across Sembcorp Siza Water’s concession area has caused a corresponding
increase in water demand with the growth for the 2010/2011 financial year being 10%. Sembcorp Siza Water
expects that further developments in this area will increase the demand from 12,300 cubic metres per day in
2010/2011 to 13,300 cubic metres per day in 2011/2012 and 14,300 cubic metres per day in 2012/2013. The
historical and future predicted increase in demand for Sembcorp Siza Water is presented in Figure 11.8.
Figure 11.8: Total Daily Sales to Sembcorp Siza Water

2012/2013 to 2016/2017
The remaining water sales to iLembe District Municipality for 2011/2012 include:
 approximately 9,000 cubic metres per day sales to the coastal areas from Umgeni Water’s
Hazelmere WTP;
 16,000 cubic metres per day sales to KwaDukuza (Stanger). Supply to the town of KwaDukuza includes
15,000 cubic metres per day from the Mvoti WTP and a further augmentation of 1,000 cubic metres per
day from the Hazelmere System via an emergency pipeline from Honolulu Reservoir to the
Mvoti Balancing Reservoirs; and
 6,000 cubic metres per day sales to 36 inland rural schemes owned by iLembe District Municipality and
operated by Umgeni Water.
iLembe District Municipality is implementing a number of water demand management (WDM) initiatives
within the town of KwaDukuza (Stanger) and they estimate that savings from these initiatives will offset the
growth in sales for the area. They therefore predict a zero per cent growth rate in 2011/2012 (31,000 cubic
metres per day) with an increase in demand of 1,500 cubic metres per day in 2012/2013.
Ugu District Municipality: Short-Term Bulk Sales Forecast

Total sales to the Ugu District Municipality increased by 0.7% from 21,600 cubic metres per day in the
2009/2010 financial year to 21,700 cubic metres per day) in 2010/2011. The low increase, in comparison to
the projection for this period, was primarily due to the water restrictions that were imposed as a result of the
sharp drop in water levels of the Umzinto and E. J. Smith dams from May 2010 until October 2010. A number of
infrastructure projects are being implemented by Umgeni Water in order to mitigate the future risk of
non-supply.
Ugu District Municipality is currently constructing a pipeline from their Hazelwood Reservoir to the Greater
Vulamehlo area to supply water from the Umzinto WTP supply system to this area resulting in an expected
growth rate of 6.8%.
The expected growth in sales to the Ugu District Municipality (as confirmed by them) is estimated at 13.08% in
the 2011/2012 financial year and 8.51% in 2012/2013. (Figure 11.9).
Figure 11.9: Total Daily Sales to Ugu District Municipality

2012/2013 to 2016/2017
Ugu District Municipality highlighted the growth potential of the Middle South Coast area if additional water
becomes available and prompted the step increase towards April 2012 when Phase 2a of the South Coast
Pipeline (SCP-2a) is commissioned.
This expected growth is a result of the Ugu District Municipality’s proposed initiatives towards the
reduction of backlogs and the rapid growth in water sales in the inland rural areas of the municipality,
specifically in the Greater Vulamehlo, Ifafa and Mathulini areas.
Ugu District Municipality has embarked on a number of water demand management (WDM) initiatives.
However, these are mainly in the Lower South Coast region and not in the Umgeni Water area of supply and
hence they do not expect to have an impact on the projected water demand growth rates.
Sisonke District Municipality: Short-Term Bulk Sales Forecast
The Ixopo Water Treatment Works, which is operated by Umgeni Water, supplies the greater Ixopo area.
Average daily sales from the Water Treatment Works in 2010/11 amount to 2,500 cubic metres per day. The
projected sales from the Water Treatment Works has been estimated with a zero per cent growth at 2,500
cubic metres per day in 2011/12 and 2012/13.

2012/2013 to 2016/2017
11.2.2 Bulk Water Supply Infrastructure Constraints and Requirements
This section describes the more significant constraints within Umgeni Water’s existing bulk supply
infrastructure and the proposed infrastructure development plans to overcome these constraints and provide
the additional capacity required for further expansion of the existing supply ‘footprint’ area. The proposed
water supply infrastructure links directly to the proposed water resource infrastructure discussed in
Chapter 10.
Mgeni System
Over recent years the eThekwini Metropolitan Municipality has put considerable effort into optimising the
operation of its distribution systems that are served by the Lower Mgeni System. Amongst other things, this has
led to the municipality implementing new infrastructure in order to undertake a significant load shifting
exercise. The municipality’s western aqueduct development, which is expected to be fully commissioned in
mid-2013, will represent the most significant of these load-shifting operations. The intention is for those areas
currently being served under pumping from the Lower Mgeni System (namely, from Durban Heights Water
Treatment Works) to be transferred onto the Upper Mgeni System, to be served under gravity from Midmar
Water Treatment Works via the western aqueduct.
Further to this, eThekwini Metropolitan Municipality plans to link the western aqueduct to its northern
aqueduct thereby extending this supply to the municipality’s northern areas as far as the Dube Trade Port
development zone. Whilst this measure will free up additional capacity within the Lower Mgeni System that
can be redirected elsewhere within the Municipality, it places considerable additional load on much of Umgeni
Water’s infrastructure in the Upper Mgeni System, including the ’57, ’61 and ‘251 Pipeline systems, Midmar
Water Treatment Works, and ultimately on the water resources available from Midmar Dam. The recent
augmentation of the ’57 Pipeline by Umgeni Water was undertaken in order to provide sufficient capacity in
this portion of the supply network to meet the required demands of the western aqueduct.
Once Phase 2 of the Mooi-Mgeni Transfer Scheme (MMTS-2) has been commissioned in 2013, the 99% assured
yield of the Mgeni System at Midmar Dam will increase from 322,500 cubic metres per day to 476,200 cubic
metres per day. However, even an increased yield at Midmar Dam will be insufficient to support the imposition
of the proposed full Western Aqueduct load shift for any significant period of time, and further water resource
developments will be required.
One water resource option that is to be investigated by DWA is the Mkomazi Water Project which would
transfer raw water from the Mkomazi River to a Water Treatment Works in the adjacent catchment, with
potable water then being supplied to the Umlaas Road area to feed into the ’57 Pipeline and subsequently into
the western aqueduct. The Mkomazi Water Project is currently only entering the detailed feasibility
investigation stage and therefore the very earliest that it is envisaged that the scheme could be completed and
operational is 2024. Refer to discussion in Chapter 10 of this Business Plan.
With Midmar Dam’s yield then being fixed after MMTS-2, it is deemed prudent that all future bulk distribution
infrastructure upgrades within the Upper Mgeni System (Midmar Water Treatment Works - Umlaas Road) be
limited to the water resources capacity that Midmar Dam can support (bearing in mind that Midmar Dam must
also contribute to the water resource requirements downstream of it). Hence, the water available to meet
demands downstream of Umlaas Road Reservoir is limited until such time as the Mkomazi Water Project is
commissioned. Further to this, the available water will decrease over time as the demands upstream of the
Umlaas Road Reservoir increase.
In order to meet the anticipated load shift in demand by eThekwini Metropolitan Municipality from the Lower
Mgeni System to the Upper Mgeni System, the following Umgeni Water infrastructure projects will be required:

2012/2013 to 2016/2017
 Upgrade of Midmar Water Treatment Works;

 Augmentation of the ’61 Pipeline from ED2 to Umlaas Road together with an upgrade of the Umlaas
Road Reservoir.
Another major infrastructure project that will be required over the next 30 years in the inland area to cover
capacity constraints includes the implementation of the uMshwathi Bulk Water Supply Scheme. This scheme
will include the augmentation of the existing ’69 Pipeline (Claridge to Wartburg) and an increase of the capacity
of Wartburg Reservoir. The Wartburg Pump Station will also need to be upgraded. In addition, an upgrade of
the Bruyns Hill Pump Station, pipeline and Reservoir will be implemented. The final phase of the uMshwathi
Bulk Water Supply Scheme will be to extend the system to the rural areas of Efaye, Ozwathini and Ndwedwe.
South Coast System
Due to a water resource constraint at Nugwane Dam and the limited capacity of Amanzimtoti Water Treatment
Works, it is necessary to augment the supply to areas downstream of the Amanzimtoti Water Treatment Works
with potable water from Wiggins Water Treatment Works via the South Coast Augmentation Pipeline, until
such time as a new regional bulk water supply system is developed on the lower reaches of the Mkomazi River
(refer to Chapter 10). In the interim, the Wiggins Water Treatment Works sub-system should have sufficient
treatment and distribution capacity to meet the long-term demands of Amanzimtoti and the South Coast
Pipeline.
Hydraulic analysis has confirmed that the existing South Coast Augmentation Pipeline has adequate capacity to
meet current and projected demands up to the year 2020, provided that a new in-line booster pump station is
installed along the South Coast Augmentation Pipeline to replace the existing Umlazi Pump Station. Umgeni
Water is in the process of constructing a new South Coast Augmentation Booster Pump Station to address this
constraint. This will serve as a medium-term infrastructure development strategy to meet current and
projected demands off the South Coast Augmentation Pipeline up to the year 2021.
The main issue that needs to be addressed in this region is the continued reliance on the already stressed
Lower Mgeni System as the primary water source for this region, supplied from Inanda Dam via the Wiggins
Water Treatment Works along the South Coast Augmentation Pipeline to the Amanzimtoti Water Treatment
Works. The Amanzimtoti Water Treatment Works will need to continue to operate together with the South
Coast Augmentation Pipeline in order to meet demands until a long-term solution is in place.
Umgeni Water is currently in the process of implementing Phase 2a of the South Coast Pipeline (SCP-2a),
which will relieve the demand off Umzinto Water Treatment Works by approximately 4,500 cubic metres per
day. This will allow the relieved capacity to be utilised for growth further inland. In addition, Umgeni Water is
also implementing a new link from Scottburgh South Reservoir, via Ellingham Reservoir, to Umzinto Water
Treatment Works to mitigate the risk of non-supply during dry periods and to meet future increases in water
demand from the Umzinto Water Treatment Works. This project will provide an additional 4 500 cubic metres
per day to augment the supply from the Umzinto Water Treatment Works.
The demand in the area immediately south of Mtwalume, under the jurisdiction of Ugu District Municipality,
has recently increased significantly. This has placed excessive stress on the Mtwalume Water Treatment Works
and subsequently on the Umzinto Water Treatment Works, which supplements the Mtwalume Water
Treatment Works via the pipeline linking the Bazley Reservoir to the Elysium Reservoir supply zone
The development plan for the Upper and Middle South Coast regions is outlined below. This plan utilises the
available resources from the Lower Mgeni, Nungwane, Mkomazi, Mzimayi, Mzinto and Mtwalume systems in
the most sustainable and cost effective manner.

2012/2013 to 2016/2017
 Water from the South Coast Augmentation Pipeline is only expected to be available at the
Amanzimoti Water Treatment Works, in ever reducing amounts, until 2020. Therefore, the
Amanzimtoti Water Treatment Works will need to remain operational in the short to medium-
term.
 Complete the construction and commissioning of the South Coast Augmentation Booster Pump
Station to ensure that the maximum capacity is achievable through the South Coast Augmentation
Pipeline .
 Rehabilitation and/or replacement of the pipeline from Nungwane Dam to the Amanzimtoti Water
Treatment Works will need to be undertaken.
 The long-term strategy is to develop a regional bulk water supply scheme that will receive raw
water from the lower Mkomazi River for treatment and distribution into the South Coast Pipeline.
Potable water would be fed northwards to the Upper South Coast region and Amanzimtoti, and
southwards to the Middle South Coast region.
 The South Coast Pipeline is to be extended southwards in two phases. The South Coast Pipeline
Phase 2a project (SCP-2a), is to be implemented during the first half of 2012. This project will
provide some relief for the Umzinto and Mtwalume Water Treatment Workss. The South Coast
Phase 2b project will tie into the end of SCP-2a and will link to the Ugu District Municipality supply
system from the Mzimkhulu River to add a measure of flexibility and a contingency for drought
situations in either system. The timing of SCP-2b is dependent on the development of the regional
BWS on the lower Mkomazi River.
 The Umzinto Water Treatment Works will continue to function in order to supply potable water to
communities in the adjacent inland areas of Ugu District Municipality.
 To augment the supply from Umzinto Water Treatment Works, especially during low rainfall
periods as experienced during the period from March 2010 to October 2010, the supply to Umzinto
Water Treatment Works must be supplemented from the South Coast pipeline via Scottburgh
South and Ellingham reservoirs.

2012/2013 to 2016/2017
North Coast System
The primary source of potable water supplied to the North Coast Supply System (NCSS) is from the 45 000
cubic metres per day Hazelmere Water Treatment Works. With the current demand regularly exceeding the
capacity of the plant, the operation of the plant is difficult and routine maintenance on components of the plant
is near impossible. The comparatively high supply from the Water Treatment Works, when compared to the
plant capacity, and the expected increase in future demand has necessitated the upgrading the Water
Treatment Works from 45 000 cubic metres per day to 75 000 cubic metres per day (98% assured yield of the
raised Hazelmere Dam).
The town of KwaDukuza is supplied from the Mvoti Water Treatment Works via the Mvoti Balancing
Reservoirs. The average demand placed on the Water Treatment Works over the past year was 16 900 cubic
metres per day. The design capacity of the Water Treatment Works was 12 500 cubic metres per day.
The strategic development 30-year plan for the region, that would utilise the available resources from the
Hazelmere, Thukela and Mvoti systems (as discussed in Chapter 7) in the most sustainable and cost effective
manner, is presented below.
 DWA to raise the full supply level of Hazelmere Dam to increase its firm yield and Umgeni Water to
upgrade the Hazelmere Water Treatment Works to supply up to 75 000 cubic metres per day to the
NCSS. In addition to the upgrade of the Water Treatment Works, pump stations and pipelines within the
NCSS will have to be augmented to ensure the demand placed on the system does not exceed the
capacity of the infrastructure. Pipelines that are constructed as part of this augmentation process will be
built with the ability to allow for bi-directional flow to ensure that in the future water can be brought
south from a Water Treatment Works situated at the uThukela River or the Mvoti River.
 Construct an abstraction works on the uThukela River with a regional Water Treatment Works and
associated infrastructure to supply water south to KwaDukuza Local Municipality and north to Mandini
Local Municipality. This system would link into the NCSS. The Water Treatment Works would be
constructed to initially serve 55 000 cubic metres per day and when demands dictate it would be
upgraded to 110 000 cubic metres per day.
 Develop water resource infrastructure on the Mvoti River, either at Welverdient or Isithundu with a
regional Water Treatment Works and associated supply infrastructure to further augment the NCSS. At
some stage in the future, the long-term water demands to the north of the uThukela River may require
the full (or majority of) allocation from the Lower Thukela Water Treatment Works. In this scenario
potable water may need to be supplied northwards from the NCSS (i.e. towards the Lower Thukela
Water Treatment Works) to meet the demands on the southern side of the uThukela River.

2012/2013 to 2016/2017
11.2.3 New areas to be supplied
Umgeni Water is currently undertaking an assessment of potential expansion areas. This expansion could
pertain to areas currently supplied with bulk potable water by a WSA or it could include backlog areas which
don’t have supply or where current supply is not unsustainable. Figure 11.10 highlights the high and low
density areas within the WSA’s currently supplied by Umgeni Water. By overlaying Umgeni Water’s existing
supply ‘footprint’ onto this map it is possible to identify areas of possible future expansion (areas of high
population density outside of the ‘footprint’ area). Figures 11.11, 11.12, 11.13, 11.14 and 11.15 show that
that there are many areas outside of Umgeni Water’s current supply ‘footprint’ area that contain notable
populations.
The following sections highlight some of the future expansion projects which Umgeni Water is undertaking in
each of the WSA’s.
Figure 11.10: Population density of the WSA’s supplied by Umgeni Water
Table 11.3: Population with water access below RDP levels (Umgeni Water, 2011)
WSA Population Backlog Population with access below RDP level %
uMgungundlovu DM 390,357 42,335 7%
Msunduzi LM 624,412 54,881 9%
Sisonke DM 470,812 110,654 18%
Ugu DM 741,974 212,344 34%
eThekwini MM 3,540,682 90,872 15%
iLembe DM 582,489 109,320 18%
Total 6,350,726 620,406 10%

2012/2013 to 2016/2017
eThekwini Metropolitan Municipality
The following strategic projects (Table 11.4) will be undertaken within eThekwini Metropolitan Municipality
to either consolidate existing supplies or to expand into new areas. Potential expansion areas are shown in
Figure 11.11.
Figure 11.11: Proposed extensions to Umgeni Water’s Supply ‘Footprint’

in eThekwini District Municipality
Table 11.4: Projects to be implemented in eThekwini Metro within the next five years
Objective Major Project Project 2013 2014 2015 2016 2017
Total (R'm) R'm R'm R'm R'm R'm
Consolidation Durban Heights WW – Filter Upgrade 190 5 5 60 60
Consolidation Durban Heights WW – Candy Filters & Actuators Upgrade 21 0.4 15 5
Asset Condition Nagle Aqueducts 3 & 4 - Refurbishment 53 22 29
Asset Condition Durban Heights WW – Res 3 Roof Rehabilitation 28 3 15 10
Refer to Table 11.5 for Hazelmere system projects.

2012/2013 to 2016/2017
iLembe District Municipality
The following strategic projects (Table 11.5) will be undertaken within iLembe District Municipality to either
consolidate existing supplies or to expand into new areas. Potential expansion areas are shown in
Figure 11.12.

in iLembe District Municipality
Table 11.5: Projects to be implemented in iLembe District Municipality within the next five years
Objective Major Project Project 2013 2014 2015 2016 2017

Total (R'm) R'm R'm R'm R'm R'm
Rural Expansion Maphumulo BWS Scheme Phase 1 187 61 17
Rural Expansion Maphumulo BWS Scheme Phase 2 162 35 70 49
Rural Expansion Lower Thukela BWS Scheme Phase 1 894 80 220 250 206 105
Consolidation Hazelmere to Bifurcation Pipeline Augmentation 97 59 15
Consolidation Hazelmere WTW Pump Station upgrade 22 10 10
Consolidation Hazelmere WTW: Upgrade (45,000 to 75,000 m3/d) 104 34 54 14
Consolidation Hazelmere WTW: Raw Water Pipeline 19 14 4
Refer to Table 11.6 for uMshwathi BWSS project.

2012/2013 to 2016/2017
Umgungundlovu District Municipality
The following strategic projects (Table 11.6) will be undertaken within Umgungundlovu District Municipality
to either consolidate existing supplies or to expand into new areas. Potential expansion areas are shown in
Figure 11.13.

in Umgungundlovu District Municipality
Table 11.6: Projects to be implemented in uMgungundlovu District Municipality in the next five years
Objective Major Project Project Total 2013 2014 2015 2016 2017
R'm R'm R'm R'm R'm R'm
Rural Expansion Greater Mpofana BWS Scheme 278 1.5 1.5 90 94 22
Rural Expansion uMshwathi BWSS (Wartburg Phase 1-3) 565 16 25 99 94 134
Rural Expansion Richmond Pipeline 182 46 63 49
Rural Expansion Greater Eston BWS Scheme 157 52 68 12

2012/2013 to 2016/2017
Sisonke District Municipality
The Greater Bulwer Donnybrook Bulk Water Supply Scheme would supply water from a dam near the town of
Bulwer to the surrounding areas of Bulwer and Donnybrook. Umgeni Water has set aside R20 million CAPEX
with the intention of ultimately constructing this scheme as a partnership with the Sisonke District
Municipality. The potential expansion area of the scheme is shown in Figure 11.14.

in Sisonke District Municipality
Table 11.7: Projects to be implemented in Sisonke District Municipality in the next five years
Rural Expansion Greater Bulwer/Donnybrook BWSS 20 20

2012/2013 to 2016/2017
Ugu District Municipality
The following strategic projects (Table 11.8) will be undertaken within Ugu District Municipality to either
consolidate existing supplies or to expand into new areas. Potential expansion areas are shown in
Figure 11.15.

in Ugu District Municipality
Table 11.8: Projects to be implemented in Ugu District Municipality within the next five years
Consolidation Ellingham Link Pipeline 37 7 20 10
Asset Condition Nungwane Raw Water Aqueduct Upgrade 69 2 2 1 57 7
Rural Expansion Mhlabatshane BWS Scheme Phase 1 186 60

2012/2013 to 2016/2017
11.2.4 Summary of Major Bulk Water Supply Infrastructure Projects
Table 11.98: Planned Major Infrastructure in Five-Year Business Plan Period.
Objective Key Municipality Major Project Description Project Total Five-Year

Beneficiary (R'm) (R'm)
Consolidation eThekwini MM Durban Heights WW – Filter Upgrade 190 130
Consolidation eThekwini MM Durban Heights WW – Candy Filters & Actuators Upgrade 21 21
Consolidation iLembe DM Hazelmere to Bifurcation Pipeline Augmentation 97 74
Consolidation iLembe DM Hazelmere WTW Pump Station upgrade 22 21
Consolidation iLembe DM Hazelmere WTW: Upgrade (45,000 to 75,000 m3/d) 104 102
Consolidation iLembe DM Hazelmere WTW: Raw Water Pipeline 19 18
Consolidation Ugu DM Ellingham Link Pipeline 37 37
Asset Condition eThekwini MM Nagle Aqueducts 3 & 4 - Refurbishment 53 51

Asset Condition eThekwini MM Durban Heights WW – Res 3 Roof Rehabilitation 28 28
Asset Condition Ugu DM Nungwane Raw Water Aqueduct Upgrade 69 69
Rural Expansion iLembe DM uMshwathi Regional Pipeline (Wartburg Phase 1-3) 565 369
Rural Expansion iLembe DM Maphumulo BWS Scheme Phase 1 187 78
Rural Expansion iLembe DM Maphumulo BWS Scheme Phase 2 162 154
Rural Expansion iLembe DM Lower Thukela BWS Scheme Phase 1 894 861
Rural Expansion Umgungundlovu DM Greater Mpofana BWS Scheme 278 209
Rural Expansion Umgungundlovu DM uMshwathi BWSS (Wartburg Phase 1-3) 565 369
Rural Expansion Umgungundlovu DM Richmond Pipeline 182 149
Rural Expansion Umgungundlovu DM Greater Eston BWS Scheme 157 132
Rural Expansion Sisonke DM Greater Bulwer/Donnybrook BWSS 20 20
Rural Expansion Ugu DM Mhlabatshane BWS Scheme Phase 1 186 60

2012/2013 to 2016/2017
11.3 Status of 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 in the process of being concluded.
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.
Quarterly operational liaison meetings with the municipalities will continue to ensure that customer
requirements are continuously met and responses to new requirements are provided.
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 on-going rehabilitation of the existing infrastructure.

2012/2013 to 2016/2017
11.4 Research and Development

Table 11.10: Planned R&D Projects in Five-Year Business Plan Period.
Project Name Planned Activities

1. Development of an Efficient Ozone Operating Development of the control system for the Umgeni Water Wiggins Water
Strategy. Treatment Works ozone plant upgrade.
Develop an operating strategy that reduces energy consumption.
2. Evaluation of Direct Up-flow Filters (DUF) for Compare cost-effectiveness of the technology (operations and
Potable Water. maintenance).
3. Evaluation of an Innovative treatment System Research is ongoing and will provide short term potable water access for
for Point of Use (POU) Water Treatment. people who do not have access to piped water.
4. Evaluation of High-rate Clarifiers. Prepare design guidelines for the optimisation of high-rate clarifier design
and construction.
5. Monitoring of Endocrine Disrupting Compounds This project is on-going and will result in a cost benefit for the
(EDC) Levels in Darvill WWW Organization when all analysis will be done in-house as opposed to using
external laboratory facilities.
6. Determination of Residual Polymeric Coagulants The work has significantly advanced will be completed.
in Potable Water.
7. Climate Change Modelling Test model on the upper Mooi and Mgeni catchments incorporating the
Mooi-Mgeni Transfer Scheme, and the receiving streams to Midmar Dam.
11.5 Management and Operations Arrangements

The management and operations arrangements of projects and programme in the plan are the responsibility of
Umgeni Water.

2012/2013 to 2016/2017
Chapter 12: Bulk Wastewater Treatment and Disposal
Umgeni Water owns and operates the Darvill Wastewater Treatment Works and Ixopo Wastewater Treatment
Works and Operates and Maintains the Howick Wastewater Treatment Works for the uMgungundlovu District
Municipality.
Table 12.1: Compliance for the period July 2011 to February 2012 and 2011 Green Drop Status.
Wastewater Treatment Works Average Volume Per cent 2011 Green Drop Status
(103 m3/d) Compliance Assessed jointly with Customer
Darvill 75.3 82.7  Msunduzi LM 78.7%
Howick 7.2 86.3  uMgungundlovu MM 74.4%
Ixopo 0.6 90.6  Sisonke DM 64.6%
Albert Falls North 0.01 71.4 Not assessed
Albert Falls South 0.01 66.7 Not Assessed
Darvill Wastewater Treatment Works
The average daily flow of the Darvill Wastewater Treatment Works is 82,600 cubic metres per day, with peaks
as high as 240,000 cubic metres per day during periods of storm ingress. In addition to the increase in the
hydraulic load, a 33% increase in the organic has been observed since 2008.
The increase in the organic load has put a strain on the capacity of the plant to treat and remove nutrients from
the sewage biologically. Most of the unit processes are currently operating far above capacity, leading to the
discharge of non-compliant effluent into the Msunduzi River.
A recent planning investigation examined several growth scenarios in the Msunduzi municipality and
recommends an immediate upgrade by 35,000 cubic metres per day, which will be adequate until 2023, and a
further upgrade of 20,000 cubic metres per day thereafter, the timing for which will be determined by the
demand growth patterns.
A capital project to undertake this work is in the Capex programme and commissioning is expected by
February 2017. An upgrade of the works aeration capacity will be implemented within the next year to
minimise the impact of the increase in the organic load.
Umgeni Water has been issued with a 20 year licence (No. 21065561) from 24 June 2010, renewable every five
years. The permitted discharge is 87,000 cubic metres per day.
Summary of plans to achieved Green Drop Certification over Five-Year Period
 Effluent quality is compromised by overloading and the works capacity will be increased.
 A fine bubble aeration system will be installed within the next 18 months as an interim project.
 A 35,000 cubic metres per day upgrade will be undertaken over the five-year period.
 Multiple process optimisation interventions in progress to address inefficient treatment processes
 A Wastewater Risk Abatement Plan (WRAP) will be developed in conjunction with the Msunduzi Local
Municipality.
 Green Drop Certification for the Darvill WWW is expected to be achieved in 2015.
Table 12.2: Projects to be implemented in uMgungundlovu District Municipality in the next five years
Consolidation Darvill WWTW: Upgrade (85,000 m3/d) 280 7 27 60 70 60
Consolidation Darvill WWTW: Diffused Air System 63 58 4.5
Consolidation Darvill WWTW: Co-Generation 30 2 28

2012/2013 to 2016/2017
Ixopo Wastewater Treatment Works
The current capacity of the Ixopo WWW is 1,000 cubic metres per day ADWF and the projected 2013 inflow
will exceed this if the District Municipality continues with reticulation maintenance. Upgrade of the works
capacity is therefore necessary. To this effect a third aerator will be commissioned by the end of 2012 and an
additional clarifier by 2014.
The wastewater treatment works, is currently below 2,000 cubic metres per day and is operated under a
General Authorisation.
 Effluent quality non-compliance is due to overloading.

 The plant treatment capacity will be upgraded through the installation of a third aerator.
 Plans for a second clarifier are in design.
 Green Drop Certification for the Ixopo WWW is expected to be achieved in 2013.
Howick Wastewater Treatment Works
Umgeni Water has an Operations and Maintenance Contract with the uMgungundlovu District Municipality for
the Howick WWW. Effluent quality non-compliance is primarily due to the lack of adequate sludge dewatering.
Process and asset management improvements are required to improve the wastewater quality compliance.
Upgrading of the solids removal process is currently in progress.
 Effluent quality is expected to improve by the installation of a mechanical sludge dewatering system
during 2012.
 Multiple process optimisation interventions are being undertaken.
 A Wastewater Risk Abatement Plans (WRAP) is being developed in conjunction with the
uMgungundlovu District Municipality.
 Green Drop Certification for the Howick WWW is expected to be achieved in 2015.
Other initiatives
Appointment of an Engineer to work closely with all three wastewater works sites to ensure on-going
interaction between plant and maintenance staff on equipment issues.
Achievement of Green Drop status is dependent on the municipalities’ ability to fulfill and provide proof of
compliance against the Green Drop requirements. In this regard Umgeni Water is committed to
assisting municipalities through:
 Communicating requirements and improving understanding of Green Drop criteria.
 Designing wastewater monitoring programmes.
 Development of Incident Management Protocols.
 Publication of effluent quality information in a format that is accessible to consumers.
 Development of Wastewater Risk Abatement Plans (WRAP).

2012/2013 to 2016/2017
Chapter 13: Retail Supply
Chapter 13: Retail Supply
Umgeni Water does not provide any section 29 retail supplies.

2012/2013 to 2016/2017
Chapter 14: Other Activities (Section 30)
14.1 Implementing Agent for Bulk Water Supply Infrastructure Development in OR

Tambo District Municipality and Alfred Nzo District Municipality.
Umgeni Water will continue to provide implementing agency services to OR Tambo District Municipality and
Alfred Nzo District Municipality for bulk water services. Work will be undertaken in terms of the infrastructure
funding agreement that was signed by the Department of Water Affairs (Eastern Cape Region), the OR Tambo
District Municipality and Umgeni Water in February 2008, and a tripartite funding and implementation
agreement currently being concluded between the Department of Water Affairs, the Alfred Nzo District
Municipality and Umgeni Water.
The Greater Mbizana Regional Bulk Water Supply Scheme
The Greater Mbizana Regional Bulk Water Supply Scheme is currently being implemented, with a number of
components under construction. As a result of changes that took place as part of the municipal demarcation
process in 2011, the project is now under the jurisdiction of the Alfred Nzo District Municipality.
Project progress and planned activities for contracts that have been awarded are:
Construction of the Ludeke Dam
 The contract is to construct the Ludeke Dam, a 40 m high, Category 3, clay-core rock-fill dam on the
Ludeke River, a tributary of the Mtamvuna River.
 Construction work on the Ludeke Dam is progressing well.
 Expected date of completion is February 2013.
Construction of the first phase of the Nomlacu Water Treatment Works
 The civil and mechanical and electrical works required for Phase 1 of the upgrading and extension of
the Nomlacu Water Treatment Works to provide up to 10 000 cubic metres per day.
 Construction work of the first phase of the Nomlacu Water Treatment Works is nearing completion.
 Expected date of completion is June 2012.
Construction work on the first phase of the Bulk Treated Water Supply System
 Phase 1 of the bulk treated water supply system, comprising 30 km of pipelines, 6 No. bulk storage
reservoirs, and a pump station.
 Construction work on the first phase of the Bulk Treated Water Supply System started in March 2012.
 Expected date of completion is September 2013.
Raw water pump station and rising main to the Nomlacu Water Treatment Plant
 The contract for the raw water pump station and 13.2 km long, 500 mm diameter rising main to the
Nomlacu Water Treatment Plant was completed in December 2011.
The target date for completion of Phase 1 of the Scheme is September 2013 at a total capital cost of
approximately R450 million (including VAT).

2012/2013 to 2016/2017
The implementation of further phases of the bulk water supply will depend on priorities within the area and
the availability of funding.
The purpose of the project is to ultimately supply 20,000 cubic metres per day of potable water to a population
of 266,000 people, allowing for an increase in the average consumption per capita from 25 litres per person per
day to 75 litres per person per day over a 30-year time horizon. The targeted categories of consumers to be
supplied with potable water are domestic water users throughout the region, and commercial and light
industrial users and institutional users mainly within the town of Bizana. The estimated total capital cost of the
entire scheme, including all phases of the bulk water supply system and the links to the village reticulation, is in
excess of R1.1 billion over a multi-year development period.
Ingquza Hill Regional Bulk Water Supply Scheme
Umgeni Water is still awaiting instructions from OR Tambo District Municipality to proceed with the detailed
feasibility study and preliminary design of the Ingquza Hill Regional Bulk Water Supply Scheme. Once approval
to proceed has been received, it is anticipated that this study will take between eighteen and twenty four
months to complete. The OR Tambo District Municipality has allocated R10 million from its MIG funds for this
project. Indications are that the Department of Water Affairs will appoint Umgeni Water directly as
Implementing Agent. Details of the terms of reference and the conditions of appointment are not yet known.
14.2 Operation, Administration and Maintenance of Dams

Umgeni Water signed an agreement for the operation, administration and maintenance of dams with DWA.
This encompasses: Midmar Dam, Albert Falls Dam, Inanda Dam, Hazelmere Dam, and The Mearns Diversion
Weir, Mearns Pumping Station, Transfer Pipeline and Receiving Streams.
14.3 Implementing Agent: DEA Working-for-Water

Umgeni Water has been appointed by DEA as its Implementing Agent for the control of terrestrial alien invasive
plants in selected catchments in the Mvoti to Mzimkhulu Water Management Area. The programme will hire
and train people from within the community as contractors or to be employed as part of the contractor’s team.
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. This will contribute to the social economy by creating jobs through
clearing of alien vegetation in Umgeni Water raw water supply catchments.
Table 14.1: Working-for-Working Programme
Project Name Total Hectares Total Person Days Max People Employed per project
KZN Karkloof 1 081 6 033 60
KZN Lions River 1 891 10 337 60
KZN Midmar 990 5 250 36
KZN Nagle 1 800 9 150 96
KZN Mgeni Valley 1 905 10 170 84
KZN Upper Mvoti 1 520 5 002 60
Total 9 187 45 942 396

2012/2013 to 2016/2017
14.4 Implementing Agent: DWA RRU (Rapid Response unit)

DWA has established a Rapid Response Unit (RRU) as a facility to respond to emergencies and potential crises
within the water sector. DWA has appointed Umgeni Water as the implementing agent to assist with the
implementation of the RRU Projects. The scope of work of the RRU is:
 Responding to crises that result from water and wastewater infrastructure challenges, for example,
cholera outbreaks and sewerage spillages.
 Augmenting DWA’s capacity in responding to disasters i.e. floods, droughts and pollution of water.
 Designing and implementing proactive interventions aimed at pre-empting crises before they occur.
 Implementing small Capex and refurbishment projects.
The primary focus of the RRU will be on technical and operational issues, but proposals for sustainable medium
term solutions to be implemented by DWA, municipalities and other relevant institutions will be drafted where
resources and time permit. The RRU will also have the ability to undertake small capital and refurbishment
works to give effect to the turnaround plans that are implemented in each particular situation. In
municipalities that have been identified as high risk but not yet in a crisis, the RRU will also undertake
proactive work such as the development of disaster management, water safety plans as well as the
implementation of short-term projects that are listed as pre-requisites for the implementation of key long-term
programmes e.g. water conservation and demand management plan for the Regional Bulk Infrastructure Grant
(RBIG) projects.
14.5 Operating and Maintenance Agreement with OR Tambo DM

An O&M contract was signed with OR Tambo DM on the 25th February 2011. There has been no progress in the
past year, due to OR Tambo not fulfilling its contractual obligations in terms of upfront payments. The contract
is in the process of being cancelled.
14.6 Laboratory Services

Umgeni Water is providing support to municipalities in order to improve their Blue Drop and Green Drop
compliance. Municipalities include Sisonke DM, Ugu DM, uMgungundlovu DM, Msunduzi LM, uThukela Water,
Alfred Nzo DM. Support for municipalities will continue as per agreed contracts

2012/2013 to 2016/2017
Chapter 15: Human Resources Plan

Umgeni Water continues to face skills shortage challenges and in response is reviewing and deepening the
implementation of its 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.
15.1 Workforce Profile

Umgeni Water will continue to maintain and enhance its core business functions, in support of implementation
of this business plan.
Although the workforce plan is being finalised, information that was used as the basis for this Human
Resources Plan includes the projected additional human resource requirements, as well as, the age profile
shown is Table 15.1 and Figures 15.1 respectively. This plan clearly shows that the workforce plan is
targeting or will be using the training programme initiatives, as well as, implementing a targeted succession
planning process to ensure that Umgeni Water addresses the unemployment within the youth cohort and
thereby improve our employment equity targets.
Umgeni Water will strive to maintain the labour turnover of ≤ 10% of industry benchmark and the recruitment
turnaround time is set at 45 days.
The current and projected workforce numbers and diversity in support of this is shown in Table 15.1 and
Table 15.2, respectively.

2012/2013 to 2016/2017
Table 15.1: Current Workforce Profile (projected to 30 June 2012)
Occupational Levels Male Female Total
A C I W A C I W
Top management 2 0 0 1 1 0 0 1 5
Senior management 3 2 8 3 4 1 4 1 25
Professionally qualified and experienced specialists and 55 7 37 25 52 4 16 9 205
mid-management
Skilled technical and academically qualified workers, 170 13 50 31 111 12 31 12 430
junior management, supervisors, foremen, and
superintendents
Semi-skilled and discretionary decision making 110 1 2 0 2 1 5 1 123
Unskilled and defined decision making 92 0 0 0 18 0 0 0 110

Total (excluding Board members) 432 22 97 60 188 19 56 24 898
Table 15.2: Five-Year Projected Workforce Profile to 2016/2017 (includes contract employees)
Occupational Levels 2012/2013 2013/2014 2014/2015 2015/0216 2016/2017

Top management 5 5 5 5 5
Senior management 25 25 25 25 25
Professionally qualified and experienced specialists
207 208 208 214 214
and mid-management
Skilled technical and academically qualified workers,
junior management, supervisors, foremen, and 463 472 472 472 472
superintendents
Semi-skilled and discretionary decision making 125 125 125 131 131
Unskilled and defined decision making 110 110 110 110 110
Total (excluding Board members) 935 945 945 957 957
During this business plan period, four per cent (4%) of the workforce is anticipated to retire normally from the
organisation (Figure 15.1). 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. As indicated, the training initiatives will introduce more young employees into the organisation.
Figure 15.1: Workforce Age Profile (2012)
Age Analysis
30%
30%
20%
Employee %
18% 16%
20%
11%
10% 4%
1%
0%
0-25 26-35 36-45 46-50 51-55 56-60 61-65
Age

2012/2013 to 2016/2017
15.2 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 15.1 and Figure 15.2, respectively.
Figure 15.2: Five-Year Workforce Projection by Race
Race Profile as at 31 March 2012 Projected Race Profile to 2015/2016

W
9% C
I 5%
18%
I
A A 18%
C 70% 68%
3%
W
9%
Figure 15.3: Gender Profile
Gender Profile as at 31 March 2012 Projected Gender Profile 2015/2016
Female Female
28% 31%
Male
Male
69%
72%
Development and Advancement of Women Employees
Umgeni Water remains committed to developing and advancing women employees in the organisation, and
increase the women complement over the next five years from 28% to 31% (Figure 15.3). Higher targets are
set for the more skilled workforce categories as indicated below.
 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.

2012/2013 to 2016/2017
15.3 Training programmes

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. Umgeni Water will develop strong partnerships with
universities, FET colleges, vocational institutions and SETAs in support of its skills development initiatives.
Learnerships and Apprenticeships
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
 Develop and send 37 external learners for trade tests in Mechanical Engineering, Electrical engineering
and Instruments.
Bursary and Graduate 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, mechanical engineering and financial accounting.
 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. A further twenty six trainees is envisaged to be enrolled to the fields of chemistry, chemical
engineering, microbiology and mechanical engineering upon receipt of funding for the Energy SETA
(ESETA)
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 15.3.
Process Controller – Blue-drop and Green-drop Certification
 In meeting the requirements of Regulation 17 of the Water Services Act No. 108 of 1997 (the blue-drop
and green-drop accreditation) an assessment has been conducted to determine the skills and
competencies levels of Process Controllers. As a result of this, Umgeni Water will develop a plan to close
the gaps that will ensure Blue drop and Green drop certifications for all its sites progressively over the
five-year period.

2012/2013 to 2016/2017
Contribution to regional skills development – municipalities
 Umgeni Water is partnering with National Treasury to develop and train graduate engineers with specific
emphasis on meeting the skills shortage in the municipalities in KwaZulu-Natal. As part of this
programme, a total of forty-three (43) engineers will be trained over a five-year period with the intention
of achieving professional registration with certified professional bodies at the end of the five-year period.
To ensure sustainability, the internship programme will be treated as a bursary for which trainees will be
contracted to work for the municipalities for a period equal to the number of years they were trained by
Umgeni Water.
Table 15.3: Staff Skills Development Plan for 2012/2013 to 2016/2017

Baseline 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017
Learnerships
49 learners 37 artisans 37 qualified 37 qualified 37 new learners 37 new learners
enrolled as water qualified. artisans in artisans in enrolled. enrolled.
and wastewater training. training.
process controllers
and artisans. 15 process 15 new process 15 process 15 process 15 new process
controllers controllers controllers controllers controllers
qualified NQF L4 enrolled and enrolled and qualified NQF L4 enrolled and
and available for trained in water trained in water and available for trained in water
absorption. and wastewater. and wastewater. absorption and wastewater.
Graduate development
18 graduates/ 18 graduates/ 18 graduates/ 18 graduates/ 18 graduates/ 18 graduates/
interns developed interns developed interns developed interns developed interns developed interns developed
in engineering, in engineering, in engineering, in engineering, in engineering, in engineering,
science and other science and other science and other science and other science and other science and other
required required required required required required
professional fields. professional fields. professional fields. professional fields. professional fields. professional fields.
Bursaries
7 students enrolled 10 students 10 students 10 students 10 students 10 students
in engineering enrolled in enrolled in enrolled in enrolled in enrolled in
fields. engineering fields. engineering fields. engineering fields. engineering fields. engineering fields.
Graduate Engineers – Municipality and National Treasury Partnership
Enrolment 43 engineers 43 engineers 43 engineers 43 engineers 43 engineers
programme. enrolled and enrolled and enrolled and enrolled and professionally
trained. trained. trained. trained. registered.
Training, Development and Assisted Eduction
Training, 60% of training 60% of training 60% of training 60% of training 60% of training
development and budget spent on budget spent on budget spent on budget spent on budget spent on
assisted education increasing capacity increasing capacity increasing capacity increasing capacity increasing capacity
are informed by of core and of core and of core and of core and of core and
Individual distinctive distinctive distinctive distinctive distinctive
Development competencies. competencies. competencies. competencies. competencies.
Plans.
15.4 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 (Aid for Aids).
 Strengthening of HIV/AIDS awareness in the organisation.

2012/2013 to 2016/2017
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 estimated at 19.8%, 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 Departments 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.
15.5 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.
Sixty-five per cent (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.

2012/2013 to 2016/2017
Chapter 16: Environmental Management Programmes and Plans
16.1 Environmental Sustainability Programmes

Umgeni has recognised the need to minimise and/or reduce its impact on the natural environmental through
incorporating environmental sustainability within one of the core perspectives of the organisation. This
ensures that environmental sustainability is one of the parameters that the organisation’s performance is
measured against. In line with this mind shift, Umgeni Water has developed and is implementing an
environmental management framework which is aimed at aligning Umgeni Water with environmental
sustainability and to present strategies and plans to achieve environmental sustainability. The framework
presents a set of four key environmental indicators as well as associated variables and targets upon which
environmental sustainability of the organisation is founded. The implementation of these indicators is through
the development of strategies and plans (outlined below) which aimed at achieving environmental
sustainability whilst promoting a shift towards a green economy in which there is growth and expansion in the
business activities while decoupling reliance on the unsustainable use of natural resources.
 Environmental management plans and programs for operational sites,

 Undertaking environmental management for scheduled projects in compliance with environmental
laws and regulations
 Development of strategies focusing on energy, biodiversity, carbon footprint, waste management,
renewable energy and air pollution
Environmental management plans and programs for operational sites
Umgeni Water ensures that the impact on the natural environment and surrounding communities is minimised
through monitoring and auditing environmental performance at all our sites. Our plans in this regard are:
 An annual environmental audit as well as site inspection for all waterworks, wastewater works and
dams owned by Umgeni Water.
 An environmental legal compliance audit will be conducted for the organisation.
Undertaking environmental management for scheduled projects in compliance with environmental laws
and regulations
The organisation continues to apply Integrated Environmental Management (IEM) principles in the entire life
cycle of all infrastructure projects in order to ensure environmental sustainability. This includes, conducting
Environmental Impact Assessments for proposed projects, in accordance with environmental legislation,
development of Environmental Management Plans to minimise impacts on the environment as well as
continuous environmental monitoring.
To this end projects that will require either a Basic Assessment process or Environmental Impact Assessments
in the next five years are indicated in Table 16.1. The timing for these authorisations is determined by the
infrastructure implementation programme of the organisation.

2012/2013 to 2016/2017
Table 16.1: Bulk Infrastructure Projects that will require environmental authorisations:
Project name Requirements

Greater Mpofana Project Obtain ROD
Mshwati Bulk Water Supply Scheme Amend existing ROD
Umlaas Road New Water Project Obtain ROD
Nungwane Raw Water Aqueducts Obtain ROD
Lower Tukela Bulk Water Supply Scheme Obtain ROD
Darvill Wastewater Works Upgrade Obtain ROD
Projects that do not require environmental authorisations will be subjected to a screening assessment that will
be used to prepare environmental management plan, to mitigate potential impacts identified, and ensure
implementation is in keeping with the organisation’s objectives and targets.
Green Economy Projects
As part of implementing its Environmental Sustainability Framework, Umgeni Water has identified the
following initiatives and plans that have the potential to significantly contribute towards a greener economy,
(defined as economic activities that take into consideration the key pillars of sustainable development, namely
enhancing human health whilst ensuring that future generations are not exposed to environmental risks and
ecological scarcities):
 Initiatives and plans to reduce greenhouse gases / carbon footprint.

 Improving energy efficiency.
 Renewable energy projects.
 Developing and implementing a biodiversity management plan.
 Waste management initiatives.
Initiatives and Plans to reduce greenhouse gases / carbon footprint
Umgeni Water’s carbon footprint mapping exercise has indicated an increasing trend in carbon emissions
(Figure 16.1), prompting the setting of targets, and identification of initiatives and projects to reduce
emissions, in line with the countries objectives.
The most significant contribution arises from emissions associated with electricity consumption from ESKOM.
A large proportion of Umgeni Water’s electricity usage is:
 For pumping raw water from water,

Figure 16.1: Umgeni Water carbon emissions trends.
 In treatment processes,
 Pumping during distribution of potable Total CO2e Emissions (Tonnes)
water.
200,000
165,065
160,000
The increasing trend in electricity consumption is 134,370
125,404
attributed to customer growth, prolonged pumping 120,000 108,485
for inter-basin transfers as part of the Mooi/Mgeni
Transfer Scheme, and commissioning of new 80,000 68,408
infrastructure, including pumps.

40,000
0
2007 2008 2009 2010 2011

2012/2013 to 2016/2017
The organisation plans to reduce its energy consumption through the following projects:
 Hydropower feasibility study

 Energy cogeneration project.
 Investigation for green buildings, property, plant and equipment.
Other targets that have been set to offset the emissions include:
 Tree planting initiatives

 Darvill WWTP forestation project
 Investigations of other offsetting initiatives e.g. building artificial wetlands on operational sites
Improving energy efficiency.
Energy Audits were conducted at ten water treatment works, three wastewater treatment works and two office
buildings and has highlighted several areas that present opportunities for implementing energy efficiency
measures. The energy efficiency measures that will be investigated further for possible implementation
include:
 reducing energy consumption at water treatment works and wastewater treatment works through
installing variable speed drives for pumps and/or replacing motors with energy efficient motors;
 reducing energy consumption at buildings by replacing lighting equipment with energy efficient
lamps, light fittings and/or controlling the lighting requirements.
These and some other interventions being explored further have the potential to result in energy saving of
approximately 90,812,024 kWh per annum.
Renewable energy projects.
Umgeni Water is investigating the construction of an energy cogeneration plant at the Darvill WWTW. The
plant will utilise the methane which is generated from the digesters to produce electricity. The preliminary
investigation indicated that there is potential to produce approximately 22 MWhr electricity per day.
 The plant will be designed in 2013.

 Construction of the plant will be undertaken in 2014.
Implementation of the project will enable the organisation to reduce greenhouse gas emissions and use
renewable energy as a component of its process.
Developing and implementing a biodiversity management plan.
Umgeni Water will develop and implement a biodiversity management plan in 2013. This will be aligned to the
conservation status targets set for the KwaZulu-Natal Province.
Waste management initiatives.
 Waste management initiatives include:

 Review of the organisation’s waste management strategy to this align to the new Waste Act.
 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).

2012/2013 to 2016/2017
 Extension of plans to include potable water works treatment residues and wastewater treatment
works sludge management, for implementation in the five-year business plan period.
 Set a target for chemical consumption per kilolitre of water produces that will aid in improving
chemical consumption efficiency.
Water quality management
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. Water
quality management 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.
Corporate social responsibility initiatives
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. The
organisation’s plans include:
 Conducting water education classrooms for learners of all age groups at the Midmar, Darvill and
Durban Heights sites.
 Implementing planned rural community outreach programmes, targeting vulnerable communities.
 Continuing to implement the adopt a school programme for the four adopted schools.
 Implementing Adopt a River project.
 Identifying and accounting in terms of green jobs created through our green economy special projects.
 Establishing cooperatives and similar indicatives, as part of implementing Umgeni Water’s capital
expenditure and other programmes.
 Developing and implementing the organisation’s servitudes management plan.
 Engaging in collaborative sector initiatives with municipalities, government, community, business and
other stakeholders, including for: building the regions awareness during special environmental days,
including, Wetlands Day, Arbor Day, Water Week, Environmental Week, Biodiversity Day, Marine
Week, and others.

2012/2013 to 2016/2017

2012/2013 to 2016/2017
Chapter 17: Water Conservation and Demand Management Plan

Water Demand Management initiatives could relieve the stress already imposed on many water resource and
supply systems. This could further influence Umgeni Water’s capital expenditure programme through enabling
some of the augmentation projects to be deferred to later dates.
Umgeni Water experiences very low water loss from its infrastructure (currently below 5%) and the
organisation is committed to reducing / maintaining its water loss below this level.
However, the organisation recognises that significant savings could be gained through customers’ water loss
measures. In this regard, Umgeni Water will continue to work with and assist customers, where possible. In
this regard, water service authorities with whom Umgeni Water is contracted for bulk potable water supply are
at various stages regarding implementation of water conservation and demand management measures within
their respective areas.
Over the past few years the eThekwini Metropolitan Municipality implemented a significant Water Demand
Management Programme in order to reduce its unaccounted-for-water. The benefits from this programme
were realised in 2011 with a sustained reduction in water purchases from Umgeni Water. The interventions
that had the most marked impact included pressure management, active leakage control, and the
implementation of a sewer tariff which was linked to water consumption. Owing to a lack of available funds,
eThekwini Municipality has recently reduced the extent of their Water Demand Management Programme and a
corresponding increase in demand has subsequently been experienced.
In a recent initiative Umgeni Water utilised Swiss Grant Funding, through the Development Bank of South
Africa, to undertake an assessment of water loss in the Swayimana area of uMgungundlovu District
Municipality (UMDM). This pilot study included the monitoring of flows and identification of water loss in the
district municipalities reticulation network. The results of the study showed high water loss and UMDM were
appraised of areas where significant water savings could be obtained through leak management. The study also
showed that the behaviour of the rural communities toward water conservation could be a contributing factor
towards high unaccounted for water. After initiating an education champagne in the area significant savings
were realised.
There are no known initiatives currently underway in Sisonke and the remaining uMgungundlovu municipal
areas. The iLembe and Ugu District Municipalities are implementing a number of water demand management
initiatives within the towns of KwaDukuza (Stanger) and Port Shepstone and they estimate that savings from
these initiatives will offset the growth in sales for the area, although the Port Shepstone area falls outside the
jurisdiction of Umgeni Water. The Msunduzi Local Municipality has recently embarked on an extensive water
demand management programme consisting of a number of different initiatives. It has instituted an aggressive
credit control policy which is expected to have an impact on water sales. During 2012, it is expected that its
pressure reduction initiative in the reticulation system will contribute to reducing water losses.
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 the organisation’s water
treatment works.

2012/2013 to 2016/2017

2012/2013 to 2016/2017
Chapter 18: Financial Plan
18.1 Introduction
The financial business plan responds to the strategy of expansion of water services by planning, mobilising,
accounting for and reporting on resources while managing financial risk and ensuring the achievement of
sound financial management at Umgeni Water.
The major issues which have impacted on the Umgeni Water Financial Business Plan are:
 Increase in the major input costs:

o The capital unit charges for water resources infrastructure which impact on the raw water
pricing.
o Deterioration in the quality of raw water which impacts on treatment costs and processes.
o Energy costs which continue to exceed CPI for the next 5 years.
o Higher staff costs due to pressures created by overall high public sector wage settlements in
excess of CPI.
 Minimal growth in water sales to major customer.
 The social component cost of Infrastructure for Rural Development, in the absence of a formal national
rural water investment / funding policy, results in an asset impairment charge to the Income
Statement.
 Low levels of tariff increases and the reliance on cross subsidisation from the major customer.
The total operating income before interest will reduce by 13% from R564m in 2012 to R493m in 2013.
For the next two years the lower levels of interest paid and higher interest income will result in relatively low
net finance costs which will cushion the reduction in operating profits.
Due to the increasing cost trends and increased asset impairments, the 5 year Financial Plan projects a
decrease in Net profit % from 30% in 2012 to 18% in 2017. The cost per kilolitre of potable water is expected
to rise by 28% from R2.422 in 2012, to R3.106 in 2013, with reducing Gross Profit margins.
Operating cashflows for the next 5 years are still strong and remain on an annual basis above the R600m
threshold but will not be sufficient to fund in full the R4.2bn capital expenditure programme which will be
funded through existing financial investments and new borrowings.
From a debt management point of view, the organisation will have a funding requirement from 2016 onwards,
which is a year earlier than the 2012 business plan. The level of debt will peak in 2017 at R2 073 but still
within the acceptable debt:equity ratio less than 0.7 times and with no debt covenants expected to be breached.
 Two of Umgeni Water’s major financial risks will need to be carefully managed. Firstly the extent to
which Umgeni Water is able to set and maintain a sustainable tariff going forward. This risk is evident
within the context of the reduction of its 2013 tariff increase from 6.1% to 5.6%. The other major risk
relates to the quantum of the unfunded social component on the Rural Development infrastructure.
The funding support from the Bulk Infrastructure Grant is imperative for Umgeni Water’s financial
viability.

2012/2013 to 2016/2017
18.2 Financial Planning Assumptions
18.2.1 Macroeconomic factors

Table 18.1 Macro-Economic Assumptions
Budget Forecast
F'09 F'10 F'11 F'12 F'12 F'13 F'14 F'15 F'16 F'17
CPI
calendar average 7.10% 4.20% 5.00% 5.70% 6.30% 5.80% 5.50% 5.70% 5.70% 5.70%
% Adjustment
Revised calendar average 7.10% 4.20% 5.00% 5.70% 6.30% 5.80% 5.50% 5.70% 5.70% 5.70%
PPI
calendar average -0.10% 9.40% 7.40% 5.00% 6.80% 4.40% 5.20% 5.80% 5.70% 5.70%
% Adjustment 0.00% 0.00% 0.00% 2.00% 3.00% 3.00% 2.00% 2.00% 2.00% 2.00%
Revised calendar average -0.10% 9.40% 7.40% 7.00% 9.80% 7.40% 7.20% 7.80% 7.70% 7.70%
Interest Rate - Borrowings*

Short-term 5.84% 5.81% 5.92% 6.22% 6.52% 6.77% 6.99%
Spread 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
6.44% 6.41% 6.52% 6.82% 7.12% 7.37% 7.59%
Long-term 9.10% 9.05% 7.84% 8.34% 8.85% 8.51% 8.19% 8.19%

Spread 1.60% 1.60% 1.40% 1.40% 1.40% 1.80% 1.80% 1.60%
10.70% 10.65% 9.24% 9.74% 10.25% 10.31% 9.99% 9.79%
European Investment Bank = Fixed rate 9.10% 8.99% 8.99% 8.99% 8.99% 8.99% 8.99%
Interest Rate - Investments 4.44% 4.91% 5.02% 5.32% 5.62% 5.87% 6.09%
Weighted average cost of capital 9.42% 9.28% 9.40% 9.44% 9.54% 8.92% 8.76%
Exchange rates
R/$ 11.700 9.710 10.080 10.030 9.860 10.491 11.093 11.753 11.753
R/euro 13.120 11.320 11.610 12.230 11.840 12.624 13.418 14.182 14.182
R/pound sterling 11.200 11.980 11.060 9.990 10.890 10.452 10.104 9.796 9.796
Reference was made to the following publications in order to arrive at the macro-economic factors for 2012 to 2017:
- Bureau for Economic Research (BER) Inflation Forecast - January 2012
- BER Interest Forecast – January 2012
- BER Exchange rate Forecast – January 2012
* Interest Rate - Borrowings:
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 R204 obtained from the Bureau for Economic Research.

2012/2013 to 2016/2017
18.2.2 Staff costs

Table 18.2 Staff Costs
Budget Forecast
F'09 F'10 F'11 F'12 F'12 F'13 F'14 F'15 F'16 F'17
Annual Salary Increase 12.0% 9.0% 8.0% 8.3% 8.3% 7.9% 7.9% 7.7% 7.6% 7.6%
[Based on nominal wage rate forecast by BER]
Staff Complement
Filled 733 740 725 734 797 907 917 917 929 929
Contract Staff - General 66 61 62 27
Contract Staff - Recoverable 10 29 31 21 28 28 28 28 28 28
Trainees 16 15 13 16
SUB-TOTAL 825 845 831 798 825 935 945 945 957 957
Vacancies - - - 122 74
Total establishment 825 845 838 920 899 935 945 945 957 957
Staff Costs
- Direct staff costs 82,666 92,618 100,944 118,896 106,226 131,492 143,776 158,899 170,975 183,969
- Total Indirect staff costs 155,524 181,739 192,732 229,668 212,377 240,937 262,491 288,086 309,981 333,539
- Indirect staff costs(per face of I/S) 112,280 132,871 140,573 167,683 153,329 174,697 191,018 211,109 227,154 244,417
- Maintenance Payroll (incl in maintenance cost) 43,245 48,869 52,159 61,985 59,048 66,240 71,473 76,977 82,827 89,122
- O&M Dams payroll (recovered from DWA) 6,472 6,977 7,529 8,108 8,725 9,388
Subtotal 238,191 274,357 293,676 348,564 325,075 379,406 413,796 455,093 489,681 526,896
- % Increase before recoveries 20.2 15.1 7.1 10.7 16.7 9.1 10.0 7.6 7.6
- Less WIP Recoveries (8,806) (11,998) (7,698) (8,545) (8,120) (9,440) (10,186) (10,971) (11,804) (12,701)
Total staff costs 229,384 262,359 285,978 340,019 316,955 369,966 403,610 444,123 477,877 514,195
- % Increase after recoveries 12.8 14.3 9.0 10.8 16.7 9.1 10.0 7.6 7.6
- Average pay 289 325 350 379 362 406 438 482 512 551
- % Increase in average pay 12.4 7.6 3.2 12.2 7.9 10.0 6.3 7.6
Productivity - kl'000 per employee 504 504 495 450 462 446 444 450 451 457
Other payroll related costs included in operating costs
Retirement benefit costs (included in other operating costs)

- Post-retirement medical aid 24,640 27,646 40,567 25,319 25,616 30,094 5,000 5,000 5,000 5,000
- Pension 13,422 4,990 - 20,493 9,359 9,359 5,000 5,000 5,000 5,000
- Pension - cost of conversion DB to DC - - - 27,000 27,333 27,333 - -
Total retirement benefit costs 38,062 32,636 40,567 45,812 34,975 66,454 37,333 37,333 10,000 10,000
- % Increase 7.4 (14.3) 24.3 (13.8) 90.0 (43.8) - (73.2) -
Trainees
establishment 18 18 18 18 18 18
cost 1,544 1,665 1,797 1,935 2,083 2,241
Learners
establishment 37 37 37 37 37 37
cost 777 838 905 974 1,048 1,128

2012/2013 to 2016/2017
18.2.3 Operating costs

Table 18.3 Major Operating Costs Assumptions
Budget Forecast
F'09 F'10 F'11 F'12 F'12 F'13 F'14 F'15 F'16 F'17
Energy
- Forecast Price increase 25.8% 25.8% 16.0% 16.0% 16.0% 14.0% 12.0%
- Cost 45,400 59,398 90,844 109,959 128,860 151,608 175,865 204,003 232,564 260,472
Direct 43,145 56,963 87,657 103,851 123,093 144,919 168,106 195,003 222,303 248,979
Indirect 2,255 2,435 3,187 6,108 5,767 6,689 7,759 9,001 10,261 11,492
- Increase in cost (%) 15.1 30.8 52.9 41.8 17.7 16.0 16.0 14.0 12.0
- Cost per kilolitre 10.9 13.9 21.9 31.1 36.4 41.9 48.0 53.9 59.5
Chemicals
- Forecast Price increase 7.5% 9.8% 9.4% 9.2% 9.8% 9.7% 9.7%
- Cost 32,751 32,510 36,727 39,410 44,922 52,147 56,944 62,525 68,590 75,243
- Increase in cost 30.1 (0.7) 13.0 22.3 16.1 9.2 9.8 9.7 9.7
- Cost per kilolitre 7.9 7.6 8.9 10.8 12.5 13.6 14.7 15.9 17.2
Maintenance
- Forecast Price increase 6.0% 11.2% 7.2% 7.8% 7.7% 7.7%
- Total Cost 115,540 127,019 133,251 125,978 142,244 158,155 169,543 182,767 196,840 211,997
Direct 100,825 108,500 109,851 110,443 128,364 143,711 154,058 166,074 178,862 192,634
Indirect 14,715 18,520 23,400 15,535 13,879 14,445 15,485 16,693 17,978 19,362
- Maintenance payroll 48,869 52,159 61,985 59,048 66,240 71,473 76,977 82,827 89,122
- Total excl Maint payroll 78,151 81,092 63,993 83,196 91,915 98,069 105,790 114,013 122,875
- Increase in cost 29.7 9.9 7.4 6.7 11.2 7.2 7.8 7.7 7.7
- Increase in cost (excl Maint payroll) 2.6 10.5 6.7 7.9 7.8 7.8
- % of Assets (PPE) 5.6 4.7 4.6 4.5 4.1 3.5 3.2 2.9 2.9

2012/2013 to 2016/2017
18.2.4 Raw water costs

The major change between this year’s business plan and the 2012 business plan projection for raw water costs
is attributable to the capital unit charge for the Spring Grove Dam which takes effect 01 July 2012.
Table 18.4 Raw Water Costs Components
Budget Forecast
F'09 F'10 F'11 F'12 F'12 F'13 F'14 F'15 F'16 F'17
Raw Water Abstraction Volumes
Volume Mgeni System 396 401 395 382 384 382 385 389 395 401
Volume Mdloti System 14 15 16 23 22 23 24 25 25 26
Volume Other 20 20 21 21 23 23 23 23 23 23
Total Abstraction Volume 430 436 432 426 430 428 432 437 443 450
Raw Water Consumption Charge per System

Mgeni System
Tariff existing infrastructure 15.68 16.15 18.33 20.91 20.43 20.82 21.91 23.63 26.90 28.43
Increase 0.2 3.0 13.5 14.1 11.5 1.9 5.2 7.9 13.8 5.7
Mdloti system
Tariff existing infrastructure 72.68 83.92 92.96 70.95 69.70 79.68 93.76 99.47 109.41 120.35
Increase 18.9 15.5 10.8 (23.7) (25.0) 14.3 17.7 6.1 10.0 10.0
Consumption charge - New Capex

Cost Raising Hazelmere Dam Wall (R'000) 5,031 5,077 4,962 4,990
Increase - 0.8 0.9 (2.3) 0.6
Spring Grove dam 40.80 43.10 45.50 47.40 49.40
Increase - 5.6 5.6 4.2 4.2
Operation and maintenance Charge per System

Mgeni System
Cost 9.57 9.71 10.27 10.87 11.79 13.06 14.07
Increase - - 5.8 5.9 8.5 10.8 7.7
Mdloti system
Cost 36.40 30.71 32.47 34.40 36.93 39.80 42.86
Increase - - 5.7 5.9 7.4 7.8 7.7
Water Resource Management (WRM) Charge (based on registered volume)

Tariff - existing 1.35 1.60 1.99 2.70 2.18 2.37 2.60 2.86 3.15 3.47
Increase 6.3 18.7 24.2 9.7 8.5 10.0 10.0 10.0 10.0
Total Raw Water Costs

- Abstraction 72,184 76,942 87,222 95,983 94,005 97,864 106,619 116,586 133,831 144,905
- Capital Unit Charge - - - - - 151,360 160,972 171,717 181,732 192,405
- O & M Dams 44,822 44,128 46,698 50,025 55,013 61,634 67,432
- Hazelmere Dam wall - - - - 5,031 5,077 4,962 4,990
- Water Resource Mgmt charge 5,560 6,928 8,729 11,824 9,057 9,863 10,936 12,170 13,588 15,171
Total Raw Water Costs 77,744 83,870 95,951 152,630 147,189 305,784 333,583 360,563 395,747 424,903
Effective unit cost 18.08 19.24 22.22 35.83 34.27 71.39 77.26 82.54 89.26 94.41
Increase 2.4 6.4 15.5 54.2 108.3 8.2 6.8 8.1 5.8

2012/2013 to 2016/2017
18.3 Sales volumes

Table 18.5 Water Sales Volumes Projections
Budget Forecast
F'09 F'10 F'11 F'12 F'12 F'13 F'14 F'15 F'16 F'17
kl'000 kl'000 kl'000 kl'000 kl'000 kl'000 kl'000 kl'000 kl'000 kl'000
- Bulk 415,956 425,848 414,876 413,905 414,983 416,550 419,881 424,780 431,151 437,619
- % Increase 3.0 2.38 (2.58) 0.0 0.4 0.8 1.2 1.5 1.5
- Raw water 524 487 550 439 709 709 432 432 432 432
- % Increase 277.8 (6.98) 13.01 28.9 - (39.1) - - -
- Wastewater 273 273 358 246 358 358 362 366 372 377
- % Increase 29.4 (0.01) 31.18 - - 1.0 1.2 1.5 1.5
Figure18.1: Bulk Water sales volume

kl'000 % Growth
430 4%
425.4
3%
425
2.9% 2%
420 2.4% 415.0 1%
415.4 414.9 416.6
415 0%
0.4%
-2.5% 0.0% -1%
410
-2%
405 -3%
FY'09 FY'10 FY'11 FY'12 Fcst FY'13 Bud
Water sales projections per customer

Table 18.6 Bulk Sales Volumes per Customer
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Actual Actual Actual Budget Forecast Budget
Customer
Vol Vol Vol Growth Vol Growth Vol Growth Vol Growth
kl'000 kl'000 kl'000 % kl'000 % kl'000 % kl'000 %
eThekwini 326,232 328,504 310,994 (5.3) 312,075 0.3 310,527 (0.1) 310,527
Msunduzi 56,525 58,501 63,938 9.3 61,456 (4.0) 64,333 0.6 65,043 1.1
uMgungundlovu 10,572 11,219 11,112 (0.9) 11,737 5.3 11,528 3.7 11,758 2.0
Siza 3,828 4,171 4,476 7.3 4,643 3.6 4,553 1.7 4,945 8.6
Ugu 6,019 7,871 7,923 0.7 8,678 8.7 7,923 - 8,002 1.0
iLembe 8,569 11,692 11,569 (1.0) 11,684 1.0 12,032 4.0 12,092 0.5
Sisonke 822 901 921 2.2 917 (0.3) 908 (1.3) 908 -
Sappi - - 1,110 100.0 1,222 9.1 1,057 (4.8) 1,057 -
Other - Retail 2,865 2,501 2,818 12.7 1,493 (88.7) 2,122 (24.7) 2,217 4.5
Total 415,432 425,360 414,861 (2.5) 413,905 (0.2) 414,983 0.0 416,550 0.4

2012/2013 to 2016/2017
Figure18.2: Composition of Customer Base 2013 Figure18.3: Composition of Customer Base 2012
2% Customer base 2013 Customer base 2012

1% 0% 2% 3% 0%
3%
0% 0% eThekwini MM 1% 0% 0% eThekwini MM
3% Msunduzi LM 3% Msunduzi LM
uMgungundlovu DM uMgungundlovu DM
Siza Water Siza Water
16% Ugu DM 15% Ugu DM
iLembe DM iLembe DM
75% Sisonke DM 76% Sisonke DM
Sappi Sappi
Other - Retail Other - Retail

2012/2013 to 2016/2017
Volume trends per customer

Figure 18.4 (a to g) Bulk Sales volumes per customer
a) Sales Volumes - eThekwini b) Sales Volumes - Msunduzi

kl'000 % Growth kl'000 % Growth
330 328.5 0.04 66 63.9 65.0 0.1
326.2 64.3
0.03
325 64 0.08
0.02
3.4% 0.01 62 0.06
320 9.3%
0 58.5
60 0.04
315 0.7% -0.01
311.0 1.1%
310.5 310.5 -0.02 58 0.02
56.5
310
0.0% -0.03 56 3.5% 0
-5.3% -0.1%
-0.04 0.6%
305 54 -0.02
-0.05 -2.1%
300 -0.06 52 -0.04
FY'09 FY'10 FY'11 FY'12 Fcst FY'13 Bud FY'09 FY'10 FY'11 FY'12 Fcst FY'13 Bud
c) Sales Volumes - uMgungundlovu d) Sales Volumes - Siza
12 0.16 6 0.1
11.8
12 0.14 4.9 0.09
11.5 4.5
12 5 4.6
0.12 4.2 0.08
11 11.2 3.8 8.6% 0.07
11.1
0.1 4 9.0%
11
6.1% 0.06
11 0.08
3 0.05
11 0.06 7.3%
10.6 0.04
11
0.04 2
10 -0.9% 0.03
13.4% 0.02
10 3.7% 0.02
1
10 2.0% 0 0.01
1.4%
1.7%
10 -0.02 - 0
e) Sales Volumes - Ugu f) Sales Volumes - iLembe
9 7.9 0.35 14 0.4
7.9 7.9 8.0 11.7 11.6
12.0 12.1
8 0.35
0.3 12
7 0.3
6.0 0.25 10
6 8.6 36.4% 0.25
30.8%
5 0.2 8 0.2
4 0.15 6 0.15
3 0.1
0.1 4 3.9%
0.7% -1.0% 0.6%
2 0.05
8.0% 1.0% 0.05 2 3.5%
1 0.0% 0
- 0 - -0.05
g) Sales Volumes - Sisonke
kl'000 % Growth
0.94 0.9 0.12
0.92 0.9 0.9
0.9 0.1
0.90
0.08
0.88
0.86 9.6% 0.06
2.2%
0.84 0.04
0.8
0.82
0.02
0.80 2.5% 0.0%
-1.3% 0
0.78
0.76 -0.02
FY'09 FY'10 FY'11 FY'12 Fcst FY'13 Bud

2012/2013 to 2016/2017
18.4 Tariff projections
18.4.1 Bulk water tariff 2013: consultation process
1. Customers
The following consultation meetings with customers were held and attended by representatives of DWA, TCTA
and Umgeni Water:
Table 18.7 Consultations with customers
Customer Date Venue
Sisonke District Municipality 11 November 2011 Umgeni Water Head Office
Msunduzi Municipality 08 November 2011 Umgeni Water Head Office
eThekwini Municipality 07 November 2011 eThekwini Office
Siza Water 09 November 2011 Umgeni Water Pineside Office
iLembe District Municipality 09 November 2011 Umgeni Water Pineside Office
uMgungundlovu District Municipality 08 November 2011 Umgeni Water Head Office
Ugu District Municipality 11 November 2011 Umgeni Water Pineside Office
In light of the affordability concerns expressed by the customers, Umgeni Water revised its tariff proposal
down to 6.1%.
2. Comments received from SALGA
 SALGA concluded that the tariff increase sought (6,1%, plus a Capital Unit Cost) aims to achieve cushioning
of the short-term cash outflows, and Umgeni Water is planning to absorb some of the financial
requirements of its planned major capital expenditure.
 The level of capital investment planned, given the reduced productivity and the need to fund these assets
from external borrowings, should receive attention from the customer Municipalities.
 It is suggested that a tariff increase level of 6.1% is low, and the increase should be permitted.
 The Capital Unit Charge, while encountering resistance from the customers, is transparent, and highlights
the cost impact of the capital investment being made.
3. Comments received from National Treasury
 National Treasury recognises that the increase in Umgeni Water’s operating costs far exceed the tariff
proposal.
 Moreover, the increase in operating costs is partly attributable to the increase in impairments of rural
developmental projects.
 National Treasury urges Umgeni Water to continue engaging with DWA on funding for rural development
projects.
18.4.2 Bulk water tariff 2013: Approval by DWA

 Following NERSA’s announcement on the tariff decrease for energy prices from 25.9% to 16%, Umgeni
Water was requested by DWA to reduce its bulk water tariff increase for 2012/13 to 5.6%
 In its response to DWA, Umgeni Water explained its tariff methodology and risks to a decrease to the
proposed 2012/13 tariff increase of 6.1% given the context of Umgeni Water’s tariff policy which allows

2012/2013 to 2016/2017
the organisation to set a long term sustainable tariff that is not always influenced by annual spikes in
either its revenue or costs and that the review of the energy costs by itself reduces the tariff to an
unsustainable level of 5.6%.
18.4.3 Bulk water tariff projections

Table 18.8 Tariffs for Bulk Water sales
Budget Forecast
F'09 F'10 F'11 F'12 F'12 F'13 F'14 F'15 F'16 F'17
- Bulk Tariff 1
- Base Tariff 2.960 3.079 3.279 3.482 3.482 3.694 3.901 4.115 4.350 4.598
- Tariff Increase 0.118 0.200 0.203 0.212 0.212 0.207 0.215 0.235 0.248 0.262
- New Tariff - Umgeni
Water 3.079 3.279 3.482 3.694 3.694 3.901 4.115 4.350 4.598 4.860
- % Increase - UW 4.0 6.5 6.2 6.1 6.1 5.6 5.5 5.7 5.7 5.7
Add Capital unit charge
- Spring grove - 0.408 0.431 0.455 0.474 0.494
- Total Tariff 3.079 3.279 3.482 3.694 3.694 4.309 4.546 4.805 5.072 5.354
- % Increase -Total 6.2 6.1 6.1 16.6 5.5 5.7 5.6 5.6
- Bulk Tariff 2 - eThekwini

- Base Tariff 2.960 3.019 3.215 3.414 3.414 3.622 3.825 4.035 4.265 4.508
- Tariff Increase 0.059 0.196 0.199 0.208 0.208 0.203 0.210 0.230 0.243 0.257
Water 3.019 3.215 3.414 3.622 3.622 3.825 4.035 4.265 4.508 4.765
- % Increase - UW 2.0 6.5 6.2 6.1 6.1 5.6 5.5 5.7 5.7 5.7
- Spring grove - - - 0.408 0.431 0.455 0.474 0.494
- Total Tariff 3.019 3.215 3.414 3.622 3.622 4.233 4.466 4.720 4.982 5.259
- % Increase -Total 2.0 6.5 6.2 6.1 6.1 16.9 5.5 5.7 5.6 5.6
- Bulk Tariff 3 - Siza

- Base Tariff 2.960 3.079 3.279 3.482 3.482 3.726 3.935 4.151 4.388 4.638
- Tariff Increase 0.118 0.200 0.203 0.244 0.244 0.209 0.216 0.237 0.250 0.264
Water 3.079 3.279 3.482 3.726 3.726 3.935 4.151 4.388 4.638 4.902
- % Increase - UW 2.0 6.5 6.2 7.0 7.0 5.6 5.5 5.7 5.7 5.7
- Spring grove - - - 0.408 0.431 0.455 0.474 0.494
- Total Tariff 3.079 3.279 3.482 3.726 3.726 4.343 4.582 4.843 5.112 5.396
- % Increase -Total 4.0 6.5 6.2 7.0 7.0 16.6 5.5 5.7 5.6 5.6
18.4.4 Other Commercial/Management Fee increases

Table 18.9 Other Revenue charges
Actual Actual Actual Budget

F'10 F'11 F'12 F'13
Potable Water – Other customers R/kl R/kl R/kl R/kl
Sappi - 3.535 7% 3.782 6% 3.994
Commercial 7.638 6% 8.111 6% 8.638 7% 9.277
Reticulation 8.793 6% 9.338 7% 9.945 7% 10.681
Bulk Raw Water
Piped 1.697 13% 1.917 15% 2.20 7% 2.36
Dam 0.341 13% 0.385 15% 0.44 130% 1.02
Waste Water
Ixopo 7.144 6% 7.587 7% 8.125 8% 8.734
Management Fee R'000/p.a R'000/p.a R'000/p.a R'000/p.a
Darvill Waste Water 42,724 6% 45,372 7% 48,594 7% 52,238
Howick waste Water 6,043 4% 6,298 6% 6,657 6% 7,029
Reticulation - Msunduzi 9,024 -26% 6,671 11% 7,387
Water Research Levy
Levy 0.039 5% 0.041 5% 0.043 6% 0.045

2012/2013 to 2016/2017
Table 18.10 Tariff Cost Components
2011/2012
Components 2008/2009 2009/2010 2010/2011 BUDGET 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017
Tariff Change Tariff Change Tariff Change Tariff Change Tariff Change Tariff Change Tariff Change Tariff Change Tariff Change Tariff Change
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 % R.c/kl %
Direct Costs
Chemicals 0.070 27% 0.069 -2% 0.080 16% 0.087 7% 0.100 25% 0.116 16% 0.126 8% 0.136 9% 0.148 8% 0.159 8%
Depreciation 0.138 12% 0.147 7% 0.160 9% 0.160 -1% 0.188 17% 0.199 6% 0.211 6% 0.225 7% 0.239 6% 0.254 6%
Energy 0.092 9% 0.118 29% 0.193 63% 0.209 12% 0.271 41% 0.318 17% 0.366 15% 0.420 15% 0.471 12% 0.520 10%
Maintenance 0.219 25% 0.232 6% 0.243 5% 0.233 -1% 0.282 16% 0.313 11% 0.333 6% 0.354 7% 0.376 6% 0.399 6%
Raw Water 0.187 2% 0.197 5% 0.231 17% 0.369 52% 0.355 53% 0.734 107% 0.794 8% 0.849 7% 0.918 8% 0.971 6%
Staff Costs 0.176 10% 0.193 9% 0.214 11% 0.236 10% 0.223 4% 0.280 25% 0.304 9% 0.333 10% 0.353 6% 0.375 6%
Other direct operating activities 0.008 -58% 0.022 169% 0.021 0% 0.019 -19% 0.032 48% 0.035 10% 0.038 8% 0.041 8% 0.043 6% 0.046 6%
Total Direct Costs 0.890 11% 0.978 10% 1.143 17% 1.314 14% 1.451 27% 1.995 37% 2.172 9% 2.359 9% 2.548 8% 2.724 7%
Indirect Costs
Overheads 0.456 -15% 0.552 21% 0.659 19% 0.698 8% 0.649 -1% 0.792 22% 0.878 11% 0.948 8% 0.937 -1% 0.995 6%
Depreciation 0.030 -3% 0.035 16% 0.040 15% 0.071 41% 0.044 12% 0.062 40% 0.079 27% 0.079 0% 0.092 16% 0.153 67%
Amortisation 0.225 -1% 0.232 3% 0.233 0% 0.007 -97% 0.007 -97% 0.007 -1% 0.007 -1% 0.007 0% 0.007 0% 0.006 0%
Impairments 0.005 0.023 392% 0.293 1176% 0.232 10% 0.198 -33% 0.226 14% 0.311 37% 0.163 -47% 0.057 -65% - -100%
Total Indirect Costs 0.715 -10% 0.842 18% 1.225 46% 1.009 -11% 0.898 -27% 1.087 21% 1.274 17% 1.197 -6% 1.093 -9% 1.154 6%
Total direct & indirect cost 1.606 0.6% 1.820 13% 2.368 30% 2.322 2% 2.349 -1% 3.082 31% 3.446 12% 3.556 3% 3.642 2% 3.878 6%
Finance Costs 0.260 -33% 0.169 -35% 0.038 -78% 0.134 25% 0.073 94% 0.024 -67% 0.085 248% 0.107 26% 0.258 142% 0.338 31%
Cost - Bulk Water 1.865 -6% 1.989 7% 2.406 21% 2.456 3% 2.422 0.7% 3.106 28% 3.531 14% 3.663 4% 3.900 6% 4.216 8%
Less: Sundry income 0.064 317% 0.009 -87% -0.034 -495% 0.006 0.005 -114% 0.004 -4% 0.006 40% 0.006 4% 0.007 4% 0.007 4%
Net Cost - Bulk Water 1.802 -8% 1.981 10% 2.439 23% 2.450 2.417 -1% 3.102 28% 3.525 14% 3.656 4% 3.893 6% 4.209 8%
Contribution from Wastewater 0.012 88% 0.017 37% 0.010 -40% 0.010 -7% 0.018 81% 0.015 -19% 0.014 -5% 0.013 -5% 0.017 32% 0.016 -11%
Contribution from Section 30 activities 0.060 240% 0.050 -16% 0.020 -61% 0.020 27% 0.026 29% 0.020 -20% 0.002 -88% 0.002 -1% 0.002 -1% 0.002 -1%
Total cost 1.729 -11% 1.914 11% 2.410 26% 2.420 1% 2.373 -2% 3.067 29% 3.509 14% 3.641 4% 3.873 6% 4.191 8%
Total Average UW Tariff 3.027 2% 3.226 7% 3.638 13% 3.638 6% 3.640 0.1% 4.211 16% 4.442 5% 4.694 6% 4.957 6% 5.233 6%
Surplus Margin/(deficit) 1.298 27% 1.312 1% 1.228 -6% 1.217 18% 1.267 3% 1.144 -10% 0.933 -18% 1.054 13% 1.083 3% 1.042 -4%
applied to capex 0.561 0.768 1.517 1.234 2.268 2.768 2.769 2.898 2.153
Surplus Margin/(deficit) for future capex 0.737 0.544 (0.289) 0.034 (1.124) (1.835) (1.715) (1.814) (1.111)
Projected water sales ( Ml ) 415.96 3% 425.85 2% 413.91 -3% 413.91 0% 414.98 0% 416.55 0% 419.88 1% 424.78 1% 431.15 1% 437.62 1%
Projected revenue ( R m) 1516 18% 1630 8% 1860 14% 1860 11% 1778 -4% 1960 10% 1950 -1% 2085 7% 2234 7% 2394 7%
Projected costs ( R m) 991 11% 1090 10% 1354 24% 1354 9% 1251 -8% 1484 19% 1559 5% 1638 5% 1768 8% 1968 11%
Projected surplus ( Rm ) 526 34% 540 3% 505 -6% 505 18% 527 4% 477 -10% 391 -18% 447 14% 466 4% 426 -9%
Reserves ( R m) 1542 51% 2082 35% 3016 45% 3016 20% 3034 1% 3510 16% 3902 11% 4348 11% 4815 11% 5240 9%
Projected surplus as a % of reserves 34% -11% 26% -24% 17% -35% 17% -2% 17% 4% 14% -22% 10% -26% 10% 3% 10% -6% 8% -16%
Debt service cost ( R m) 268 -1% 230 -14% 104 -55% 104 -12% 92 -11% 87 -5% 95 9% 84 -12% 117 40% 154 31%
Debt (Debt + Equity) ratio 1.283 -37% 0.729 -43% 0.449 -38% 0.449 -20% 0.440 -2% 0.420 -4% 0.355 -16% 0.288 -19% 0.387 34% 0.396 2%
Capex ( R m) 233 115% 327 40% 628 92% 628 15% 512 -18% 945 85% 1,162 23% 1,176 1% 1,249 6% 942 -25%

2012/2013 to 2016/2017
18.5 Surplus policy
18.5.1 Introduction
Umgeni Water's objective for managing capital is to enhance shareholder (The Executive Authority) value by
providing efficient and reliable water services to customers at the lowest economic cost while reducing debt,
remaining financially self-sufficient and generating sufficient surplus to meet the required capital expenditure
programme. This objective has remained consistent with the prior years.
As a government business enterprise, Umgeni Water strives towards a target optimal capital structure, which is
made up of a combination of financial liabilities and capital and reserves. This structure is agreed annually
between Umgeni Water and its Executive Authority in the shareholders compact and is managed in terms of the
targeted debt to equity ratio and Umgeni Water's tariff policy
The purpose of the policy is to guide the accrual and application of surplus’s earned in any one year.
18.5.2 Policy
Surpluses are accrued for the following purposes:
1. Maintain optimal capital structure.
2. Repayment of debt during the current financial year.
3. Provision for repaying debt during a future year (for example, provision for a bullet payment).
4. Cash contribution toward the purchase of plant and equipment during the current year.
5. Provision of cash contribution toward the purchase of plant and equipment in the future.
6. Refurbishment of plant and equipment during the current year.
7. Provision towards refurbishment of plant and equipment during a future year.
8. Provision for contingencies which could materialise in the form of either a reduction in revenue or
increased unexpected costs or both.
18.5.3 Optimal capital structure

In terms of the optimal capital structure, the debt to equity ratio should not exceed 0.7 times. Thus, retained
surpluses should contribute toward achievement of this target ratio and the optimal level of equity.
Amounts retained in excess of the optimal accumulated surplus should be in terms of 18.5.2.2 to 18.5.2.8 above.
Otherwise, the over-recovery of the surplus should be returned to the customers through a reduction on the
next financial year’s calculated tariff.

2012/2013 to 2016/2017
Version: 14 June 2012 10:26 AM
18.6 Subsidy projections

The subsidy projections are based on the Bulk Infrastructure Grants required supporting the Developmental
projects, details of which are to be found in section 18.10.2.
Subsidy projections are derived from the social component in the developmental projects and the amount is
determined as that which cannot be recovered through the tariff structure.
The following subsidy projections are anticipated to co-fund the social component of the developmental
projects
Table 18.11 Regional bulk infrastructure grants
Project Status of Grant Total RBIG F'11 F'12 F'13 F'14 F'15 F'16 F'17 F'18
Funding
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Greater Eston / Richmond Confirmed 109,030 9,977 20,000 38,623 40,430
Greater Mpofana Phase I Not Confirmed 96,620 3,166 675 40,500 42,300 9,980
Lower Thukela BWSS Not Confirmed 258,867 9,480 23,161 63,691 72,377 90,159
Maphumulo BWSS (Ph 1 & 2) Not Confirmed 139,600 84,990 34,978 19,633
Mhlabatshane BWSS Confirmed 79,980 68,000 11,980
Ncgebo scheme (Incl. Water Not Confirmed
Treatment Upgrade)
uMshwathi BWSS Not Confirmed 328,000 9,410 14,521 57,388 54,793 78,027 113,861
TOTAL 1,012,098 9,977 88,000 157,648 113,764 181,212 169,470 178,166 113,861
However, in spite of the R1 billion grants projected to be received Umgeni water will also contribute R548m
towards the social component of these projects. The social component carried by Umgeni Water will be
reflected as impairments in its income statement.
Table 18.12 Impairment summary
Project Capital Cost Total F'11 F'12 F'13 F'14 F'15 F'16 F'17
Impairment
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Greater Eston / Richmond 338,010 115,447 2,171 8,200 37,373 54,048 13,656
Greater Mpofana Phase I 213,672 3,836 147 1,595 1,694 400
Lower Thukela BWSS 894,167 81,542 1,959 7,391 20,325 23,096 28,771
Maphumulo BWSS (Ph 1 & 2) 349,001 221,775 45,450 69,840 12,698 60,070 33,718
Mhlabatshane BWSS 186,000 77,700 38,481 39,218
Ncgebo scheme (Incl. Water 48,000 48,000 33,650 2,390 3,047 8,912
Treatment Upgrade)
uMshwathi BWSS 564,692
TOTAL 2,593,542 548,300 119,752 80,578 94,294 130,421 69,293 24,791 29,171

2012/2013 to 2016/2017
18.7 Subsidiaries and Associates
Msinsi Holdings (Pty) Ltd

Msinsi Holdings (Pty) Ltd is a 100% owned subsidiary of Umgeni Water, which provides land and wildlife
management of the land surrounding some of Umgeni Water's major dams and treatment works. Although the
entity is projected to break even over the five year period to 2017 with positive operating cash flows, the entity
is anticipating a loss for 2012 due to the downturn in the tourism industry, coupled with high fuel price
increases which have led to a decrease in tourism revenue. Going forward, the entity will be investing in its
capex to upgrade the tourism facilities and UW will be increasing it management fee for the management of the
dams as the management fee was not increased for the past 3 years.
Refer to section 18.9 Financial Statement Projections for the financial statement projections of Msinsi
Holdings (Pty) Ltd.
Umgeni Water Services (Pty) Ltd

Umgeni Water Services (Pty) Ltd is a 100% owned subsidiary of Umgeni Water. Its main business is holding of
an investment (18.5%) in an associate, namely, Durban Water Recycling and carrying out other commercial
activities.
Thus the main source of income for Umgeni Water Services is the dividend distribution by its associate
company Durban Water Recycling. It is envisaged that Umgeni Water Services will retain its current investment
in Durban Water Recycling at R6m for the next 5 years.
Refer to section 18.9 Financial Statement Projections for the financial statement projections of Umgeni
Water Services (Pty) Ltd.

2012/2013 to 2016/2017
18.8 Challenges in Collection of Debtors

There have been no significant challenges in terms of collection of amounts due by debtors.
Debtor’s days outstanding will not exceed 40 days.
Figure18.5: Debtors Days

2012/2013 to 2016/2017
18.9 Financial Statement projections

The financial statement projections of Umgeni Water, its subsidiaries and the Group are presented in this
section.
The deviations in growth and decline in significant line items are explained under section 22 “Self-evaluation of
the financial viability of Umgeni Water”.

2012/2013 to 2016/2017
Table 18.13
UMGENI WATER
Income Statement (in R'000)
For the year ended June 30, F09 F10 F11 F12 F12 F13 F14 F15 F16 F17
TOTAL Actual Actual Actual Budget Forecast
Volume of Bulk treated water sold (in kl'000) 415,956 425,848 414,876 413,905 414,983 416,550 419,881 424,780 431,151 437,619
Revenue 1,485,496 1,622,380 1,648,950 1,853,130 1,771,863 1,954,048 1,944,062 2,078,611 2,227,634 2,387,080
Water Sales - Bulk 1,259,187 1,373,784 1,423,332 1,506,646 1,511,116 1,753,204 1,863,850 1,992,696 2,135,615 2,288,500
Water Sales - Raw Water 368 232 338 297 418 802 515 545 576 609
Wastewater Sales 1,814 1,492 2,717 1,999 9,566 10,157 10,801 11,550 12,392 13,295
Wastewater Management Fee 40,116 42,724 45,372 48,594 48,594 52,238 56,104 60,200 64,594 69,310
Section 30 activities 184,012 204,148 177,191 295,594 202,169 137,646 12,791 13,620 14,456 15,368
Cost of sales 545,025 620,857 661,821 836,951 826,025 999,637 968,752 1,064,212 1,166,773 1,265,939
Changes in water inventory (122) 601
Chemicals 32,751 32,510 36,727 39,410 44,922 52,147 56,944 62,525 68,590 75,243
Depreciation 59,848 65,190 69,076 75,324 80,444 85,330 91,473 98,608 106,201 114,379
Energy 43,145 56,963 87,657 103,851 123,093 144,919 168,106 195,003 222,303 248,979
Maintenance 100,825 108,500 109,851 110,443 128,364 143,711 154,058 166,074 178,862 192,634
Raw Water 77,744 83,870 95,951 152,630 147,189 305,784 333,583 360,562 395,747 424,903
Staff Costs 82,666 92,618 100,944 118,896 106,226 131,492 143,776 158,899 170,975 183,969
Section 30 activities 141,132 169,537 150,589 225,259 179,635 118,566 1,538 1,541 1,541 1,541
Other direct operating activities 7,035 11,067 11,027 11,138 16,151 17,690 19,274 21,000 22,554 24,291
Gross profit 940,471 1,001,523 987,129 1,016,179 945,839 954,410 975,310 1,014,399 1,060,860 1,121,142
63% 62% 60% 55% 53% 49% 50% 49% 48% 47%
Other operating income 30,826 7,762 (9,643) 6,431 6,060 6,026 6,161 6,303 6,453 6,612
Administration Expenses 329,163 389,186 532,430 452,545 388,133 467,139 548,459 523,023 486,929 551,166
Staff Costs (excl Maintenance Payroll costs) 112,280 132,871 140,573 167,683 153,329 174,697 191,018 211,109 227,154 244,417
Energy 2,255 2,435 3,187 6,108 5,767 6,689 7,759 9,001 10,261 11,492
Depreciation 12,869 15,359 17,139 29,910 18,891 25,978 33,343 33,874 39,726 67,081
Amortization 93,504 98,978 96,798 2,900 2,842 2,836 2,836 2,836 2,836 2,836
Impairments 1,942 9,790 121,706 96,047 82,078 94,294 130,421 69,293 24,791 29,171
Maintenance 14,715 18,520 23,400 15,535 13,879 14,445 15,485 16,693 17,978 19,362
Other operating & administrative expenses (net of recoveries) 91,598 111,233 129,627 149,897 111,346 148,200 167,596 180,217 164,183 176,806
Operating income before interest 642,134 620,100 445,057 570,065 563,766 493,297 433,012 497,679 580,385 576,587
Net interest and finance charges 116,496 80,076 20,006 64,936 37,089 16,774 41,902 50,877 114,109 150,688
Interest Paid 267,571 230,500 114,237 103,928 92,413 87,484 95,092 83,520 117,129 153,549
Interest Received (151,075) (150,424) (94,231) (38,992) (55,324) (70,710) (53,190) (32,643) (3,020) (2,861)
Net Profit (Loss) 525,638 540,024 425,051 505,129 526,677 476,523 391,110 446,802 466,276 425,899

2012/2013 to 2016/2017
Table 18.14
UMGENI WATER
BULK WATER Actual Actual Actual Budget Forecast
Volume of treated water sold (in kl'000) 415,956 425,848 414,876 413,905 414,983 416,550 419,881 424,780 431,151 437,619
Revenue 1,259,555 1,374,016 1,423,670 1,506,943 1,511,534 1,754,006 1,864,366 1,993,241 2,136,191 2,289,109
Water Sales - Bulk 1,259,187 1,373,784 1,423,332 1,506,646 1,511,116 1,753,204 1,863,850 1,992,696 2,135,615 2,288,500
Cost of sales 370,237 417,086 474,083 543,690 602,019 830,855 912,096 1,001,995 1,098,763 1,191,910
Changes in water inventory (122) 601 - - - - - - - -
Chemicals 29,294 29,387 33,293 36,175 41,466 48,352 52,801 57,975 63,599 69,768
Depreciation 57,358 62,700 66,585 66,348 78,081 82,817 88,780 95,704 103,074 111,010
Energy 38,105 50,338 79,892 86,520 112,389 132,502 153,702 178,294 203,255 227,646
Maintenance 91,228 98,732 100,856 96,396 117,154 130,299 139,681 150,576 162,170 174,657
Raw Water 77,744 83,870 95,951 152,630 147,189 305,784 333,583 360,562 395,747 424,903
Staff Costs 73,199 82,022 88,660 97,606 92,659 116,609 127,717 141,604 152,365 163,945
Gross margin/profit 889,318 956,930 949,587 963,253 909,515 923,151 952,270 991,246 1,037,429 1,097,199
71% 70% 67% 64% 60% 53% 51% 50% 49% 48%
Other operating income 26,452 3,636 (13,982) 2,309 1,900 1,833 2,589 2,731 2,881 3,040
Staff Costs 106,246 125,706 135,565 161,417 150,226 173,309 189,521 209,497 225,419 242,551
Energy 2,255 2,435 3,187 6,108 5,767 6,689 7,759 9,001 10,261 11,492
Depreciation 12,420 14,782 16,534 29,470 18,448 25,867 33,224 33,746 39,588 66,932
Amortization 93,504 98,978 96,798 2,900 2,842 2,836 2,836 2,836 2,836 2,836
Impairments 1,942 9,790 121,706 96,047 82,078 94,294 130,421 69,293 24,791 29,171
Maintenance - - 21,027 12,563 13,267 14,222 15,331 16,512 17,783
Other operating & administrative expenses 81,131 106,956 113,612 121,536 100,813 136,673 157,028 168,803 151,896 163,574
Interest Paid 259,111 222,464 109,790 94,319 85,518 80,856 88,788 77,917 114,243 150,663
Interest Received (151,075) (150,424) (94,231) (38,992) (55,324) (70,710) (53,190) (32,643) (3,020) (2,861)
Net Profit (Loss) 510,237 529,878 411,618 492,756 508,485 461,903 384,249 440,195 457,784 418,098

2012/2013 to 2016/2017
Table 18.15
UMGENI WATER
WASTEWATER Actual Actual Actual Budget Forecast
Volume of treated water sold (in kl'000) - - - - - - - - - -
Revenue 41,930 44,216 48,089 50,593 58,160 62,395 66,905 71,750 76,986 82,604
Water Sales - Bulk - - - - - - - - - -
Water Sales - Reticulation - - - - - - - - - -
Water Sales - Raw Water - - - - - - - - - -
Wastewater Sales 1,814 1,492 2,717 1,999 9,566 10,157 10,801 11,550 12,392 13,295
Wastewater Management Fee 40,116 42,724 45,372 48,594 48,594 52,238 56,104 60,200 64,594 69,310
Cost of sales 26,149 26,534 29,172 34,379 39,763 44,865 49,341 54,442 59,765 65,272
Changes in water inventory - - - - - - - - - -
Chemicals 3,357 3,071 3,353 3,153 3,456 3,794 4,143 4,549 4,991 5,475
Depreciation 2,490 2,490 2,491 3,682 2,363 2,513 2,694 2,904 3,127 3,368
Energy 4,515 5,789 6,902 8,414 10,704 12,417 14,404 16,709 19,048 21,333
Maintenance 7,137 7,597 7,210 8,281 10,539 12,666 13,578 14,637 15,764 16,978
Raw Water
Staff Costs 5,388 6,297 7,498 8,721 10,381 11,067 11,942 12,861 13,839 14,890
Section 30 activities - - - - - - - - - -
Gross margin/profit 15,780 17,682 18,917 16,214 18,397 17,530 17,564 17,308 17,221 17,332
38% 40% 39% 32% 32% 28% 26% 24% 22% 21%
Other operating income 3,572 3,572 3,805 3,572 3,610 3,612 3,572 3,572 3,572 3,572
Staff Costs - - - - - - - - - -
Energy - - - - - - - - - -
Depreciation 381 385 414 207 271 111 119 128 138 149
Amortization - - - - - - - - - -
Impairments
Maintenance 1,202 317 123 132 142 153 165
Interest Paid 8,460 8,032 4,445 6,544 6,895 6,628 6,305 5,603 2,886 2,886
Interest Received
Net Profit (Loss) 5,145 7,221 10,607 4,190 7,606 6,146 5,861 5,606 7,492 6,801

2012/2013 to 2016/2017
Table 18.16
UMGENI WATER
Balance Sheet (in R'000)
As at June 30 F09 F10 F11 F12 F12 F13 F14 F15 F16 F17
Actual Actual Actual Budget Forecast
ASSETS
Non-current assets 2,660,142 2,816,639 2,912,924 3,561,409 3,182,245 3,905,798 4,804,773 5,713,408 6,753,206 7,338,062
Property, plant and equipment 2,471,835 2,681,063 2,866,994 3,517,860 3,142,424 3,872,523 4,778,542 5,689,175 6,731,119 7,318,279
Other non-current assets 165,826 116,954 26,610 28,671 24,971 23,239 21,378 19,381 17,235 14,931
Investments 22,481 18,622 14,468 9,998 9,998 5,183 - - - -
Investments in subsidiaries - - 4,853 4,882 4,853 4,853 4,853 4,853 4,853 4,853
Employee loans - - - - - - - - -
Current Assets 1,413,580 1,480,766 1,857,412 1,254,852 2 030 410 1 913 614 1 264 605 636 212 635 107 653 012
Inventories 9,129 8,607 8,783 7,482 8,970 9,168 9,376 9,597 9,830 10,077
Accounts receivable 174,766 246,997 196,143 223,393 214,036 239 291 243 541 254 343 268 326 286 144
Sundry Debtors 7,781 16,731 14,720 6,964 14,720 14,720 14,720 14,720 14,720 14,720
Current portion of employee loans 431 510 - - - - - - - -
Short-term investments 1,213,416 1,178,673 1,509,594 999,297 1,777,297 1 635 297 982 297 342 297 327 297 327 297
Interest Receivable 3,282 12,314 13,866 14 14 14 14 14 14 14
Assets held for sale - 16,934 14,481 16,934 14,481 14,481 14,481 14,481 14,481 14,481
Bank balances and cash 4,775 - 99,826 768 894 645 176 760 439 279
Total assets 4,073,722 4,297,405 4,770,336 4,816,261 5 212 656 5 819 412 6 069 378 6 349 620 7 388 313 7 991 074
Reserves
Accumulated reserves 1,542,116 2,082,143 2,507,194 3,015,754 3 033 871 3 510 394 3 901 504 4 348 306 4 814 582 5 240 481
Non-current liabilities 1,105,046 1,579,500 1,487,535 1,343,283 1,462,562 1,624,539 1,521,645 1,384,880 1,298,121 1,210,844
Interest bearing borrowings 917,449 1,372,794 1,257,787 1,223,295 1,209,608 1,346,055 1,254,298 1,119,701 1,035,397 950,903
Post retirement medical benefit obligations 187,597 206,707 229,747 119,988 252,954 278,484 267,347 265,180 262,724 259,942
Provisions
Current liabilities 1,426,559 635,762 775,607 457,225 716 223 684 479 646 229 616 434 1 275 609 1 539 749
Accounts payable (including accruals & leases) 273,818 370,832 554,915 232,880 489,385 455,942 418,723 385,393 355,001 324,195
Provisions 58,120 61,978 69,124 58,978 69,124 69,124 69,124 69,124 69,124 69,124
Current portion of interest bearing loans 1,061,455 144,655 115,006 129,746 124 111 128 086 128 998 134 597 826 303 1 122 495
Other payables/loans 33,166 40,876 36,562 35,621 33,602 31,327 29,384 27,321 25,181 23,935
Bank overdrafts 17,421 - - - - - - - -
Total reserves and liabilities 4,073,722 4,297,405 4,770,336 4,816,261 5 212 656 5 819 412 6 069 378 6 349 620 7 388 313 7 991 074

2012/2013 to 2016/2017
Table 18.17
UMGENI WATER
OTHER (S30) Actual Actual Actual Budget Forecast
Volume of treated water sold (in kl'000) - - - - - - - - - -
Revenue 184,012 204,148 177,191 295,594 202,169 137,646 12,791 13,620 14,456 15,368
Other 184,012 204,148 177,191 295,594 202,169 137,646 12,791 13,620 14,456 15,368
Cost of sales 148,639 177,236 158,567 258,882 184,242 123,917 7,315 7,774 8,246 8,757
Changes in water inventory - - - - - - - - - -
Chemicals 101 51 81 82 - - - -
Depreciation - - - 5,294 - - - -
Energy 526 836 863 8,916 - - - -
Maintenance 2,460 2,171 1,785 5,767 671 745 799 861 927 999
Raw Water - - - - -
Staff Costs 4,078 4,300 4,786 12,570 3,186 3,816 4,117 4,434 4,771 5,134
Projects/WIP costs 141,132 169,537 150,589 225,259 179,635 118,566 1,538 1,541 1,540 1,540
Other direct operating activities 341 342 463 995 750 790 861 938 1,007 1,085
Gross margin/profit 35,373 26,911 18,625 36,712 17,927 13,729 5,476 5,845 6,211 6,610
19% 13% 11% 12% 9% 10% 43% 43% 43% 43%
Other operating income 803 555 534 550 550 581
Staff Costs 6,034 7,165 5,008 6,266 3,103 1,387 1,497 1,612 1,735 1,866
Energy - - - - - - - - - -
Depreciation 68 192 191 233 173 - - - -
Amortization - - - - - - - - - -
Impairments - - - - -
Maintenance 1,171 1,000 1,055 1,131 1,219 1,313 1,414
Other operating & administrative expenses 5,102 (1,339) 9,960 19,516 3,615 3,393 1,849 2,014 2,163 2,330
Net interest and finance charges - 4 2 3,064 - - - - - -

Interest Paid 4 2 3,064 - - - - -
Interest Received
Net Profit (Loss) 24,971 21,445 2,827 8,182 10,586 8,474 1,000 1,000 1,000 1,000

2012/2013 to 2016/2017
Table 18.18
UMGENI WATER
Statement of Changes in Equity (in R'000)
For the Year ended June 30 Accumulated
Capital Revaluation Profit
Contributions Reserve (Loss) Total
Balance at 30 June 2009 442,847 - 1 099 269 1 542 116
Net movement - - 540 024 540 024
Balance at 30 June 2010 442,847 - 1 639 293 2 082 143
Net movement - - 425 051 425 051
Balance at 30 June 2011 442,847 - 2 064 344 2 507 194
Net movement - - 526 677 526 677
Balance at 30 June 2012 442,847 - 2 591 020 3 033 871
Net movement - - 476 523 476 523
Balance at 30 June 2013 442,847 - 3 067 544 3 510 394
Net movement - - 391 110 391 110
Balance at 30 June 2014 442,847 - 3 458 653 3 901 504
Net movement - - 446 802 446 802
Balance at 30 June 2015 442,847 - 3 905 455 4 348 306
Net movement - - 466 276 466 276
Balance at 30 June 2016 442,847 - 4 371 731 4 814 582
Net movement - 425 899 425 899
Balance at 30 June 2017 442,847 - 4 797 631 5 240 481

2012/2013 to 2016/2017
Table 18.19
UMGENI WATER
Cash Flow Statement (in R'000)
For the year ended June 30 F09 F10 F11 F12 F12 F13 F14 F15 F16 F17
OPERATING ACTIVITIES
Operating profit before working capital changes 798,051 827,129 750,266 774,246 748 049 701 735 691 085 702 290 753 939 790 053
Changes in working capital (54,893) 18,854 265,171 (108,172) (62 514) (35 249) (54 473) (47 925) (48 179) (52 443)
Net cash from operating activities 743,157 845,983 1,015,437 666,074 685 535 666 486 636 612 654 365 705 760 737 611
INVESTING ACTIVITIES
Additions to property, plant and equipment (233,371) (327,197) (374,915) (627,925) (511 955) (944 812) (1 162 302) (1 176 223) (1 249 273) (942 279)
Additions to intangible assets (2,774) (4,917) (3,860)
Proceeds on disposal of Property, plant & equipment 14,157 641 4,834
Transfer to financial asset
Grant Funding 21,946 9,977 18,642 88 000 50 603 40 430 107 045 73 334 181 212
Disposal of investments 2,389 1,278 29 - - - - - - -
Net cash used in investing activities (219,600) (308,249) (363,935) (609,282) (423 955) (894 209) (1 121 873) (1 069 178) (1 175 938) (761 067)
FINANCING ACTIVITIES
Net change in long-term borrowings (107,964) (486,095) (144,655) (47,126) (39 074) 140 421 (90 845) (128 998) (134 597) (84 303)
Net Investments - LTI & RED (251,882) (41,198) (326,794) 88,470 (263 233) 146 815 658 183 640 000 15 000 -
Proceeds from (repaid to) short-term borrowings (14,222) - - - - - - - 742 000 296 000
Interest received 102,456 150,424 94,231 38,992 55 324 70 710 53 190 32 643 3 020 2 861
Deferred interest amortized 47,034 (42,799) (32,735) (21 117) (42 988) (40 644) (44 728) (38 437) (37 713)
Interest paid (259,288) (230,095) (114,237) (103,928) (92 413) (87 484) (95 092) (83 520) (117 129) (153 549)
Net cash used in financing activities (530,900) (559,930) (534,254) (56,327) (360 513) 227 474 484 792 415 398 469 857 23 296
CASH AND CASH EQUIVALENTS

Net increase/(decrease) in cash and cash equivalents (7,343) (22,196) 117,247 465 (98 933) (249) (468) 584 (321) (160)
At beginning of year 12,118 4,775 (17,421) 303 99 826 894 645 176 760 439
At end of year 4,775 (17,421) 99,826 768 894 645 176 760 439 279

2012/2013 to 2016/2017
Table 18.20
Msinsi Income Statement (R'000)

-
Revenue 25,994 26,147 25,963 28,619 26,102 28,652 31,325 34,491 36,813 39,462
Environmental Management Fee 14,217 14,000 13,160 13,160 13,160 14,740 16,508 18,489 19,691 20,971
Eco-Tourism & Other Revenue 11,777 12,146 12,802 15,458 12,941 13,912 14,816 16,002 17,122 18,491
Cost of sales 0 0 0 0 0 0 0 0 0
Gross profit 25,994 26,147 25,963 28,619 26,102 28,652 31,325 34,491 36,813 39,462
Other operating income 0 0 0 0 0 0 0 0 0 0
Staff Costs 16,177 16,497 16,808 18,846 18,846 19,034 21,021 22,387 23,954 25,512
Energy
Depreciation 649 636 875 953 953 700 750 325 325 250
Amortization
Impairments
(net of recoveries)
117,000
Operating income before interest 1,162 143 31 0 -2,522 5 496 752 560 526
Net interest and finance charges 156 230 85 0 19 63 56 52 65 54

Interest Paid 18 21 26 45 26 0 0 0 0 0
Interest Received 174 251 111 46 44 63 56 52 65 54
Net Profit (Loss) 1,318 373 116 0 -2,503 68 552 804 625 580

2012/2013 to 2016/2017
Table 18.21
Msinsi Holdings Balance Sheet (in R'000)

As at June 30 F09 F10 F11 F12 F13 F14 F15 F16 F17
Actual Actual Actual Forecast
ASSETS
Non-current assets 5,827 7,592 6,906 6,805 6,305 6,447 6,894 6,313 8,509
Property, plant and equipment 1,239 2,944 2,556 2,600 2,300 2,193 2,931 2,559 3,204
Other non-current assets 4,589 4,649 4,244 4,100 3,900 4,149 3,858 3,649 5,200
Investments 0 0 105 105 105 105 105 105 105
Employee loans
Current Assets 3,505 2,108 2,675 162 959 1,546 750 1,913 543
Inventories 16 34 73 40 45 50 55 60 65
Accounts receivable 176 138 142 75 133 163 208 216 246
Sundry Debtors 0 0 0 0 0 0 0 0
Current portion of employee loans 0 0 0 0 0 0 0 0
Inter - Company Loan 285 141 194 0 0 0 0 0 0
Interest Receivable
Assets held for sale 105 105
Bank balances and cash 2,923 1,690 2,266 48 782 1,334 488 1,638 233
Total assets 9,332 9,700 9,581 6,967 7,264 7,993 7,644 8,225 9,052
Reserves 4,292 4,664 4,780 2,277 2,345 2,896 3,701 4,326 4,906
Accumulated reserves 4,292 4,664 4,780 2,277 2,345 2,896 3,701 4,326 4,906
Non-current liabilities 0 0 0 0 0 0 0 0 0
Interest bearing borrowings
Post retirement medical benefit obligations
Provisions
Current liabilities 5,041 5,036 4,800 4,690 4,920 5,097 3,943 3,900 4,146
Accounts payable (including accruals & leases)
Provisions 2,322 2,038 1,816 1,900 2,227 2,100 1,850 1,925 1,987
Inter - Company Loan Account 0
Other payables/loans 2,719 2,998 2,985 2,790 2,693 2,997 2,093 1,975 2,159
Bank overdrafts
Total reserves and liabilities 9,332 9,700 9,581 6,967 7,264 7,993 7,644 8,226 9,052

2012/2013 to 2016/2017
Table 18.22
Msinsi Holdings Cash Flow Statement

For the year ended June 30 F09 F10 F11 F12 F13 F14 F15 F16 F17
Actual Actual Actual Forecast
Operating profit before working capital changes 1,316 267 -24 -1,483 1,031 1,822 512 2,239 721
Changes in working capital 112 442 -110 100 -160 269 -954 -131 149
Net cash from operating activities 1,428 709 -134 -1,383 871 2,091 -442 2,108 870
Additions to property, plant and equipment -831 -2,343 -510 -997 -400 -1,346 -747 -1,232 -778
Additions to intangible assets
Proceeds on disposal of Property, plant & 24 80 0 0 0 0 0
equipment
Transfer to financial asset
Grant Funding
Biological Assets 1,049 170 1,055 144 200 -249 291 209 -1,551
Net cash used in investing activities 241 -2,173 624 -853 -200 -1,595 -456 -1,023 -2,329
Net change in long-term borrowings -421 0 0 0 0 0 0 0 0
Net Investments - LTI & RED
Proceeds from (repaid to) short-term borrowings
Interest received 174 251 111 44 63 56 52 65 54
Deferred interest amortized
Interest paid -18 -21 -26 -26 0 0 0 0 0
Retirement benefits - OFF B/S
Net cash used in financing activities -265 230 85 18 63 56 52 65 54

Net increase/(decrease) in cash and cash equivalents 1,404 -1,233 575 -2,217 734 552 -846 1,150 -1,405
At beginning of year 1,519 2,923 1,690 2,266 48 782 1,334 488 1,638
At end of year 2,923 1,690 2,266 48 782 1,334 488 1,638 233

2012/2013 to 2016/2017
Table 18.23

Income Statement (R'000)
-
Revenue 345 0 0
Cost of sales 321 0 0 0 0 0 0 0 0
Gross profit 24 0 0 0 0 0 0 0 0 0
Other operating income 7 0 0 0 0 0 0 0 0 0
Administration Expenses 18 23 21
Share of profit from associate 1,264 2,985 3,300
117,000
Operating income before interest 1,277 2,962 3,279 0 0 0 0 0 0 0
Net interest and finance charges 45 72 0 45 0 0 0 0 0 0

Interest Paid
Interest Received 45 72 45
Net Profit (Loss) 1,322 3,034 3,279 45 0 0 0 0 0 0

2012/2013 to 2016/2017
Table 18.24

Balance Sheet (in R'000)
As at June 30 F09 F10 F11 F12 F12 F13 F14 F15 F16 F17
ASSETS
Non-current assets 4,634 6,239 6,569 5,963 6,569 6,569 6,569 6,569 6,569 6,569
Other non-current assets 640 536 536 260 536 536 536 536 536 536
Investments in subsidiaries and associates 3,994 5,703 6,033 5,703 6,033 6,033 6,033 6,033 6,033 6,033
Current Assets 2,972 2,972 2,972 2,972 2,972 2,972 2,972
Total assets 4,634 6,239 9,541 5,963 9,541 9,541 9,541 9,541 9,541 9,541
Reserves -1,838 1,196 4,475 1,305 4,475 4,475 4,475 4,475 4,475 4,475
Accumulated reserves -1,838 1,196 4,475 1,305 4,475 4,475 4,475 4,475 4,475 4,475
Non-current liabilities 6,444 5,023 5,045 4,630 5,045 5,045 5,045 5,045 5,045 5,045
other non current liabilities 6,444 5,023 5,045 4,630 5,045 5,045 5,045 5,045 5,045 5,045
Current liabilities 28 20 21 28 21 21 21 21 21 21
Accounts payable (including accruals & leases) 28 20 21 28 21 21 21 21 21 21
Total reserves and liabilities 4,634 6,239 9,541 5,963 9,541 9,541 9,541 9,541 9,541 9,541

2012/2013 to 2016/2017
Table 18.25
Group Income Statement (in R'000)

For the year ended June 30 F09 F10 F11 F12 F'12 F'13 F14 F'15 F'16 F'17
Volume of Bulk treated water sold (in kl'000) 415,956 425,848 414,876 413,905 414 983 416 550 419 881 424 780 431 151 437 619
Revenue 1,492,688 1,633,043 1,660,912 1,868,605 1 784 805 1 967 960 1 958 879 2 094 612 2 244 755 2 405 572
Water Sales - Bulk 1,259,188 1,373,786 1,423,332 1,506,646 1 511 116 1 753 204 1 863 850 1 992 696 2 135 615 2 288 500
Water Sales - Reticulation - - - - - - - - - -
Wastewater Sales 1,814 1,492 2,717 1,999 9 566 10 157 10 801 11 550 12 392 13 295
Wastewater Management Fee 40,116 42,724 45,372 48,594 48 594 52 238 56 104 60 200 64 594 69 310
Section 30 activities 191,203 214,810 189,153 311,070 215 111 151 558 27 608 29 621 31 578 33 859
Cost of sales 545,011 620,858 661,842 836,951 826 025 999 637 968 752 1 064 212 1 166 773 1 265 939
Changes in water inventory (122) 601 (121) - - - - - - -
Chemicals 32,751 32,510 36,727 39,410 44 922 52 147 56 944 62 525 68 590 75 243
Depreciation 59,848 65,190 69,076 75,324 80 444 85 330 91 473 98 608 106 201 114 379
Energy 43,145 56,963 87,678 103,851 123 093 144 919 168 106 195 003 222 303 248 979
Maintenance 100,825 108,500 109,167 110,443 128 364 143 711 154 058 166 074 178 862 192 634
Raw Water 77,744 83,870 95,951 152,630 147 189 305 784 333 583 360 562 395 747 424 903
Staff Costs 82,666 92,618 100,944 118,896 106 226 131 492 143 776 158 899 170 975 183 969
Section 30 activities 141,132 169,537 150,589 225,259 179 635 118 566 1 538 1 541 1 541 1 541
Other direct operating activities 7,022 11,067 11,832 11,138 16 151 17 690 19 274 21 000 22 554 24 291
Gross profit 947,677 1,012,186 999,070 1,031,654 958 780 968 322 990 126 1 030 400 1 077 982 1 139 633
63% 62% 60% 55% 53% 49% 50% 49% 48% 47%
Other operating income 31,707 8,529 (9,366) 6,431 6 060 6 026 6 161 6 303 6 453 6 612
Administration Expenses 337,338 403,216 544,639 468,003 403 596 481 046 562 779 538 272 503 490 569 131
Staff Costs 152,395 170,989 188,183 167,683 172 175 193 731 212 039 233 497 251 108 269 929
Energy 2,255 2,435 3,187 6,108 5 767 6 689 7 759 9 001 10 261 11 492
Depreciation 13,517 15,995 18,014 30,580 19 844 26 678 34 093 34 199 40 051 67 331
Amortization 94,218 98,978 96,798 2,900 2 842 2 836 2 836 2 836 2 836 2 836
Impairments 2,072 9,806 122,150 96,047 82 078 94 294 130 421 69 293 24 791 29 171
Maintenance 14,715 18,520 23,400 15,535 13 879 14 445 15 485 16 693 17 978 19 362
Other operating & administrative expenses 58,166 86,493 92,906 149,150 107 011 142 373 160 146 172 754 156 465 169 010
129,627 -
Operating income before interest 642,046 617,499 445,065 570,082 561 244 493 302 433 507 498 431 580 945 577 113
Net interest and finance charges 116,296 79,773 19,923 64,953 37 044 16 711 41 846 50 825 114 044 150 634
Interest Paid 267,489 230,341 114,190 103,931 92 413 87 484 95 092 83 502 117 129 153 549
Interest Received (151,193) (150,568) (94,267) (38,977) (55 368) (70 773) (53 246) (32 677) (3 085) (2 915)
Share of profit from associate 1,264 2,985 3,300 -
Net Profit (Loss) 527,014 540,711 428,442 505,129 524 199 476 591 391 661 447 606 466 901 426 480

2012/2013 to 2016/2017
Table 18.26
Group Balance Sheet (in R'000)

As at June 30, F09 F10 F11 F12 F12 F13 F14 F15 F16 F17
ASSETS
Non-current assets 2,666,523 2,825,051 2,921,006 3,570,239 3,190,574 3,913,626 4,812,743 5,721,825 6,761,042 7,348,095
Property, plant and equipment 2,473,075 2,684,007 2,869,548 3,522,617 3,145,024 3,874,823 4,780,735 5,692,106 6,733,678 7,321,483
Other non-current assets 166,973 116,719 30,852 33,079 29,607 27,675 26,063 23,775 21,420 20,667
Investments - Financial Instruments 22,481 18,622 14,468 9,998 9,998 5,183 - - - -
Investments in subsidiaries and associates 3,994 5,703 6,138 4,545 5,945 5,945 5,945 5,945 5,945 5,945
Employee loans - - - - - - - - - -
Current Assets 1,417,441 1,483,271 1,863,714 1,257,727 2 033 545 1 917 546 1 269 124 639 935 639 992 656 528
Inventories 9,145 8,642 8,857 7,527 9,009 9,212 9,426 9,652 9,890 10,142
Accounts receivable 175,407 257,269 196,453 223,526 217 083 242 396 246 676 257 523 271 514 289 362
Sundry Debtors 7,781 6,964 18,372 7,034 14,720 14,720 14,720 14,720 14,720 14,720
Current portion of employee loans 606 680 - 80 - - - - - -
Short-term investments 1,213,416 1,178,673 1,509,594 999,297 1 777 297 1 635 297 982 297 342 297 327 297 327 297
Interest Receivable 3,282 12,314 13,866 14 14 14 14 14 14 14
Assets held for sale 105 17,039 14,481 17,039 14,481 14,481 14,481 14,481 14,481 14,481
Bank balances and cash 7,699 1,690 102,091 3,210 942 1 427 1 510 1 248 2 077 512
Total assets 4,083,964 4,308,322 4,784,720 4,827,966 5 224 119 5 831 172 6 081 867 6 361 760 7 401 034 8 004 622
Reserves
Accumulated reserves 1,547,292 2,088,004 2,516,445 3,021,724 3 040 623 3 517 214 3 908 875 4 356 481 4 823 382 5 249 862
Non-current liabilities 1,105,045 1,606,873 1,487,534 1,343,283 1,462,562 1,624,539 1,521,645 1,384,880 1,298,121 1,210,844
Interest bearing borrowings 917,448 1,400,166 1,257,787 1,223,295 1,209,608 1,346,055 1,254,298 1,119,701 1,035,397 950,903
Post retirement medical benefit obligations 169,472 189,742 214,098 119,988 252,954 278,484 267,347 265,180 262,724 259,942
Other Non Current Liabilities 18,125 16,965 15,649 - - - - - - -
Current liabilities 1,431,627 613,445 780,741 462,959 720 934 689 420 651 347 620 399 1 279 530 1 543 916
Accounts payable (including accruals & leases) 276,562 374,201 558,414 232,908 489,407 455,964 418,745 385,414 355,022 324,216
Provisions 60,444 63,664 70,759 61,792 71,024 71,351 71,224 70,974 71,049 71,111
Current portion of interest bearing loans 1,061,455 117,282 115,006 129,746 124 111 128 086 128 998 134 597 826 303 1 122 495
Other payables/loans 33,166 40,877 36,562 38,513 36,392 34,020 32,381 29,414 27,156 26,094
Bank overdrafts - 17,421 - - - - - - - -
Total reserves and liabilities 4,083,964 4,308,322 4,784,720 4,827,966 5 224 119 5 831 172 6 081 867 6 361 760 7 401 034 8 004 622

2012/2013 to 2016/2017
Table 18.27
Group Cash Flow Statement (in R'000)

For the year ended June 30 F09 F10 F11 F12 F12 F13 F14 F15 F16 F17
Operating profit before working capital changes 799,545 827,017 782,286 775,230 746 566 702 766 692 907 702 802 756 178 790 774
Changes in working capital (54,267) 19,604 230,072 (108,606) (62 414) (35 409) (54 204) (48 879) (48 310) (52 294)
Net cash from operating activities 745,278 846,621 1,012,358 666,624 684 152 667 357 638 703 653 923 707 868 738 481
Additions to property, plant and equipment (234,203) (329,540) (375,424) (629,508) (512,952) (945,212) (1,163,648) (1,176,970) (1,250,505) (943,057)
Additions to intangible assets (2,774) (4,917) (3,860) - - - - - - -
Proceeds on disposal of Property, plant & equipment 14,180 641 4,914 - - - - - - -
Transfer to financial asset - - - - - - - - - -
Grant Funding 21,946 9,977 18,642 88,000 50,603 40,430 107,045 73,334 181,212
Proceeds on disposal of Biological Assets 879 170 1,055 144 200 (249) 291 209 (1,551)
Investments in Subsidiaries and Associates 1,402 1,278 2,970 (540) - - - - - -
Net cash used in investing activities (220,516) (310,422) (360,368) (611,406) (424,808) (894,409) (1,123,468) (1,069,634) (1,176,961) (763,396)
Net change in long-term borrowings (107,964) (486,095) (144,655) (47,126) (39 074) 140 421 (90 845) (128 998) (134 597) (84 303)
New Debt proposed - - - - - - - - -
Capital contributions - - - - - - - - -
Net Investments - LTI & RED (251,882) (41,198) (326,794) 89,879 (263 233) 146 815 658 183 640 000 15 000 -
Proceeds from (repaid to) short-term borrowings (14,222) - - - - - - 742 000 296 000
Interest received 102,573 195,295 85,228 38,974 55 343 70 773 53 246 32 695 3 085 2 915
Deferred interest amortized (32,735) (21 117) (42 988) (40 644) (44 728) (38 437) (37 713)
Interest paid (259,205) (227,631) (147,947) (103,928) (92 413) (87 484) (95 092) (83 520) (117 129) (153 549)
Net Repo & Market-making - - - - - - - - -
- - - - -
Net cash used in financing activities (530,700) (559,629) (534,168) (54,936) (360 495) 227 537 484 848 415 450 469 922 23 350

Net increase/(decrease) in cash and cash equivalents (5,938) (23,430) 117,822 283 (101 150) 485 84 (262) 829 (1 565)
At beginning of year 13,637 7,699 (15,731) 2,927 102 092 942 1 427 1 510 1 248 2 077
At end of year 7,699 (15,731) 102,091 3,210 942 1 427 1 510 1 248 2 077 512

2012/2013 to 2016/2017
Table 18.28 Umgeni Water Group Segmental report
Segmental Report (in F09 F10 F11

R'000) Primary Primary Primary
Bulk Waste S30 Total Bulk Waste S30 Total Bulk Waste S30 Total
For the year ended Water Water Water Water Water Water
June 30,
Volume sold 415,956 273 0 416,229 425,848 273 0 426,121 415,426 358 0 415,784
Revenue 1,259,555 41,930 191,203 1,492,688 1,374,017 44,216 214,810 1,633,043 1,423,670 48,089 189,153 1,660,912
Cost of sales -370,235 -26,151 -148,625 -545,011 -417,085 -26,535 -177,236 -620,856 -474,102 -29,172 -158,569 -661,843
Changes in water inventory 122 0 0 122 -601 0 0 -601 121 0 0 121
Chemicals -29,293 -3,357 -101 -32,751 -29,387 -3,071 -52 -32,510 -33,292 -3,353 -82 -36,727
Depreciation -57,358 -2,490 0 -59,848 -62,699 -2,491 0 -65,190 -66,585 -2,491 0 -69,076
Energy -38,104 -4,515 -526 -43,145 -50,338 -5,789 -836 -56,963 -79,913 -6,902 -863 -87,678
Maintenance -89,194 -9,171 -2,460 -100,825 -98,732 -7,597 -2,171 -108,500 -99,922 -7,417 -1,828 -109,167
Raw water -77,744 0 0 -77,744 -83,870 0 0 -83,870 -95,951 0 0 -95,951
Section 30 activities 0 0 -141,132 -141,132 0 0 -169,537 -169,537 0 0 -150,589 -150,589
Staff costs -73,200 -5,388 -4,078 -82,666 -82,022 -6,297 -4,299 -92,618 -88,660 -7,498 -4,786 -100,944
Other direct operating expenses -5,464 -1,230 -328 -7,022 -9,436 -1,290 -341 -11,067 -9,900 -1,511 -421 -11,832
Gross profit 889,320 15,779 42,578 947,677 956,932 17,681 37,574 1,012,187 949,568 18,917 30,584 999,069
Other income 26,452 3,572 1,683 31,707 3,636 3,572 1,321 8,529 -13,962 3,805 791 -9,366
Other operating and

administration expenses -312,212 -5,748 -19,378 -337,338 -377,167 -6,001 -20,048 -403,216 -508,430 -7,671 -28,538 -544,639
Amortisation -94,218 0 -94,218 -98,978 0 -98,978 -96,798 0 -96,798
Impairments and write-offs 22,372 -131 22,242 -9,790 -16 -9,806 -122,150 -122,150
Depreciation -12,420 -381 -717 -13,518 -14,782 -385 -828 -15,995 -16,533 -414 -1,067 -18,014
Other expenses -227,946 -5,367 -18,530 -251,844 -253,617 -5,616 -19,204 -278,437 -272,949 -7,257 -27,471 -307,677
Profit from operations 603,560 13,603 24,883 642,046 583,401 15,252 18,847 617,500 427,176 15,051 2,837 445,064
Interest income 151,075 0 118 151,193 150,424 0 144 150,568 94,231 0 36 94,267
Finance costs -259,011 -8,460 -18 -267,489 -222,464 -8,032 155 -230,341 -109,791 -4,445 46 -114,190
Share of profit from associate 0 0 2,985 2,985 0 0 3,300 3,300
Profit for the year 495,624 5,143 26,247 527,014 511,361 7,220 22,131 540,712 411,616 10,606 6,219 428,441
Capital expenditure 230,805 2,571 827 234,203 291,768 26,832 15,856 334,457 338,815 1,237 39,233 379,285
Segment assets 2,507,557 91,066 57,791 2,656,414 2,782,577 88,245 85,079 2,955,901 2,937,750 85,662 69,503 3,092,915
Interest in associate 0 0 4,099 4,099 0 0 5,703 5,703 0 0 6,138 6,138
Unallocated 1,423,451 1,346,718 1,685,667
Consolidated total assets 4,083,964 4,308,322 4,784,720
Segment liabilities 1,900,697 39,351 38,856 1,978,904 1,388,058 33,624 95,766 1,517,448 1,388,058 33,428 95,766 1,517,252
Unallocated 557,768 702,870 288,990
Consolidated total liabilities 2,536,672 2,220,318 1,806,242

2012/2013 to 2016/2017
Table 18.28 Continued
F12 F13 F14

Primary Primary Primary
Bulk Waste S30 Total Bulk Waste S30 Total Bulk Waste S30 Total
Water Water Water Water Water Water
414,983 358 0 415,341 416,550 358 0 416,908 419,881 362 0 420,242
1 511 534 58 160 215 111 1 784 805 1 754 006 62 395 151 558 1 967 960 1 864 366 66 905 27 608 1 958 879
-602,019 -39,763 -184,242 -826,025 -830,855 -44,865 -123,917 -999,637 -912,096 -49,341 -7,315 -968,752
0 0 0 0 0 0 0 0 0 0 0 0
-41,466 -3,456 0 -44,922 -48,352 -3,794 0 -52,147 -52,801 -4,143 0 -56,944
-78,081 -2,363 0 -80,444 -82,817 -2,513 0 -85,330 -88,780 -2,694 0 -91,473
-112,389 -10,704 0 -123,093 -132,502 -12,417 0 -144,919 -153,702 -14,404 0 -168,106
-117,154 -10,539 -671 -128,364 -130,299 -12,666 -745 -143,711 -139,681 -13,578 -799 -154,058
-147,189 0 0 -147,189 -305,784 0 0 -305,784 -333,583 0 0 -333,583
0 0 -179,635 -179,635 0 0 -118,566 -118,566 0 0 -1,538 -1,538
-92,659 -10,381 -3,186 -106,226 -116,609 -11,067 -3,816 -131,492 -127,717 -11,942 -4,117 -143,776
-13,082 -2,319 -750 -16,151 -14,492 -2,407 -790 -17,690 -15,832 -2,581 -861 -19,274
909 515 18 397 30 868 958 780 923 151 17 530 27 641 968 322 952 270 17 564 20 293 990 126
1,900 3,610 550 6,060 1,833 3,612 581 6,026 2,589 3,572 0 6,161
-372,736 -7,506 -23,354 -403,596 -452,935 -8,368 -19,743 -481,046 -535,012 -8,971 -18,797 -562,779
-2,842 0 0 -2,842 -2,836 0 0 -2,836 -2,836 0 0 -2,836
-82,078 0 0 -82,078 -94,294 0 0 -94,294 -130,421 0 0 -130,421
-18,448 -271 -1,126 -19,844 -25,867 -111 -700 -26,678 -33,224 -119 -750 -34,093
-269,368 -7,235 -22,228 -298,831 -329,938 -8,257 -19,043 -357,238 -368,531 -8,852 -18,047 -395,429
538 679 14 501 8 064 561 244 472 049 12 774 8 479 493 302 419 846 12 165 1 496 433 507
55 324 0 44 55 368 70 710 0 63 70 773 53 190 0 56 53 246

-85 518 -6 895 0 -92 413 -80 856 -6 628 0 -87 484 -88 788 -6 305 0 -95 092
0 0 0 0 0
508 485 7 606 8 109 524 199 461 903 6 146 8 542 476 591 384 249 5 861 1 552 391 661
502,255 9,700 997 512,952 857,612 87,200 400 945,212 1,082,952 79,350 1,346 1,163,648
3 214 724 92 728 69 374 3 376 826 3 885 561 177 304 69 074 4 131 939 4 718 620 253 841 69 670 5 042 131
5 945 5 945 5 945 5 945 5 945 5 945
1 841 348 1 693 288 1 033 791
5 224 119 5 831 172 6 081 867
969,177 33,232 11,463 1,013,872 962,963 33,036 11,760 1,007,759 913,576 32,840 12,489 958,905
1,169,624 1,306,200 1,214,087
2,183,496 2,313,959 2,172,992

2012/2013 to 2016/2017
18.10 Capital expenditure programme

The allocation of cashflows and the intra year movement is in accordance with the current life cycle of the
projects, customer requirement and in terms of infrastructure stabilisation.
Table 18.29 Summary of capex programme
Cashflows Unescalated
Capex Category Actual Actual Actual Budget Revised Total Forecast
F'09 F'10 F'11 F'12 Forecast 2013 - 2017 F13 F14 F15 F16 F17
F'12
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Augmentation 136 557 273 909 193 123 221 054 172 116 1 173 246 244 774 228 574 231 913 278 700 189 285
Expansion 24 467 5 582 327 409 177 1 500 51 500 140 000 144 000 72 177
Upgrade 1 664 15 300 27 492 80 020 107 741 495 029 201 068 144 460 25 401 63 000 61 100
Rehabilitation 17 562 593 447 5 683 10 020 160 630 28 450 34 600 16 000 67 000 14 580
Development Projects 36 660 19 795 131 288 220 039 190 454 1 842 047 352 898 490 062 458 998 300 755 239 333
Immovable 216 910 315 180 352 350 526 796 480 659 4 080 129 828 690 949 196 872 312 853 455 576 475
Business Plan 2011/12 526 796 3 010 242 556 561 561 977 469 327 579 726 842 651
% Increase / (Decrease) -9% 36% 49% 69% 86% 47% -32%
Equipment & Vehicles 3 817 3 960 9 763 11 473 7 782 42 483 12 535 6 018 18 730 5 200
Information Communication Technology 1 705 8 683 11 190 26 206 16 000 68 350 19 000 12 850 9 700 10 850 15 950
Laboratory & Process Services 11 771 6 607 5 980 25 053 7 514 38 270 21 129 4 860 2 536 9 045 700
Umgeni Water Movable 17 293 19 250 26 934 62 732 31 296 149 103 52 664 23 728 30 966 25 095 16 650
Business Plan 2011/12 62 732 108 959 43 959 16 710 24 660 18 630 5 000
% Increase / (Decrease) -50% 37% 20% 42% 26% 35% 233%
Total Capital Budget 234 203 334 430 379 284 589 528 511 955 4 229 233 881 354 972 924 903 278 878 550 593 125
Business Plan 2011/12 589 528 3 119 201 600 520 578 687 493 987 598 356 847 651
Increase / (Decrease) -77 573 1 110 032 280 834 394 237 409 291 280 194 -254 526
% Increase / (Decrease) -13% 36% 47% 68% 83% 47% -30%
Cashflows Escalated
Summary Of Escalated Budget F09 F10 F11 Budget F12 Total F13 F14 F15 F16 F17
F'12 2012 - 2016
Immovable Budget 562 618 480 659 5 287 628 888 356 1 133 956 1 135 900 1 213 588 915 828
Movable Budget 66 890 31 296 187 262 56 456 28 347 40 323 35 684 26 451
Total Capital Budget 629 508 511 955 5 474 889 944 812 1 162 302 1 176 223 1 249 273 942 279
Escalation % 29% 7% 19% 30% 42% 59%

2012/2013 to 2016/2017
Figure18.6: Capital expenditure allocation
The capital infrastructure programme is based on Umgeni Water’s Infrastructure Master Plan which is aligned
to KZN Bulk water supply which is structured according to the provincial and local strategic priorities.
18.10.1 Major Movements from the 2012 business plan

Table 18.30 Summary of major movements
CAPEX CATEGORY Business Plan Business Plan Increase / (Decrease)

2012-2013 2011-2012
F'13 - F'17 F'13 - F'17
R'000 % R'000 % R'000 %
Augmentation R 1 173 246 28% R 1 590 852 51% -R 417 606 -26%
Expansion R 409 177 10% R 156 225 5% R 252 952 162%
Upgrade R 495 029 12% R 263 685 8% R 231 344 88%
Rehabilitation R 160 630 4% R 116 340 4% R 44 290 38%
Development Projects R 1 842 047 44% R 883 140 28% R 958 907 109%
Information Communication & Technology R 68 350 2% R 53 050 2% R 15 300 29%
Equipment, Vehicles, Laboratory & Process Services R 82 563 2% R 55 909 2% R 26 654 48%
Total Umgeni Water Capex 4 231 043 100% 3 119 201 100% 1 111 842 36%
The major movements between the 2012 business plan and the 2013 business plan are as follows:
Table 18.31 (a to e) major movements between 2012 Business Plan and 2013 Business Plan
a) Augmentation Decrease (R418m)
Project Cashflows Comment

2013 - 2017
(Decrease) Increase
Hazelmere WW: Upgrade (45 to 74 404 Due to an updated estimate provided by the detailed feasibility study.
75Ml/day) Furthermore, the project is being fast-tracked to meet the demands in the
north coast.
Lower Mkomazi Bulk Water Scheme -232 500 The project cashflows for construction have been deferred to 2020. In
the current 5 year period, the cashflows are for detailed feasibility only.
Mkomazi Bulk Water Supply -120 650 The project has been deferred with only the feasibility study aspect to be
done within 5 year period. Implementation is aligned to the
commissioning of the water resources component by DWA.
Phase 1: Claridge to Wartburg p/l -57 914 Project incorporated into the uMshwathi Bulk Water Supply Scheme
augmentation incl. pumpstation (Wartburg Phase 1 - 3) which is a developmental project.
Phase 2: Wartburg to Dalton p/l -108 683 Project Incorporated into the uMshwathi Bulk Water Supply Scheme
augmentation (Wartburg Phase 1 - 3).
Umlaas Road Reservoir No.2 (45Ml) 66 570 Project brought forward due to operational requirements, to balance the
flow when the Western Aqueduct is commissioned.
Umlaas New Water Project -102 000 Due to the delay on the Western Aqueduct project, this project has been
deferred until the Western Aqueduct project is complete.
61 p/l: extension (Richmond Off- 24 100 The project has been accelerated in terms of procuring the pipe coils.
take to Umlaas Road)

2012/2013 to 2016/2017

2013 - 2017
(Decrease) Increase
East Coast Desalination Plants 16 000 New project to address water supply demands via alternate water
resources.
Howick Reservoir Upgrade (6.5 Ml) 16 500 Review of the timing of the project.
b) Expansion Increase of 253m

2013 - 2017
(Decrease) Increase
Strategic Expansion Projects 200 000 Expansion in terms of strategic growth.
Greater Mpofana Regional Scheme 52 952 Detailed feasibility completed and re- assessment of cost.
c) Upgrade Increase of R231m

2013 - 2017
(Decrease) Increase
Dbn Hts WW: Filter Upgrade 47 300 Required earlier due to deterioration of filter floors and structural
failures.
Darvill WWW 77 500 Includes the energy co-generation project and the diffused air system
installation
Package Plant - North Coast 15 000 New project to assist address water supply demands in the North Coast.
Refurbishment Head Office 22 801 Including the major air conditioning renewal project.
Wiggins Filter Valve & Actuator 12 000 New project
Upgrade
d) Rehabilitation Increase of R44m

2013 - 2017
(Decrease) Increase
Nagle Aqueduct 3 & 4 - Refurbish 50 250 The findings of a risk assessment indicated that additional cost is to be
incurred in the rehabilitation of the pipeline joint on aqueducts 3 & 4
e) Rural Development Increase of R959m

2013 - 2017
(Decrease) Increase
Greater Eston 21 671 This project has been accelerated.
Maphumulo BWS PH 2 56 077 The construction is aligned to the commissioning of Phase 1.
Mhlabatshane Sub-Regional Scheme -18 985 Due to change in timing of project implementation.
uMshwathi Bulk Water Supply 201 417 Net effect of consolidation of the Wartburg Scheme and Ozwathini BWS.
Scheme ( Wartburg Phase 1 - 3)
Lower Thukela BWS - Phase 1 687 622 This project is being fast tracked to meet the growing demands in the
North Coast
Richmond P/L-30km's -12 269 Due to change in timing of project implementation.
Ngcebo BWS Scheme Phase 1 - 8 000 New Capex Item. The water treatment works at Ngcebo is currently
Upgrade of Water Treatment running at capacity and this upgrade is now necessary to provide water
for additional growth in the area. Requested by iLembe District
Municipality.
Table 18.32 Financial indicators specific to capital investment
F09 F10 F11 F12 F12 F13 F14 F15 F16 F17 Umgeni
Water Target
Return on assets (income before
interest & taxes divided by total 22.6% 20.0% 13.7% 15.0% 16.7% 12.1% 8.8% 8.5% 8.4% 7.7% 15% to 20%
assets excluding investments)
Asset turnover (revenue divided by
0.523 0.523 0.508 0.487 0.525 0.476 0.388 0.351 0.319 0.315
total assets excluding investments )
Fixed asset turnover (revenue
0.601 0.605 0.575 0.527 0.564 0.507 0.409 0.367 0.332 0.327
divided by fixed assets)

2012/2013 to 2016/2017
18.10.2 Developmental Projects

In order to meet the shareholder mandate of water service delivery and elimination of backlogs in rural areas, Umgeni Water’s Capex programme has made provision for
the following major projects:
 R1 842bn spend over 5 years in rural areas representing 44% of the 5 year Capex.
 Estimated total social component of the project in 5 year Capex is R1 560bn.

o R1 012m of regional Bulk infrastructure grant (RBIG) forecast as a contribution toward social component of the projects.
o Asset impairment over the 5 year period to 2017 representing unfunded social component estimated at R548m.
In order to minimise the potential financial risks Umgeni Water has made an application for RBIG for some of the above projects and awaits response from DWA.
Table 18.33 Rural project evaluation
Customer Project Total Interest Escalation Total RBIG Total Economic Social Value Construction
capital capitalised Project excl VAT project value Funded as follows: Commencement
cost after RBIG Date
R'000 R'000 R'000 R'000 R'000 R'000 R'000 RBIG UW Total
R'000 R'000 R'000
uMgungundlovu Greater Eston / Richmond 338 010 21 135 59 304 418 449 -109 030 309 419 193 972 109 030 115 447 224 477
uMgungundlovu Greater Mpofana Phase I 213 672 24 374 24 714 262 760 -96 620 166 140 162 304 96 620 3 836 100 456 2013/11/01
iLembe Lower Thukela BWSS 894 167 101 998 88 550 1 084 715 -258 867 825 848 744 306 258 867 81 542 340 409 2012/08/01
iLembe Maphumulo BWSS (Ph 1 & 2) 349 001 56 287 26 145 431 433 -139 600 291 832 70 057 139 600 221 775 361 376 2010/05/01
Ugu Mhlabatshane BWSS 186 000 19 388 15 194 220 581 -79 980 140 601 62 902 79 980 77 700 157 680 2010/08/01
iLembe Ncgebo scheme Phase 1 (Incl. 48 000 1 011 8 157 57 168 57 168 9 168 48 000 48 000 2009/01/01
Water Treatment Upgrade)
uMgungundlovu uMshwathi BWSS 564 692 55 385 72 929 693 007 -328 000 365 007 365 007 328 000 328 000 2013/06/01
& iLembe
TOTAL 2 593 542 279 578 294 993 3 168 113 -1 012 098 2 156 015 1 607 715 1 012 098 548 300 1 560 398
(A) Economic Value: Defined as the future economic benefits which will flow to Umgeni Water with an existing affordable tariff structure over a 20 year repayment
term.
(B) Social Component reflects the amount that cannot be recovered through the affordable tariff structure.

2012/2013 to 2016/2017
Regional Bulk Infrastructure Grants:
The following grants have been taken into account.
Table 18.34 RBIG funding
Total RBIG
Project Status of Grant F'11 F'12 F'13 F'14 F'15 F'16 F'17 F'18
Funding
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Greater Eston / Richmond Confirmed 109 030 9 977 20 000 38 623 40 430
Greater Mpofana Phase I Not Confirmed 96 620 3 166 675 40 500 42 300 9 980
Lower Thukela BWS Not Confirmed 258 867 9 480 23 161 63 691 72 377 90 159
Maphumulo BWS Scheme (Phase 1 & 2) Not Confirmed 139 600 84 990 34 978 19 633
Mhlabatshane BWS Scheme Confirmed 79 980 68 000 11 980
uMshwathi BWS Not Confirmed 328 000 9 410 14 521 57 388 54 793 78 027 113 861
TOTAL 1 012 098 9 977 88 000 157 648 113 764 181 212 169 470 178 166 113 861
Table 18.35 Impairment Summary:
Project Capital Cost % of Capital Total F'11 F'12 F'13 F'14 F'15 F'16 F'17
Cost Impairment
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Greater Eston / Richmond 338 010 34% 115 447 2 171 8 200 37 373 54 048 13 656
Greater Mpofana Phase I 213 672 2% 3 836 147 1 595 1 694 400
Lower Thukela BWS 894 167 9% 81 542 1 959 7 391 20 325 23 096 28 771
Maphumulo BWS Scheme (Phase 1 & 2) 349 001 64% 221 775 45 450 69 840 12 698 60 070 33 718
Mhlabatshane BWS Scheme 186 000 42% 77 700 38 481 39 218
Ncgebo scheme (Incl. Water Treatment Upgrade) 48 000 100% 48 000 33 650 2 390 3 047 8 912
uMshwathi BWS 564 692 0%
TOTAL 2 593 542 21% 548 300 119 752 80 578 94 294 130 421 69 293 24 791 29 171

2012/2013 to 2016/2017
18.10.3 Summary of major capital investments - 2013 to 2017.
Table 18.36 Major projects
Project Description Business Plan 2013 Cashflows 2013 - 2017

Umgeni System
Years F'18 - 41
2013 - 2017 F'13 F'14 F'15 F'16 F'17
Business Plan
Forecast F'12
Project Stage
Project Total
30/06/2011
DFIFunded
Beyound 5
Cashflows
Customer
Cashflows
Objective
Progress
Projects
Work In
Revised
Project
2013
Cat.
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
AUGMENTATION
AUG CON Upper Umgeni '251 RW p/l: Midmar RW P/S to Midmar WW duplication 1,2,3 C1-B2 70 000 70 000 2 000 10 000 40 000 18 000
AUG CON Upper Umgeni '251/'51 New RW p/l (Dam - RW P/S) 1,2,3 B1 20 000 20 000 6 500 12 500 1 000
AUG CON Upper Umgeni 61 p/l: extension (Richmond Offtake to Umlaas Road) 1,3 A1 181 916 8 631 24 630 148 655 49 575 56 245 42 835
AUG CON EIB Upper Umgeni 61 pipeline extension (ED2 to Richmond Offtake) 1,2,3 A1 79 076 50 564 21 449 7 063 3 949 3 114
AUG CON Upper Umgeni Darvill WWW: Digestor Upgrade 1,2 C1-B2 10 250 10 250 4 800 5 450
AUG CON Upper Umgeni Darvill WWW: Plant Capacity Incr. (85Ml/d) (10Ml/d in 3-5yrs) 2 C1-B2 280 000 50 223 950 7 350 26 600 60 000 70 000 60 000 56 000
AUG CON Upper Umgeni DVH - Claridge Reservoir Pipeline 2,3,5 C1 42 000 42 000
AUG CON Lower Umgeni East Coast Desalination Plants 1,4 C1 18 000 2 000 16 000 11 500 4 500
AUG CON South Coast Ellingham Link Pipeline 4 C1-B2 37 000 500 36 500 7 000 19 500 10 000
AUG CON Lower Mvoti Fawsley Park WW 5 C2-C1 300 000 300 000
AUG CON Lower Mvoti Fawsley Park-Mvoti Balancing Res Pipeline (9km) 5 C2-C1 54 500 54 500
AUG CON EIB Hazelmere Hazelmere to Bifurcation Pipeline Augment. (700dia x 10km) 1,5 A1 97 400 3 427 20 000 73 973 59 178 14 795
AUG CON EIB Hazelmere Hazelmere WW: Raw Water Pipeline 1,5 A2 18 780 752 237 17 790 14 232 3 558
AUG CON EIB Hazelmere Hazelmere WW: Upgrade (45 to 75Ml/day) 1,5 A2 104 195 567 1 250 102 378 34 000 54 000 14 378
AUG CON Hazelmere Honolulu Reservoir Upgrade (15 Ml) 5 C2 60 000 2 000 2 000 58 000
AUG CON EIB Hazelmere Honolulu to Mvoti Balancing Reservoir Pipeline (800dia x 7km) 5 A1 77 300 49 879 18 000 9 422 7 538 1 884
AUG CON Upper Umgeni Howick Reservoir Upgrade (6.5 Ml) 3 B1 13 000 250 12 750 8 000 4 750
AUG CON Upper Umgeni Howick West Reservoir Upgrade (8.5Ml) 2,3 B2 17 000 17 000 500 14 500 2 000
AUG CON Upper Umgeni Lion Park Pipeline 1,3 C1 12 000 12 000 1 200 9 700 1 100
AUG CON Mkomazi Lower Mkomazi Bulk Water Scheme 1,3 C2-C1 796 000 6 000 500 3 000 2 500 790 000
AUG RUR Lower Umgeni Mapaphetwa WW: Upgrade Plant (5.0 Ml/d) (incl reseviour) 1 A1 39 800 14 669 23 247 1 884 1 884
AUG CON Upper Umgeni Midmar Dam RWPS - New Standby Pumpset & Manifolds 1,2,3 C1-B2 20 000 20 000 1 000 4 000 13 000 2 000
AUG CON EIB Upper Umgeni Midmar WW: Upgrade Ph 2 (250 to 375Ml/d) 1,2,3 B2 225 000 115 650 224 235 7 500 7 500 80 000 80 000 49 235
AUG CON Upper Mkomazi Sys Mkomazi Bulk Water Supply 1,3 C2-C1 1 611 000 150 5 850 3 150 2 700 1 605 000
AUG RUR Upper Umgeni Phase 2: Wartburg to Dalton p/l augmentation 3,5 C1-B2
AUG CON South Coast South Coast Augmentation Booster Pump Station 4 A1 86 681 53 849 23 894 8 938 6 392 2 546
AUG CON EIB South Coast South Coast Ph. 2a (Park Rynie to Kelso) 4 A1 31 856 18 784 13 072
AUG CON South Coast South Coast Ph.1(Toti to Umkomaas & to Scottburgh) 1,5,4 O 39 817 159 2 000 12 000 5 500 6 500
AUG CON Upper Umgeni Umlaas New Water Project 1 C1 417 000 25 000 3 000 22 000 392 000
AUG CON Upper Umgeni Umlaas Road Reservoir No.2 (45Ml) 1,3 C1-B2 74 450 74 450 400 6 100 36 000 31 950

2012/2013 to 2016/2017
Umgeni System
Years F'18 - 41
2013 - 2017 F'13 F'14 F'15 F'16 F'17
Business Plan
Forecast F'12
Project Stage
Project Total
30/06/2011
DFIFunded
Beyound 5
Cashflows
Customer
Cashflows
Objective
Progress
Projects
Work In
Revised
Project
2013
Cat.
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
AUG CON South Coast Umzinto link (Ellingham Reservoir to Umzinto WW) 4 O 32 746 468 6 463 5 170 1 293
AUG Various Other Projects 626 139 118 258 20 268 8 695 6 156 2 539 199 000
Sub Total Augmentation 5 492 906 319 653 172 116 1 173 246 244 774 228 574 231 913 278 700 189 285 3 496 500
EXPANSION
EXP RUR Mooi Greater Mpofana Regional Scheme 3 B2 277 709 4 168 327 209 177 1 500 1 500 90 000 94 000 22 177 64 037
EXP EXP Strategic Expansion Projects 200 000 200 000 50 000 50 000 50 000 50 000
EXP Various Other Projects 879 000 879 000
Sub Total Expantion 1 356 709 4 168 327 409 177 1 500 51 500 140 000 144 000 72 177 943 037
UPGRADE
UPG CON Aircon Renewal:Head Office A1 21 014 3 226 7 000 10 100 10 100
UPG CON Upper Umgeni Darvill Aerators - Diffused Air System 2 A2 63 000 500 62 500 58 000 4 500
UPG CON Upper Umgeni Darvill Sludge Handling Facility 2 C1-B2 17 500 17 500 5 500 12 000
UPG CON Upper Umgeni Darvill WWW - PLC Upgrades (10-yr upgrade cycle) 3,2 B1 15 000 15 000
CON Darvill WWW: Co Generation C1-B2 30 000 0 30 000 2 000 28 000
UPG Lower Umgeni Darvill Various Projects 3,2 9 433 833 300 8 300 6 000 2 300
UPG CON Lower Umgeni Dbn Hts WW: Candy Filters and Actuators upgrade 1 C1-B2 20 500 20 500 400 15 100 5 000
UPG CON Lower Umgeni Dbn Hts WW: Filter Upgrade 1 190 000 130 000 5 000 5 000 60 000 60 000 60 000
UPG CON Lower Umgeni Dbn Hts WW: PLC Upgrade (5-yr upgrade cycle) 1 B1 43 430 230 43 200
UPG Lower Umgeni Dbn Heights Various Projects 73 497 2 546 18 890 38 061 18 881 15 980 2 700 500 14 000
UPG CON EIB Hazelmere Hazelmere WW pumpstation upgrade 1,5 B1 21 500 900 20 600 10 480 10 120
UPG CON Hazelmere Hazemere Electrical Upgrade - Dual Incomers 1,5 B1 12 000 12 000
UPG CON Upper Umgeni Midmar PLC Upgrades (10-yr upgrade cycle) 1,2,3 A1 19 771 15 000
UPG CON Hazelmere Package Plant - North Coast 1,5 A1 25 000 10 000 15 000 15 000
UPG CON South Coast Quarry Reservoir upgrade (7.5Ml) 1,4 B1 15 000 500 14 500 12 000 2 500
UPG CON Upper Umgeni Refurbishment Head Office 24 100 4 754 1 500 17 701 3 000 10 000 4 701
UPG CON Lower Umgeni Wiggins Dam Safety: Concrete Rehab 1 B1 10 000 10 000 4 000 6 000
UPG CON Lower Umgeni Wiggins Highlift Pumpstation (Incl. Surge Anticipator) 1 A2 5 000 4 200 800 800
UPG CON Lower Umgeni Wiggins Ozone Plant Rahb and Element Replacement (every ten 1 60 000 50 19 950 5 950 9 000 5 000 40 000
UPG ASS Lower Umgeni Wiggins Filter Valve & Actuator Upgrade B1 12 000 12 000 1 600 10 400
UPG Lower Umgeni Wiggins Various Projects 1 35 765 16 515 18 650 11 520 4 630 2 500 600
UPG Various Other Projects 140 014 10 539 35 386 48 867 30 837 8 930 5 500 2 500 1 100 39 750
Sub Total Upgrade 863 524 22 128 107 741 495 029 201 068 144 460 25 401 63 000 61 100 227 550
REHABILITATION
REH ASS Lower Umgeni Dbn Hts WW: Reservoir 3 Roof Rehabilitation & Dam Safety 1 C1 28 000 28 000 3 000 15 000 10 000
REH ASS Lower Umgeni Nagle Aqueduct 3 & 4 - Refurbish 1, B1-A1 53 100 2 450 50 650 21 650 29 000
REH ASS South Coast Nungwane Raw Water Aqueduct (450dia x 18km) 1,4 B2 68 580 68 580 2 000 2 000 1 000 57 000 6 580
REH Various Other Projects 23 265 429 7 570 13 400 4 800 600 8 000

2012/2013 to 2016/2017
Umgeni System
Years F'18 - 41
2013 - 2017 F'13 F'14 F'15 F'16 F'17
Business Plan
Forecast F'12
Project Stage
Project Total
30/06/2011
DFIFunded
Beyound 5
Cashflows
Customer
Cashflows
Objective
Progress
Projects
Work In
Revised
Project
2013
Cat.
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Sub Total Rehabilitation 172 945 429 10 020 160 630 28 450 34 600 16 000 67 000 14 580
DEVELOPMENT
DEV RUR Upper Mkomazi Sys Greater Bulwer/Donnybrook BWSS 6 C1 20 000 20 000 20 000
DEV RUR Upper Umgeni Greater Eston 3 A1 157 408 6 209 18 753 132 446 52 000 68 018 12 428
DEV RUR Lower Thukela Lower Thukela BWS - Phase 1 5 B1 894 167 7 745 25 000 861 422 80 000 220 000 250 000 206 422 105 000
DEV RUR Lower Thukela Lower Thukela BWS - Phase 2 5 B1 130 015 130 015
DEV RUR EIB Upper Mvoti Maphumulo BWS PH 1 5 A1 187 247 48 723 60 000 78 524 61 080 17 444
DEV RUR Upper Mvoti Maphumulo BWS PH 2 5 A2 161 754 6 671 1 000 154 083 35 000 70 000 49 083
DEV RUR EIB South Coast Mhlabatshane Sub-Regional Scheme 4 A1 186 000 66 186 60 000 59 814 59 814
DEV RUR South Coast Mhlabatshane Sub-Regional Scheme - Area 1-3 Bulk supply Pipeli 4 B2
DEV RUR South Coast Mhlabatshane Sub-Regional Scheme Ph 2 - Mkimkhulu Abstr 4 C2 65 000 65 000
DEV RUR EIB Upper Mvoti Ozwathini Bulk Water Scheme 3,5 C1-B2
DEV RUR EIB Upper Umgeni Richmond P/L-30km's 3 A2 180 602 10 915 12 000 157 687 46 400 62 600 48 687
DEV RUR Upper Umgeni uMshwathi Bulk Water Supply Scheme ( Wartburg Phase 1 - 3) 3,5 C1-B2 564 692 50 368 617 16 150 25 000 98 800 94 333 134 333 196 025
DEV Various Other Projects 84 297 18 355 13 652 9 454 2 454 7 000
Sub Total Development Projects 2 631 182 164 804 190 454 1 842 047 352 898 490 062 458 998 300 755 239 333 391 040
TOTAL IMMOVABLES 10 517 265 511 182 480 659 4 080 129 828 690 949 196 872 312 853 455 576 475 5 058 127
OTHER Movables - Equipment & Vehicles 53 378 306 8 779 44 293 12 535 6 018 18 730 6 232 778 0
ICT Information Communication & Technology 175 471 1 121 16 000 68 350 19 000 12 850 9 700 10 850 15 950 90 000
OTHER Laboratory & Process Services 45 785 7 514 38 270 21 129 4 860 2 536 9 045 700 0
TOTAL MOVABLES 274 634 1 427 32 293 150 913 52 664 23 728 30 966 26 127 17 428 90 000
CASH FLOWS AS PER 2011/12 BUSINESS PLAN 589 528 3 119 201 600 520 578 687 493 987 598 356 847 651
INCREASE / (DECREASE) -76 576 1 111 842 280 834 394 237 409 291 281 226 -253 748
UPG = Upgrade, EXP = Expansion, REH = Rehabilitation, AUG = Augmentation, DEV = Development Projects, ICT = Information & Communication Technology Other = Equipment & Vehicles
CON = Consolidation, EXP = Expansion, RUR = Rural consolidation & Expansion, ASS = Asset condition, ICT = Information & Communication Technology, Other = Equipment & Vehicles
A1 = In Construction, A2 = In Tender, B1 = In Detailed Design, B2 = In Preliminary Design, C1 = In Detailed Feasibility, C2 = In Pre-Feasibility, O = Commissioned
Customers 1: eThekwini MM; 2: Msunduzi LM; 3:uMgungundlovu DM; 4:Ugu DM; 5:iLembe DM; 6: Sisonke

2012/2013 to 2016/2017
Figure18.7: 30 year project total movement between the 2011/12 business plan and the 2012/13 business plan
Thirty-Year Capital Expenditure Programme

1 000
2018-2022 - Decrease of (R2,083m)
Project Increases:
900 Umlaas New Water Project R282m
uMshwathi BWS R196m
Souther Ndewdwe R60m
800 Project Decreases:

Mkomazi BWS (R1,662m)
Lowr Thukela BWS (R488m)
Lower Mkomazi (R368m)
700
Phase 1: Claridge to Wartburg p/l
augmentation incl. pumpstation (R130m)
Worlds View Reservoir (R88m)
600 Darvill WWW Plant Capacity Inc. (R52m)
Rand (Millions)
2030 - Increase of R118m

500 Mkomaazi BWS- R118m
2012-2017 - Increase of R1,024m

Project Increases:
400 Lower Thukela BWS - Phase 1 R688m
uMshwathi BWS R369m
Hazelmere WW: Upgrade R 74m
Umlaas Road Reservoir No.2 (45Ml) R67m
300 Greater Mpofana Regional Scheme R53m
Nagle Aqueduct 3 & 4 - Refurbish R50m
Darvill Aerators - Diffused Air System R48m 2038-2040 - Increase of R333m
Dbn Hts WW: Filter Upgrade R47m
Wiggins Dbn Heights Various Projects R42m
Upper Mvoti Regional Water R333m
200
Darvill WWW: Co Generation R30m 2025-2027 - Decrease of (R385m)
Project Increase:
Project Decreases: South Coast 2B R20m
Lower Mkomazi Bulk Water Scheme (R233m) Lower Mkomazi BWS R40m
100
Ozwathini Bulk Water Scheme (R167m)
Mkomazi Bulk Water Supply (R121m) Project Descreases:
Phase 2: Wartburg to Dalton p/l Aug. (R109m) Upper Mvoti Regional Water (R333m)
Umlaas New Water Project (R102m) Lower Thukla (R111m)
F'12 F'13 F'14 F'15 F'16 F'17 F'18 F'19 F'20 F'21 F'22 F'23 F'24 F'25 F'26 F'27 F'28 F'29 F'30 F'31 F'32 F'33 F'34 F'35 F'36 F'37 F'38 F'39 F'40
Financial Year
Business Plan 2013 Business Plan 2012

2012/2013 to 2016/2017
Figure18.8: 30 year capex programme by category

2012/2013 to 2016/2017
Chapter 19: Debt Management and Funding Requirements
19.1 Long Term Cashflow and outstanding debt projections
19.1.1 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 interest rate 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 on-going basis.
Figure19.1: Asset Liability matching
3. Optimal Debt Level

The key driver in determining the optimal level of debt for Umgeni Water is 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 UG21 bond, exposes Umgeni Water to forward
starting interest rate and refinancing risk. These risks can be eliminated through redemption portfolio
management.

2012/2013 to 2016/2017
19.2 Debt curve

The shift in long-term borrowings arises primarily from the reduction in the thirty-year capex program which
is illustrated on figure 18.7. At the current projected debt levels (red line), Umgeni water will still be within the
acceptable leverage ratios and hence, these levels of debt will be acceptable.
Figure 19.2: Comparison of gross Debt Budget F’12 to Budget F’13
Figure 19.3: Comparison of Net Debt Budget F’12 to Budget F’13

2012/2013 to 2016/2017
19.3 Funding strategy
Table 19.1: Funding requirements (2012/13 to 2016/17)

Funding requirements Short term Medium term L/term
Financial Year (R'm) F12 F13 F14 F15 F16 F17
Operational Cash flows 686 666 637 654 706 738
CapEx - Gross (Escalated) -512 -945 -1162 -1176 -1176 -761
Net Operating and CapEx cash flow 174 -278 -526 -522 -470 -23
CapEx – Grants 88 51 40 107 73 181
Net financing activities -193 85 -168 -225 -287 -273
Net Incremental Funding Requirement p.a. 69 -142 -653 -639 -684 -115
Net (Funding) Investing requirements 69 -142 -653 -639 -684 -115

Opening Balance Call investments 1366 1435 1293 639 0 -684
Closing Balance (incl net bank) 1435 1293 639 0 -684 -799
Short term funding strategy: FY12 to FY13
 No funding requirements in the short term.

 Continue to invest funds in short term investments 6 to 18 months.
 Only EIB funding to be drawn down: F’12 – R76m and F’13 – R265m
Medium-term: FY14 to FY16
 Continue to invest surplus funds in short term investments not exceeding 18 months.
 Funding requirement in 2016 of R585m arises from higher Capex investment activities which should
be funded via long term debt.
Long-term: FY17 onwards
Table 19.2: Funding requirements (2016/17 to 2021/22)

Funding requirements
Financial year (R'm) F17 F18 F19 F20 F21 F22
Operational Cash flows 738 791 839 807 874 923
CapEx - Gross (Escalated) -761 -790 -235 -425 -541 -659
Net Operating and CapEx cash flow -23 1 604 382 332 265
CapEx - Grants 181 169 178 114
Net financing activities -273 -303 -245 -174 -711 -92
redemption strategy: UG21 -65 -155 -195 415 0
Net Incremental Funding Requirement p.a. -115 -198 383 126 37 173
Opening Balance Call investments -684 -799 -997 -614 -488 -451
Closing Balance (incl net bank) -799 -997 -614 -488 -451 -278
The current projections reflect that Umgeni Water will in the long term require significant additional long term
funding to provide for its next phase of high capital expenditure and the redemption of the UG21 bond and that
its tariff increase will have to be above projected CPI levels if the organisation is to maintain an optimal
gearing level.
Medium to long term Funding strategy
 The funding strategy in the medium to long term will be as follows:

o Source of funding: Bond issuance via the DMTN programme

2012/2013 to 2016/2017
o Amount: 2 tranches of R500m in F’15 and F’16

o Tenure: 10 years
Impact of the funding strategy will be as follows:
 Impact on the Debt Level:
Figure 19.4: Comparison of net Debt Budget F’12 to Budget F’13

Debt increases over the
optimal level of R1.8bn in
2015 when the bond is issued
but thereafter follows a
downward trajectory to meet
the existing debt curve.
In 2022, the debt curve will
move outward again to cater
for the redemption assets
that need to be built up for
the redemption of the
proposed bond in 2025.
 Impact on the existing loan covenants:

With the proposed issuance, no covenants will be breached
Figure 19.5: Debt:Equity Ratio(Covenant: less than 0.7 times)
Figure 19.6: Interest cover ratio (covenant: greater than 2.5 times)

2012/2013 to 2016/2017
19.4 Sources of funding: 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.
19.4.1 Bank Funding

A summary of the various funding facilities that Umgeni Water currently has and major conditions relating to
those facilities are as per Table 19.3.
Table 19.3: Bank Funding Facilities
Bank Type of facility Committed Uncommitted

FNB Working capital facility R50 million
RMB Multipurpose Treasury Facility R100 million
Standard Bank General banking facility R50 million
Investec General credit facility R50 million
ABSA Overnight facility R30 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;
 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.
 Guarantees and letters of credit
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

2012/2013 to 2016/2017
 Overdraft – Prime Rates

 Overnight – Base rate plus 2%
Nedbank
 Overnight loans
 Electronic banking facilities
19.4.2 Annuity Loans

Terms, conditions and maturity are specific to each loan agreement. The most significant loans and the
balances as at 30 June 2012 (forecast) are: DBSA loan 71, part of which is a variable interest rate fifteen-year
loan at, R 350 million and part (R75m) at a fixed interest rate; and DBSA loan 73, which is a fixed interest rate
ten-year loan, at R 175 million.
19.4.3 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.
o 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.
o Interest rate
The interest rate will be determined at the time of issuance of notes and will be specified in the Applicable
Pricing Supplement.
o Maturity
The Notes are not subject to any minimum or maximum maturity.
o 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.

2012/2013 to 2016/2017
19.4.4 Development Funding Institutions
European Investment Bank (EIB) Loan

In December 2011, Umgeni Water concluded the signing of the loan facility agreement with the EIB. The
European Investment Bank provided EUR 35 million (R390 million) long-term funding facility to Umgeni Water
for new investment and upgrading of existing pipelines, water treatment works, pumping and service
reservoirs that will contribute to improved supply of bulk potable water in the Umgeni Water operational area.
The granting of the loan to Umgeni Water is the first loan to be made to a South African water board by the
European Investment Bank.
The loan is unsecured.
19.5 Confirmation of compliance with loan covenants

The only financial covenants are per the EIB agreement as follows:
 Consolidated EBIT to Borrowing Costs of not less than 2.5 : 1
 Consolidated Gross Borrowings to Consolidated Equity not greater than 0.7 : 1
Table 19.4: Compliance with loan covenants

Ratio 2009 2010 2011 2012 2013 2014 2015 2016 2017
Debt: Equity 1.283 0.729 0.548 0.440 0.420 0.355 0.288 0.387 0.396
Interest cover 2.336 2.384 3.093 4.499 3.825 3.220 3.926 3.772 3.030
In terms of the current projections 2012 to 2017, Umgeni Water does not look to breach the covenants.
19.6 Debt guaranteed by government

Umgeni Water does not have any government guaranteed debt.
19.7 Maturity Profile of Debt

The maturity profile (Table19.5) indicates the short and long term borrowings.
Table 19.5: Maturity profile of investment (Balance Sheet)

Investment maturity structure (R'm) F'09 F'10 F'11 F'12 F'13 F'14 F'15 F'16 F'17
< 1year 1 213 1 179 1 510 1 777 1 635 982 342 327 327
98% 98% 99% 99% 100% 100% 100% 100% 100%
1-5 years 22 19 14 10 5 0 0 0 0
2% 2% 1% 1% 0% 0% 0% 0% 0%
5-10 years 0 0
0% 0% 0% 0% 0% 0% 0% 0% 0%
+10 Years 0 0
0% 0% 0% 0% 0% 0% 0% 0% 0%
Total Investments 1 236 1 197 1 524 1 787 1 640 982 342 327 327

2012/2013 to 2016/2017
Figure 19.7: Investment portfolio
Table 19.6: Maturity profile of debt (Balance Sheet)
Debt maturity structure

F'09 F'10 F'11 F'12 F'13 F'14 F'15 F'16 F'17
(R'm)
< 1year 1 061 145 115 124 128 129 135 826 1 122
54% 9% 8% 9% 9% 9% 11% 44% 54%
1-5 years 592 593 519 483 507 412 902 838 773
30% 38% 38% 36% 34% 30% 72% 45% 37%
5-10 years 312 808 739 693 698 704 99 99 99
16% 52% 54% 52% 47% 51% 8% 5% 5%
+10 Years 13 34 142 139 119 99 79
1% 0% 0% 3% 10% 10% 9% 5% 4%
Total Borrowings 1 979 1 545 1 373 1 334 1 474 1 383 1 254 1 862 2 073
Net Borrowings 743 348 -151 -454 -166 401 912 1 534 1 746
Long - term debt (>1 year) 917 1 400 1 258 1 210 1 346 1 254 1 120 1 035 951
Movement -53.60% 52.62% -10.17% -3.83% 11.28% -6.82% -10.73% -7.53% -8.16%
Short - term debt (<1 year) 1 061 145 115 124 128 129 135 826 1 122
945.22
Movement -86% -20.50% 7.92% 3.20% 0.71% 4.34% 513.91% 35.85%
%
Table 19.6.1: Fixed versus Floating Debt

Ratio of Fixed to floating interest
F09 F10 F11 F12 F13 F14 F15 F16 F17
rate debt
Fixed Interest Rate Debt (R’m) 1 479 1 067 973 984 1 174 1 133 1 054 970 935
75% 70.30% 71.40% 73.76% 79.65% 81.93% 84.05% 52.09% 45.11%
Floating Interest Rate Debt (R’m) 500 450 400 350 300 250 200 892 1 138
25% 29.70% 28.60% 26.24% 20.35% 18.07% 15.95% 47.91% 54.89%
TOTAL BORROWINGS 1 979 1517 1 373 1 334 1 474 1 383 1 254 1 862 2 073
Table 19.6.2: long term funding portfolio

LOAN LENDER MATURITY DATE CAPITAL OUTSTANDING (R'm)
2009 2010 2011 2012 2013 2014 2015 2016 2017
LN27 DBSA 2011/03/31 18 14 0 0
LN47 DBSA 2011/03/31 22 21
LN30 DWA 2013/05/04 3 2 1 1 0
LN37 DWA 2009/06/30 0
LN54 RMB 2013/06/30 45 36 25 13 0

2012/2013 to 2016/2017
LOAN LENDER MATURITY DATE CAPITAL OUTSTANDING (R'm)

2009 2010 2011 2012 2013 2014 2015 2016 2017
LN56 Liab RMB 2014/09/30 18 15 12 9 5
LN71-1&2 DBSA 2019/03/31 500 450 400 350 300 250 200 150 100
LN71-3 DBSA 2019/03/31 107 97 86 75 64 54 43 32 21
LN72 DBSA 2021/03/31 43 40 37 34 31 28 24 21 17
LN73 DBSA 2016/03/31 273 243 211 175 137 96 50 0
UG65 2010/06/01 974
UG21 Capital market 2021/03/02 600 600 600 600 600 600 600 600
LN74 EIB forecast 76 337 356 336 1059 1335
TOTAL 2004 1517 1373 1334 1474 1383 1254 1862 2073
Figure 19.8: Debt Maturity
The increase in the debt maturing in less than one year in F16 and F’17 is due mainly to the increase in short
term debt to fund capital expenditure requirements. However, this is not a viable option as long term assets
cannot be funded through short term debt. Thus the medium to long term funding strategy as per section 19.6
will remedy the anomaly presented above.
19.8 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 based on:
 F’12 – R1 950m
 F’13 – R1 800m
 F’14 – R1 750m

2012/2013 to 2016/2017
Figure 19.9: Analysis of funding against approved borrowing limits
Table 19.7: Gross Borrowings (R’m)
Borrowing Limit F12 F13 F14 F15 F16 F17

Gross Borrowings 1 334 1 474 1 383 1 254 1 862 2 073
Contingencies 300 300 300 300 300 300
TOTAL GROSS BORROWINGS 1 634 1 774 1 683 1 554 2 162 2 373
Approved borrowing Limit 1 950 1 800 1 750
(Over) Under utilisation 316 26 67 -1 554 -2 162 -2 373
19.9 Proposed borrowings
19.9.1 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 19.8: Proposed total borrowings (R’000)
Date of Total gross Total portion

Borrowing Borrowing Long term Short term
Actual Short-term
portion of Short-term
Actual Actual total short
long term borrowings
term
debt
2008/2009 1 978 904 917 449 1 061 455 1 061 455 -
2009/2010 1 517 449 1 372 794 144 655 144 655 -
2010/2011 1 372 794 1 257 787 115 006 115 006 -
Projected Projected Proposed Total Projected Projected Projected
2011/2012 1 333 719 1 137 473 72 135 1 209 608 124 111 124 111 -
2012/2013 1 474 141 1 095 445 250 610 1 346 055 128 086 128 086 -
2013/2014 1 383 296 1 219 126 35 172 1 254 298 128 998 128 998 -
2014/2015 1 254 298 1 119 701 - 1 119 701 134 597 134 597 -
2015/2016 1 861 701 1 035 397 - 1 035 397 826 303 142 316 683 987
2016/2017 2 073 397 950 903 - 950 903 1 122 495 1 007 547 114 948

2012/2013 to 2016/2017
Table 19.9: Borrowing programme in Rands – Foreign (R’000)
* The loans are denominated in South African Rands and thus there is no currency risk
Date of Total gross Foreign portion
Actual Short-term
term
debt
2008/2009
2009/2010
2010/2011
2011/2012 75 932 - 72 135 72 135 3 797 3 797 -
2012/2013 336 668 68 339 250 610 318 949 17 719 17 719 -
2013/2014 356 189 301 229 35 172 336 401 19 788 19 788 -
2014/2015 336 401 316 613 - 316 613 19 788 19 788 -
2015/2016 316 613 296 824 - 296 824 19 788 19 788 -
2016/2017 296 824 277 036 - 277 036 19 788 19 788 -
Table 19.10: Borrowing programme –Domestic (R’000)

Date of Total gross Domestic portion
Actual Short-term
term
debt
2008/2009 1 978 904 917 449 1 061 455 1 061 455
2009/2010 1 517 449 1 372 794 144 655 144 655
2010/2011 1 372 794 1 257 787 115 006 115 006
2011/2012 1 257 787 1 137 473 - 1 137 473 120 315 120 315 -
2012/2013 1 137 473 1 027 106 - 1 027 106 110 366 110 366 -
2013/2014 1 027 106 917 897 - 917 897 109 209 109 209 -
2014/2015 917 897 803 088 - 803 088 114 809 114 809 -
2015/2016 1 545 088 738 573 - 738 573 806 515 122 528 683 987
2016/2017 1 776 573 673 867 - 673 867 1 102 707 987 759 114 948
19.10 Hedging policies
19.10.1 Interest rate derivatives

 Purpose:
o To improve the ability to raise long term finance
o To reduce the cost of long term finance
o To provide instruments to assist in the management of the interest rate and liquidity risk on long
term finance.
 Approved instruments
o The following derivative instruments are approved for the purpose stated.
Table 19.11: Approved interest rate derivative instruments
Funding Risk management

Written Over the counter (OTC) interest rate options on Umgeni Water bonds X X
Written OTC interest rate options on non-Umgeni Water bonds which are on the X
approved list
Purchased OTC interest rate options on Umgeni Water bonds X X
Purchased OTC interest rate options on Non-Umgeni Water bonds X
o The writing of options is only permitted for approved non-Umgeni Water bond issues where the
issuer makes a market in the underlying issues.

2012/2013 to 2016/2017
o Both options written and purchased may have a maximum expiry of 12 months from transaction
date.
o Options include caps, floor, collar, rate swaps.
 Delegation of Authority
The Board of Umgeni Water is responsible for approving the following:
o Approve instruments and combinations thereof for utilisation in funding, investment and
hedging activities
o Select instruments and techniques from the approved list
o Appoint dealers to deal in the Options Market
o Approve special transactions entered into with market participants
o Determine which underlying bonds can be utilised for buying and writing options
19.10.2 Derivatives for management of foreign currency risk

 Purpose
o To reduce the cashflow risk associated with transactions concluded in foreign currency.
 Policy
o Umgeni Water’s risk profile requires that all funding transactions be South African Rand
denominated, and thus the only foreign currency transactions permitted are those required to
hedge transactions arising from the operating environment.
o Depending on the business and economic environment prevailing, minimum hedging level for
foreign exchange risk should be 30% to 40% of the underlying risk.
o Any prepayments in terms of foreign currency transactions should not exceed 30% as
determined by the South African Reserve Bank.
o There must be a bona fide business basis for all foreign exchange transactions.
 Approved instruments
o Natural hedging
o Forward market hedging
 Delegation of Authority
o All forward cover transactions to be approved by the General Manager: Finance as delegated by
the Board from time to time.

2012/2013 to 2016/2017
Chapter 20: Materiality and Significance Framework
Chapter 20: Materiality and Significance Framework

The framework is applied under two main categories, being quantitative and qualitative aspects.
Quantitative aspects: Materiality level
Umgeni Water assesses the level of a materiality as being ½ % of Umgeni Water’s gross revenue. It is
recognised that different levels of materiality can be set for different classes of transactions. Umgeni Water has,
however, taken the approach of setting a more conservative materiality level that will be used for all classes of
transactions.
Factors considered:
 Nature of Umgeni Water’s business: Revenue for Umgeni Water primarily comprises sales of water,
fees for management of waterworks and waste water works and revenue fROM S30 activities.
 Statutory requirements applicable to Umgeni Water:
o Umgeni Water is listed as a PFMA Schedule 3B public entity.
o The Board of Umgeni Water is required to execute their mandate in terms of the PFMA.
o Umgeni Water accordingly elects to give preference to a lower level of materiality due to it being
so closely governed by various acts and the public accountability responsibility it has to
stakeholders.
 The control and inherent risks associated with Umgeni Water: In assessing the control risk of
Umgeni Water, management concluded that level of materiality being ½ % of gross revenue is
appropriate and prudent. This assessment is based on the fact that a sound control environment is
being maintained. In this regard cognisance was given to amongst other matters:
o Proper and appropriate governance structures are established which include a Board of
Directors (Accounting Authority), CE and Executive Management.
o A Risk Management Committee with specific risk management responsibilities;
o An audit committee that closely monitors the control environment of Umgeni Water;
o The function of internal audit is outsourced to professional independent internal auditors; and
o A three year Internal Audit Coverage Plan, based on annual risk assessments.
Qualitative Aspects
Materiality is not confined to the size of the entity and the elements of its financial statements.
 Umgeni Water recognises that misstatements that are large either individually or in the aggregate
may affect a “reasonable” user’s judgement. Further, misstatements may also be material on
qualitative grounds. These qualitative grounds include amongst other:
o New ventures that Umgeni Water may enter into.
o Unusual transactions entered into that are not of a repetitive nature and are required to be
disclosed purely due to the nature thereof due to knowledge thereof affecting the decision
making of the user of the financial statements.
o Transactions entered into that could result in reputational risk to Umgeni Water.
o Any fraudulent or dishonest behaviour of an officer or staff of Umgeni Water.
o Any suspected corruption, irregularities or fraud.
o Any infringement of Umgeni Water’s agreed performance levels.
o Procedures/processes required by legislation or regulation (e.g. PFMA and the Treasury
Regulations).
o Unauthorised, irregular or fruitless and wasteful expenditure.
o Items of a non-financial nature, which would impact on the continued operation and deliverables
of Umgeni Water.
The policy contained in this framework will be appropriately presented in the Annual Report of Umgeni Water.

2012/2013 to 2016/2017
Chapter 21: Financial Ratios

Table 21.1 Umgeni Water financial indicators and ratios
Umgeni Water Financial Indicators and F09 F10 F11 F12 F12 F13 F14 F15 F16 F17
Ratios
A Performance criteria/indicators
1 Volume of water sold (kl'000) 415 956 425 848 414 876 413 905 414 983 416 550 419 881 424 780 431 151 437 619
eThekwini Municipality(kl'000) 326 232 328 504 310 994 312 075 310 527 310 527 313 010 316 662 321 412 326 233
Siza Water 3 828 4 171 4 553 4 685 4 553 4 945 4 984 5 042 5 118 5 195
Other WSA's(kl'000) 85 897 93 173 99 330 97 145 99 903 101 078 101 886 103 075 104 621 106 191
2 Total gross revenue (R'000) 1 485 496 1 622 380 1 648 950 1 853 130 1 771 863 1 954 048 1 944 062 2 078 611 2 227 634 2 387 080
3 Total Bulk Revenue (R'000) 1 259 187 1 373 784 1 423 332 1 506 646 1 511 116 1 753 204 1 863 850 1 992 696 2 135 615 2 288 500
eThekwini Municipality(R'000) 984 893 1 067 354 1 061 732 1 130 336 1 124 729 1 301 419 1 383 818 1 479 445 1 585 526 1 699 023
Siza Water 11 785 13 678 15 587 17 298 16 965 21 267 22 613 24 178 25 912 27 766
Other WSA's(R'000) 262 508 292 752 346 014 359 012 369 423 430 519 457 419 489 073 524 178 561 712
4 Bulk Revenue Growth 5.74% 9.10% 13.04% 5.94% 6.17% 16.02% 6.31% 6.91% 7.17% 7.16%
5 Weighted average Water tariff (R/kl) (total bulk rev/total 3.027 3.226 3.033 3.638 3.640 4.211 4.442 4.694 4.957 5.233
bulk vol)
eThekwini Municipality 3.019 3.215 3.019 3.622 3.622 4.191 4.421 4.672 4.933 5.208
Siza Water 3.079 3.279 3.482 3.726 3.726 4.301 4.537 4.795 5.063 5.345
Other WSA's 3.079 3.279 3.079 3.694 3.694 4.267 4.502 4.758 5.024 5.304
6 Net profit (loss) for the year 525 638 540 024 425 051 505 129 526 677 476 523 391 110 446 802 466 276 425 899
7 Cost of raw water (c/kl) 18.690 19.695 23.128 36.876 35.469 73.409 79.447 84.882 91.788 97.094
8 Profit from Operations/Revenue 0.432 0.382 0.270 0.308 0.318 0.252 0.223 0.239 0.261 0.242
9 Total expenditure/Revenue 0.667 0.672 0.736 0.731 0.706 0.759 0.802 0.788 0.794 0.824
10 Cost of sales/Revenue 0.367 0.383 0.401 0.452 0.466 0.512 0.498 0.512 0.524 0.530
11 Total cost/volume (Rand/kl) (Consolidated) 2.382 2.560 2.927 3.272 3.015 3.562 3.713 3.856 4.100 4.497
12 Total cost/volume (Rand/kl) (Primary only) 1.962 2.086 2.086 2.577 2.552 3.250 3.685 3.827 4.069 4.464
13 Total cost/volume (Rand/kl) (Bulk only) 1.865 1.991 2.406 2.456 2.422 3.106 3.531 3.663 3.900 4.282
14 Net Finance costs (Rand/kl) 0.280 0.188 0.048 0.157 0.089 0.040 0.100 0.120 0.265 0.344
15 Personnel cost ratio (Total Personnel costs/Total Costs excl 0.223 0.223 0.202 0.222 0.214 0.209 0.221 0.233 0.241 0.236
finance costs)
16 Personnel cost per kilolitre (Personnel costs/Annual 0.469 0.530 0.582 0.692 0.625 0.735 0.797 0.871 0.923 0.979
volume)
volume) (Primary only)
volume) (Bulk only)
19 Number of employees 825 845 845 920 899 935 945 945 957 957
20 Kl'000sold per employee 504 189 503 962 490 978 449 897 461 605 445 508 444 318 449 502 450 524 457 282

2012/2013 to 2016/2017
Version: 14 June 2012 2:32 PM
Ratios
B Operating Risks
21 Working ratio (total expenses excluding depreciation, 0.477 0.512 0.613 0.637 0.628 0.692 0.715 0.699 0.676 0.684
amortisation and finance costs divided by Total revenue)
22 Operating Ratio (Total Costs excluding depreciation & 0.555 0.561 0.625 0.673 0.649 0.701 0.736 0.723 0.727 0.747
amortisation/Total Revenue)
23 Controllable working ratio (total expenses exclud.raw water, 0.424 0.460 0.555 0.555 0.545 0.536 0.543 0.525 0.498 0.506
deprec, amort & inter. divided by total. rev.)
24 Return on assets (income before interest & taxes divided by 22.63% 20.00% 13.71% 14.97% 16.46% 11.80% 8.51% 8.28% 8.22% 7.52%
total assets excluding investments)
25 Asset turnover (revenue divided by total assets excluding 0.523 0.523 0.508 0.487 0.517 0.468 0.382 0.346 0.315 0.311
investments )
26 Gross margin % 63.31% 61.73% 59.86% 54.84% 53.38% 48.84% 50.17% 48.80% 47.62% 46.97%
27 Current asset turnover (revenue divided by current assets 7.421 5.370 4.741 7.251 7.000 7.021 6.886 7.072 7.237 7.329
excl investments)
28 Fixed asset turnover (revenue divided by fixed assets) 0.601 0.605 0.575 0.527 0.564 0.505 0.407 0.365 0.331 0.326
29 Debtors collection period (debtors divided by revenue times 37.668 48.745 38.085 38.597 38.676 39.208 40.110 39.177 38.566 38.380
365) (Excl. VAT) *
30 Trade debtors collection period (Trade Debtors divided by 37.668 48.745 38.085 38.597 38.676 39.208 40.110 39.177 38.566 38.380
revenue times 365) Excl VAT
31 Accounts receivable turnover (revenue divided by accounts 8.500 6.568 8.407 8.295 8.278 8.166 7.982 8.172 8.302 8.342
receivable) (Excl. VAT)
* Accounts receivable is made up as follows:

Trade Debtors 174 766 246 997 196 143 223 393 214 036 239 291 243 541 254 343 268 326 286 144
Provision for Doubtful debts - - - - - - - - - -
174 766 246 997 196 143 223 393 214 036 239 291 243 541 254 343 268 326 286 144
C Financial Risks
31 Current ratio (current assets divided by current liabilities) 0.991 2.329 2.395 2.744 2.835 2.796 1.957 1.032 0.498 0.424
32 Debt ratio (total debt divided by total assets) 0.486 0.353 0.288 0.281 0.256 0.253 0.228 0.198 0.252 0.259
33 Gross Debt-equity ratio (total liabilities divided by total 1.283 0.729 0.548 0.449 0.440 0.420 0.355 0.288 0.387 0.396
accumulated reserves)
34 Net Debt-equity ratio (Net liabilities divided by total 0.482 0.154 (0.060) 0.114 (0.150) (0.047) 0.103 0.210 0.319 0.333
accumulated reserves)
35 Weighted Average Cost of Capital (WACC) (Per AFS) 12.63% 9.50% 9.28% 9.42% 9.28% 9.40% 9.44% 9.54% 8.92% 8.76%
36 Weighted Average Cost of Capital (WACC) (Finance 13.52% 15.19% 8.32% 7.68% 6.93% 5.93% 6.87% 6.66% 6.29% 7.41%
costs/Gross borrowings)
37 Financial Leverage (D/(D+E)) (Net of redemption assets) 0.449 0.419 0.351 0.308 0.304 0.295 0.262 0.224 0.279 0.283
C Debt Management
Net Debt
Total Borrowings (as per Balance sheet) 1 978 904 1 517 449 1 372 794 1 353 042 1 333 719 1 474 141 1 383 296 1 254 298 1 861 701 2 073 397
Total Investment (as per Balance sheet) 1 235 897 1 197 295 1 524 061 1 009 295 1 787 295 1 640 480 982 297 342 297 327 297 327 297
Net Borrowings (Total Borrowings - Total Investment) 743 008 320 153 (151 268) 343 747 (453 575) (166 339) 400 999 912 001 1 534 404 1 746 101

2012/2013 to 2016/2017
Ratios
D Business Credit Risk
38 Interest Cover ratio (EBIT/int paid) 2.336 2.384 3.093 4.228 4.499 3.825 3.220 3.926 3.772 3.030
39 EBITDA interest coverage (EBITDA/int paid) 2.993 3.469 5.498 6.526 7.206 6.943 5.896 7.579 6.225 4.955
40 Cash from operations/average total debt 0.376 0.558 0.740 0.492 0.514 0.452 0.460 0.522 0.379 0.356
41 Return on average total capital 0.416 0.298 0.178 0.189 0.186 0.141 0.111 0.114 0.121 0.110
42 EBITDA/Sales 0.544 0.493 0.381 0.366 0.376 0.311 0.288 0.305 0.327 0.319
43 Funds flow net debt pay back (cash from op before WC 0.403 0.545 0.547 0.572 0.561 0.476 0.500 0.560 0.405 0.381
adj/total int bearing debt)
E Surplus Ratios
44 Accounting Surplus (NP)/Fixed Assets (PPE) 0.213 0.201 0.148 0.144 0.168 0.123 0.082 0.079 0.069 0.058
45 Return on turnover (NP)/Revenue 0.354 0.333 0.258 0.273 0.297 0.244 0.201 0.215 0.209 0.178
46 EBITDA 808 355 799 626 628 070 678 199 665 942 607 441 560 664 632 997 729 148 760 883
47 Net Debt/EBIDAR 2.448 1.898 2.186 0.507 2.003 2.427 2.467 1.982 2.553 2.725

2012/2013 to 2016/2017
Table 21.2 Umgeni Water GROUP financial indicators and ratios
GROUP Financial Indicators and Ratios F09 F10 F11 F12 12 13 14 15 16 17

A Performance criteria/indicators
1 Total gross revenue (R'000) 1 492 688 1 633 043 1 660 912 1 868 605 1 784 805 1 967 960 1 958 879 2 094 612 2 244 755 2 405 572
2 Bulk Water Business segment
2.1 Volume of water sold (kl'000) 415 956 425 848 414 876 413 905 414 983 416 550 419 881 424 780 431 151 437 619
2.2 Total Bulk Revenue (R'000) 1 259 188 1 373 786 1 423 332 1 506 646 1 511 116 1 753 204 1 863 850 1 992 696 2 135 615 2 288 500
2.3 Average increase in revenue 5.7% 9.1% 13.0% 5.9% 6.2% 16.0% 6.3% 6.9% 7.2% 7.2%
2.4 Weighted average Water tariff (R/kl) (total bulk rev/total bulk vol) 3.027 3.226 3.431 4.051 3.641 4.209 4.439 4.691 4.953 5.229
2.5 Total cost per kl sold 1.865 1.991 2.406 2.426 2.419 3.100 3.522 3.681 3.879 3.115
3 Net profit (loss) for the year 527 014 470 178 428 442 505 129 524 199 476 591 391 661 447 606 466 901 426 480
4 Profit from Operations/Revenue 0.430 0.390 0.268 0.306 0.314 0.251 0.221 0.238 0.259 0.240
5 Total expenditure/Revenue 0.669 0.713 0.738 0.733 0.710 0.761 0.803 0.789 0.795 0.825
6 Cost of sales/Revenue 0.365 0.373 0.398 0.448 0.463 0.508 0.495 0.508 0.520 0.526
7 Total cost/volume (Rand/kl) (Consolidated) 2.401 2.617 2.956 3.308 3.052 3.595 3.747 3.892 4.138 4.538
8 Net Finance costs (Rand/kl) 0.280 0.378 0.048 0.157 0.089 0.040 0.100 0.120 0.265 0.344
9 Personnel cost ratio (Total Personnel costs/Total Costs excl finance costs) 0.266 0.268 0.240 0.234 0.226 0.220 0.232 0.245 0.253 0.247
10 Personnel cost per kilolitre (Personnel costs/Annual volume) 0.565 0.603 0.697 0.737 0.671 0.781 0.847 0.924 0.979 1.037
B Operating Risks
11 Working ratio (total expenses excluding depreciation, amortisation and finance 0.479 0.507 0.616 0.640 0.631 0.694 0.716 0.700 0.678 0.686
costs divided by Total revenue)
12 Operating Ratio (Total Costs excluding depreciation & amortisation/Total 0.557 0.606 0.628 0.674 0.652 0.703 0.738 0.725 0.728 0.749
Revenue)
13 Controllable working ratio (total expenses exclud.raw water, deprec, amort & 0.427 0.451 0.558 0.558 0.549 0.539 0.546 0.528 0.501 0.509
inter. divided by total. rev.)
14 Return on assets (income before interest & taxes divided by total assets 22.54% 18.58% 14.31% 14.95% 16.33% 11.77% 8.50% 8.28% 8.21% 7.52%
excluding investments)
15 Asset turnover (revenue divided by total assets excluding investments ) 0.524 0.476 0.534 0.489 0.519 0.470 0.384 0.348 0.317 0.313
16 Gross margin % 63.49% 62.69% 60.15% 55.21% 53.72% 49.20% 50.55% 49.19% 48.02% 47.37%
17 Current asset turnover (revenue divided by current assets excl investments) 7.316 8.752 5.453 7.231 6.965 6.972 6.829 7.037 7.179 7.307
18 Fixed asset turnover (revenue divided by fixed assets) 0.604 0.518 0.619 0.530 0.568 0.508 0.410 0.368 0.333 0.329
19 Debtors collection period (debtors divided by revenue times 365) (Excl. VAT) * 37.624 32.710 49.594 38.300 38.942 39.436 40.319 39.364 38.727 38.513
20 Accounts receivable turnover (revenue divided by accounts receivable) (Excl. 8.510 9.788 6.456 8.360 8.222 8.119 7.941 8.134 8.268 8.313
VAT)
* Accounts receivable is made up as follows:

Trade Debtors 175 407 165 205 257 269 223 526 217 083 242 396 246 676 257 523 271 514 289 362
Provision for Doubtful debts - - - - - - - - - -
175 407 165 205 257 269 223 526 217 083 242 396 246 676 257 523 271 514 289 362

2012/2013 to 2016/2017
GROUP Financial Indicators and Ratios F09 F10 F11 F12 12 13 14 15 16 17

C Financial Risks
21 Current ratio (current assets divided by current liabilities) 0.990 0.808 2.418 2.717 2.821 2.781 1.948 1.031 0.500 0.4
22 Debt ratio (total debt divided by total assets) 0.485 0.343 0.352 0.280 0.255 0.253 0.227 0.197 0.252 0.259
23 Gross Debt-equity ratio (total liabilities divided by total accumulated reserves) 1.279 0.619 0.727 0.448 0.439 0.419 0.354 0.288 0.386 0.395
24 Net Debt-equity ratio (Net liabilities divided by total accumulated reserves) 0.480 0.554 0.153 0.114 (0.149) (0.047) 0.103 0.209 0.318 0.333
25 Weighted Average Cost of Capital (WACC) (Per AFS) 12.63% 9.50% 9.50% 9.42% 9.33% 9.42% 9.52% 9.69% 9.86% 10.02%
26 Weighted Average Cost of Capital (WACC) (Finance costs/Gross borrowings) 13.52% 20.61% 7.53% 7.68% 6.93% 5.93% 6.87% 6.66% 6.29% 7.41%
28 Financial Leverage (D/(D+E)) (Net of redemption assets) 0.449 0.382 0.418 0.308 0.303 0.295 0.261 0.224 0.278 0.283
C Debt Management
Net Debt
29 Total Borrowings (as per Balance sheet) 1 978 903 1 208 449 1 517 448 1 353 041 1 333 719 1 474 141 1 383 296 1 254 298 1 861 701 2 073 397
30 Total Investment (as per Balance sheet) 1 235 897 126 862 1 197 295 1 009 295 1 787 295 1 640 480 982 297 342 297 327 297 327 297
31 Net Borrowings (Total Borrowings - Total Investment) 743 007 1 081 587 320 153 343 747 (453 575) (166 339) 400 999 912 001 1 534 404 1 746 101
D Business Credit Risk

32 Interest Cover (EBIT/int paid) 2.400 2.534 2.681 4.315 4.537 3.427 3.512 4.025 3.802 3.206
33 EBITDA interest coverage (EBITDA/int paid) 2.993 3.226 3.463 6.540 7.189 6.951 5.909 7.594 6.233 4.960
34 Cash from operations/average total debt 0.377 0.619 0.558 0.537 0.513 0.453 0.462 0.521 0.380 0.356
35 Return on average total capital 0.415 0.323 0.296 0.189 0.185 0.140 0.111 0.114 0.120 0.110
36 EBITDA/Sales 0.542 0.497 0.488 0.364 0.372 0.309 0.287 0.303 0.325 0.317
37 Funds flow net debt pay back (cash from op before WC adj/total int bearing debt) 0.404 0.665 0.545 0.573 0.560 0.477 0.501 0.560 0.406 0.381
E Surplus Ratios
38 Accounting Surplus (NP)/Fixed Assets (PPE) 0.213 0.151 0.201 0.144 0.167 0.123 0.082 0.079 0.069 0.058
39 Return on turnover (NP)/Revenue 0.353 0.291 0.331 0.271 0.294 0.242 0.200 0.214 0.208 0.177
40 EBITDA 809 629 803 592 797 662 678 886 664 374 608 145 561 910 634 075 730 033 761 659
41 Net Debt/EBIDAR 0.918 1.346 0.401 0.506 (0.683) (0.274) 0.714 1.438 2.102 2.292

2012/2013 to 2016/2017
Chapter 22: Self-Evaluation Statement on Financial Viability
22.1. Operating Performance analysis
22.1.1. Key indicators of operating performance

Umgeni Water’s operating performance can be measured in terms of the following key indicators
Figure 22.1: Gross profit

GP margins are declining from 60% in
2011 to 53% in 2012 to 47% by 2017.
This is mainly due to the higher than
inflationary increase in operating
costs, more specifically;
 Raw water
 Staff costs
 Energy costs
Figure 22.2: Earnings before interest and tax (EBIT)
EBIT and Net profit have been

impacted negatively by the higher
than inflationary increase in
operating costs, more specifically;
 Raw water
 Staff costs
 Energy costs
And the increase in assets
impairments from 2012 to 2017
which total R430m.

2012/2013 to 2016/2017
Figure 22.3: Net Profit
As a result of higher operating costs,

modest volume growth and asset
impairments, net profit margins look
to decline from 30% in 2012 to 18%
in 2017.
Figure 22.4: Return on assets
The return on assets ratio is expected

to decrease to lower than the target
ratio of 15% to 20% mainly due to the
decrease in EBIT.
Figure 22.5: Interest Cover

The interest cover ratio is forecast to
be above the required ratio and
covenant of greater than 2.5 times.

2012/2013 to 2016/2017
Factors impacting on operating performance

The operating performance of Umgeni Water is being negatively impacted by:
(i) The increase in asset impairments
(ii) Higher than inflation linked increases in operating costs per kilolitre
(iii) Low volume growth
Figure 22.6: Volume sales analysis
The growth in sale volumes is positive 2% in F’12 and 0.4% in F’13.
Increase in operating costs

The key cost drivers per unit of kilolitre sold as indicated by the table below for F’12 to F’13 are raw water,
energy, staff, chemicals and impairments
Table 22.1 Summary Tariff costs components table
2011/2012
Components 2010/2011 BUDGET 2011/2012 2012/2013
Tariff Change Tariff Change Tariff Change Tariff Change
R.c/kl % R.c/kl % R.c/kl % R.c/kl %
Direct Costs
Chemicals 0.080 16% 0.087 7% 0.100 25% 0.116 16%
Depreciation 0.160 9% 0.160 -1% 0.188 17% 0.199 6%
Energy 0.193 63% 0.209 12% 0.271 41% 0.318 17%
Maintenance 0.243 5% 0.233 -1% 0.282 16% 0.313 11%
Raw Water 0.231 17% 0.369 52% 0.355 53% 0.734 107%
Staff Costs 0.214 11% 0.236 10% 0.223 4% 0.280 25%
Other direct operating activities 0.021 0% 0.019 -19% 0.032 48% 0.035 10%
Total Direct Costs 1.143 17% 1.314 14% 1.451 27% 1.995 37%
Indirect Costs
Overheads 0.659 19% 0.698 8% 0.649 -1% 0.792 22%
Depreciation 0.040 15% 0.071 41% 0.044 12% 0.062 40%
Amortisation 0.233 0% 0.007 -97% 0.007 -97% 0.007 -1%
Impairments 0.293 1176% 0.232 10% 0.198 -33% 0.226 14%
Total Indirect Costs 1.225 46% 1.009 -11% 0.898 -27% 1.087 21%
Total direct & indirect cost 2.368 30% 2.322 2% 2.349 -1% 3.082 31%

2012/2013 to 2016/2017
2011/2012
Components 2010/2011 BUDGET 2011/2012 2012/2013
Tariff Change Tariff Change Tariff Change Tariff Change
R.c/kl % R.c/kl % R.c/kl % R.c/kl %
Finance Costs 0.038 -78% 0.134 25% 0.073 94% 0.024 -67%
Cost - Bulk Water 2.406 21% 2.456 3% 2.422 0.7% 3.106 28%
Less: Sundry income -0.034 -495% 0.006 0.005 -114% 0.004 -4%
Net Cost - Bulk Water 2.439 23% 2.450 2.417 -1% 3.102 28%
Contribution from Wastewater 0.010 -40% 0.010 -7% 0.018 81% 0.015 -19%
Contribution from Section 30 activities 0.020 -61% 0.020 27% 0.026 29% 0.020 -20%
Total cost 2.410 26% 2.420 1% 2.373 -2% 3.067 29%
Total Average UW Tariff 3.638 13% 3.638 6% 3.640 0.1% 4.211 16%
Surplus Margin/(deficit) 1.228 -6% 1.217 18% 1.267 3% 1.144 -10%

applied to capex 1.517 1.234 2.268
Surplus Margin/(deficit) for future capex (0.289) 0.034 (1.124)
Projected water sales ( Ml ) 413.91 -3% 413.91 0% 414.98 0% 416.55 0%

Projected revenue ( R m) 1860 14% 1860 11% 1778 -4% 1960 10%
Projected costs ( R m) 1354 24% 1354 9% 1251 -8% 1484 19%
Projected surplus ( Rm ) 505 -6% 505 18% 527 4% 477 -10%
Reserves ( R m) 3016 45% 3016 20% 3034 1% 3510 16%
Projected surplus as a % of reserves 17% -35% 17% -2% 17% 4% 14% -22%
Debt service cost ( R m) 104 -55% 104 -12% 92 -11% 87 -5%
Debt (Debt + Equity) ratio 0.449 -38% 0.449 -20% 0.440 -2% 0.420 -4%
Capex ( R m) 628 92% 628 15% 512 -18% 945 85%
22.2. Cost Control

Figure 22.7: Cost per kl (bulk)
The cost per kl for the Bulk Water Segment is projected to increase by 0.5% in 2012 and 28% in 2013.
The main cost drivers for direct costs are chemicals, raw water, energy and staff costs in 2012 and 2013
resulting in an increase in directs costs of 27% and 37% in 2012 and 2013 respectively.
The main components of indirect costs are depreciation, amortization, impairments and other indirect costs.
Indirect cost per kl is projected to decrease in 2012 by 27% due to the completion of the amortization of the
financial asset in 2011 but will increase in 2013 by 22% and this is mainly due to the increase in asset

2012/2013 to 2016/2017
impairment costs and the conversion costs for the conversion of the pension fund from the defined benefit fund
to a defined contribution fund.
Net finance costs are projected to increase in 2012 by 86% due to the decrease in interest income as available
investments are utilized for Capex and Opex requirements. In 2013, net finance costs will decrease by 76% due
the increase in interest income.
Analysis of major operating costs
Figure 22.8: Components of Raw Water costs (R’m)
Raw water costs are anticipated to increase by 53% in 2012 due to the operation and maintenance costs of
DWA owned dams being charged back to Umgeni Water and will increase in 2013 by 108% due to the capital
unit charge for the Spring Grove Dam.
Figure 22.9: Staff costs (R’m)
Staff costs
600
527
490
500 455
414
400 379
325
287
300
200
100
-
2009 2010 2011 2012 2013 2014 2015 2016 2017
Total staff costs will increase by 13.2% in 2012 and 17% in 2013. The increase in staff costs is mainly
attributable to the increase in the number of staff which is required for the new schemes coming online by
2013.

2012/2013 to 2016/2017
Figure 22.10: Energy costs (R’m)
300 Energy
260
250 233
204
200
176
152
150 129
100 91
50
0
2009 2010 2011 2012 2013 2014 2015 2016 2017
Total energy costs are forecast to increase by 42% in 2012 and 18% in 2013. The higher than inflation increase
in 2012 is mainly due to the additional pumping in the mearns whilst the increase for 2013 is mainly to the
16% price increase for that year.
Table 22.2 Summary of S29 costs

2011 2012 % % 2013 % %
Actual Forecast Change total costs Budget Change total costs
R'm R'm R'm
Semi controllable 759 761 0.2% 63% 1 022 34% 70%
− chemicals/Energy/Raw Water 223 321 44% 510 59%
− Staff Costs 232 255 10% 304 19%
− Depreciation/Amortisation/impair 305 184 -40% 208 13%
ment of assets
Non-Controllable 339 361 7% 30% 345 -4% 24%
Controllable 96 92 -4% 99 8% 7%
total costs S29 1 194 1 214 2% 1 467 21%
Total costs excluding S30 project costs are projected to increase by 2% in 2012 and 21% in 2013. The increase
in semi controllable costs which are 63% of total operating cost in 2012 and 70% in 2013 is projected to
increase 0.2% in 2012 and 34% in 2013. These increases are driven by the increase in energy, chemicals, raw
water and staff costs and impairment of assets.

2012/2013 to 2016/2017
22.3. Cashflow analysis

Figure 22.11: Cashflow from operations
Net cash generated

from operations is
expected to decline over
next 3 years to levels
just over R600m due
to the increase in
working capital
requirements relating
to the cost of converting
to a defined
contribution pension
fund as well as lower
operating profits
Figure 22.12: Utilisation of Cashflow from operations
Utilisation of cashflow from operations

capital expenditure financing activities
operating cashlfows
1,600
1,400
1,200
1,000
R'm
800
600
400
200
0
2009 2010 2011 2012 2013 2014 2015 2016 2017
Over the next 5years cashflow from operations will be increasingly directed toward capex but is insufficient to
fund both capex and financing costs.

2012/2013 to 2016/2017
22.4. Financial Position
Figure 22.13: Property, plant & equipment
Property, plant and equipment is projected to increase to R7 310m by 2017 from R2 867m achieved in 2011.
The increase in PPE is due to the anticipated capital expenditure over the next 5 years (2012 to 2017) of
R5 475m offset by total impairments of R430m.
Figure 22.14: Investments
To ensure sufficient liquidity Umgeni water will maintain a liquidity buffer of R200m. Long term investments
consist of an amortising investment with RMB, the proceeds of which will be fully paid to Umgeni Water by
2013. The current investments are to be utilized toward Capex and operational expenditure.

2012/2013 to 2016/2017
22.4.1. Debt Management

Figure 22.15: Debt to assets ratio
The ratio of debt to assets will decline

favourable over the next 3 years to 0.2
times in 2015. From 2016 the entity
may see an increase in the ratio due to
additional funding requirements from
capex and opex. However, even in the
long term the ratio does not look to
exceed the target of less than 0.4 times.
Figure 22.16: Debt to equity ratio
The ratio of debt to equity will decline

favourable over the next 3 years to 0.3
times in 2015. From 2016 the entity
may see an increase in the ratio due to
additional funding requirements from
capex and opex. However, even in the
long term the ratio does not look to
exceed the target of less than 0.7 times.
Figure 22.17: Debt to EBITDA (Leverage Ratio)
The ratio of debt to EBITDA (“Leverage

ratio”) will decrease to 2 times in 2012
due to the improved operating profit
margins from 2011. However the ratio
will increase in 2013 to 2014 due to the
increase in asset impairments and
direct operating costs. A temporary
recovery of the ratio is expected in 2015
however as debt increases from 2016
onward, so too will the leverage ratio.

2012/2013 to 2016/2017
Business Segment information
Table 22.3 Business segment operating profit
2011 2012 2013

R'm R'm R'm
Bulk 427 26% 539 -12% 472
WW 15 0% 15 -13% 13
S30 3 267% 11 -27% 8
620 -9% 564 -13% 493
Bulk Segment
In F’12 the operating profit margin is 26% higher than the prior year owing to the completion of the
amortization of the reticulation financial asset in F’11.
It is anticipated that in F’13 the impact of the increase in impairments and operating cost will result in a
decrease in the operating profit by 12%.
WW Segment
The bulk wastewater segment is not projected to show growth owing to the high operating costs with relatively
low management fee increases.
S30 Segment
An analysis of the S30 segment in terms of the projects is as follows:
Table 22.4 Analysis of S30

FY 2010 FY 2011 FY 2012 FY 2013
Actual Actual Forecast Budget
R'000 R'000 R'000 R'000
Revenue - Section 30 197 970 172 480 202 169 137 646
Sect 30 - Revenue : Laboratory Serv 3 199 2 080 3 000 3 100
Sect 30 - Revenue : Research 563 3 099 3 807 1 333
Sect 30 - Revenue : Scientific & Environ 14 553 18 305 55 985 9 649
Sect 30 - Revenue : Sanitation 123 401 16 429 2 722 -
Sect 30 - Revenue : Water Infrastructure 47 230 123 436 127 357 92 080
Sect 30 - Revenue : Other - - - 20 878
Sect 30 - Revenue : O & M 9 024 9 131 9 298 10 606
Cost of Sales -Section 30 Costs 169 537 150 584 179 635 118 566
Sect 30 - Laboratory Services 1 363 861 1 500 1 550
Sect 30 - Projects : Research 630 3 099 3 453 1 323
Sect 30 - Projects : Scientific & Environ 13 366 17 669 51 846 9 018
Sect 30 - Projects : Sanitation 108 883 15 221 2 619 -
Sect 30 - Projects : Water Infrastructure 45 296 113 733 120 073 87 695
Sect 30 - Projects : Other - - 144 18 980
Other Direct costs 3 095 3 715 4 607 5 351
GROSS PROFIT / (LOSS) 25 338 18 181 17 927 13 729
Net Admin and operating Costs 4 878 14 145 7 339 5 255
OPERATING PROFIT / (LOSS) 20 460 4 036 10 588 8 474
Although revenue shows relatively good growth in 2012, in 2013 due to the completion of current S30 projects
such as the Greater Mbizana Project, revenue will decline by 32% year-on-year. Net profit margins are
expected to be 5% to 6% year on year.

2012/2013 to 2016/2017
22.5. Sensitivity Analyses
The following scenarios could result in an increase in the funding requirements as indicated in section 19.6.
22.5.1. Acceleration in capital expenditure

Impact on debt level
Should Capex accelerate by R300m from F’13 to F’15, this will result in an increase in the funding requirements
in the short term and may necessitate an earlier issuance than the funding strategy as per section 19.6.
Figure 22.18: Impact of acceleration of capex on debt level
22.5.2. Non-payment by debtors (debtors days = 90 days)

Should the debtor’s days increase to 90 days, this will result in higher funding requirements and thus a higher
debt level.
Figure 22.19: Impact of non-payment by debtors on the debt level

2012/2013 to 2016/2017
22.5.3. Non-receipt of grant funding

Should grant funding of R1bn not be received as per the funding requirements in section 19.6 then this will
result in higher funding requirements and thus a higher debt level which may impact on the financial viability
of the entity.
Figure 22.20: Impact of non-receipt of grant funding on the debt level

2012/2013 to 2016/2017
Chapter 23: Analysis of Financial Risk

Umgeni Water assumes a low risk tolerance approach to risk. The risks described in the sections that follow
have been identified as specific treasury risks and are managed proactively to ensure their timely mitigation.
23.1. 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.
23.2. 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 1,950m for F’12,
R 1,800m for F’13 and R1,750m for F’14.
23.3. Credit Investment Risk

Credit investment risk 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

2012/2013 to 2016/2017
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.
23.4. Interest rate risk

The main risk driver comes from changes in the market place, whilst a minor driver comes from changes in the
capital structure from loan servicing and new loan generation. Unanticipated increases in the interest costs
could result in an incr5ease in the funding requirements.
Mitigation approach
Umgeni Water will:
 Maintain a ratio of 70% fixed to 30% floating interest rate debt to manage the impact of volatility of
changes in interest rates on cashflow and net profit.
 Use an interest-rate-hedging instrument for a maturity period that matches the underlying repricing
risk, which is in line with Umgeni Water’s overall interest rate risk profile.
 Depending on the business and economic environment prevailing, minimum hedging level for interest
rate risk should be 30% to 40% of the underlying risk.

2012/2013 to 2016/2017

2012/2013 to 2016/2017
Chapter 25: Analysis of Risk
25.1 Analysis of Risk

Umgeni Water’s risk management is guided by an Integrated Risk Management Framework, initially approved
by the Board in 2006. This framework was reviewed to align it to ISO 31000 (Risk Management- Principles &
Guidelines) and King III and approved by the Board in September 2011. Umgeni Water defines risk as “all
sources of uncertainty that could affect, positively or negatively, the organisation’s ability to achieve its
strategic and business objectives”. There is a clear link between Umgeni Water’s strategy and the integrated
risk management framework.
Figure 25.1: Umgeni Water’s integrated risk management process
Context setting:
Operating environment;
Stakeholder profile and expectations;
Strategy, sustainability perspectives and
objectives.
Integrated Risk Management Policy:

• Board committment and mandate;
• Management's approach and committment to
risk management; Independent assurance:
Monitoring and review Provided through control
• Organisation's beliefs regarding risk and the testing by Internal Audit.
manner it which it chooses to conduct its
activities to deal with risk.
• Integrated Risk Management Policy; Risk
Appetite and Tolerance Framework; and Risk
Management Plan are the Board’s Communication and
manifestations of its accountability for risk consultation
governance.
Risk assessment:
Risk identification;
Risk analysis; Risk treatment
Risk evaluation.
Integrated Risk Management Governance structure
 The Board is ultimately accountable for integrated risk management, providing guidance and direction
and is kept informed of the status and effectiveness of the risk management system.
 The Audit Committee monitors and approves the status of strategic risks quarterly, the overall
effectiveness of the organisation’s risk management function, and its implementation by management, and
reports the status to the Board.
 The Corporate Risk Management Committee, which comprises the Executive, Top Managers and the
divisional Risk Champions monitor the status of strategic risks and ratifies them prior to submission to the
Audit Committee for approval. Operational risks are monitored and approved by the committee on a
quarterly basis.
 The Executive, Top Management and the Board review the organisation’s strategic risks and identify
emerging risks on an annual basis and report these to Corporate Risk Management Committee, Audit
Committee and the Board.

2012/2013 to 2016/2017
 Risk Owners who are the General Managers and Risk Champions of each division integrate risk
management into their day-to day management processes to continually identify emerging risks, review,
mitigate and monitor the status of the risks assigned to them.
The integrated risk management framework uses a risk priority table (Table 25.1) for reporting and assigning
priority for action to mitigate risks. If actions are not taken within the specified time, the continued toleration
of the residual down-side risk is explicitly signed off.
Table 25.1: Umgeni Water risk priority table
Risk Score Suggested Action Suggested Authority for continued

Timing toleration of residual risk
≤ 80 Plan in keeping with all other Normally within Manager and Manager’s
and/or if within risk appetite for priorities. 1 year direct reports
category.
80 to 200 (and higher) Plan to deal with in keeping with Medium term CE’s direct reports
and/or if greater than risk appetite but the business plan. (Normally within
lower than risk tolerance for category. 3 months).
≥ 200 Immediate action to be taken until Short term CE and Board

and/or greater than risk tolerance for the residual risk is reduced below (less than
category. stated levels - unless exposure is 1 month)
authorised.
Figure 25.1: Umgeni Water’s strategic risks per perspective
Customer and Stakeholder Perspective

Infrastructure
investment to meet
Failure to supply. Potable water quality. Customer relations.
service delivery
mandate.
Failure of critical Wastewater effluent

Stakeholder relations.
infrastructure. quality
Financial Perspective
Credit risk concentration Sustainable tariff Liquidity risk
Process Perspective
Water Emergency Legal and
Servitude
resources Environment. preparedness regulatory Fraud risk.
encroachment.
availability. plans. compliance.
Health and Integrated

Henley Dam Governance of
Climate change. safety business
encroachment. ICT.
performance. continuity plan.
Organisational Capacity
Sucession planning for executive and top managers. Skills availability and attraction.

2012/2013 to 2016/2017
Table 25.2: Assessment of the major risks.
Ten risks are outside the risk appetite level, of which one is also outside the risk tolerance level.
# Risk Overall Control Strength (OCS) Mitigation Approach

Residual Risk Score (RRS)
Desired Control Strength (DCS)
Risks outside both the risk appetite and risk tolerance levels.
1 Wastewater OCS: (50%) Satisfactory Wastewater effluent quality standards are not been met. Initiatives
effluent quality RRS: 10.8 Moderate-low per works are:
DSC: (100%) Excellent Darvill WWTW
The aeration capacity will be increased - by 31 August 2012
The plant is to be upgraded by 30,000 m3/d – achieved over three-
year period - by June 2015.
The enforcement of by-laws by Msunduzi LM will assist in reducing
this risk.
Howick WWTW
Sludge de-watering process is being optimised through installation
of desludging equipment – by 30 April 2012.
Ixopo WWTW
The aeration capacity is being increased – by 31 October 2012
A third clarifier is being built –by July 2013.
Risks outside the risk appetite but within the risk tolerance level.
1 Emergency OCS: (60%) Satisfactory Water supply interruptions experienced in the Ballito area.
Preparedness RRS: 36 Moderate-high Mitigation achieved by implementation of:
Plans DSC: (95%) Very Good Incident management protocols for water quality and for volume
and pressure
The northern area capacity enhancement project is in progress and
will be complete by June 2012
Emergency Preparedness Plans are to be reviewed to improve
internal and external communications - by May 2012.
2 Succession OCS: (50%) Satisfactory Mitigation by three key recruitments being made:
planning for RRS : 26 Moderate-high Two complete (notably the Company Secretary and GM Engineering
executives and DSC: (90%) Very Good and Scientific Services) – in January 2012.
top management. The appointment of the Chief Executive is in the final stages of
completion.
3 Failure to Supply OCS: (55%) Satisfactory Water supply interruptions experienced in the Ballito area.
RRS: 22 Moderate-high Supply failure was due to insufficient capacity to meet demand.
DSC: (90%) Very Good Critical supply infrastructure has been identified.
An action plan to prevent recurrence is in place – for completion by
June 2012.
4 Skills availability OCS: (70%) Good Mitigation achieved by implementation of:
and attraction RRS : 21.6 Moderate-high The succession plan – as above.
DSC: (90%) Very Good The workforce plan – over a five-year period.
The broad banding framework to be approved - by June 2012.
5 Water resources OCS: (30%) Weak This risk has been mitigated through:
availability RRS: 21.6 Moderate-low Water resource and demand management initiatives and modelling
DSC: (45%) Weak of hydrological impacts of climate change. This risk will be further
mitigated through diversification of sources of supply namely
wastewater reuse and seawater desalination. This risk is essentially
out of Umgeni Water’s control.
6 Relations with OCS: (50%) Satisfactory Mitigation achieved by implementation of:
customers RRS: 15.3 Moderate-low An improved customer engagement plan to be implemented
DSC: (95%) Excellent annually, independent customer satisfaction surveys and a short-
medium and long –term water services strategy for each customer
7 Servitude OCS: (41%) Weak Mitigation to be achieved:
encroachment RRS : 11.6 Moderate-low Development of a servitudes policy – complete.
DSC: (90%) Very Good Implementation of the policy – a procedure is being developed.
8 Secure chlorine OCS: (55%) Satisfactory This risk will be mitigated through:
supply RRS: 7.7 Minor-high A revised supplier contract taking into account delivery, business
(emerging risk) DSC: (95%) Excellent continuity plans of supplier and Umgeni Water, affordability and
price increases in context of tariff setting process
A study of alternate methods of disinfection for individual water
and wastewater works

2012/2013 to 2016/2017
# Risk Overall Control Strength (OCS) Mitigation Approach

Residual Risk Score (RRS)
Desired Control Strength (DCS)
9 Henley dam OCS: (30%) Weak The status of the land claim by the community is being assessed and
encroachment RRS : 7.2 Minor-high will inform future action to be taken.
and impact on DSC: (90%) Very Good
assets.
10 Health and safety OCS: (50%) Satisfactory Mitigation to be achieved by
performance. RRS : 5.6 Minor-high Appointment of a dedicated SHEQ Manager – by June 2012.
DSC: (95%) Excellent Implementation of NOSA and further embedding of the OHSAS
18001 safety management system.
Construction safety managed through safety officers, contractor
safety plans and safety audits – in place.
11 Climate change OCS: (50%) Satisfactory Mitigation to be achieved by
RRS : 0.6 Negligible Minimising Umgeni Waters carbon footprint and through water
DSC: (70%) Good resource and demand management initiatives
Financial risks, sustainable tariff, credit risk concentration and liquidity risk are detailed in the Financial plan
section of this business plan.
Emerging Risks
Emerging risks have been identified by the Audit Committee, Executive and Top Management for further
consideration and mitigation:
 Water sector Institutional realignment

 48- hour water storage capacity of customers
 Sustainability of energy supply
25.2 Key Internal Audit Issues

Umgeni Water does not have any material internal audit issues.
25.3 Legal Action in Progress

Umgeni Water does not have any significant / material legal action in progress.
25.4 Contingent Liabilities
Collateral
Collateral security is given to certain financial institutions in respect of mortgage loans advanced to employees
under the home ownership scheme.
This amount is R7,900 for 2011/12
Guarantees
Guarantees are given by certain financial institutions in respect to payments to utility service providers.
This amount is R1.0 m for 2011/12.

2012/2013 to 2016/2017
Chapter 26: Fraud Prevention

Umgeni Water addresses fraud through an Integrated Fraud Management Framework which will be managed
by five (5) guiding principles:
Principle 1: As part of the organisation’s governance structure, a fraud risk management framework is
in place, including a written fraud policy (or policies) to convey the expectations of the Board and
senior management regarding managing fraud risk.
Principle 2: Fraud risk exposure will continue to be assessed periodically by the organisation to
identify specific potential schemes and events that the organisation needs to mitigate.
Principle 3: The Fraud Prevention Plan will include techniques to avoid potential key fraud risk
events should be established, where feasible, to mitigate possible impacts on the organisation.
Principle 4: Detection techniques should be established to uncover fraud events when preventive
measures fail or unmitigated risks are realised.
Principle 5: A reporting process is in place to ensure a coordinated approach to investigation and

corrective action to help ensure potential fraud is addressed appropriately and timely.
Fraud Policy
In this regard the organisation has the Fraud Policy with its main objectives being to:
 Promote standards of honest and fair conduct;

 Prevent fraud and corruption;
 Detect and investigate fraud and corruption;
 Take appropriate action against offenders;
 Recover any losses; and
 Maintain strong systems of internal control.
Fraud Governance Structure
The Board is committed to sound governance practices. The Board of Umgeni Water is also committed to
manage fraud risks by ensuring that written policies and procedures are in place to manage fraud risks.
The Audit Committee is mandated to achieve the highest level of financial management, accounting and
reporting to the shareholder. The Audit Committee guided by its charter, sets out its responsibilities regarding
risk management and specifically has oversight of financial reporting risks and internal financial controls as
well as fraud and IT risks as they relate to financial reporting.
The Fraud Prevention Committee:-The Board acknowledges its responsibility to ensure that Umgeni Water is a
fair, transparent and ethical organisation and has therefore established a fraud prevention committee to
effectively manage fraud. This committee is chaired by an independent chairperson.
Internal and External Auditors provide the added independent assurance to the Board on the effectiveness of
the internal controls.

2012/2013 to 2016/2017
Fraud Risk Assessments
The Board has developed and approved a comprehensive risk management framework that articulates the risk
management of the Board, its committees and management to formally conduct and review risk assessments,
including any fraud risks faced by the organisation. Fraud risks are monitored quarterly with appropriate
mitigation controls put into place to increase the control strengths.
Fraud Prevention
Umgeni Water has put mechanisms in place, to manage the organisations vulnerability to fraud. These
mechanisms are designed to prevent, deter and detect fraud. Fraud prevention is a primary control which is
anticipated to lower the likelihood of fraud occurring. Fraud prevention is embedded in internal controls
which are part of Umgeni Water’s policies and procedures and includes elements of Code of Conduct, Code of
Ethics, Disclosure of Interests, delegation of authority, proper recruitment vetting and checks, etc. In this
regard Umgeni Water continues to manage its implementation plan of all prevention processes identified.
Fraud Detection and Investigation - Anonymous Hotline Facility
Umgeni Water continues to operate a fraud hotline service, managed by an external service provider and is
available to all staff members and other stakeholders, including suppliers. This provides an accessible
mechanism for all suspicions of fraud or otherwise unethical behaviour to be reported. All calls are
investigated and appropriately followed through with the assistance of a developed fraud protocol procedure.
Information is further used to improve internal controls to better manage fraud risk.

2012/2013 to 2016/2017
Chapter 27: Corporate Social Responsibility Plan

Umgeni Water is in the process of drafting a formal Corporate Social Responsibility (CSR) Policy, which will
provide clear guidance to the organisation on the nature of: the CSR activities that it would participate in, the
types of inputs it will make, and the outputs and outcomes it will target as a result of its CSR initiatives.
The draft policy is currently being reviewed by the organisation.
The organisation will formalise its CSR policy in 2012/2013. In the absence of a formal policy to guide
initiatives, CSR initiatives will be guided by the organisations strategies and its approved business plan, and
will be managed through existing controls and governance environment in the organisation.
Some key points that are in discussion toward development of the CSR policy are the following:
 Umgeni Water’s core business is water services provision for which it implements water and wastewater
projects.
 CSR initiatives will be the value-add initiatives that are provided over and above these core water services
projects.
 The focus of the CSR initiatives will be water related.
 CSR initiatives will benefit communities.
 CSR initiatives will benefit the environment.
 CSR initiatives will contribute to job creation.
 CSR initiatives will often be collaborative in nature, working with communities and partnering with key
stakeholders in community outreach and other initiatives.
 Umgeni Water will identify the principles for and allocate a finite budget to CSR initiatives.
 CSR initiatives that provide education and create awareness will include required resources: people,
equipment and facilities, and educational materials development and distribution.
 Educational CSR initiatives will relate to water and wastewater treatment, water conservation and demand
management, environmental management, including pollution prevention and waste management.
 CSR initiatives will include adopt a river, adopt a school, adopt a spot, adopt a wetland type initiatives.

2012/2013 to 2016/2017

2012/2013 to 2016/2017
Chapter 28: Umgeni Water Scorecard

2012/2013 to 2016/2017
Umgeni Water Five-Year (2013'2017) Scorecard Targets
(1) Customer and Stakeholder Perspective
SO 1: Increase services and customers.

OUTCOMES: Community and Environmental Sustainability. Customer Satisfaction. Stakeholder Understanding and Support.
Key Performance Indicator (KPI) Strategic Plan Target Baseline (2011/2012) Year 1 (2012/2013) Year 2 (2013/2014) Year 3 (2014/2015) Year 4 (2015/2016) Year 5 (2016/2017)
(2030)
KPI 1: The extent to which UW has grown its services and Regional expansion. New. Draft Business Plan for Business Plan for Business Plan for Business Plan for Business Plan for
customers. expansion strategy. expansion strategy. expansion strategy. expansion strategy. expansion strategy.
KPI 2: Per cent bulk potable water volume growth. 65% 0% 0.4% 0.7% 1.2% 1.4% 1.6%
(670 mil m3 ) (415 mil m3 ) (417 mil m3 ) (420 mil m3 ) (425 mil m3) (431 mil m3) (438 mil m3 )
Conceptual plans for 6 Growth plans for 6 Growth plans for 6 Growth plans for 6 Growth plans for 6
customers. customers. customers. customers. customers.
KPI 3: Per cent bulk wastewater volume growth. 100% 0% 0% 0.7% 1.2% 1.4% 1.6%
(44 mil m3 ) (29 mil m3 ) (29 mil m3) (29.2 mil m3 ) (29.6 mil m3) (30 mil m3 ) (30.4 mil m3)
Conceptual plans for 5 Growth plans for 5 Growth plans for 5 Growth plans for 5 Growth plans for 5
customers. customers. customers. customers. customers.
KPI 4: Per cent revenue from s30 growth.  (14) Expanded water value- 11% 7% - - - -
chain services.
SO 2: Increase customer and stakeholder satisfaction.

OUTCOMES: Stakeholder Understanding and Support. Customer Satisfaction. Product Quality.
KPI 5: The extent to which there is engagement of Positive stakeholder Positive engagements and Stakeholder Stakeholder Stakeholder Stakeholder Stakeholder
statutory, contracted and non-contracted stakeholders, engagement and policy response to queries. engagement plan for engagement plan for engagement plan for engagement plan for engagement plan for
inputs into policy frameworks and response to queries. influence for expansion expansion strategy. expansion strategy. expansion strategy. expansion strategy. expansion strategy.
strategy. New Marketing, branding Marketing, branding Marketing, branding Marketing, branding Marketing, branding
and reputation and reputation and reputation and reputation and reputation
management plan. management plan. management plan. management plan. management plan.
KPI 6 Per cent statutory compliance for bulk potable water 100% 100% compliance with 100% 100%. 100%. 100%. 100%.
with SANS 241. (1) Health parameters.
100% with Operational

and Aesthetic parameters
for 9 of 11 WTW
Number of systems that are Blue Drop certified. All. 9 9 12 12 15 15
KPI 7: Per cent statutory compliance for bulk wastewater 100% 85% 90% 90% 100% 100% 100%
with discharge license or general authorisation.(20)
Number of systems that are Green Drop certified. All. 0 1 2 2 2 3

KPI 8: Per cent customers with signed bulk supply 100% 83% 100% 100%. 100%. 100%. 100%.
agreements. (8) (5 of 6 customers)
KPI 9: Per cent days’ supply disrupted, > 24 hours, relative 0% 2% 0% 0% 0% 0% 0%
to total number of possible supply days. (3) (7.5 days).
DWA SHC Annex 1 KPI
Version: 31 May 2012 Page 184

(2) Financial Perspective
SO 3: Mobilise funds.
Key Performance Indicator (KPI) Strategic Plan Target (2030) Baseline (2011/2012) Year 1 (2012/2013) Year 2 (2013/2014) Year 3 (2014/2015) Year 4 (2015/2016) Year 5 (2016/2017)
KPI 10: Funds mobilised for long-term financial sustainability of social Optimal funding mix mobilised R88m grant funding Sustainable funding Sustainable funding Sustainable funding Sustainable funding Sustainable funding
projects for long-term financial received. and financing plans. and financing plans. and financing plans. and financing plans. and financing plans.
sustainability.
SO 4: Increase return on assets

KPI 11: Per cent return on assets. (9) 1.5% above cost of funding 16.46% 11.80% 8.51% 8.28% 8.22% 7.52%
KPI 12: Debtors days managed. (9) ≤ 30 39 ≤ 35 ≤ 35 ≤ 35 ≤ 35 ≤ 35
SO 5: Improve financial ratios.

KPI 13: Debt to Equity ratio (gearing risk) managed. (9) ≤ 60% ≤ 44% ≤ 42% ≤ 35% ≤ 29% ≤ 39% ≤ 40%
KPI 14: Interest cover. ≥ 2.5 ≥ 4.499 ≥ 3.825 ≥ 3.220 ≥ 3.926 ≥ 3.772 ≥ 3.030
KPI 15: Liquidity - measured by operating cash flows (R'm) (9) ≥ R600m R686m R666m R636m R654m R706m R738m
KPI 16: Gross profit margin % (primary activity) (9) ≥ 45% ≥ 59% ≥ 45% ≥ 45% ≥ 45% ≥ 45% ≥ 45%
KPI 17: Gross profit margin % (Secondary activity) (9) ≥ 30% ≥9% ≥ 10% ≥ 30% ≥ 30% ≥ 30% ≥ 30%
KPI 18: Net profit margin % (primary activity) (9) ≥ 20% ≥33% ≥ 20% ≥ 20% ≥ 20% ≥ 20% ≥ 19%
KPI 19: Net profit margin % (secondary activity) (9) ≥ 10% ≥3% ≥ 5% ≥ 5% ≥ 5% ≥ 5% ≥ 5%
Version: 14 Jun 2012 Page 185

(3) Process Perspective
SO 6: Increase infrastructure for access and additional capacity and improve asset condition.
OUTCOMES: Infrastructure Stability. Community and Environmental Sustainability. Operational Resiliency.
Key Performance Indicator (KPI) Strategic Plan Target (2030) Baseline (2011/2012) Year 1 Year 2 Year 3 Year 4 Year 5
(2012/2013) (2013/2014) (2014/2015) (2015/2016) (2016/2017)
KPI 20: Per cent total infrastructure capital expenditure within target cash flows.(12) 100%. 87% (R512m of R590m) R829m R949m R872m R853m R576m
KPI 21: Infrastructure projects within completion target dates (per cent variance). (12) ≤ 5% variance. -15% ≤ 5% variance. ≤ 5% ≤ 5% ≤ 5% ≤ 5%
KPI 22: Per cent infrastructure capital expenditure for rural access within target cash flows.(13) 100%. 86% (R190m of R220m) R353m R490m R459m R301m R239m
KPI 23: Infrastructure maintenance (Opex) within target cash flows. ≤10% variance 122% (R142m of R116m) R158m. R170m R183m R197m R212m
SO 7: Improve service delivery systems

OUTCOMES: Operational Optimisation. Operational Resiliency. Infrastructure Stability. Community and Environmental Sustainability.
KPI 24: Number of permanent and number of temporary Jobs created.(16) 100% (establishment filled) 72 50 40 25 10 7
3% of project spend. 650 750 750 750 700 450
KPI 25: Per cent of BBBEE spend increased and number of new entrants.(10) 80% of BBBEE spend. -7% (71% 2012, 77% 2011). 13% 0% 0% 0% 0%
20% new entrants. new 3 4 6 7 9
KPI 26: Per cent major tender project value (>R10m) awarded to targeted suppliers. 50%. new 10% 15% 20% 25% 30%
KPI 27: Corporate Social Responsibility Initiatives.(17) 3 3 3 3 3 3 3
79 water education classes.
4 schools adopted.
1 school library built.
KPI 28: Number of innovations / environmental sustainability initiatives. 10 2 3 3 4 4 5
Energy co-generation project.
Wastewater reclamation project.
KPI 29: Water loss as a per cent of total water produced.(2) ≤5% 2.5% ≤5% ≤5% ≤5% ≤5% ≤5%
KPI 30: Total costs within overall budget (Per cent variance)(11) 0% 0% 0% 0% 0% 0% 0%
KPI 31: Unqualified external audit report.(4) Unqualified Unqualified. Unqualified. Unqualified Unqualified Unqualified Unqualified
KPI 32: Per cent repeat and unresolved internal audit findings.(7) 0 repeat findings. 0 0 repeat 0 0 0 0
0 unresolved findings 7 3 unresolved 2 2 1 0
KPI 33: Breaches of materiality and significance framework.(19) 0 0 0 0 0 0 0
KPI 34: Statutory submissions made on time.(15) 100% of statutory submissions. 100% 100% 100% 100% 100% 100%
KPI 35: Board member attendance.(6) 100%. 93%. 100% 100% 100% 100% 100%
KPI 36: Number of key business processes, policies and systems improved and are enabling for 100% Aligned systems to ISO 9001 for 100% 100% 100% 100% 100%
strategy implementation. continuous improvement.
KPI 37: Turnaround time (working days), from date of requisition, for awarding of open tenders. ≤ 60 ≤60 ≤60 ≤60 ≤60 ≤60 ≤60
KPI 38: Turnaround time (working days) for filling vacant posts. ≤ 45 ≤45 ≤45 ≤45 ≤45 ≤45 ≤45

(4) Organisational Capacity Perspective
SO 8: Develop water resources

Water Resources Adequacy.
Key Performance Indicator (KPI) Strategic Plan Target (2030) Baseline (2011/2012) Year 1 (2012/2013) Year 2 (2013/2014) Year 3 (2014/2015) Year 4 (2015/2016) Year 5 (2016/2017)
KPI 39: Sustainable water resource options identified for all Developed a sustainable mix of 100% 100% 100% 100% 100% 100%
systems.(21) water resources.
SO 9: Increase skills and competency.

Leadership and Employee Development.
KPI 40: Number of employees trained in core and distinctive 100% required skills or access to
competencies: (18) skills.
 learnerships 49 52 52 52 52 52
 graduate trainees / interns 18 18 18 18 18 18
 graduate engineers (NT) 43 43 43 43 43 43
 bursars 10 10 10 10 10 10
KPI 41: Per cent employee turnover. (5) ≤ industry benchmark 2.8% ≤10%. ≤10%. ≤10%. ≤10%. ≤10%.

Chapter 29: Signed Declaration
Chapter 29: Signed Declaration

Umgeni Water hereby declares that all information is disclosed, is correctly disclosed and included in this
business plan document as required in terms of the Water Services Act (Act 108 of 1997), Public Finance
Management Act (Act 1 of 1999), and associated regulations and prescribed guidelines issued by the
Department of Water Affairs and National Treasury.
Ms NICA GEVERS
Acting Chief Executive
31 May 2012
Mr ANDILE MAHLALUTYE
Chairperson of the Board of Umgeni Water
31 May 2012

2012/2013 to 2016/2017

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Table of Contents

Volume 1: Policy Statement

Umgeni Water Five-Year Business Plan Page 3

Strategic Highlights by the Chairperson of the Board of Umgeni Water

South Africa’s long term vision:

Government’s vision for state-owned enterprises:

Emerging water related policy issues:

Key national government water strategy actions / targets:

 A comprehensive water resources management strategy including an investment programme for

Page 4 Umgeni Water Five-Year Business Plan

Umgeni Water Strategies

Umgeni Water Five-Year Business Plan Page 5

Chairperson of the Board of Umgeni Water

Page 6 Umgeni Water Five-Year Business Plan

Foreword by the Chief Executive

Umgeni Water Five-Year Business Plan Page 7

Acting Chief Executive

Page 8 Umgeni Water Five-Year Business Plan

1.1 Legislative mandate

1.2 Activities of Umgeni Water

1.3 Supply Area and Customers

 eThekwini Metropolitan Municipality

Umgeni Water Five-Year Business Plan Page 9

Umgeni Water’s infrastructure assets in support of its primary business comprise:

 Approximately 632 kilometres of pipelines and 118 kilometres of tunnels;

Page 10 Umgeni Water Five-Year Business Plan

2.1 Linkage between DWA Outcomes and Government Outcomes

 Outcome 1 (Education) “Quality of our basic education”

 Outcome 4 (Employment)  “Decent employment through inclusive economic growth”

 Outcome 6 (Infrastructure)  “An efficient, competitive and responsive infrastructure network”

 Outcome 7 (Rural Development)  “Vibrant, equitable, sustainable rural communities, contributing

 Outcome 8 (Human Settlement)  “Sustainable human settlements and improved quality of

Umgeni Water Five-Year Business Plan Page 11

2.2 DWA Performance Objectives for Water Boards

DWA Outcomes linked to government

Customer and Stakeholder

(2) Non-Revenue Water. systems.

Outcome 11: International SO 8: Develop water resources

Page 12 Umgeni Water Five-Year Business Plan

2.3 Umgeni Water Strategy

“To provide innovative, sustainable, effective and affordable water,

“A Key Partner in enabling government to deliver effective and

Umgeni Water Five-Year Business Plan Page 13

Innovation and Excellence

Page 14 Umgeni Water Five-Year Business Plan

Umgeni Water Strategies

Umgeni Water Five-Year Business Plan Page 15

2.4 Umgeni Water Strategic Objectives (Strategy Map)

Strategic Themes: Year 1 - Efficiency and Rejuvenation

Umgeni Water / Core strategic statement:

4 Balanced Perspectives 9 Strategic Objectives

Customer and SO1: Increase

Financial SO3: Mobilise funds.

Page 16 Umgeni Water Five-Year Business Plan

Umgeni Water Ten Outcomes

SO 1: Increase services and customers.

SO 5: Improve Financial Ratios.

SO 9: Increase skills and competency.

Umgeni Water Five-Year Business Plan Page 17

2.5 Umgeni Water Strategic Objectives, Performance Outcomes and KPIs

Page 18 Umgeni Water Five-Year Business Plan

Umgeni Water Five-Year Business Plan Page 19

Page 20 Umgeni Water Five-Year Business Plan