NAMAKWA

WATER BOARD

ANNUAL REPORT 2008

BACKGROUND

The Namakwa Water Board provides potable water to Nama Khoi Municipality & De Beers Namaqualand Mines.

The area of responsibility included the towns of Steinkopf, Okiep, Concordia, Carolusberg, Nababeep, Springbok and the mining communities at the De Beers Namaqua mines

The area of responsibility is in the arid north western part of the Northern Cape were the Orange River is the only sustainable source of water.

Pumping water from the Orange River is costly because of distance and elevation to be pumped

ACHIEVEMENTS & CHALLENGES Challenges :-The Municipality do not have the capacity to take over the Water

Board (Section 78 investigation funded by DWAF). - The Board not able to pay creditors.- Various pipeline failures occurred due to age of infrastructure

resulting in communities left without potable water. (Dec’07 Concordia 4 days)

Achievements :- Temporary appointment of consultants to perform managerial

duties June’08- Omissions reported by Auditors resolved- Involve various stakeholders in seeking resolution to financial crises

of Board eg. DG ,Department of Water Affairs, MEC for Local Government Northern Cape Province, District municipality, Customers

- Received operational grant from disaster fund (Namaqua District Municipality)

REPORT OF INDEPENDENT AUDITORS Unqualified Opinion

In our opinion the financial statements present fairly, in all material respects, the financial position of the entity at 30 June 2008 and the results of its operations and cash flows for the year ended in accordance with IFRS.

Emphasis Of Matter

Without qualifying our opinion, we draw attention to note 11 to the financial statements which indicates the existence of a material uncertainty which may cast significant doubt on the entity’s ability to continue as a going concern.

Report On Other Legal And Regulatory Requirements

In accordance with our responsibilities in terms of sections 44 (2) and 44 (3) of the Auditing Profession Act, we report that we have identified certain unlawful acts or omissions committed by persons responsible for the management of Namakwa Water Board which constitute reportable irregularities in terms of the Auditing Profession Act, and have reported such matters to the Independent Regulatory Board for Auditors.

PERFORMANCE SUMMARY

Board made a loss of R 17 mil 2008 vs. profit of R 2,6 mil 2007(R 12 mil remission of debt included in 2007)

Operating loss of R 1,4 mil 2008 & profit of R 3,9 mil 2007 mainly due to increase in salaries & operational cost & write down of debts & asset scrapping

Debtors decreased by R 1,5 mil(R0,698 non recoverable written off)

Creditors Increased by R0,8 mil (Mainly Raw water purchased from Water Affairs)

Relook at accounting policy resulting in non Cash based funds written off to provide a more realistic view of entity.

FINANCIAL PERFORMANCE 2007/2008

NOTES 2008R

2007R

Revenue 9 639 834.25 9 620 144.94

Other Income 3 58 449.52 4 405 391.55

Administration Expenses ( 362 961.47 ) ( 370 012.55 )

Other Operational Expenses ( 24 007 428.08 ) ( 21 363 315.44 )

Financing Costs ( 2 408 082.03 ) ( 2 293 354.74 )

Loss before remission of debt ( 17 080 187.81 ) ( 10 001 146.24 )

Remission of debt - 12 630 579.69

(Loss)/Surplus for the year ( 17 080 187.81 ) 2 629 433.45

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

STATEMENT OF FINANCIAL POSITION(BALANCE SHEET)

NOTES 2008R

2007R

ASSETSNon-Current Assets Property, Plant and Equipment 5 82 919 280.16 96 233 514.00Current Assets 3 254 125.88 4 921 006.56 Fixed Investments 6 654 652.17 604 409.59 Trade and other Debtors 7 2 599 473.71 4 152 080.22 Cash and Cash Equivalents - 164 516.75Total Assets 86 173 406.04 101 154 520.56EQUITY AND LIABILITIESFunds and Reserves 73 270 971.31 90 364 267.96 Retained Income 3 039 266.57 6 113 655.35 Non-Distributable Reserves 76 310 237.88 84 250 612.61 Revaluation Reserve 76 310 237.88 76 568 346.72 Maintenance Fund - 7 384 185.29 Retainer Fees Special Fund - 298 080.60Total Liabilities 12 902 434.73 10 790 252.60Non-Current Liabilities Long Term Loans 8 10 672 586.78 10 403 049.98Current Liabilities 2 229 847.95 387 202.62 Trade and other Creditors 9 1 224 482.42 387 202.62 Bank Overdraft 1 005 365.53 -Total Equity and Liabilities 86 173 406.04 101 154 520.56

CASH GENERATED BY OPERATIONS2008

R2007

R (Loss)/Surplus for the Year (17 080 187.81) 2 629 433.45

Adjustments for:

Depreciation 12 025 018.00 12 243 089.00

Interest Received (50 242.58) (600 983.66)

Interest Paid 2 408 082.03 2 293 354.74

Remission of Debt - (12 630 579.69)

Assets Scrapped 1 269 997.00 -

Operating income before changes in working capital

(1 427 333.36) 3 934 313.84

STRATEGIC PLAN 2009/2011

The strategic goal for the Board is to get out of its current cash flow crisis and to become self sustainable. This will be attain by :

Secure short term financial assistance Reduce cost of operations Reach agreement with Municipality to take over

distribution Recovery of actual cost of service Remission of Debt - Water Affairs loan Reach agreement with DBSA for rescheduling of loan Secure funding for urgent capital replacement

CAPITAL EXPENDITURE PRIORITIES 2009/2011

The Flocculation dosing pumps, Lime feeders and Chlorinators are all defect, which is directly impacting the quality of water and the health of operators.

Urgent replacement required of ±26km section of the main pipeline between Vrieskloof and Okiep. The lining of the pipeline has broken up, causing corrosion and blockading of the pipeline and frequent pipeline failures, resulting in the community been left without potable water.

Replacement required of ±9 km section of the pipeline between Okiep and Nababeep. The pipeline has reach the end of its economical life and leaks occur on the line. As this line is not accessible by road, maintenance cannot be carried out on the line.

Replacement required of ±5 km section of the pipeline between Okiep and Carolusberg. The pipeline has reach the end of its economical life and leaks occur on the line.

Replacement required of ±9 km section of the pipeline between Okiep and Concordia. The pipeline is use to pump water under high pressure and has reach the end of its economical life.

The Metering equipment to measure extraction and distribution needs to be replace as meters is not working. This is also necessary to determine water losses and leaks on pipelines.

The communication and telemetric control between reservoirs and pump stations which is needed to monitor reservoirs levels and communication between operators need to be replace or upgraded to ensure reservoirs levels are monitor accurately and pumps are activate in correct sequence to prevent pipeline burst.

Other short term replacement that needs to be made includes: The housing for operators have not been maintained properly and needs upgrading to repairs insure the

availability of personnel. Two vehicles for technical and repair personnel needs to be replaced urgently. The Lifting equipment on the trucks used to transport pumps & pipes need to be repaired as it not safe

or effective currently. Access roads especially for the Nababeep pipeline needs to be upgraded as the pipeline is not accessible

for repairs.