REVENUE MANAGEMENTPresented by: MPHO MOFOKENGACTING Chief Financial OfficerWater Trading Entity

Date : 16 April 2013

Background

• The Water Trading Entity (WTE) was established in 1983 under the Exchequer Act as a trading account operating as an integral part of the Department of Water Affairs. The status of government trading accounts was eventually changed through the Public Finance

Management Act of 1999, converting trading accounts into trading entities.

• The Water Trading Entity has adopted General Recognized Accounting Practices (GRAP) in the financial year under review in accordance with Directive 9, issued in November 2011 by the Accounting Standards Board (ASB)

• The Water Trading Entity (WTE) reports directly to the Accounting Officer of the Department of Water Affairs and is comprised of two operating units, the Water Resource Management unit and the

Infrastructure Branch.

1. ANALYSIS OF RECEIVABLES

Receivables balances at 28 February 2013

CUSTOMER TYPE BALANCE 2013

R’000

BALANCE 2012

R’000

WATER BOARDS 2 111 339 1 975 723 COMPANIES 1 154 883 1 290 571MUNICIPALITIES 1 352 865 1 355 294NATIONAL AND PROVINCIAL GOVERNMENT

252 560 243 917OTHER 322 749 312 110TOTAL 5 194 396 5 177 616

1. ANALYSIS OF RECEIVABLES - FEB 2013Customer Type Total 30 Days 31 - 60 Days 61 - 90 Days 91 - 120 Days 121- 150 Days 151 Days +

Water Board 1 530 798 709 379 457 774 300 894 590 40 721 557 28 754 296 -4 734 704 785 705 196 Water User ass. 320 317 005 40 333 610 2 986 895 -12 874 930 11 557 250 -7 822 988 286 137 168 Irrigation Board 260 392 761 3 374 701 -6 668 601 8 534 430 18 393 207 -1 046 579 237 805 605 Water Service Provider -169 505 -169 505

2 111 338 970 423 166 084 297 212 884 36 381 057 58 704 753 -13 604 272 1 309 478 465

Company 1 154 882 740 115 427 467 -104 027 280 -93 495 329 125 384 957 -22 048 587 1 133 641 512

Municipality 1 040 328 174 37 438 922 7 119 297 9 984 145 1 125 456

25 259 777 959 400 578

District Municipality 269 111 046 6 793 412 -13 241 641 -1 007 105 5 598 529

2 573 632 268 394 219

Metropolitan Municipality 43 425 463 13 355 131 1 252 165 6 589 265 737

-890 066 29 435 907

1 352 864 683 57 587 464 -4 870 179 8 983 630 6 989 723

26 943 342 1 257 230 703

National Government 248 077 557 4 465 638 1 865 705 2 157 036 5 610 801

1 134 226 232 844 151

Provincial Government 4 482 528 97 351 48 687 78 979 185 550 45 004 4 026 957

252 560 085 4 562 989 1 914 392 2 236 016 5 796 351

1 179 230 236 871 108

Individual 313 816 678 2 479 473 -232 663 973 355 22 009 338 1 899 917 286 687 258

Other 8 932 706 -80 843 3 076

3 076 143 457 -4 946 8 868 887

322 749 384.58 2 398 629.54 -229 586.87 976 430.87 22 152 795.26 1 894 971.09 295 556 144.69

Grand Total 5 194 395 864 603 142 633 190 000 231 -44 918 196 219 028 578 -5 635 317 4 232 777 933

Status of the WTE Receivables Book as at 28 February 2013

Status of the WTE Receivables Book

Provision for impairment of receivables

CUSTOMER TYPE BALANCE 31 MARCH 2012

R’000

EST BALANCE 28 FEBRUARY 2013

R’000

WATER BOARDS 696 172 698 428COMPANIES 96 874 97 188

MUNICIPALITIES 1 354 876 1 359 267

NATIONAL AND PROVINCIAL GOVERNMENT 22 746 172 820OTHER 296 741 297 703TOTAL 2 467 410 2 625 047

Provision for impairment

Provision for impairment

Strategies to address long outstanding accounts

• Our approach is to ensure that our customers agree with the their outstanding balances

– This will be achieved through debtor’s circulations and– signing of acknowledgement of debt. By our customers

1. A debt collection agency has been appointed to assist the WTE to collect all outstanding debt. Part of the scope of the contract is to validate account balances and to assist in proposing adjustments to be performed to restate account balances.

2. Processes have also been implemented to validate all billing prior to it being recognised in SAP.

3. Possible write-off of incorrect interest charge.

4. We are currently performing line item clearing on the age analysis.

5. Recruitment of staff at regions and cluster to improve revenue management

6. SAP upgrade to Utility module

Response 2

• It is currently impractical to accurately restate the opening balances of receivables due to the measurement of revenue as we are using registered volumes for CMA’s and some of the NWRI customers.

• The following is the strategy to ensure roll out on the metering strategy for NWRI and some CMA customers

CORRECTION OF OPENING BALANCES

2. ACTION PLAN: METERING STRATEGY

• Currently water resource abstraction users pay water resource management (“WRM”) charges and others are dependent on an assurance of water supply through a government water scheme “GWS”).

• This response is limited to water utilised from GWS , i.e. National Water Resource Infrastructure (“NWRI”) related use.

• The Chief Director: Operations within the NWRI branch is in the process of finalising the water measuring strategy.

• The fundamental emphasis of the strategy is that metering remains the most credible and most reliable form of water use volume determination.

• Within the strategy, provision is made to determine the water consumed based on metering or any other measuring device (e.g. water releases via canal off takes)

CURRENT BILLING STRATEGY

Response 1: Cont.• The expected time frame for the implementation of the strategy is three years

after the approval of thereof.

• The branch has already budgeted for part of the expected capital expenditure to be incurred during the 2013/14 financial year.

Fin Year Budget Estimate Activity (Implementation: Draft Bulk Raw Water Use Measurement Strategy)

2013 - 2014 R12 million • User Classification and Communication• Assess Unit Capacity against Strategy; amend structure

and train.• Assess existing meter functionality.• Prioritise Strategic Users (Class 1) for compulsory

metering.• Prioritise Bulk Measurement Areas.• Establish Meter Stock.

2014 - 2015 R19 million • Establish bulk measurement arrangements with WUAs and CMAs.

• Prioritise Class 2 Users.• Augment meter stock• Establish Meter Calibration Facility• Establish Seasonal Irrigation Volume Registration

2015 - 2016 ±R10 million • Prioritise Class 3 and 4 for implementation as per the proposed strategy.

• Verification of Class 1 meters.

Response 1: Cont.• The metering strategy classifies users for the purpose of introducing the

prospect for self-reading opportunities, as follows: Class 1: These would be the Strategic users (e.g. ESKOM, SASOL, major mining

houses, etc.). Due to the very high volumes of water used it would be required that the NWRI prioritise these users for high frequency meter readings (monthly) by cluster offices.

Class 2: These would be users that could be identified to do self-reading of meters and provide the NWRI with the readings. This arrangement will be dependent on meters conforming to NWRI requirements, a web-based system available to allow for readings to be submitted to DWA from remote areas. This arrangement will also require verification audit readings at a bi-annual frequency (at least).

Class 3: These would be users whose usage will be administered through a bulk supply agreement. The bulk meter reading could be conducted similar to Class 2 arrangements but would require further reconciliation of usage of all users within the WUA with bulk reading. It will also include irrigation users where seasonal use verification will be introduced.

Class 4: These would be remote, lower volume users that would be required to do self-reading of meters on a monthly frequency. Low frequency verification readings to be undertaken by NWRI staff.

Closing RemarksIt is recommended that the Portfolio Committee note the following:

1.Progress in the implementation of the metering systems for NWRI’s

2.The age analysis of various categories of customers

3.Possible provision for impairment of receivables

THANK YOU