JOHANNESBURG WATER SOC (Ltd) Final 2015/16 BUSINESS PLAN 0
Providing Water. Providing Life. JOHANNESBURG WATER BUSINESS PLAN v4 Approved by Board: 24 April 2015 SIGN-OFF PAGE Managing Director: Johannesburg Water Mr Lungile Dhlamini... Date Member of Mayoral Committee: Environment, Infrastructure & Services Department Councillor Matshidiso Mfikoe... Date Business Plan 2015/16 V.4 1
LIST OF ACRONYMS Abbreviation Explanation AG Auditor General AMD Acid Mine Drainage AMI Advanced Metering Infrastructure BBBEE Broad Based Black Economic Empowerment BSC Balanced Scorecard BTE Biogas to Energy CAPEX Capital Expenditure CIDB Construction Industry Development Board CoJ City of Johannesburg CRC Current Replacement Value Cost DRC Depreciated Value Replacement Cost EPWP Expanded Public Works Programme ERM Enterprise Risk Management FY Financial Year GDS 2040 Growth & Development Strategy 2040 h/h Households IAMP Infrastructure Asset management Plan IDP Integrated Development Plan IT Information Technology JW Johannesburg Water LoS Level of Service MNF Minimum Night Flow MOE s Municipal Owned Entities NGOs Non- Governmental Organizations NRW Non-Revenue Water OHS Occupational Health & Safety RUL Remaining Useful Life SHSUP Sustainable Human Settlement Upgrade Programme SLA Service Level Agreement SMART Suitable, Measurable, Achievable, Relevant & Time Bound SMMEs Small, Medium and Micro-sized Enterprises SWM Smart Water Meter SWOT Strengths, Weaknesses, Opportunities & Threats UFW Unaccounted For Water VIP Ventilated Improved Pit-latrine WC-WDM Water Conservation & Water Demand Management WWTW Waste Water Treatment Works Business Plan 2015/16 V.4 2
EXECUTIVE SUMMARY... 4 INTRODUCTION... 6 Mandate of Johannesburg Water 6 LOOKING AT THE FUTURE... 8 18 MONTHS STRATEGIC FOCUS... 9 CAPITAL INVESTMENT PROGRAMME... 11 Implementation and Performance Overview 2015/16 11 PRIORITY IMPLEMENTATION PLANS 13 Jozi @work... 19 Corridors of freedom... 24 Green and Blue Economy... 32 SMART City Initiatives... 34 Game Changer.... 35 FINANCIAL POSITION... 38 Revenue and Tariff Analysis 48 ORGANISATIONAL EFFECIENCY... 50 Enabling Technology 50 Human Capital 58 Risk Management 62 Annexure A: Strategic Annual Balanced Scorecard: 2015 /16... 68 Annexure B: Financials... 77 Business Plan 2015/16 V.4 3
EXECUTIVE SUMMARY This Business Plan identifies how Johannesburg Water will accelerate service delivery in 2015/16 and beyond. Key focus will be to reduce costs where possible while managing them and complete priority programs more efficiently. In 2013/14 financial year Johannesburg Water management formulated a 5 year Strategic plan, to be implemented over a five year period. This document therefore stems out of the review of the 5 year Strategic Plan which will continue to be updated annually. The Plan specifies a comprehensive prioritised set of initiatives and on-going activities to enhance the present and future delivery of quality water, wastewater management, for current and future customers. To create an environment of understanding of what needs to be done to ensure sustainable delivery of quality services; Johannesburg Water identified factors that contribute most critically to the success of implementing this Business Plan. These factors will address key issues that seek to accelerate delivery of services to achieve the expected results. Provide Quality Services Maintain high quality and reliable service. Maintain a high level of community support and customer satisfaction. Apply technology and innovative management techniques to enhance the Johannesburg Water s ability to provide quality services Communications and Stakeholder Management Johannesburg Water will clearly and consistently communicate its priorities, goals, and objectives to all stakeholders. Use of technology to create a two way communication platforms, report incidents etc. Business Plan 2015/16 V.4 4
Resource Management Continue to implement the Capital Programs to meet water supply needs, replacement of infrastructure, system maintenance, and regulatory compliance demands, in a costeffective manner. Johannesburg Water will strive to achieve further water consumption per capita reductions to 308 litres per capita per day. Organization & Management Review, plan and implement succession planning Optimize the use of limited resources. Monitor, measure, and evaluate performance constantly Financial Stability Continue implementation of revenue engagement project to increase metered customers to improve revenue. Continue to maintain efficiency in operational costs. SMME Development & Job Creation Implementation of 65 contractors developed from CIDB grade 2CE to 6CE by 2016. Create 17 915 EPWP jobs and 290 GEP learnerships by 2016 Business Plan 2015/16 V.4 5
ABOUT JOHANNESBURG WATER INTRODUCTION Mandate of Johannesburg Water JW is wholly owned by the CoJ, as a Water Services Provider to deliver water and wastewater service to approximately 4.4 million residents (Census 2011) within the jurisdiction of the CoJ. JW provides potable water services to an area ranging from Midrand in the north to Orange Farm in the south, and Alexandra and others in the east to Roodepoort in the west. Vision To be a World Class African, Water and Sanitation Utility Mission We provide all CoJ citizens with quality Water and Sanitation services by: Corporate Values Teamwork Accountability Cost Effectiveness Communication Customer Service Business Plan 2015/16 V.4 6
Johannesburg Water Supply Area and Customers Johannesburg Water customers have grown over the years. The company provides services to approximately 1.4 million households, in line with census 2011. The entity services seven regions within the CoJ, namely; A: Midrand / Ivory Park/ Diepsloot/Kya Sand B: Rosebank/ Randburg/Emmarentia/Greenside/Melville/Northcliff/Parktown C: Roodepoort/Constantia Kloof/Northgate D: Doornkop/ Dobsonville/ Protea Glen E: Alexandra/Wynberg/Sandton G: Orangefarm/Ennerdale/Lenasia The real cost challenges for the organisation are cost of sales and bad debt provision which have both increased in the last 5 financial years while the contribution of operating and staff costs and interest have decreased. The increase in cost of sales is particularly a potential threat to the organisation as it has not been accompanied by a commensurate increase in billed revenue The entity s primary business is done through the following assets: 89 Water reservoirs, 28 Water towers, 10 Depots, 4 Laboratories, 12 581 km of water pipelines. 6 Waste Water Treatment Works Johannesburg Water supplies approximately 1,574 Ml/day and treats it to acceptable effluent standards. Business Plan 2015/16 V.4 7
LOOKING AT THE FUTURE Johannesburg Water has reviewed its Business Model to ensure that it best responds to the service delivery requirements and the rising pressure of providing quality services to residents within the CoJ. The review of the business resulted in strategic interventions such as Re-alignment of High Level Structure to ensure that the organisational structure supports the business goals. On the face of Johannesburg Water priorities is the need to adapt our business processes, systems and controls such that they re aligned to the goals of company and further support the identified Flagship Programmes. Service Delivery Imperatives Customer Charter provides minimum standards of services for citizens of CoJ. In order to improve quality of services, the entity has committed to exceed the minimum service standards Interventions that are being implemented in the current financial year to reach 100% Service Level Standards are: Minimum performance standards of 6 water related jobs per team per day and 5 sewer related jobs per team per day Increase in Infrastructure Renewal (Water 308 km and Sewer 130 km in 2014/15 Water 114 km and Sewer 55 km in 2015/16) Extended Standby (Shift) introduced in order to improve service delivery after hours. The entity plans to achieve the following standards, to ensure service delivery is accelerated. 95% of water bursts restored within 48 hours 95% of sewer blockages cleared within 24 hours 99% compliance with water quality standard (SANS 241) Planned water interruptions to be completed within 12 hours 100% of the time 95% of water meters to be read at least once a month (actual reading) 100% of new water connections to be installed within 25 days of receiving payment Business Plan 2015/16 V.4 8
18 MONTHS STRATEGIC FOCUS CoJ developed a concept referred to as the House which seeks to accelerate the implementation of services over the next 12 months. The House comprises of four, (4) pillars that have been identified as priority programmes namely: Corridors of Freedom, Green & Blue Economy, Jozi@Work and Smart City. The House Model Business Plan 2015/16 V.4 9
These Priority Programmes have been identified as the key programmes of action leading to December 2016. The House is set on a foundation referred to as the Core Mandate, which focuses on service delivery turnaround. The Core Mandate deals with all basic service requirements and standards. Communication and Development has been identified as the overarching functions that supports the priority Programmes within the Mayors House. The House has identified Communication and Development as the game changer, in enhancing positive perceptions of the City and also improving customer s relations and communications regarding City s intervention to accelerate delivery of quality services. Within the next 18 months and beyond, Johannesburg Water will give direct focus Priority Programmes that support the House objectives. Prioritised Capital Projects will be implemented to contribute directly and indirectly to the Flagship Programmes. Business Plan 2015/16 V.4 10
CAPITAL INVESTMENT PROGRAMME Implementation and Performance Overview 2015/16 Johannesburg Water capital programme relates to infrastructure projects that support the City s Flagships Programmes as well as infrastructure management which provide suitable capacity and efficient infrastructure to meet City of Johannesburg (CoJ) water demand. Over and above the identified Flagship Programmes, the capital projects supports the CoJ 2040 Growth and Development Strategy (GDS) outcomes as well as City of Johannesburg Priorities adopted at the Mayoral Lekgotla in 2013, such projects form part of the cluster Priority Implementation Plans, referred to as PIPs. The major focus for JW is to deliver services in the most effective way with a better distribution of risks between customers and the organisation. City of Johannesburg had made a commitment to invest a total of R 110 billion in infrastructure in the coming 10 year period. Johannesburg Water infrastructure commitment for the same period amounted R 25 billion of which R 1 billion was spent by June 2014, with additional R 1 billion to be spent by June 2015. In 2015/16 a capital budget provision of R 792 million has been made. However the budget for the 3-year period from 2015/16 to 2017/18 amounts to R 3.0 billion. It should be noted that this is R 1.6 billion less than previously approved R4.6 billion for the same period. Business Plan 2015/16 V.4 11
Figure 1: 2015/16 Capex Allocation per Capital Programme 40% 35% 30% 25% 20% 15% 10% 5% 0% 18% Water Demand Management 2015/16 - Percentage Capex per program 22% WWTW Expansion and Renewal 35% Water Network Upgrading & Renewal 14% Sewer Network Upgrading & Renewal 1% Access to Basic Services: Water 10% Other Programs In line with GDS 2040 outcomes, JW has set a series of high level capital projects and interventions that seek to increase the current infrastructure capacity in order to meet CoJ economic development s needs. The new Lanseria (50 Ml) wastewater treatment work will be one of the major capital projects that will commence in 2015/16 financial year, the project is planned to be completed in 2019/20 financial year. Upon completion the project will provide additional capacity to 50 000 households equivalent. This project will also relieve the current pressure on Northern Works, while also unlocking economic developments, which will results in job creation. Pipe Replacement (Upgrade and Renewal) forms part of the key capital programs that Johannesburg Water will continue to implement in 2015/16 financial year. In a pursue to reduce unaccounted for water (UFW), pipe replacement has been identified as key program to assist in combating physical losses. Priority Implementation Plan section provides more detail with regards to the set targets for 2015/16 financial year. Business Plan 2015/16 V.4 12
PRIORITY IMPLEMENTATION PLANS PIP: Resource Sustainability IDP Programme: Water Demand Management: Project: Infrastructure Upgrade and Renewal Project The project objective is to reduce the current high level of Non-Revenue Water (NRW) through the upgrading and renewal of the existing water reticulation pipelines (secondary mains), retrofitting of internal property leaks, installation of water meters (prepaid meters) and educating consumers on water conservation. In 2015/16 financial year JW intends to complete the remaining scope of Soweto Infrastructure Upgrade and Renewal project. Upon completion a total of 183 940 properties will be retrofitted and meters installed which include the replacement of old water mains. Revenue collections have improved from R 3.5 million in 2012/13 to R 5.7 million by June 2014. Johannesburg Water has planned to expand this project to other areas within the city, which include Orange Farm and Ivory Park. The roll-out of this project will be through Jozi@work programme whereby local contractors will be appointed to execute the work and formal training and mentoring will be provided which includes guidance on registration with construction industry development board. The project will also focus on installation of smart meters so to enhance the revenue, reduce billing errors and improve customer relation with JW consumers. Business Plan 2015/16 V.4 13
Project: Water Pipe Replacement Johannesburg Water s network has consumed 45% of its life which implies that only 55% remaining useful life is still in good condition. In order to improve water network remaining life Johannesburg Water had planned to replace a total of 900 kilometres of water pipes by June 2017. However, based on reduced budgets, it is estimated that only 709 km will be achieved. This initiative is geared towards reduction of physical losses within the City of Johannesburg. The table below shows the revised three year plans and regions to be covered, with 307 kilometres planned for the current year while 114 kilometres has been planned for the 2015/16. Table 1: 2015/16 2016/17 Pipe Replacement Plan PIPE REPLACEMENT PROGRAMME SUMMARY Areas of Operations Length of Mains (m) 2014/15 2015/16 2016/17 Total Midrand 39 055 34 000 30 000 103 055 Sandton Alex 54 595 50 000 25 000 129 595 Randburg Roodepoort 69 210 15 000 30 000 114 210 Southdale Langlaagte 80 880 10 000 10 000 100 880 Soweto 50 000 50 000 Deep South 14 240 5 000 10 000 29 240 Total 307 980 114 000 105 000 526 980 Renewal Rate (%) 2.70 1.00 0.95 Business Plan 2015/16 V.4 14
Project: Pressure Management The aim of this programme is to reduce excessive night-time water pressures on existing installations in order to decrease background leaks and to limit unnecessary pipe bursts. The CoJ currently operates over 491 Pressure Reducing Valves (PRVs). The target for this project is to achieve at least 72 kl/day per PRV. Table below is the scope of the project with time-frames and expected savings to 15/16FY. The budget for the remaining scope is R8 million. Table 2: Estimated projected savings JW Depot Region CoJ Region No of PRV s to be serviced Expected completion date Projected savings per annum (ml) Randburg A 227 April 2015 3,915 Ml Sandton B 168 April 2015 3,600 Ml Jhb Central B, F 55 April 2015 1,366 Ml Midrand A 133 June 2015 2,260 Ml Deep South G 22 July 2015 578 Ml Soweto D 45 August 2015 1,183 Ml Total 650 12 902 Ml Business Plan 2015/16 V.4 15
PIP: SUSTAINABLE HUMAN SETTLEMENT UPGRADE PROGRAM IDP Programme: Infrastructure Upgrade and Renewal Project: Waste Water Treatment Works Expansion and Renewal Johannesburg Water will commence with the designs of Lanseria (50 Ml) wastewater treatment work in the Northern drainage basin in 2015/16 financial year. The plan is to have the works completed by end 2019/20 financial year. Upon completion this project will provide additional capacity for 50 000 households equivalent. In order to continue to support the city economic developments, further upgrade or expansions and upgrade and renewal will continue in other works in 2015/16 financial which include, Olifantsvlei, Bushkoppies, Northern Works and Driefontein. Bulk Wastewater critical projects to commence in 2015/16 include refurbishment of Northern Works Unit 3, Realignment of Bushkoppies Outfall Sewer, and Northern Work Emergency bypass. Project: Sewer Network Pipe Replacement and Upgrading Program Johannesburg Water intends to reduce number of blockages per 100 kilometres of pipes. This is aimed to improve level of service to its customers. Sewer pipe replacement programme has been identified to achieve this objective. By June 2014 a total of 33 kilometres of old sewer pipes have been replaced against a target of 60 kilometres, while a total of 428 sewer blockages per 100 kilometres have been reported in the same period. In 2015/16 FY, 55 kilometres of sewer pipes will be replaced. Table below, shows the detailed sewer pipe replacement per regions for three years city-wide. The upgrade will also assist in reducing the sewer blockages as most of these areas are experiencing high sewer blockages. As a result of budget reduction, it is estimated that only 277 km against a target of 800 km will have been replaced by June 2017. 16
Table 3: 2014/15 2016/17 Sewer pipe replacement plan PIPE REPLACEMENT PROGRAMME SUMMARY Johannesburg Water Areas of Length of Mains (m) Areas 2014/15 2015/16 2016/17 Total Midrand 10 000 11 654 21 654 Zandfontein North & South 18 850 6 000 5 000 29 850 Randburg & Hamburg 100 670 9 000 5 000 114 670 Langlaagte & Southdale 9 710 15 000 5 000 29 710 Klipspruit & Avalon 10 000 10 000 Ennerdale 1 110 5 000 5 000 11 110 Total 130 340 55 000 31 654 216 994 Renewal rate 1.20 0.51 0.28 Project: Water Network Upgrading Besides the pipe renewal program implementation of water network upgrades will also be done in 2015/16 financial year. Due to higher development growth within the city the current infrastructure needs upgrade so to meet the current demand including the developments within three major corridors of freedom. Upon completion of these projects Johannesburg will ensure access to water in compliance with agreed service-delivery pressure, flow standards and minimum 24-hour security of supply. Project: Reservoirs The entity s service standards commit to ensure a minimum of 24-hour storage facilities. To ensure a minimum 24-hour security of supply across all supply zones Johannesburg Water will ensure construction of Diepsloot reservoir, Lenasia High level, and Orange Farm high level, Halfway House, and Woodmead reservoirs. Table below reflects developmental impact expected on these projects. Business Plan 2015/16 V.4 17
Table 4: Expected Outcomes on Infrastructure Upgrades and Renewal Projects Name of the Project Budget Return on Impact Program Name R 000 Investment 2015/1 2016/1 2017/ 15/1 16/1 17/1 15/1 16/1 17/1 6 7 8 6 7 8 6 7 8 Bulk 173 259 357 Increased 50 Ml Green Drop Wastewate 060 500 040 treatment capacity certification and r Upgrade at Lanseria reduced level on Infrastructu WWTW and river contamination re Upgrade improved effluent and quality in all Renewal WWTW Sewer Pipe 109 129 141 277 kilometres of Less sewer Replaceme 000 650 700 pipes replaced by blockages and nt June 2017 and improved level of reduced number of service and blockages per 100 respond time to kilometre sewer blockages Reservoirs 54 000 177 117 Additional water Additional 293 000 000 000 storage for households 293 000 connection within households the City equivalent Total 336 566 615 060 150 740 Business Plan 2015/16 V.4 18
Jozi@work Johannesburg Water contribution towards creation of decent jobs will be mainly through 5 programmes being Pipe Replacement Contractor Development, Retrofitting and Leaks Repairs; Operation and Maintenance of Water and Sewer Infrastructure and Rainwater Harvesting. Tables below provide 2015/16 FY and 2016/17 FY Jozi@work targets and projected outputs. Through Jozi@work, the Entity will support a total of 114 SMME s by end June 2017 while 2913 decent jobs will be created by the same period. It is envisaged that additional 100 entities will be appointed subject to budget availability. Table 5: Jozi@work 2015/16 Targets Jozi@Work Wave-Two Projected Outputs (2015/16) Jozi@work No. of Entities Entities No. Capex Opex Region program Entities owned by Youth owned by Women of Jobs Budget (Rm) Budget (Rm) Pipe 65 26 39 975 97.5 - All Renewal O&M 25 13 12 175-50 E Rainwater 24 10 14 144-30 All Harvesting Total budget 114 49 65 1 294 97.5 80 Business Plan 2015/16 V.4 19
Table 6: Jozi@work 2016/17 Targets Jozi@Work Wave-Two Projected Outputs (2016/17) Jozi@work No. of Entities Entitie No. Capex Opex Regions program Entities owned by Youth s owned by Wome n of Jobs Budget (Rm) Budget (Rm) Pipe Renewal 65 26 39 1 300 160 - All O&M 25 13 12 175-50 E Rainwater 24 10 14 144-30 All harvesting Retrofitting 35 20 15 210 50 - G Total budget 149 69 80 1 829 210 80 Business Plan 2015/16 V.4 20
Pipe Replacement Development Programme Johannesburg Water will use learner contractor development programme to roll-out pipe replacement program. A total of 65 SMMEs have been appointed and are currently undergoing technical and business training, by the end 2014/15 financial year all SMMEs would have completed 1 st Trial contract. In the coming financial years 2015/16 and 2016/17 all SMMEs will be awarded two contracts and it is expected that upon the completion of the program all will be certified as level 4 CIDB contractors. Internal Plumbing and Water Leaks Repairs Johannesburg Water purchased 570 billion-litres per annum from Rand Water (Bulk Service Provider) of which 29% (160 821 ML) is supplied to previously marginalised areas of Soweto, Alexandra Township and Orange Farm. Through this programme Johannesburg Water intends to create decent jobs through appointment of local SMMEs mainly plumbers to do retrofitting and leak repairs. Given the budget cut in the 2015/16 FY Johannesburg Water will only be able to complete the balance of the stands within Soweto including planning and preparations for other areas. This programme will assist Johannesburg Water to reduce water losses and improve water conservation and demand management within the City and also to improve its revenue. Part of this programme will include training and development of local SMMEs through retrofitting and plumbing works including technical and financial training. Water and Sewer Networks Repairs and Maintenance Johannesburg Water do experience a large number of pipe failures, blockages and bursts on both sewer and water mains in especially hotspot areas like Ivory Park, Alexandra, Diepsloot, Orange Farm and sections of Soweto. This then leads to delayed response times due to the high frequency of infrastructure failures. Business Plan 2015/16 V.4 21
In order to rectify the situation in these hotspot areas Johannesburg Water will appoint local as and when contractors with the necessary expertise to attend to infrastructure failures on the water and sewer infrastructure on behalf of Johannesburg Water. The purpose of this programme is to ensure that problems are attended to with the added benefit of local business opportunities which leads to addressing unemployment in these targeted areas. The project will support a total of 25 SMMEs contractors from the local communities with relevant CIDB grading which determine the contract value. Urban Rainwater Harvesting (Maru A-Pula) Urban Rainwater Water Harvesting (URWH) is one of the programmes initiated to reduce the water demand within the City of Johannesburg. Johannesburg Water together with Gauteng Department of Education have embarked on the Rainwater Harvesting initiative that intends to harvest rainwater for domestic use. A total of 500 high water consuming schools have been identified with the view of repairing water leaks within their schools and also provide them with rain water harvesting tanks that will be used to store rain water for use in ablution blocks. Phase 1 of the program commenced in 2014/15 financial year with 2 JW depots while 200 schools are also planned to be completed by end June 2015. A total of 300 schools will be completed in by end of June 2016. A total of 24 SMMEs local contractors will be appointed and supported to implement this project and Johannesburg Water will ensure that 50% of the appointed contractors are youth and women. 22
Jozi@Work in Other Services within JW As the company seek to increase basic water and sanitation coverage, Jozi@work principles will be fully implemented in the rolling-out of basic services throughout the City. Local corporative or SMMEs will be appointed to install ventilated pit latrines (VIP) toilets including the installation of communal stand pipes in un-serviced areas. Unbundling of Chemical toilet has also been identified as potential job creator, whereby the current model will be phased out and contracts will be re-organised to include more suppliers at various categories of supply. It is anticipated that more local contractors will benefit as opposed to the current arrangement whereby less than 5 suppliers have been appointed. In order to increase job creation opportunities Johannesburg Water will partner with City Parks regarding the up-keep of the grounds in all treatment works facilities. The approach will be to appoint local residents or cooperative to do grass cutting within the works. Maintenance of Depot facilities will also be done under Jozi@work with more focus on plumbing repairs and fencing for new satellite depot. 23
Corridors of Freedom South Africa is compounded with a history of imbalances of the past, prior 1994. This past history was designed in a manner that black people will stay far away from the towns or cities as a result areas like Soweto, Alexandra and Orange Farm were established. Given the 20 years of Democracy the City of Johannesburg has embarked on the process of redressing this challenge of the past through corridors of freedom initiative. This initiative will contribute towards an inclusive and accessible City to all. It will ensure that people come closer to the City or working zones, while also being provided with mobility through public transport ( Rea-vaya) to commute to the city. Corridors of freedom are geared toward ensuring that high density human settlements are developed within the City of Johannesburg. It should be noted that highly dense settlements have positive benefits with regards to provision of services by government as the rate of servicing more households is lower than of servicing one or few households who stay away from main bulk supply or services. In support of corridors of freedom Johannesburg Water will implement various capital projects that are geared to support the expected population and economic activities within the corridor. Johannesburg Water will ensure that there is enough water supply and sanitation services capacity to support higher density settlements. Detailed analysis has been undertaken for each of the defined Corridors of Freedom incorporating increased densities and land-use changes. Projects that seek to responds to the identified needs have been identified and detailed below including a table that provides return on investment that will be realised upon completion of all projects. The identified projects will be implemented over a 4-year period starting in 2014/15 financial year. The detailed scope of work to be undertaken has been defined below under each corridor. 24
Turffontein Corridor The Turffontein Corridor requires the construction of 2.2 km of water mains, a 2.5 Ml water tower and pump station. Construction will commence in 2015/16 with the construction of the water mains with the tower and pump station to follow in subsequent years. Upgrading of approximately 5.1 km of collector sewers are expected to commence in 2016/17. Louis Botha Corridor Louis Botha requires the construction of PRV pressure management zones, a 37 Ml reservoir and 1.4 km of bulk water mains. The PRV zones will be implemented in 2015/16 with the reservoir and bulk mains commencing in 2016/17. The sewer system requires the upgrading of 5.4 km of collector sewers which is anticipated to commence in 2016/17. Empire Perth Corridor Empire Perth requires the construction of 7.2 km of water mains, a 26 Ml reservoir and a 2 Ml water tower. The water main construction will commence in 2015/16 with the reservoir and tower planned to commence in 2016/17. The sewer system requires upgrading of 5.1 km of collectors sewers which will commence in 2016/17. Table 7, below provides a detailed corridors of freedom programs and estimated return on Investment 25
Table 7: Capital Investment Programme and Return on investment Summary of Johannesburg Water Capital Program Name of Project Name Capital Budget (R m) Return on Investment COJ Program 2015/1 6 2016/1 7 2017/18 Regions Infrastructure Upgrade and Renewal 143 000 96 000 112 000 Total water savings of 36 000 Ml per annum (R 182 Million Water Saving City Wide per annum at a current rate of R 5.04/ kl) For Soweto only in 2015/16 Water Pipe Replacement 114 105 101 850 Potential Water savings of 1 296 City Demand 000 000 Ml/annum on completion of Wide Manageme programme equivalent to R 6.5 nt Million/year). Pressure Management 39 198 39 514 45 000 Potential Water savings of 15 477 Ml City per annum equivalent to R 80 Wide Million/year) Smart Meter Pendin g budget availabi lity 24 000 28 000 Improve Water Revenue. Improve customer satisfaction levels City Wide Business Plan 2015/16 V.4 26
Bulk Wastewater Expansion and Upgrades Reservoirs Olifantsvlei heating and mixing / 30 000 50 000 Treatment service continuity D & F refurbishment Bushkoppies balancing tank 20 000 37 000 Treatment service continuity D Goudkoppies (Refurbishment) 150 9 000 10 000 Treatment service continuity D & F Ml/d Northern Works (Refurbishment) 460 Ml/d 80 000 67 500 25 000 Treatment service continuity A, B,C & E Driefontein concrete lining over-flow 10 000 20 000 Treatment service continuity C Lanseria 50Ml/d 5 000 60 000 245 000 Treatment capacity for 50 000 HH C Ennerdale 2 000 5 000 1 000 Treatment service continuity G WWTW General 7 000 20 000 25 000 Treatment service continuity City Blue Hills Tower 1.2 Ml 1 000 5 000 Storage capacity for 1 000 HH C Carlswald Reservoir 10Ml 1 000 20 000 4 000 Storage capacity for 10 000 HH A Kensington Reservoir 15Ml 12 000 8 000 Storage capacity upgrade for 15 000 F HH Robertville Tower 2.25Ml 2 000 6 000 Storage capacity for 2250 HH F Orange Farm High Level Reservoir 10 000 15 000 Storage capacity upgrade for 35 000 G 35Ml HH Lenasia High Level Reservoir 15 Ml 8 000 20 000 Storage capacity upgrade to 15 000 HH G President Park Reservoir 50Ml 12 000 Storage capacity upgrade for 50 000 HH F Diepsloot Reservoir and Tower 20 Ml 10 000 Storage capacity upgrade for 20 000 G 27
Sewer Upgrade HH Ennerdale Lawley Reservoir & Tower 1 000 15 000 17 000 Storage capacity upgrade for 20 000 G 20ml HH Woodmead Reservoir 20Ml 2 000 23 000 12 000 Storage capacity for 20 000 HH E Halfway House Reservoir 20Ml 2 000 20 000 30 000 Storage capacity for 20 000 HH A Crown Gardens Reservoir & Tower 16 Ml 1 000 9 000 12 000 Storage capacity upgrade for 16 000 HH F Sewer Pipe Replacement (City Wide) 109 129 141 700 Reduced number of blockages per City 500 650 100 meters,replacement of 800 km sewer 28
Table 8: Corridors of Freedom Projects Corridor Name Louis Botha Empire Perth Programme Programme Impact Return on Investments Water Meet additional water demand of 32 851 kl/d and storage Improved infrastructure to support Upgrade: including bulk upgrading to the value of R 99.7 million to additional 50 000 households within the support projected additional population of 171 819 corridor Sewer Meet additional sewer generation of 26 280 kl/d through Improved infrastructure to support Upgrades: collector sewer to the value of R 28.2 million additional 50 000 households within the corridor BWW Northern Works current capacity of 460 Ml can accommodate Treatment service continuity additional 26 Ml to be generated from the corridor Water Meet additional water demand of 24 889 kl/d and storage Improved infrastructure to support Upgrades including bulk upgrading to the value of R 152.4 million to additional 40 000 households within the support projected additional population of 130 003 corridor Sewer Meet additional sewer generation of 19 911 kl/d through Improved infrastructure to support Upgrades collector sewer to the value of R 8.4 million additional 40 000 households within the corridor BWW Bushkoppies Works capacity of 248 Ml can accommodate Improved infrastructure to support additional 20 Ml generated from the corridor additional 30 000 households within the corridor 29
Water Meet additional water demand of 20 368 kl/d and storage Improved infrastructure to support Upgrades including bulk upgrading to the value of R 31.8 million to additional 30 000 households within the support projected additional population of 95 776 corridor Turffontein Sewer Meet additional sewer generation of 16 294 kl/d through Improved infrastructure to support Upgrades collector sewer upgrading to the value of R 12.4 million additional 30 000 households within the corridor BWW Goudkoppie Works capacity of 130 Ml can accommodate Treatment service continuity additional 16 Ml generated 30
Acceleration of Service Delivery The foundation of the House is the Core Mandate, which relates to acceleration of service delivery to meet service delivery standards. Within Johannesburg Water the Core Mandate refers to all initiatives that support the achievements of the Flagship Programs as well as the roof of the House, Communication and Development such as operations, and all organizational wide support functions. Provision of Basic Service Water Basic water service (LoS1) in informal settlements has been provided to 127 474 of the 142 285 households showing a coverage of 89.6%. These means the remaining 14 811 households are being provided water services at nominal service (water tankers) and require to be upgraded to LoS1. The plan for 2014/15 FY is to provide access to basic water to 3187 households thereby increasing the coverage to 130 661. In 2015/16 FY, the plan is to upgrade 3 022 households to Los1 (basic service level) and will result in coverage being increased to 133 683 which is equivalent to 93.95% in informal settlement. Provision of Basic Service Sanitation Basic sanitation service (LoS1) in informal settlements has been provided to 58 958 of the 142 285 households showing a coverage of 41.44%. The balance of 83 327 households (backlog) are being provided with a nominal service (chemical toilets) and they require to be upgraded to LoS1. In 2015/16, additional 2 527 households will also be upgraded to Los1 (basic service level) which will result in coverage being increased to 64 173 which is equivalent to 45.10% in informal settlement. In order to improve accessibility to basic sanitation JW has invested in a new closed loop sanitation technology, that is geared to have high level coverage. Phase one of this project has been completed in Diepsloot. The technology will be assessed for implementation in Ruimsig and Ekuphumuleni settlements where there s no coverage or low. Business Plan 2015/16 V.4 31
Green and Blue Economy To support the growth of a greener City, that supports a clean and inclusive economy, Johannesburg Water will continue to roll out initiatives that contribute to climate change mitigation goals. Johannesburg Water will look into Energy Efficiency and Alternatives, ECO Buildings and Alternative Water Resources. Energy Efficiency and Alternatives In an effort to reduce JW s reliance on electricity that s been generated through conventional methods we will implement at least one in-pipe turbine at the Sandton Bulk supply line. This turbine will generate electrical energy through the reduction of pressure that is required in this supply system. This electrical energy that will be generated will be used at the Linbro Park Reservoir for monitoring and SCADA equipment. JW is also investigating the possibility of installing additional in-pipe turbines. Johannesburg Water will also change standards of electrical equipment especially motors so that when upgrade or renewal takes place the premium efficiency motors are used instead of the normal standard efficiency motors. In doing so the electricity consumptions at WWTW and Water and Sewer pump stations will reduce this will free-up electricity for growth in other areas of the City. Johannesburg Water will also continue with the Biogas to Electrical energy generation at the Wastewater Treatment works. With the projects at Northern and Driefontein works coming to an end during the 14/15 financial year Johannesburg Water will initiate the process of rolling out similar installations at our Southern Wastewater treatment Works. All this is done to reduce the reliance on the normal electricity grid and to contribute positively to the reduction in GHG emissions due to conventional coal-fired power generation methods. 32
ECO Buildings All new Johannesburg Water buildings will be based on eco designs and materials. Energy efficient fittings like solar power geysers and LED lights will become standard requirements of the new buildings. In 2015/16 the Ennerdale depot will be retrofitted with energy efficient fittings in the effort to reduce electricity consumption. Alternative Water Resources South Africa is a water stressed country with an ever increasing risk that water demand will outstrip supply by 2021. Efforts will not only include infrastructure management but also consumer demand management and alternative water resources. Johannesburg Water has embarked on a multi-pronged approach to promote water conservation and reduce water demand. To this end the organisation has streamlined key Water Conservation/Water Demand Management interventions that will have the maximum contribution in achieving the target of saving 44 711 Ml volume of water by 2016. Key interventions identified for acceleration are as follows; Pipe replacement Pressure management Active leak detection Soweto infrastructure upgrade and renewal Education Awareness Promotion and installation of Rain water harvesting systems Promotion of use of ground water Effluents re-use 33
The business case has been developed to support promotion and installation of rain water harvesting systems as well as retrofitting leaking plumbing features of the identified schools as part of alternative water resources The rainwater harvested together with retrofitting 1021 schools can achieve a potential savings of 4 424 488 kl per annum. 500 schools will be installed with the systems in 2015/16 FY and the remainder installed in 2016/17 FY. The organisation has conducted the hydrological mapping to identify areas that have a high ground water yield and an intensive campaign which includes setting-up of a helpdesk will be conducted to promote the use of groundwater. This campaign will be conducted in partnership with the Borehole Association of South Africa. SMART City Initiative s The entity s contribution support of a SMART City is a mixture of initiatives that comprises of: SMART communication technology, Water devices that record real time consumption. Telemetry Systems In the 2015/16 FY the entity will continue piloting the viability of the SMART water meters, the pilot is undertaken within JW facilities at a micro scale, and this is to test the technical capability of the meters. Once this pre-trial is completed and successful, we believe the technology can be rolled out to key priority areas within the City depending on budget availability. The objective of installing these SMART Water Meters is to improve payment levels and to reduce water losses. The mass roll-out will not be done due to budget cuts, however should the situation change during the year the mass roll-out of SWM will commence. The trial prepayment metering will verify the functionality of the meters in terms of the ability to vend on the Johannesburg City Power s vending platform and accept engineering tokens. Furthermore the meters are being tested for provision of the required free basic water allowance (including allowance stated on the indigent Policy), cutting off water service once credit has been exhausted and the ability for Johannesburg Water to receive the readings from the instruments. The Biogas to Energy project discussed under the Green Economy is regarded as a smart initiative as well. 34
Communications as a Game Changer Communications and Stakeholder Management Johannesburg Water has developed a strategy to enable it to implement activities that will: Improve the awareness and appreciation by the citizens regarding the activities and services of the company Improve the trust and confidence in the company by its customers based on real service delivery experiences and perceptions. Help the company achieve its organisational objectives Engage effectively with stakeholders Demonstrate the success of our work & ensure citizens understand what we do Change negative behaviour and perceptions where necessary To articulate a singular view of the City of Johannesburg. Proactively create awareness about JW s Vision & Strategy & Programmes in line with City Priorities. Use the media to educate residents on water conservation and reflect contributions made to service delivery through infrastructure upgrades and renewals. Mobilise the residents of the city to support JW programmes and pay for services. The main outcome of communication as a game changer is to enable the company to be and be projected as a Caring Company that is Responsive to the Needs and Future of its Citizens. And furthermore, to close the gap between the Perceptions; Trust and Confidence people have in the company and Actual Experiences. This will be done to enhance the overall message of the City which is A City @ Work. The Communication and Development strategic plan as the game changer is rested against the following three thrusts; Communication, Customer Care and Stakeholder Management. 35
Communications The organisation has identified the following key stakeholders who drive the brand awareness, perceptions, and customer experiences that affect the reputation of the organisation: Business (small & large) Households Civil society Inter-Governmental Organizations (Local, Provincial, National & International) Opinion shapers (media, bloggers, academia) Vulnerable groups (unemployed, children, people with disabilities, poor & homeless) Internal stakeholders (staff within the City & entities, boards, and elected members of council) For the 2015/16 FY the organisation will focus on communicating to the communities the infrastructure projects that are happening; ensure notification of customers on planned and unplanned service disruptions; Water conservation and demand management, Safety precautions on capital projects and promotion of the use of alternative water resource. Customer Care Customer Care forms an intrinsic part of JW business in that feedback is received on the service provided to customers before, during and after using the services. The annual Customer Satisfaction Survey to determine customer satisfaction levels and identify key drivers for work on customer complaints and issues emerging from the survey is the main tool used to receive the feedback. As part of customer care the company will also: Conduct annual customer satisfaction survey to determine satisfaction levels and identify key drivers to improve satisfaction levels; Send positive messages and articles in the media to help shape Johannesburg Waters perception of opinion shapers such as the media, bloggers and the academia; Proactively forge partnership and collaboration with other organisations and private sector to enhance its corporate image. 36
Stakeholder Management The organisation will enhance stakeholder consultation by establishing additional key stakeholder forums to inform and educate stakeholders about various services that Johannesburg Water provides and these includes the: Top 100 Customer Forum which will be provided a dedicated Manager who will serve as a point of reference for these customers in an effort to improve the payment levels of services received by these customers; Councillors Service Delivery forum aimed at maintaining regular contact and ensure that service delivery queries are received and resolved promptly; Trade and Effluent Forum aimed at informing customers about the various legislations governing the effluent disclosure. Partner with communities and educate about water conservation, the use of pre-paid water meters, the proper use of sewer infrastructure and basic services. As part of Corporate Social Responsibility activities, the company will ensure that it operates in a manner that minimises detrimental impact to society and the environment. 37
FINANCIAL PERFORMANCE The company has been exempted from the payment of normal company tax in terms of sec 10 (1) (t) of the income tax act since July 2007 and has consequently not been providing for tax since this date. The revenue function, which includes the customer call centre, invoicing of customers and collection of monies from customers is outsourced to the City of Johannesburg s Revenue and Customer Relations Management department. Since 2013 a small team in Johannesburg Water has been assisting with the credit control of platinum customers. The revenue, net profit and cash of the company have been underperforming over the past few financial years due to difficult economic conditions. Despite the continued strain on the liquidity of the company, it will continue to supply 6 kl free water per household. The foregone revenue for the year is R288 million. In addition, water is supplied to registered indigents. There are currently 31 677 registered indigents receiving between 10 to 15 kl free water per month. The foregone revenue is R47 million. There are 42 862 registered indigents receiving up to 100% rebates on sewer charges. The foregone revenue is R69 million. Johannesburg Water has established a team to investigate all properties in the City to ensure that they are being billed for water and sewer services. This will result in an increase of revenue where instances are identified where customers have not been billed or that have been billed incorrectly. Revenue is budgeted to increase to R8.4 billion in 2015/16 which is an increase of 14% on the forecast of R7.3 billion in 2015. The proposed average tariff increase of 14% (2015: 8.9%) will be charged to our customers who range from domestic customer to industrial customers. 38
Revenue R million 12 000 10 000 8 000 6 000 4 000 2 000 - Actual 2010 Service Revenue Actual 2011 Actual 2012 Actual 2013 Actual 2014 Adj budge t 2015 Budget 2016 Budget 2017 Budget 2018 Service Revenue 4 015 4 638 5 364 5 872 6 436 7 331 8 361 9 099 9 898 % Increase on prior year 8.36% 15.54% 15.65% 9.47% 9.60% 13.91% 14.05% 8.82% 8.78% Bulk water increase % 8.90% 13.80% 12.90% 11.20% 9.82% 8.10% 13.50% 6.50% 6.50% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% The average proposed tariff increase for 2015/16 is 14%. This is based on the Rand Water gazetted tariff increase of 13.5% and a retail margin of 0.5% to fund capital projects and loans. The increase is above the inflation rate and the inflation target by the South African Reserve Bank and may impact on consumer payment levels. The increase however, does not adequately cover funding for the capital expenditure required to replace infrastructure that is reaching the end of its useful life over the next few years. Therefore additional loans will be required to fund the shortfall. Bulk purchases consist of the purchase of potable water from Rand Water. The price is determined by a combination of a government pricing strategy which is linked to producer inflation for the raw water as well as the costs incurred by Rand Water for the treatment of the water. For the 2015/16 year, the increase from Rand Water will be 13.5%. This includes the new AMD charge which is levied by TCTA to the Vaal River water users through Rand Water, the AMD charge was not separately levied in the raw water cost. The bulk water volume purchases budget has been based on current consumption patterns with a 3% allowance for increases which is in line with the population growth per the 2011 census. The impact of water demand management initiatives such as pressure valve management, 39
R million active leakage control and the prepaid metering project have been factored into the calculation. These initiatives will yield a reduction in the cost of water purchases. The net profit of the company declined in 2014 from 2013 due to a reduction in billed volumes and an increase in provision for bad debts (i.e. lower payment levels). The forecast for 2014/15 has been revised down to R894 million from the original budget of R1 251 million as a result of the reduction in the expected payment level. The budgeted profit for 2016 shows an increase to R 1 520 million mainly due to the budgeted payment level of 93.9% against an actual average payment level of 82.9% in June 2014 and 80.5% for the 2014/15 year up to March 2015. 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Actual 2010 Actual 2011 Actual 2012 Net Profit Actual 2013 Actual 2014 Adj budget 2015 Budget 2016 Budget 2017 Budget 2018 Net Profit 208 385 582 812 535 894 1 520 1 564 1 788 The profit before bad debt will improve to R2 028 million from the R1 610 in 2014 and the forecast of R1 776 in 2015 through the improvement in the payment level. The low payment level from customers remains a concern. During 2014 the payment level was 82.9% and the forecast for 2015 has been revised down from 92.9% to 88%.The budgeted payment level in 2015/16 is 93.9% and will require a major effort from the revenue collection department at the City as well as from the internal credit control department in the company which is now responsible for credit collections of the platinum customers. 40
R'Million R million 1200 1000 800 600 400 200 0 Actual 2010 Actual 2011 Actual 2012 Bad debt Actual 2013 Actual 2014 Adj budget 2015 Budget 2016 Budget 2017 Budget 2018 Bad debt 685 655 915 910 1 075 882 508 552 600 Control over operating costs The operating costs per category is reflected in the diagram below. Operational Expenses Trend 1 000 000 900 000 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 - Actual 2010 Actual 2011 Actual 2012 Actual 2013 Actual 2014 Adj budge t 2015 Budget 2016 Budget 2017 Budget 2018 Employee related Costs 596 355 574 103 632 564 700 510 741 162 796 570 829 102 883 040 936 959 Contracted Services 313 915 438 230 471 722 487 002 563 121 610 520 751 692 795 202 840 399 General Expenses 377 289 502 319 518 362 589 503 586 209 519 279 656 731 705 981 758 228 Employee related cost is budgeted to increase from R796 million in 2015 to R829 in 2016. The CoJ has allowed a growth of only 4% which is a major risk as the general salary increase is 41
Percentage likely to be between 6% and 8%. JW will only fill critical vacant posts to ensure that service delivery doesn t get affected. JW would not be able to recover the shortfall by natural attrition as the staff retention is currently at 99.4% and may request additional funds during the midterm.. Employee related cost is budgeted to be 27.6% (forecast 2015: 26.1%) of operating expenditure. The total employee cost as a percentage of total operating costs remained well below the 30% benchmark of the City of Johannesburg and National Treasury. Salaries as a % of Operating Expenditure 30.0 28.0 26.0 24.0 22.0 20.0 Salaries as a % of Operating Expenditure 2010 2011 2012 2013 2014 2015 2016 2017 2018 Actual 2010 Actual 2011 Actual 2012 Actual 2013 Actual 2014 Adj budge t 2015 Budget 2016 Budget 2017 Budget 2018 29.3 26.9 25.4 25.9 25.0 26.1 27.6 27.4 27.2 The company ended the 2014 year on 25% salaries to operating expenses. It should be noted that continued reduction of the salaries will ultimately have a negative effect on the service delivery of the company. Johannesburg water has a staff per 1000 connection ratio of 7.4 which is lower than the water industry benchmark of 10. This low ratio has a potential of putting a constraint on the service delivery. 42
The budget for contracted services (excluding the CoJ service fee) increases by 31% to R558 million when compared to the 2014/15 budget. This increase of R131 million is the result of inflationary adjustments on normal contracts as well as an increase of R68 million for the maintenance of infrastructure which includes the Jozi @ work projects, increase of R10 million on consultancy services pertaining to various projects, an increase on Emfuleni cross boundary sewer charges of R 6.1 million, and R21 million relating to IT improved systems such as SAP, IMQS, MRQC, Syntel and a business dashboard tool. General expenses will increase to R657 million which is an increase of 26% due to increased maintenance on water and sanitation infrastructure of R27 million, Software licenses for IT systems of R11.4 million, increased publicity, public relations and public participation of R12.3 million and additional security services at depots, reservoirs and pump stations of R 8 million. There will also be an increase in the cost of chemicals due to the weaker Rand which would amount to R 3.6 million. Cash generated from operations The collection rate of water billed to customers is set at 93.9% for the 2016 to 2018 financial years. This is an improvement on the 82.9% achieved in the 2014 financial year and the 88% forecasted for 2015. 43
Payment level 100.0 90.0 % 80.0 70.0 60.0 Actual 2010 Actual 2011 Actual 2012 Actual 2013 Actual 2014 Adj budge t 2015 Budget 2016 Budget 2017 Budget 2018 JW Debtors 95.2 78.6 82.3 78.7 82.9 88.0 93.9 93.9 93.9 CoJ Debtors 75.9 78.6 82.3 78.7 82.9 88.0 93.9 93.9 93.9 Total Payment level 83.5 78.6 82.3 78.7 82.9 88.0 93.9 93.9 93.9 The continued focus on improving billing and collections by the Revenue and Customer Relations Department at the CoJ will result in improved collection of outstanding monies for the 2014/15 financial year. 44
R million The cash balance is swept to the City of Johannesburg in terms of the treasury management arrangement. At the end of 2014 financial year, Johannesburg Water had cash reserves of R42 million (2013: R73 million). The projected cash reserves for the MTEF is reflected below. Cash at Bank 3 600 400 3 200 000 2 800 600 2 400 200 2 000 1 800 600 1 400 200 1 000 800 600 400 200 - Actual Actual Actual Actual Actual Adj Budget Budget Budget 2010 2011 2012 2013 2014 budge t 2015 2016 2017 2018 Cash at Bank 249 96 19 73 42 335 1 288 2 326 3 426 The budgeted cash position as at 30 June 2016 is R1.3 billion (forecast 2015: R335 million). The main contributor to the improvement is the high budgeted payment levels, which is the RSSC main focus for the financial year. The additional customers added on the customer database and the increased tariffs also impact the cash reserves. The cash balance at June 2017 is budgeted to improve to a positive R2.3 billion and R 3.4 billion at June 2018. 45
R' Million Percentage Solvency The entity budgeted to be in a strong solvency position with its total assets exceeding the total liabilities by R6.8 billion in 2016. The solvency ratio as at 30 June 2016 is 1:2.15 and the corresponding liquidity position is 1:1.22 Solvency Ratio 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 - Actual 2010 Actual 2011 Actual 2012 Actual 2013 Actual 2014 Adj budge t 2015 Budget 2016 Budget 2017 Budget 2018 Total Assets 6 325 7 071 8 104 8 663 10 202 11 376 12 781 14 572 16 589 Total Liabilities 3 626 4 059 4 524 4 760 5 773 6 053 5 938 6 165 6 393 Solvency Ratio 1.74% 1.74% 1.79% 1.82% 1.77% 1.88% 2.15% 2.36% 2.59% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Capital projects The capital expenditure is budgeted as follows: June 2016 June 2017 June 2018 R 792 million R 999.9 million R 1 207.4 million The capital budget has been reduced considerably from what has previously been approved by the CoJ to address backlogs, upgrading and renewal of ageing infrastructure and new infrastructure requirements. The capital expenditure will mostly be funded by CoJ loans and grant funding. The tariff increase in future years should be at least 1.5% above the Rand Water s tariff increase so as to support the company s capital expenditure program. 46
The company is actively pursuing cost effective loans through international agencies such as AFD which will result in reduced interest rates on these capital loans for qualifying projects. Segmentation For the year to December 2014 the contribution of the water vs. sewer is shown in the table below. YEAR TO DATE up to December 2014 Water Sewer Farming Total Total Revenue 2 387 744 1 434 841 3 822 585 Bulk Water Purchases 1 767 295 1 767 295 Gross Margin 620 449 1 434 841 2 055 291 Operating expenses 365 318 671 524-1 036 842 Total Operating Income 255 131 763 318 1 018 449 Other Income 1 253 89 607 90 859 Net Farming Income/(Exp) -1 201-1 201 PBIT Before Bad debt Provision 256 384 852 924-1 201 1 108 108 Net Bad Debt Prov -417 472-250 867 - -668 338 PBIT -161 087 602 058-1 201 439 770 Net Interest Paid 22 877 97 953 120 830 Profit/(Loss) -183 964 504 105-1 201 318 940 The contribution of the sewer is higher due to lower/no input costs, whereas for water JW has to purchase water from Rand Water. 47
Revenue and Tariff Analysis It is proposed that the six (6) kilolitre free basic water allocated per household per month be continued. It is proposed that differential tariff increases continue to be applied to different tariff bands for domestic water and prepaid water and sanitation tariffs (refer to tables below). A rate of 14% is applied to Institutional and Industrial/Commercial water consumption up to 200kl per customer and a rate of 14.5% for consumption exceeding 200kl. The tariff for all other services provided to be increased by 14% for the 2015/16 financial year. The total average tariff increase for all services provided would be approximately 14%. PROPOSED TARIFF INCREASE Domestic water and prepaid water and sanitation tariffs to be increased as follows: >0 to 6 kl free >6 to 10 kl 10% >10 to 15 kl 11% >15 to 20 kl 14% >20 to 30 kl 15% >30 to 40 kl 15.5% >40 kl 16% Institutional and industrial / commercial tariffs to be increased by: Consumption up to 200kl at 14% Consumption exceeding 200kl at14.5% All other tariffs to be increased by 14%. The Table below depicts tariff increases per Band (consumption levels) Rand Water Proposed Proposed Tariff Tariff Motivation Tariff Bands Increase (%) % Adjustment Increase (%) 0-6 (13.50) Free of charge 48
Tariff Bands Rand Water Proposed Tariff Increase (%) % Adjustment Proposed Tariff Increase (%) >6-10 13.50 (3.50) 10.00 >10-15 13.50 (2.50) 11.00 >15-20 13.50 0.50 14.00 >20-30 13.50 1.50 15.00 >30-40 13.50 2.00 15.50 >40 13.50 2.50 16.00 Motivation Proposed tariff increase below Rand Water tariff increase to accommodate low income groups. This band still represents a low consumption group of customers. Tariff increase still below Rand Water's proposed tariff increase. This band is regarded as the mid-point of the bands and represents the average monthly water consumption. The average tariff increase is therefore applied to this band. This band represents the highest consumption for the middle income group. Tariff is therefore slightly above the average tariff increase to subsidise other free basic services. Income stream of this group of customers regarded such that they can contribute substantially to free basic services such as water tankers, chemical toilets, etc. Consumers to consider cost of water and apply water demand management. This is the highest consumer bracket. High consumers will continue to pay a higher tariff to emphasize the importance of water as a scarce resource and to enforce water demand management. The trend of tariff increases can potentially make it unaffordable for households to afford water sold and other services provided by JW. This may increase the provision for bad debts and negatively impact the financial sustainability of the City. 49
ORGANISATIONAL EFFICIENCY Enabling Technology The new financial year marks the second year into the Information Technology s three year strategic cycle. Built upon solid technology platforms, processes and resources the IT department has continued to grow in capacity and deliver on innovation through new technologies in support of the company s objectives. The continued transformation is supported by an increase in capital spending of 17% - from an already increased base of 60% from the previous financial year. The solid technology platforms and processes have enabled the company to deliver consistent performance and reliability of its IT systems and infrastructure; 99.7% and 98.5% respectively. The user base has largely remained unchanged with around 1100 users whilst the ICT asset based has marginally increased by 3.1% due to new or enhanced applications and systems like Infrastructure Asset Management (IMQS) and Water Prepaid Meters (CDS). IT Strategic Projects for 2015/16 FY The projects that will be undertaken during the financial year are as follows: Enterprise Asset Management IT Stream (continued from FY2014/15) Management Information System (continued from FY2014/15) Meter Database Workforce Mobility Enterprise Asset Management IT Stream The project is responsible for the implementation of technology and systems in support of the company s Enterprise Asset Management project. The solution is a hybrid approach between SAP Plant Maintenance and IMQS. The IMQS system is primarily responsible for the unbundling of assets whilst SAP will maintain the company s financial and technical asset registers. The SAP system will also drive the planned maintenance for assets. The design of the solution was completed in Dec 2014 and the consortium will start with the solution build from January 2015. The system will go live in August/September 2015. 50
Meter Database The Meter Database project is very operational in its nature but equally strategic in respect of the company s revenue and billing. The project has a strong link with the Enterprise Asset Management project due to water meters forming a large contingent of the company s assets. The objective of the project is to build a database of actual meters installed on the ground and put controls in place to ensure the integrity of the database through correct business processes. Workforce Mobility Some mobility technology and commercial solutions were explored during 2014/15 FY. Whilst mobility can be found everywhere, Workforce Mobility is somewhat industry centric and therefore whatever technology or solution is decided is an informed decision based on striking a right balance between technology and business. The initiative will continue to be explored with a view to implementing a solution in 2015/16 FY. Like the Meter Database project, Workforce Mobility has a strong link to the EAM project since data and information pertaining to assets will be easily accessible by the workforce whilst on the field. The proposed technology platform is to not only access data and information but extend the functionality to include works management through maintenance orders. Business process improvements through the use of information technology The organisation has embarked on a process of identifying the operations or employee skills that could be corrected, modified or removed to encourage smoother procedures, more efficient workflow and optimize underlying processes and achieve more efficient results. The following projects have been identified and scoped in order to achieve the aforementioned efficiencies. Supply Chain Management Supply Chain Management (SCM) currently operates in an environment of increasingly intense scrutiny driven by legislation & regulations, attenuating budgets, productivity demands, rapid technology advances, public and political expectations for service improvements. Hence SCM 51
faces enormous changing environment and these include, amongst others: An Enterprise Resource Planning (ERP) System by its very nature is not designed to be a one-stop-shop to meet the full needs of the organization. Procurement is neglected within the ERP system and is not seamless like an e-procurement System that is able to yield immediate results. SAP is a procurement solution designed mainly for the private sector and does not fully meet the demands of government procurement requirements. A state of the art technology platform which is capable of addressing the organization s inbound Spend Management needs will be installed which will have the following impact and outcomes: An end-to-end, fully integrated software solution, which can interface into the existing ERP system Virtual elimination of paperwork Track spending and compliance with policy, procedures and regulation SCM staff will spend less time on processing orders and other administrative activities, and more time on strategic value added activities Decreased turnaround times in the tender-evaluate-award cycle Substantially reduced administrative expense and time needed for document copying, collating, distribution and accounting Lower administration burdens and costs to both JW and suppliers Better audit trails for all messages, document views and modifications to system records in the tender, quotation and contract management processes Improved compliance to SCM policy, procedures and regulations Elimination of maverick spend, resulting in spend savings in excess of 25% are possible Centralized management of supplier contracts for both Capex and Opex 52
Integrated Dispatch Centre The Integrated Dispatch Centre (IDC) for Johannesburg Water is to be developed to support Johannesburg Water and our shareholder, the City of Johannesburg, in improving service delivery and communication with its customers and citizens of the city whilst validating the condition of the aging infrastructure. It will be developed around existing software platforms within JW such as SAP, IMQS and Adroit Supervisory Control and Data Acquisition (SCADA). This technical management system will improve productivity within the organization and form an integral part of the Smart City initiative of the City of Johannesburg. The dispatch center proposed at JW head office will be designed to process event information in a cohesive manner, and present that information to personnel in a centralised, real-time, collaborative environment. Views tailored to operators and managers will provide detailed event information that will allow Operations and Planning divisions to interrogate and manage events, and take action as needed. The IDC will integrate vehicle tracking technology to determine the most skilled available team and their distance from incident, monitor idle teams and benchmark duration to resolve incidents with respect to determined Key Performance Indicators. SAP Job Cards will be completed on a mobile device and fixed assets details and conditions determined onsite with linked photographs for record purposes. It will ensure the Right approach, occurs in order for the city to be truly branded a world class African city. 53
Diagram below depicts the expected flow handling Job cards Right Materials Right Tools Right Informatio n Right Timing Right People The Maintenance Job Right Permission Follow-up Analysis Improvements The project will be an iterative process with live increments every fortnight. The total project will occur in three clearly defined phases and take approximately 520 days to complete (including hardware and building modifications). Management Information System The Management Information System is a solution to provide information to business on the operations of the company. With the onset of Business Intelligence tools, the role of IT has shifted from that of data guardian to that of information broker. In its simplest definition, Business Intelligence or BI is a broad category of computer software solutions that enables a company or organization to gain insight into its critical operations through reporting applications and analysis tools. In any organisation there are a number of silos of information which provide a challenge in terms of access, security, understanding the data, etc. The BI technology provides a platform that acts as a middle-man between the many sources of information through an easy to use and understandable published medium such as dashboards 54
and reports. The information presented provides management with key business indicators to support decision making. Analytical tools enable business not only to see real-time activities but also have a glance at past trends. This information can then be developed for what if scenarios and provides potential insight into answering what next, in other words predictive analytics. One of the benefits of BI is the ability to harness and store information from different databases, e.g. Meter Reading, SAP, Water Prepayment (Syntell CDS), Asset Management (IMQS) and seamlessly present the information to anyone across different technology platforms, e.g. desktop, smartphone, tablet device, etc. JW has already started a project to provide information via dashboards for different business units and operations of the company, e.g. meter reading, Operations, SCM, Finance, etc. For example, with BI the meter reading data can be collected and through the application of the current tariffs have visibility into the expected revenue. The information can be transposed spatially to provide an indication of high utilisation customers and areas. The BI technology also enables drilling-down into some indicators to get a more refined view of specific operations, e.g. work orders by depot or indicators on specific work order type, i.e. preventative and reactive maintenance. The plan for the financial year is to focus on business areas and operations in support of some of the company s initiatives such as the Revenue Recovery Programme. The vision is to provide information (dashboards and reports) to represent all areas of business. The solution includes different delivery platforms, e.g. mobile phones and tablet devices. Mobile App (citizen s reporting) The Mobile App initiative is designed with the purpose of developing a framework and rolling out an app with a series of features dedicated to empower Citizens to actively engage with their community and public sector organisations and report issues of public interest. The Mobile App is an Incident Reporting application for JW, with the aim of allowing the public to report incidents of interest to JW such as water pipe bursts, sewer main bursts, etc. to a central hub. The action of reporting is designed to be very simple and fast with key information such as the citizen s location and other key information automatically attached. 55
The initial phase is to achieve a quick-win and get to market as quickly as possible with a first version of the App to empower citizens. Thereafter subsequent phases (versions) will seek to enhance the features and power of the application. The development of a framework will enable JW to benefit from on-going and future enhancements such as Field Service Worker capabilities, Social Media integration, information and incident transfer between MoEs and many more. Some of the Mobile App features include: Log incidents with citizen s location (attachments possible) Geo spatial representation of logged incidents Notification of items of interest (e.g. planned outages, etc.) Incident assignment based on location and category SLA Metrics High availability and scalability (Cloud offering) Secure Reports and Dashboards Support for Android, Apple and Microsoft mobile operating systems 56
The diagram below depicts a high level view of the Mobile App Concept The roll out of the basic app will take approximately 3-4 months. This however, largely depends on the using a cloud based solution and complexity of integration with the Line of Business systems (e.g. SAP ERP) 57