RAND WATER ANNUAL REPORT 2023

1898 Reliable Source of Water at Zuurbekom

1903 Birth of the Rand Water Board

1904-5 Expropriation of Private Water Companies

1886 Discovery of Gold

1914 Vaal River Development Scheme

1923 Completion of the Barrage

1923 Birth of Vereeniging Pumping Station

1907 Zwartkopjes

1930-1955 Construction of Vaal Dam

1940 Rand Water Head Office at Fraser Street

1925 Construction of the first Head Office bulding for the Rand Water Board

1949-1954 The Zuikerbosch Scheme

1993 Re-invention: Birth of Rand Water

1989 Rand Water Head Office at Rietvlei, Glenvista

ANNUAL REPORT 2023

BRINGING OUR HISTORY TO LIFE:

Gold was discovered on the Witwatersrand, leading to a growth in population and expanding industries, for which there was not enough water available. Persistent droughts in the I890s compounded the problem. Initially the burgeoning mining industry and the thousands of diggers and prospectors relied on minor streams and rivers like the Jukskei River, the Natal Spruit, Braamfontein Spruit and a few fountains and wells to sustain their mining efforts and livelihood. During this time, many small water companies vied for the right to sell water to Johannesburg’s residents. In 1895, commission of enquiry determined that a public body should be created to replace and consolidate the multitude of private companies then operating for profit. In a report of 26 February 1902, the Witwatersrand Water Supply Commission recommended that the government give consideration to the establishment of an inscitution that could go by the name of ‘The Rand Water Board’. The Rand Water Board was officially established on 8 May 1903 in terms of Ordinance No. 32 of 1903, published in the Transvaal Government Gazette. The first official board meeting took place on 15 May 1903

Zuurbekom pumping station was completed in 1898-9 and was able to provide Johannesburg with sufficient water until the early I900s. The water obtained from Zuurbekom was abstracted from wells on the farm. The main Pump House building was built over one of these wells and is still visible and accessible through a tunnel under the Main Gallery. The Zuurbekom Pump House was declared a national monument, and an official unveiling ceremony of the bronze plaque of the monuments council took place in December 1976

1898 Reliable Source of Water Zuurbekom

1886 Discovery of Gold

At the time of the establishment of the Rand Water Board, it had to consolidate all the available water resources under its authority. An arbitration court sat from 6 December 1904 to January 1905 and it emerged that the Rand Water Board would be allowed to expropriate a number of private operations that owned water supplies

Expropriation of Private Water Companies 1904-5

1903 Birth of the Rand Water Board

Droughts, population growth and industrialisation obliged the rapidly growing Rand Water Board to seek additional sources of water supply. The Vaal River Development Scheme was approved in 1914 and this allowed for the construction of the Vaal River Barrage Scheme which created a much needed reservoir in the Vaal River. On 27 July 1923 the Governor-General of South Africa officially opened the scheme. This additional water source pushed the daily water supply capacity to 67,5 million litres per day.

The Zwartkopjes Pumping Station was the first pumping station that was built by Rand Water. It was the main collection point from where water was distributed to the mines and to Johannesburg’s residents. The supply from Zwartkopjes was brought into service in 1908; and for some time the water available from this source combined with the water from Zuurbekom, was adequate to meet the water supply needs of the time.

1914 Vaal River Development Scheme

1907 Zwartkopjes

Further to the building of the Barrage, a pumping station at Vereeniging Pumping Station was built to increase water supply capacity. The treated potable water from Vereeniging was pumped to the Zwartkopjes Pumping Station from where, using steam turbine driven centrifugal pumps for the first time, the water was pumped against a head of 350 metres to the higher regions of the Witwatersrand.

Before construction of the Barrage, a benchmarking visit was conducted to Egypt and Europe with respect to the latest engineering technology. Upon completion, the Barrage was an ambitious water and engineering project success, consisting of a steel-reinforced concrete structure, capable of withstanding all types of flooding conditions. It is situated 40 km downstream from Vereeniging and spans the Vaal river over a width of more than 400m. The Vaal River is dammed up over a distance of approximately 60 - 70 km with extraction taking place at a point well above the site where the major storage source was located.

1923 Birth of Vereeniging Pumping Station

1923 Completion of the Barrage

Since its establishment in 1903, Rand Water Board had always made use of rented accommodation. The first meetings of the Board were in fact held at the Rand Hotel. In 1925 the Board appointed a sub-committee to investigate a new Head Office complex built specifically to the requirements of the Board. In November 1925, construction was started on the building and the office was occupied by employees in September 1926. By 1928 the total Rand Water Board staff complement was 602, of these, 47 members were based at Head Office. In April 1939, it was decided that the Board would acquire a plot of land in Fraser Street Johannesburg as a means of addressing the problem of shortage of office space. The new building complex was to be four stories high with a basement that served as a parking garage. The new Head Office building was situated at 3 Fraser Street, Johannesburg. The mailing address was P O Box 1127, Johannesburg 2000, as it remains to this day. In the 1970s experts were of the opinion that the building was still one of the outstanding architectural features of Johannesburg.

It was agreed in 1934 that the Board should contribute towards the cost of a new dam in the Vaal River, the Vaal Dam, for the rights to store a certain quantity of water and to abstract an initial 60 million gallons per day. The sprawling Vaal Dam was completed in 1938 which culminated in the commissioning of the Zuikerbosch Pumping Station in 1955. These farsighted schemes ensured a reliable and sustained supply of water.

1930-1955 Construction of Vaal Dam

1925 Construction of the first Head Office bulding for the Rand Water Board

Following the completion of the Vaal Dam, building of the Zuikerbosch Purification and Pumping Station commenced in 1949, further increasing the total potable water supply to 150 million gallons per day. The site was strategical placed in order to obtain water from the Vaal River upstream of the inflow of the Suikerbosrand and Klip Rivers. It translated into water of consistent quality, which had not been contaminated by the highly mineralised waters of the above mentioned rivers.

1940 Rand Water Head Office at Fraser Street

1949-1955 The Zuikerbosch Scheme

120 years of excellence

Around 1993, it was proposed that the name of the organisation be changed from the Rand Water Board to Rand Water, since referring to the organisation as ‘the Board’ led to confusion. ‘Rand Water’ was also perceived to be a more modern name. The existing heraldic devices of the Board were maintained.

At the meeting of the Board held on 30 May 1985, the decision was made to relocate the Board’s Head Offices to Portion 8 of the Farm Rietvlei, 522 Impala Road, Glenvista. The construction of the new Headquarter Buildings and ancillary works was awarded in October 1986. Due to delays in construction, the decision was made to move staff as the various phases were completed. The first staff members started moving in at the end of 1988 and the building was completed in mid-I989.

1993 Re-invention: Birth of Rand Water

1989 Rand Water Head Office at Rietvlei, Glenvista

Rand Water’s ZAR 1.709 billion Sustainability linked Bond completed in June 2021, has been selected as the winner of this year’s Bonds, Loans & Sukuk Africa Awards for Local Currency Sovereign, Supra & Agency Bond Deal of the Year. This Award makes Rand Water the first State Owned Entity to use a Sustainability link Bond in Africa. Since 2014, the Awards have recognised the most innovative and ground-breaking deals from Sovereign, Corporate and Financial Institution issures and borrowers. Rand Water’s commitment to support the Government in bringing good, safe and affordable water to everyone in our area of supply led to new services bringing water to areas such as Winterveld, Odi, Heilbron and further afield. For the first time, we could truly say that we were a service provider for all its peoples in its area of supply. In 1994, four million urban households had access to clean water with rural households standing at about 970 000. By 2003, more than 5.7 million urban households had clean water, while 1.7 households in the rural area had clean water. In one of the discussions between representatives of Rand Water and the Minister of Water Affairs and Forestry, Kadar Asmal, shortly after the new government came into power, it was stated that although Rand Water did an outstanding job of providing water to the most urbanised part of South Africa, the water utility had paid scant attention to the plight of the people in the rural regions. The government’s accent on the poorest of the poor and the need also to secure for those South Africans a sense of diginity in the form of clean water became one of the first priorities of Rand Water.

The promulgation of the Water Services Act (1997) and the National Water Act (1998) changed the SA water supply scenario for good and forced Rand Water to review its core business and related responsibilities. In 1994 Minister Kader Asmal declared that access to 25 litres of clean water per day no further than 200 metre from a tap, should become a way of living.

1994 - New Legislation, New Challenges, New Responsibilities

1994 - Rand Water for all

Recognising a need to capacitate our future water engineers and technologists, Rand Water is instrumental in the establishment of the Rand Water Academy which uses a combination of theory and practical exposure to satisfy the demand for skilled professionals in the local water industry. The Rand Water Academy was unveiled on 12 October 2012.

2003- Expanding our Footprint

2012- Rand Water Academy

To our knowledge, the newly-built 210 Mℓ Vlakfontein Reservoir is the largest circular posttensioned reservoir in the world. Construction on the new cylindrical and circular reservoir at the Vlakfontein site was unveiled on 17 February, 2023. Considered a design marvel, the newly built reservoir adds to Vlakfontein’s existing 420 Mℓ reservoir, bringing the site’s total capacity to 630 Mℓ, enabling a 24-hour capaciy should there be any pumping challenges or power outages.

2021- Bonds Loans Africa

2023- Vlakfontein Reservoir

Rand Water’s growth over the past 120 years has been phenomenal. • At the turn of the 20th century-population in need of water: 102 000 and the area of supply approximately 900 Km2 • By 2023 Rand Water is the largest water utility in Africa existing for 120 years • Distribution network over 3 500km of large diameter pipeline • Feeding 60 strategically located service reservoirs • Supplied an average of 4 443 Mℓ/d of potable water with peakday demand of 5 069 Mℓ/d

• Area of supply: above 37 000 superscript Km2 • Total of over 16 million consumers supplied

1923 Birth of Vereeniging Pumping Station Still growing

2023 THEME 120 YEARS of Excellence

The publishing of the results of this year’s performance coincides with Rand Water’s 120 th anniversary. As we celebrate this milestone, we acknowledge the excellent work by all our stakeholders, and the close knit relationship that we have with them. Celebrating this milestone also symbolises resilience, integrity, and excellence in fulfilling our statutory mandate–which is to ensure supply of potable water to millions of South Africans.

Rand Water was founded in May 1903, and has become an iconic brand in the water industry in South Africa. It was established at a time when the entire Witwatersrand had been experiencing unrelenting

drought. The Witwatersrand Water Supply Commission recommended the establishment of a Water Board– marking the birth of Rand Water. As the largest water utility in Africa, it has traversed through multiple challenges to continue providing this essential resource. “Our vision of being a provider of sustainable, universally competitive water and sanitation solutions for Africa” Rand Water clearly identifies itself as a futuristic organisation. The 120 th anniversary milestone is a clear indication of how resilient we have been to adapt to ever-changing external environments. These include the socio-economic and political transitions in South Africa and around the world. The history of Rand Water is that of commitment and excellence to providing uninterrupted water supply services to its customers. This narrative stems from the fact that it was founded against the backdrop of serious water shortages to sustain Johannesburg’s burgeoning population. In the past decades, Rand Water embarked on massive infrastructure development as part of its plan to mitigate the future growing demand for water. In February 2023, the move culminated in the launching of the 210 Megalitres Vlakfontein Reservoir in Germiston, City of Ekurhuleni. The project was executed as part of the organisation’s augmentation strategy that is aimed at building storage facilities to meet water demand in its areas of supply. Currently, Rand Water has 59 reservoirs. Rand Water strives to meet the evolving needs and being supportive of its all customers by efficiently providing water in terms of the agreement it entered with them. We generate value for our customers and shareholder by being a reliable organisation that cares about the environment, employees, partners, and the communities we serve. This landmark year will also see Rand Water focusing on expanding the provision of its services in other African countries, where huge opportunities have emerged. As we celebrate the 120 Years anniversary of Rand Water, we must also take note that the organisation is encountering serious threats that have the potential to impede its operational activities. For this reason, we have embarked on a massive media campaign to educate consumers about the significance of water conservation and the dangers of encroachment on our servitudes. This is to ensure continuous supply of water to our customers with no interruptions.

LEADERSHIP REVIEW

PERFORMANCE HIGHLIGHTS

4 6 6 8

INTRODUCING OUR INTEGRATED REPORT

ASSURANCE APPROACH TO IMPROVE CREDIBILITY

APPROVAL BY THE BOARD

LEADERSHIP REVIEW FOREWORD BY THE MINISTER OF WATER AND SANITATION

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REPORT BY THE CHAIRPERSON OF THE BOARD

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ABOUT RAND WATER OUR MANDATE

16 16 17 17

OUR STRATEGY

OUR MAIN CUSTOMERS AND SUPPLIES ALIGNMENT TO DEVELOPMENTAL PLANS

OUR SUSTAINABILITY (ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS) 19 OUR VALUE CREATION MODEL OUR STAKEHOLDERS AND STRATEGIC PARTNERS

26 28 29 31 35 36 37 37 40 41 50 56 58 66 69 70 73 88 92 83

MATERIAL MATTERS

HOW WE MANAGE OUR RISKS

HOW RAND WATER IS GOVERNED OUR GOVERNANCE AT A GLANCE OUR GOVERNANCE STRUCTURE AND FRAMEWORK

RAND WATER BOARD CHARTER RAND WATER BOARD COMPOSITION

PERFORMANCE EVALUATION OF THE BOARD

BOARD OF DIRECTORS

RAND WATER BOARD COMMITTEES

EXECUTIVE COMMITTEE

KING IV PRINCIPLES APPLICATION - 2023 HOW WE CREATE VALUE CHIEF EXECUTIVE’S REVIEW

OUR VALUE PROPOSITION OUR FINANCIAL CAPITAL

CHIEF FINANCIAL OFFICER’S REPORT

• •

PFMA COMPLIANCE REPORT

• INFORMATION ON SUPPLY CHAIN MANAGEMENT

OUR HUMAN CAPITAL

OUR MANUFACTURED CAPITAL

106 125 131 137

OUR SOCIAL AND RELATIONSHIP CAPITAL

OUR NATURAL CAPITAL

OUR INTELLECTUAL CAPITAL

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS

143

REFERENCE INFORMATION ACRONYMS AND ABBREVIATIONS

314 316

LIST OF TABLES LIST OF FIGURES

317 CONTENTS

PERFORMANCE HIGHLIGHTS OPERATIONAL PERFORMANCE

Water Quality Rand Water was able to meet its SANS 241 Composite Indicator on the quality of water: Target 98.33% Achieved 99.35%

Zero Interruptions No interruptions have been reported for the year ending in June 2023

Water Losses Target 5% Achieved 4.71%

0%

BBBEE Spend as a percentage of total expenditure Target 85% Achieved 115%

Rand Water was able to supply its 17 municipal customers without any unplanned supply interruption that lasted more than 24 hours

The average Mℓ/d of potable (drinkable) water volumes sold increased by 1.2% to 4 520 Mℓ/d (FY 2022: 4 443 Mℓ/d)

Award of work to BBBEE compliant entities Target 85% Achieved 93.5%

Board member attendance Target 80% Achieved 95%

Overall project completion Target 95% Achieved 133%

Staff turnover Target 5% Achieved 2.33%

Female recruited in management and technical Positions

Customer satisfaction survey

Percentage spent on corporate social investment

Target 82.5% Achieved 83.9%

Target 95% Achieved 99%

Target 51% Achieved 83.82%

25 sustainable water supply projects were implemented to increase communities access to clean water

Total number of temporary jobs created

4161 households benefitted from domestic leak repairs and retrofitting interventions

Rand Water contributed R72 million on socio-economic development

Target 2100 Achieved 2 966

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PERFORMANCE HIGHLIGHTS

FINANCIAL PERFORMANCE

National Treasury condoned Irregular Expenditure amounting to R110 million.

Net income for the Group increased by 2.1% to R3 536 million and revenue increased by 10.9% to R19 578 million

Net finance income increased by 57% to R892 million compared to the previous year

The Group has issued unsecured bonds to the amount of R4.4 billion

Net income margin (secondary activities) Target 1.0% Achieved 54.4%

Current ratio

Target 2 Achieved 2.6

Gross income margin (primary activities) Target 29% Achieved 30.8%

Net income margin (primary activities) Target 19% Achieved 19.8%

Gross income margin (secondary activities)

Target 5% Achieved 6.7%

The Group’s funding position improved to 12% (FY2022: 14%) which is well below the threshold of 50% as prescribed in the National Treasury Borrowing Limit Approval.

Gross profit increased by 12.1% to R6 034 million (FY2022: R 5 380 million) on a year-to-year basis

Water purchases: The volumes of water purchased increased by 2% , which aligns with the rise in sales volumes.

Finance income increased by 55.5% benefiting from cash investments and the recent interest hikes.

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INTRODUCING OUR INTEGRATED REPORT

Relationship Capital (our interaction with stakeholders and communities), and Intellectual Capital (our know-how and creation of knowledge). This report includes other relevant and significant events that took place under the reporting period. Part of the information in this report is drawn from quarterly performance reports approved by the Board and submitted to the Department of Water and Sanitation (DWS). The Shareholder’s Compact and the Corporate Business Plan serve as the foundation for the quarterly reports. This report serves as our primary communication with stakeholders and investors. All financial figures in this report are derived from Rand Water’s Annual Financial Statements, which are approved by the Board, audited by Auditor-General of South Africa (AGSA), and prepared in accordance with IFRS. The information in this report is also reviewed by subject matter specialists and practitioners from the business, Executive Committee (EXCO), Group Audit and Risk Committee (GARC), and the Board, which bears ultimate accountability for the correctness, completeness, quality, and reliability of the contents in this report. The Annual Financial Statements are produced and published concurrently with this report. • The independence of the external auditors for the Rand Water Group, the audit scope and assessment of the effectiveness of the external audit function and the effectiveness of the Group’s internal controls and internal audit function. • Compliance with legal and regulatory requirements to the extent that it might have an impact on the financial statements. • Condonation of fruitless and wasteful expenditure and irregular expenditure. • The implementation of an appropriate enterprise-wide risk management strategy which is supported by an effective Enterprise-Wide Risk Management Framework (ERMF). • The quality and effectiveness of Rand Water’s risk management systems processes and procedures including the strategies and policies for the management of risks across the organisation.

This Integrated Annual Report is based on the International Integrated Reporting Framework issued by the International Integrated Reporting Council (IIRC), and it aims to demonstrate how the organisation’s strategy, governance, performance, and future plans lead to the creation of value at Rand Water. The report is also guided by the King IV Report on Corporate Governance (King IV) reporting standards and principles that promote good governance within the organisation as well as the benefits of ethical leadership and well-run organisations. Other regulatory requirements such as International Financial Reporting Standards (IFRS), Johannesburg Stock Exchange (JSE) Debt Listing requirements and Public Finance Management Act (PFMA), Act No. 1 of 1999 as amended were also considered in developing this report. Rand Water’s Integrated Annual Report reflects on both its financial and non-financial performance for the period 1 July 2022 to 30 June 2023. The report is organised around Six (6) Capitals: Financial Capital (financial performance), Manufactured Capital (our infrastructure plans and performance) Human Capital (our people), Natural Capital (our interaction with the environment), Social and The Board of Rand Water resolved to form a Group Audit and Risk Committee (GARC), combining the Audit and Risk Committee of the subsidiaries Rand Water Foundation and Rand Water Services, with that of Rand Water. GARC has been established primarily to assist the Board in overseeing, inter alia, the following: • The quality and integrity of Rand Water’s integrated reporting, the consolidated Rand Water Group (the Group) financial statements, sustainability reporting, and public announcements in respect of the financial results. • The effectiveness of Rand Water’s assurance functions and services, with particular focus on combined assurance arrangements, including external assurance service providers, the internal audit, and the finance function.

ASSURANCE APPROACH TO IMPROVE CREDIBILITY

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Combined Assurance Rand Water has adopted a combined assurance model to strengthen the internal control environment and enhance the assurance obtained from management as well as internal and external assurance providers. A combined assurance framework is in place to support the embedding of combined assurance across the Group, the results of which are submitted to the Group Audit and Risk Committee for consideration. The Combined Assurance Forum (CAF) comprises of nominated representatives from across the business including, but not limited to: Integrity and Probity Assurance (IPA); Risk Advisory Services (RAS); Group Legal Services (GLS); Group Regulatory Compliance Services (GRCS); Group Internal Audit (GIA) and the Auditor General of South Africa (AGSA). Rand Water’s combined assurance responds to risks effected through the five lines of defence model. The responsibility for combined assurance is delegated to Group Internal Audit, which facilitates and coordinates the execution of combined assurance activities. The Group Audit and Risk Committee receives quarterly reports on the status of combined assurance activities and the adequacy and effectiveness of internal controls. Governance of Risk The Group Audit and Risk Committee oversees the implementation of the policy and plan for risk management taking place by means of risk management systems and processes. The Committee oversees the financial risk management aspects and is satisfied that appropriate and effective systems are in place for risk management. Internal Controls The Committee is satisfied that internal controls and systems have been implemented and that they provide reasonable assurance that the entity’s assets are safeguarded, transactions are properly authorised and recorded, and material errors and irregularities are either prevented or detected in a timely manner. These controls are monitored throughout the organisation by management and employees, with the necessary delegation of authority and segregation of duties. Internal control deficiencies and some non-compliance were noted by the Committee through the Group Internal Audit reports. The Committee further noted with concern the close out rate of internal and external audit findings. Corrective measures are being implemented by management to address these.

The Committee is satisfied with the content and quality of quarterly reports prepared and issued by the Group during the year under review. The outcomes of these audits form the basis for the Committee’s recommendation to the Board to enable the Board to report thereon. Internal Audit In line with the PFMA and the King IV, the Group Audit Executive provides the Group Audit and Risk Committee and management with objective and reasonable assurance, thereby contributing to the effectiveness of governance, risk management and control processes. The Committee is responsible for ensuring that the Group Internal Audit function is independent and has the necessary resources, standing and authority within the Group to enable it to discharge its duties. Furthermore, the Committee oversees co-operation between internal and external auditors and serves as a link between the Board and these functions. The Committee reviewed and approved the internal audit charter, the internal audit function’s annual audit plan and the three year strategic plan. The Group Internal Audit function reports administratively to the Chief Executive and functionally to the Committee, and has the responsibility for reviewing and providing assurance on the adequacy and effectiveness of the internal control environment across all the Group’s operations. The Group Audit Executive has direct access to the Committee primarily through its chairperson. The Committee notes that the internal audit function was effective. Group Internal Audit provides reasonable assurance about the state of internal financial controls and the level of maturity of the control environment in general, which were found to be adequate and effective for the current financial year except in the procurement of goods and services. External Auditor’s Report The Committee accepts the audit opinion of the external auditors on the consolidated annual financial statements and recommends that the audited consolidated annual financial statements be accepted and read together with the report of the external auditors.

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APPROVAL BY THE BOARD The Board of Rand Water is ultimately responsible for ensuring the integrity of this 2023 Integrated Annual Report, assisted by the Group Audit and Risk Committee, and further supported by EXCO. The report is produced by a devoted team of subject matter experts from Rand Water, with the relevant skills and experience to undertake the reporting and assurance process. All involved parties have devoted substantial effort and thought into how best to report on the performance of Rand Water. The Board concluded that the report is materially presented in accordance with the applicable frameworks and requirements. This report was approved by the Board on 31 October 2023.

Chief Executive

Chairperson: Group Audit and Risk Committee

Board Chairperson

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LEADERSHIP REVIEW

HISTORY OF RAND WATER LEADERSHIP REVIEW

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FOREWORD BY THE MINISTER OF WATER AND SANITATION

with municipalities to ensure a sustainable provision of the life-giving resource and uninterrupted water service. Water and sanitation are at the very core of sustainable development, critical to the survival of people and the planet. There is a proportionate relationship between water availability and level of development including improvement in the quality of health care. While the demand for water exceeds the available supply, the level of backlog is being eroded. We participated in the United Nations Summit on Sustainable Water Management at which we pledge to marshal all the resources and institutions towards the achievement of SDG 6 which seeks to ensure safe drinking water and sanitation for all, focusing on the sustainable management of water resources, wastewater and ecosystems, and acknowledging the importance of an enabling environment. The challenges to water availability are not only threatened by excessive demand but also variability in climate which is facing the whole world. The Department implemented steps to improve water management by directing water to appropriate courses, thus reducing the impact of floods. On the other hand, the Department announced several infrastructure projects aimed at collecting water in reservoirs and water courses that will be required especially during extreme drought periods. These long-term measures remain necessary considering extreme global weather patterns that have been experienced Rand Water completed some of the major infrastructure projects. The 210 Mℓ Vlakfontein reservoir has been completed in February 2023. This reservoir provides additional storage needed and will aid supply of the rapidly increasing water demand in the east of Pretoria and Ekurhuleni Metropolitan Municipality. This is the largest post-tensioned concrete reservoir in the world.

Mr. Senzo Mchunu, MP Minister of Water and Sanitation

It gives much pleasure to inform the stakeholders about the performance results for the 2022/23 Financial Year as informed by the compact entered with the Board who represent the Accounting Authority of Rand Water. Rand Water is mandated to provide services to the provinces of Gauteng, and parts of the North-West, Mpumalanga and Free State and is the largest Water Board that services the economic hub of the country. All-important stakeholders, especially the citizens of this country, must take comfort that their wellbeing remains our priority. The Department of Water and Sanitation remains committed to resolving the challenges of water and services delivery. Rand Water as directed by the Department has implemented programmes to support local government around water resources management. Access to potable water is a constitutional right and therefore Rand Water has partnered

10

LEADERSHIP REVIEW

during the year under review. These fall in line with anticipated extremely erratic rainfall patterns that were experienced in some parts of the country. We call on the nation to continue to use this scarce resource sparingly, and take appropriate actions in the case of floods. In support of these solutions, the Department has recognised the importance of realigning its entities to strengthen water and sanitation services delivery. Downstream at local municipal level, increasing debt owed to both the Department and Water Boards remains a concern. The Department, National Treasury, and the Water Boards have proposed to put in place several measures. Robust engagements are continuing at the MinMEC (Ministers and MECs) forum, and working together with national and provincial departments of Cooperative Governance and Traditional Affairs (CoGTA). Support to local government through the implementation of Section 63 of the Water Services Act at Emfuleni Local Municipality has yielded fruits. We are aware of the challenges that require urgent attention. The positive feedback from affected communities provides optimism that progress is being made. All affected stakeholders are encouraged to continue to work together towards resolving these challenges. I note the stellar positive results presented by Rand Water. I therefore take this opportunity to congratulate the Chairperson of the Board and the Chief Executive for respectively leading both the Board and Executive Members towards the achievement of these results. I also congratulate Rand Water as they celebrate 120 years of its existence and wish them a sustainable future.

Senzo Mchunu, MP

Minister of Water and Sanitation

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REPORT BY THE CHAIRPERSON OF THE BOARD In line with its intention to strengthen governance structures and taking into consideration advancements in governance and global corporate governance ethos, the Board in October 2022, restructured its committees. This new configuration has brought about improved efficiencies in monitoring and evaluation of the performance of executives. The new configuration has also refined the key performance areas and performance targets in terms of which the overall performance of the organisation is measured by the Shareholder on a quarterly and annual basis.

The Board of Rand Water subscribes to the principles of good Corporate Governance, at the centre of which is high ethical values and integrity to name but a few. In line with best governance practice, a Social and Ethics Committee was also established in 2022 to consider and oversee Rand Water’s standing and commitment towards the management of the environment, governance, corporate social responsibility and ethical conduct in Rand Water’s operations and the impact thereof on the community and other affected stakeholders. The Board continues to be accountable for the implementation of the Innovation Driven Risk-based Strategy that was approved in 2019 and the development and approval of supporting policies and strategies to guide its implementation. To this end, the Board has reviewed and refined the Group’s strategic goals for the next five (5) years. This is in order to ensure the financial sustainability of Rand Water and to position Rand Water as the leading provider of bulk water services within its areas of service and beyond. The following are the re-defined Strategic Goals for the Rand Water Group for the next five (5) years: • Increased Self-Reliance with regard to Energy Supply; • Alternative Sources of Water Supply; • Financial Sustainability, and • Sustainable and viable Rand Water Services (Pty) Ltd, a subsidiary company of Rand Water, invested locally and in Africa. The attainment of these Strategic Goals represents the legacy of the Board. Following the review of the strategy, the Board also conducted a risk analysis and identification exercise in support of Rand Water’s Innovation Driven Risk-based Strategy. Key strategic risks and relevant mitigation plans have been identified and included in the strategic risk register to be monitored by the Board through the Group Audit and Risk Committee as part of its mandate.

Mr. Ramateu Monyokolo Chairperson of the Board

This year marks 120 years of Rand Water’s existence as a supplier of potable bulk water to its customers. The 2022/ 23 Financial Year’s Integrated Annual Report demonstrates the proud record of the entity as a going concern that continues to grow from strength to strength since its inception. Rand Water continues to deliver bulk potable water of a world class standard to its customers and is always looking at innovative ways to improve the supply of water and its operations. This Integrated Annual Report further marks a year since the appointment of this Board by the Minister of Water and Sanitation, for a four-year term commencing September 2022 to September 2026. The new Board was appointed following a rigorous nomination and selection process. The Board members underwent an intense on-Boarding and immersion programme and the Board has come to appreciate the issues that pervade the water sector.

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LEADERSHIP REVIEW

I would like to take this opportunity to thank my colleagues on the Board and congratulate the Chief Executive, management and staff of Rand Water for their invaluable contribution to the performance results achieved for the Financial Year 2022/23. These results demonstrate visionary leadership underpinned by strong commitment from staff. The guidance provided by the Honourable Minister of Water and Sanitation served to engender the spirit of success as depicted in these pleasing results. On behalf of the Board, I further wish to convey our sincere gratitude for the direction that the Honourable Minister has provided in shaping Rand Water’s Strategy thereby ensuring alignment with policies at the Department of Water and Sanitation. This direction has provided greater clarity as we finalised the annual Shareholders’ Compact for the Financial Year 2023/24. As the organisation continues on its impressive growth trajectory, I challenge the organisation to maintain this proud record of excellence into the future and to maintain its position as the leading provider of bulk water services.

One of the risks identified relates to non-payment by customers for bulk water purchases. Persistent efforts have been made to resolve and accommodate non-paying municipalities. Bilateral engagements and agreements have been entered into through relevant Intergovernmental Relations forums and despite the slow pace in improvement, it is hoped that all stakeholders will honour their obligations in this regard in order for the current situation to improve. Our stakeholders constitute our reason for existence hence the partnership with all stakeholders cannot be overemphasized and I thus also appreciate their valuable feedback and ongoing support. We have had challenges in our stakeholder engagements as a result of, amongst others, Rand Water is greatly concerned by the escalating debts owed by its customers and failure by municipalities to honour their bulk water purchase and debt settlement agreements. To operate sustainably and efficiently, Rand Water solely relies on funds collected from its customers, mainly municipalities, as Rand Water does not receive any form of allocation from the national fiscus. Consequently, Rand Water’s financial sustainability and ability to fulfil its mandate heavily depends on municipalities paying for the water they receive from the entity. our scheduled maintenance requirements and the impact of load shedding on our ability to pump water, high water demand, etc. This has led to some robust engagements with some of our key customers / stakeholders. As Rand Water, we remain committed to having open communication lines with all role-players to ensure that our customers and communities are kept abreast of developments and challenges that may impact the supply of bulk water by Rand Water from time to time.

Ramateu Monyokolo

Chairperson of the Board

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ABOUT RAND WATER

HISTORY OF RAND WATER ABOUT RAND WATER

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OUR MANDATE Rand Water is a water Board that was established and is governed in terms of Chapter 6 of the Water Services Act, Act No. 108 of 1997. Rand Water is listed as a National Government Business Enterprise in Schedule 3b of the Public Finance Management Act, Act No.1 of 1999. The Government of the Republic of South Africa, through the Department of Water and Sanitation (“the Executive Authority”), duly represented by the Minister of Water and Sanitation, is the sole Shareholder of Rand Water. Since 1903, Rand Water has been playing an integral role in the development and growth of Gauteng, its cities, and its surrounding regions by providing water to people and industries. Our mandate, as the largest bulk water utility in Africa and one of the largest in the world, is to provide bulk potable water to more than 15 million people in Gauteng, parts of Mpumalanga, Free State and North West provinces - an area that stretches over 18 000km. For 120 years, Rand Water has supplied bulk potable water to Gauteng and its surrounding areas. Rand Water’s success is based on sharing in the pioneering spirit that led to the growth of the City of Johannesburg. It is the same spirit that has driven Rand Water’s growth in terms of infrastructure and quality of water and created a reputation for supplying world-class quality water that is of international standards. During the year under review, Rand Water continued with its mandate of water and sanitation services provision in its area of operations. The customer base served by Rand Water includes metropolitan municipalities, local municipalities, mines, and large industries in Gauteng and surrounding areas. We have a global reputation for providing water of high quality that ranks among the best in the world. We have consistently met and exceeded national standards and international guidelines on water quality.

OUR STRATEGY

Our Vision Be a provider of sustainable, universally competitive water and sanitation solutions for Africa.

Our Mission To consistently meet the expectations of Rand Water customers, partners, and the Government by strengthening the capacity to: • Attract, develop, and retain leading edge skills in water services; • Sustain a robust financial performance; • Develop and sustain globally competitive capabilities in core areas; • Enter into and sustain productive partnerships; and

• Develop, test, and deploy cost-effective technologies.

Strategic Objectives To attain its vision, Rand Water set the

following strategic objectives which focus and direct the business activities of the organisation: • Achieve Operational Integrity and Use Best Fit Technology;

• Achieve a High-Performance Culture; • Positively Engage Stakeholder Base; • Achieve Growth; and • Maintain Financial Health and Sustainability.

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ABOUT RAND WATER

OUR MAIN CUSTOMERS AND SUPPLIES Our main customers are comprised of municipalities across Gauteng, parts of Mpumalanga, Free State and North West provinces, mines, industries and direct consumers. We have 17 municipalities, 27 mines, and 952 industries and direct consumers as our customers. Our capacity to supply is comprised of bulk water supplier mainly to municipalities, a distribution network over 3.500km of large diameter pipeline, feeding 60 strategically located service reservoirs. We supply an average of 4 520 Mℓ/d and peak day demand of 5 199 Mℓ/d. The distribution area of supply is divided into three regions (West, South and North) which are further subdivided into thirteen districts located strategically throughout the area of supply. These regions subdivisions and responsibilities for districts are as follows: North Region: Forest Hill, Germiston, Benoni and Esselen Park

South Region: Amanzimtoti, Meyerton, Barrage, Bloemendal and Brakpan West Region: Zuurbekom, Libanon, Krugersdorp, Waterval and Rustenburg ALIGNMENT TO DEVELOPMENTAL PLANS

Rand Water is committed to report and disclose Sustainability/ Environmental, Socal and Governance (ESG) related issues that will allow the organisation to manage its significant social, and environmental impacts, and to address those sustainability issues of interest to a broader range of investors and other stakeholders. It is critical to focus on how the organisation is contributing to national and global development priorities, such as South Africa’s National Development Plan (NDP) and the United Nations Sustainable Development Goals (SDGs).

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Responding to Sustainable Development Goals (SDGs) There are 17 Sustainable Development Goals to support the 2030 Agenda, with the aim to eradicate poverty, safeguard the environment, and promote peace and prosperity by 2030. As the provider of bulk potable water and sanitation services, we are directly supporting Goal 6 which aims to ensure available and sustainable management of water and sanitation for all. We are also indirectly supporting Goal 5: Gender Equality, Goal 8: Decent Work and Economic Growth and Goal 13: Climate Action.

Females represents 43%

2 489 plants were planted at various Rand Water sites

Green building initiative implemented

46% females at board level

Rain Harvesting Project implemented

Goal 5 Gender Equality

Applicable UN SDGs

84% supervisory and management

Goal 13 Climate Action

Waste Reduction and

Recycling initiatives

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An average of 4 520 Mℓ/d of potable water to our consumers

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131 community members employed

Goal 8 Decent Work and Economic Growth

Goal 6 Clean Water and Sanitation

The Peak day demand of 5 199 Mℓ/d achieved

39.48% of the total

447 new permanent employment

Created 2 408 job

Achieved 99.35% on SANS 241 Composite indicator

procurement spent for the designated groups (BBBEE)

opportunities through Rand Water Foundation

Rand Water continues to assist municipalities to improve the blue drop status

Figure 1: Sustainable Development Goals National Development Plan (NDP)–2030

The South African NDP Vision 2030 sets out an integrated strategy for accelerating economic growth, eliminating poverty and reducing inequality in South Africa. The National Development Plan (NDP) predicts that by 2030, all South Africans will have affordable, reliable access to sufficient, safe water and hygienic sanitation. Rand Water is, therefore, aligned to the key mandates of the NDP through its vision. This vision coincides with the timeline of the NDP of 2030. The organisation actively participates in improving water and sanitation services delivery as mandated by the NDP. In addition, Rand Water’s mandate has been expanded to cover more parts of the country. Water, as envisioned by the NDP, becomes a catalyst for economic growth, socio economic development, job creation, and service delivery. The multiplier effect of water is crucial in economic development and global competitiveness, which is one of the key principles of the NDP.

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ABOUT RAND WATER

Our Sustainability: Environmental, Social and Governance (ESG) Considerations Our Environmental, Social and Governance (ESG) approach is built on many pillars that respond to the challenges facing our organisation and, ultimately, have an impact in the communities we serve. These will be monitored and incorporated into our overall strategic focus areas. Rand Water is satisfied with the progress made thus far in addressing and disclosing ESG issues. The extent of performance in these areas demonstrates our commitment to promoting sustainable development and growth through our commitment to ensuring provision of clean water and sanitation for people of South Africa.

Environmental Pillar

Progress Update

Environmental Legal Contraventions Occupational Health and Safety relevant policies.

Rand Water manages its workplace safety in line with the following policies and procedures: • Occupational Health and Safety Act. • Construction Regulations. • Contractor Management Procedure. • Contractor Induction Procedure. • Construction Specifications. • SHE File Requirements. • Appointment of Competent Contractors. 30 environmental incidents were recorded (21 - minor, 8 - major and 1 - reportable to external authorities). Environmental Management System (ISO 14001:2015) was maintained in the last audit conducted by SABS. There were no work-related fatal injuries in this reporting period.

Work-related fatal injuries.

Environmental incidents management.

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Environmental Pillar

Progress Update

Workforce inhalable hazard exposure.

No inhalable hazards exposure experienced.

Protecting our Natural Resources Rehabilitation and Restoration

Rand Water properties, servitudes, sites, reservoirs and pipelines were monitored, maintained and environmental rehabilitation undertaken. The following projects were implemented. • Horticultural maintenance implemented on 267 ha; this includes the creation of firebreaks on pipe storage areas. • 8 032m 3 of reno-mattresses/ gabions, grass blocks and pipe encasement were installed to reinstate a footprint of approximately 11 944 m 2. • 220m of security razor wire fence line at Driefontein has been erected. • A sink hole measuring 65m 3 was backfilled on the pipeline at Libabon. In ensuring sustainable environment, erosion control was monitored, maintained, and reinstated on land that occurs over and adjacent to Rand Water properties, reservoir and pipelines. We have implemented 10 projects implemented to date as part of environment and sustainable development initiatives with the purpose of controlling the erosion, thereby conserving our natural resources, and reducing environmental harm. The removal and control of listed alien invader plants was undertaken as part of horticultural site maintenance on Rand Water properties, and this was updated in the sites alien invader plant removal programme. We have also implemented Clearing of Alien Vegetation within Thabo Mofutsanyane District Municipality with the aim of protecting underground water. The project was implemented in partnership with the Department of Forestry Fisheries and Environment (DEFFE).

Erosion Control

Alien Invasives

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