RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023 Board Report 13. Corporate business plan and shareholders compact (Continued)

operating as a pumped storage scheme and as a pumping station for water transfer over the Drakensberg from the Tugela to the Vaal. In February 1998, the Lesotho Highlands Water Project (LHWP) began transferring water into the Vaal Dam.

The LHWP in its present form comprises six dams and three pumping stations. The flow of water in the Orange River is diverted through a series of tunnels through the Maluti Mountains, into the Eastern Free State, and then into the Vaal dam. Rand Water extracts water from the Vaal Dam, purifies and disinfects the water at its Vereeniging and Zuikerbosch purification and pumping Stations. The water is then pumped to Zwartkopjes (Rand Water’s main booster pumping station) and three satellite booster pumping stations situated at Palmietfontein, Eikenhof and Mapleton. The water is then pumped to the 58 reservoirs located throughout Rand Water’s area of supply. It is from these reservoirs that water is delivered to Rand Water’s customers. Rand Water is the largest water utility in Africa, providing bulk potable water to a population that has grown to an estimated 14 million in Gauteng, parts of Mpumalanga, the Free State and North West provinces. Its customer base includes metropolitan municipalities, local municipalities, mines, industries, farmers and a few individual households. In order to attain its strategic intent, Rand Water has set the following strategic objectives, which will focus and direct the business activities of the entity over the financial period. • Achieve operational integrity and use best fit technology, • Achieve a high‑performance culture, • Positively engage stakeholder base, • Achieve growth, • Maintain financial health & sustainability. Challenging Economic Environment In February 2020, the Minister of Finance, Mr Tito Mboweni presented his budget for the country in the National Assembly. He projected a low economic growth rate: “Against this backdrop we forecast that the South African economy will grow by 0.9 per cent and inflation will average 4.5 per cent in 2020”. Subsequent to that pronouncement, the global economy was hit hard by the ramification of the COVID‑19 pandemic. This led to the regression of the Finance Minister’s positive stance on the economic growth rate of 0.9% to a negative 7.2% in 2020, as stated in his supplementary budget to Parliament. The International Monetary Fund (IMF) published the World Economic Outlook Report whose predictive models conclude that the global economy will enter into a recession and economic growth will be ‑4.9%. It is therefore important that South Africa and its corporate entities view the domestic economy in the same lenses of the global perspective. The negative economic outlook means that the economy will shed a lot of jobs, most companies (public and privates sector) will face going concern challenges and will restructure their operations to suit current negative business conditions. Rand Water is not immune to this negative economic outlook. This forces the organisation to introspect and look at initiatives to maintain long term sustainability. This shareholder’s compact coincides with a review of the Rand Water strategy. The review assesses past performance and sets the course for next phase of the Rand Water vision. It is therefore important for the review to inform the key performance indicators (KPIs) in the Shareholder’s Compact. The following performance report follows the format of the Shareholder’s Compact. The shareholder’s compact contains Rand Water’s targets that will support the Ministerial Outcomes and the DWS strategic plan. A significant number of the targets are influenced by financial KPIs. The vision of Rand Water, as stated in the Shareholder’s Compact, is as follows: To be a provider of sustainable, universally competitive water and sanitation solutions for Africa.

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