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)

Overall Performance The entity is proud that it continues to meet the mandate of a continuous supply of potable water without fail, despite challenges experienced as a result of electrical outages (i.e. Load‑shedding) and unplanned emergencies due to but not limited to vandalism of infrastructure. Rand Water was able to meet its SANS Composite Indicator on the quality of water. In addition, the entity remains an engaged corporate citizen that meets its B‑BBEE targets, corporate social investment targets, and support to local municipalities. On the financial aspect, the net profit margin target was also met, an indication of prudent management that leads to long‑term viability and sustainability. Rand Water has had challenges in the current financial year largely attributable to the global and local economic environment, which led to increasing global input prices. At this crucial moment, Rand Water continues to concentrate on identifying these global risks and finding solutions that will lead to the long‑term viability and sustainability of the Group. The continuing impact of global economic downturn and Covid‑19 has affected externally driven KPIs, such as debtors days as local municipalities continues to have financial challenges which has negatively affected Rand Water. The entity notes that some municipalities are starting to show a positive turnaround, however there remains a large number of municipalities that are struggling to pay on time. In terms of late payments, the Board resolved that Rand Water should assist with customer engagement regarding long outstanding debt as well as regular defaulters for late payments. On a monthly basis, a report of all arrears owed by each municipality together with the ageing is submitted to the National Treasury and the Department of Water and Sanitation as per Section 41(2) (b) of the MFMA. In light of this resolution, Rand Water in terms of the Legal Proceedings Against Certain Organs of State Act has issued Section 3 letters to all defaulting municipalities and summonses. In this environment, Rand Water recognises the importance of compliance to all governance, statutory and regulatory requirements. Rand Water has been affected by legislative changes that have occurred in the procurement environment which have taken time to understand and implement. These changes have impacted some KPIs in the capital expenditure program i.e capital expenditure as a percentage of target. The entity was able to put concerted effort in attaining another component of the capital expenditure, which relates to the completion of milestones. Rand Water continues to engage with National Treasury on a quarterly basis to identify areas of improvement, new legislation that may impact on Rand Water, and conclude on outstanding issues and submissions to National Treasury. The year under review was characterised by volatility in the Supply Chain Management processes and changes in the Supply Chain Management Policies. The need to transform the procurement space needed to be undertaken within the legislative Compliance. The Board was faced with a huge challenge of achieving a balance between the accomplishment of the Capital Expenditure (CAPEX) target within a stringent compliance environment. The legal challenge by losing bidders coupled with disregard for formation of joint ventures by bidders undermined the achievement of the CAPEX programme.

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