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) 13.2. Performance information explanations

Explanatory notes to the performance information: 1. Bulk potable water quality compliance Rand Water complied with the SANS 241 ‑ Composite Indicator as a result of Rand Water’s commitment to maintaining world‑class operations therefore achieving the set target. 2. Manage avoidable water losses The target was achieved as Rand Water undertook comprehensive monitoring of the network, timeous detection and solved identified leaks. 3. Number of days supply interrupted as a percentage of possible supply days Rand Water continues to meet customer demand with no planned interruption in supply. 4. Actual CAPEX spend on expansion related projects as a percentage of budget Rand Water met the set target due to monthly engagements with the Shareholder to identify challenges and ensure alignment with their requirements. 5. Annual external audit Rand Water obtained an unqualified audit opinion on the annual financial statements for the year ended 30 June 2023. 6. Improve Financial Ratios a. Current Ratio The set target was achieved as a result of increased municipality debt. b. Gross income margin % (primary activity) The set target was exceeded and this was attributable to stronger revenue performance primarily driven by the higher potable water sales volumes. c. Gross income margin (secondary activity) The target was met due to projects being executed within budgeted costs and did not erode the set margin. d. Net income margin (primary activity) The net profit margin (primary activity) target was achieved. This is attributable to increased water demand and significantly higher finance income as a result of consecutive interest rate hikes. e. Net income margin (secondary activity) Net Income exceeded the target due to reversal of Expected Credit Loss on DWS projects such as War on Leaks and the Sedibeng Regional Sewer Scheme project. f. Debt equity The set target was not met due to Rand Water not issuing new borrowing during the current financial year and an increase in accumulated reserves. g. Return on Assets The set target was not achieved and this was attributable to significantly high expected credit losses by virtue of high arear debt from defaulting customers. Rand Water has implemented debt relief measures; tightened the debt collection processes; and instituted legal collection.

176