RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023

Notes to the Consolidated Annual Financial Statements 42. Financial instruments (Continued)

Rand Water continues to work closely with the Department of Co‑operative Governance and Traditional Affairs, Department of Water and Sanitation, National Treasury and other government departments at all levels as well as relevant stakeholders to resolve the systemic challenges which have given rise to municipalities’ arrear debt.

Municipal arrear debt

The Group is exposed to credit risk resultant by the total municipal arrear debt that continues to escalate consistently, amounting to R 4.7 billion (including interest on overdue account) at year ending 30 June 2023 (2022: R 2.7 billion). The arrear portion represents 71% (2022: 63%) of total invoiced municipal debt (including interest overdue account).

Figures in Rand Thousand Net Debt Per Province

2023

2022

Gauteng

3 731 277 2 695 313

Mpumalanga Free State North West

128 113 38 231 76 170

25 571 53 136

73 865 3 973 791 2 847 885 The top 5 non‑performing or defaulting municipalities owed a combined total of R2,845 billion (2022: R1,987 billion) for long outstanding arrear debt.

Figures in Rand Thousand Municipality 1.Emfuleni Local Municipality 2.Govan Mbeki Local Municipality 3.Merafong City Local Municipality 4.Randwest City Local Municipality 5.Victor Khanye Local Municipality

2023

2022

2021

846 077 743 347 1 161 276 676 089 489 141 332 490 618 604 323 419 152 290 374 880 167 272 136 687 329 509 264 086 201 822 2 845 159 1 987 265 1 984 565

The top 5 defaulting municipalities constitute 61% of total invoiced municipal arrear debt (2022: 75%). The Group recorded 77% of debt owed by Gauteng Province Municipalities, 21% by Mpumalanga Province Municipalities, and 1% by Other Provinces. At year end, a total of 8 municipalities with total arrear debt of more than R100 million each (2021: 7), a number which has grown marginally during recent years and demonstrates the universal nature of the problem as we experienced all top 3 metropolitan municipality failing to honor their contractual obligation and Rand Waters payment terms.

The Group has classified customers performance and its analyses as it observes the discipline in customer’s payment behavior and patterns by ensuring that payments are made on or before the due date and managing their accounts and the aging thereof.

Performing Customers

Under‑Performing Customers

Non‑Performing Customers

Relates to those trade receivables that service their debt within the contractual terms. These customers maintain their debt aging levels below 45 days.

Relates to those trade receivables that do not service their debt within the contractual terms. These receivables either pay late or make part payments on the debt when it falls due but maintain their debt aging below 75 days

Relates to those trade receivables that are 90 days and beyond. Constant engagement is required for these receivables to rectify the status.

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