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)
Thus the Group has classified 8 Municipalities as Non‑Performing; 4 as Under‑Performing; and, 5 Municipalities as Performing. The classification assist the Group with sufficient monitoring of the credit risk exposure.
Non‑performing potable water municipal debtors are an identified high credit risk class subject to specific credit risk management. The collection of revenue from customers in this specific class remains a challenge. The enhancement of credit control strategies and monitoring of payment levels in this area continue to receive management’s attention. Progress on the collection process is reviewed on a regular basis and if it is evident that the amount will not be recovered, it is recommended for write off in terms of the group policy and delegation of authority. However, the process of recovery continues unless it is confirmed that there is no prospect of recovery or the costs of such action will exceed the benefits to be derived. Amounts written‑off are determined after taking into account the value of the security held. As part of our effort to recover from the defaulting municipalities in previous years, we have implemented numerous measures to manage municipal arrear debt. We continue to our robust debt management strategy. The strategy comprises three key objectives, namely: • To reduce and/or eliminate overdue debt; • Halt non‑payment in customer segments where default occurs; and • Prevent future defaulting by the current performing customers. To achieve this, we have administered, mapped and augmented existing revenue and debt management processes, and enforcing Rand Water’s rights through legal action and legal recovery processes and also accelerating Government interventions despite the latter’ slow progress and ensuring compliance to legislative prescript. Mediations to enhance our revenue and debt management efforts include close monitoring of billing and payments, assisting municipalities in their revenue collection efforts through active partnering, water efficiency initiatives as well as improved customer relationship management to proactively identify and mitigate the likelihood of defaulting. In some instances, we have implemented other collection solutions where‑in we have agreements with our municipal customers whereby we collect payments directly from their customer’s, we also entered into set‑off agreements where we have bilateral contracts with customers. We continues with stakeholder engagement and investigating ways to better enforce payment agreements with municipalities. The Group concluded negotiations and signed a total of five (5) active Debt Settlement Agreement from the defaulting municipalities within the reporting period. The Group is still in consistent negotiations with the other defaulting municipalities for amicable payment agreement. Non‑adherence to payment agreements contributes to the increase in municipal arrear debt. In our quest to recover long outstanding debt, where the Debt Settlement Agreement in not honored we have taken legal actions against some municipalities and despite the latter’ slow progress and some challenges in the process, but the Group managed in one case we to get a writ of execution in favour and the writ was exercised twice in the year under review in December 2022 and April 2023 and the Group at least managed to partially recover some of the old debts.
Non‑potable water customers
Transactions related to the abstraction of water from the Vaal river system by customers, to whom Rand Water has sold part of its water rights. These comprise mainly of industries customers who use non purified water for their business activities. Their payment terms are 30 days from the invoice date and are individually assessed for impairment.
Non‑potable water customers are not required to provide security as they generally represent a low credit risk.
302
Made with FlippingBook - professional solution for displaying marketing and sales documents online