RAND WATER ANNUAL REPORT 2023

Investor and Financial Stakeholder Relationship Management

Going Concern The Organisation continued to operate in a climate characterised by global problems, geopolitical issues, a weak economic growth, and high unemployment for the fiscal year that concluded on June 30, 2023. This was directly realised through the absorption of the rising cost of raw water, further exacerbated by the continuous increase in input costs of purifying and distribution of water such as energy and chemicals, putting strain on targeted margins. These rising prices affected the competitiveness of the domestic businesses and disposable income of consumers, which contributed to the present slow payment pattern among the Group’s primary customers (municipalities). The Group implemented a tariff increment of 8.8% which increased the entity’s revenue for the financial year ended 2023. This and other cost curtailment measures have ensured that, even with a cost base that is growing at a faster rate than revenue (as evidenced through significant increases in chemicals and energy costs), the entity still managed to achieve a resilient balance sheet for the current financial year. An approved tariff of 9.2% for FY2024 in an economy taking strain, is considered adequate to aid the current situation and is also adequate with inflation now within the 3-6% target range. Rand Water continues to stress test its balance sheet to ensure that the Organisation remains resilient and is able to remain sustainable over the short to medium term. The Group remains financially viable in terms of the Water Services Act section 34 (2)(a)-(e). Further, the organisation has applied prudent strategies to ensure the Group’s commitment to long term sustainability and to ensure growth and success of the organisation. It is crucial that Rand Water demonstrates its ability to operate as a going concern into the foreseeable future. This is evident by a strong financial stability with focus to optimising Rand Water’s financial position by diligently managing the liquidity position of the organisation. This is demonstrated by Rand Water’s total liquidity of R11.078 million consisting of cash and cash equivalent of R4.897 million, term deposit investment of R2.815 million, Bond investments of R2.116 million and committed facilities headroom of R1.250 million. In addition, the Group also have an available headroom of R5.615 million under the ZAR 10 billion Domestic Medium Term Note (DMTN) programme. Rand Water has sufficient cash resources and access to committed facilities to meet its obligations when they become due and to continue as a going concern into the foreseeable future.

The Group continued with robust engagements and negotiations with a few municipal customers for affordable repayment arrangements for longer periods that can be made an order of court, as the Group understands that the after effect of the COVID-19 pandemic will take some time to rectify. The Group also had engagements with the provincial executives’ committees, administration functions and other stakeholders (Department of Water and Sanitation, Provincial Corporative Governance and Traditional Affairs, National Treasury) as part of managing the escalating debt. The Group applauds the engagement by Minister (DWS) and the Minister (CoGTA) with Executive Mayors for the non-performing municipalities which has resulted in an establishment of a dedicated task team led by both the Director General: DWS and Director General of CoGTA. The role of the task team being mainly to facilitate engagements between Rand Water and the non-performing municipalities and assist with customer relations and effective implementation of credit management measures. The Group remains committed to continually executing its primary mandate of supporting water services authorities by providing bulk water services within its service area of jurisdiction. We welcome the pronouncement relating to withholding of equitable share made by Minister (DWS) and and Deputy Minister (DWS)on the proposed solutions to managing arrear debt. The Group remains committed to achieving positive results through clearly devised solutions and strategies, partnerships and collaborations aimed to combat the negative impact of a customer base that is still heavily impacted by the various macro-economic factors and post pandemic effects. Annually through our Investor Relations Plan, we host our Financial Stakeholders through various platforms that provides for two-way engagement between the Board, Executive Management, and the Stakeholders. Our investor and financial stakeholder relationship efforts aim to provide various platforms for continuous engagement for all stakeholders who have a keen interest in our operations. Our approach is to create partnerships through a shared passion and dedication that influences how we create value for Rand Water and the Water Sector as a whole. Our Investor Relations Plan provides various approaches that include direct engagement through annual results launches, regular one on one meetings, roadshows, strategic planning sessions, etc, that brings a diverse expertise within all areas of interest to improve the way we do things and more.

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