Rand Water | Integrated Annual Report 2025

INTEGRATED ANNUAL REPO

Consolidated Annual Financial Statements for the year ended 30 June 2025

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

42.Financial instruments (continued)

• The Group has a registered ZAR10 billion Domestic Medium Term Note (DMTN) programme, which is available to raise funds through the issuing of commercial paper and medium to long-term bonds in the domestic bond market as and when it is required.

Group borrowing limits

The Funding Plan including the required borrowing limits pertaining to the core and growth business requirements for the current reporting period were approved by the Department of Water and Sanitation and National Treasury.

Financial risk management

Financial risks are assessed, analysed daily and reported monthly to the Group Chief Financial Officer, Top Management Committee, Executive Committee, Treasury and Capital Investment Committee, Group Audit and Risk Committee and the Board. The Treasury and Capital Investment Committee oversees the operations of the treasury function including, guiding treasury policies, assisting with the overall treasury strategy and objectives while ensuring that the risks concomitant to the treasury function are monitored and managed within the constraints of the treasury policies. The Treasury and Capital Investment Committee is responsible for reporting financial risk exposure to the Board of Rand Water, at scheduled Board meeting which undertakes the ultimate responsibility of approving any recommendations made by the Treasury and Capital Investment Committee. The Group’s business operations expose it to liquidity, credit, and market risk (comprising foreign currency, commodity and interest rate), which are discussed below. Given the level of volatility in the markets, Treasury continuously monitors and manages all risks very closely so as to implement risk mitigating initiatives timeously when required.

Credit risk

Credit risk is the possibility of financial loss resulting from a customer or counterparty who holds a financial instrument and failing to discharge an obligation. Credit risk arises primarily through the provision of water services and centralised treasury activities.

Other credit risk activities include outstanding customer balances and cash deposits with financial institutions.

The credit risks can also arise from cash and cash equivalents, trade receivables and investments. These risks are effectively managed in terms of the Board-approved financial risk management framework that prescribes the investment and counterparty limits. The overall objective of the Group’s approach to credit risk management is: • to minimise any losses that could result from counterparty or issuer failure, ensuring the protection of current and future cash reserves; and • to enhance liquidity by investing in liquid instruments and projects and to maximise the rate of return on investments. Credit risk attributable to trade receivables is assessed considering the following counterparty characteristics: • Outstanding debt of 90 days and beyond; • Formal written communication indicating the customer's inability to meet its obligation as they become due; • A municipality that has been placed under Section 139 or 154 of the MFMA or an entity that is under business rescue or in liquidation without a payment arrangement; Trade and other receivables

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Rand Water | Integrated Annual Report 2025