Rand Water | Integrated Annual Report 2025

Consolidated Annual Financial Statements for the year ended 30 June 2025

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

42.Financial instruments (continued)

An analysis of trade receivables credit profile is presented below:

Impairment 2025

Impairment 2024

Figures in Rand thousands

Gross 2025

Gross 2024

Rand Water Performing

2 994 419

(301 470) (141 989) (2 473 675)

494 098 101 414

(338 752)

Under performing Non performing

146 277

(962)

4 463 099

6 368 065 (2 191 225) 6 963 577 (2 530 939)

7 603 795 (2 917 134)

The Group continues to review its well-established Credit Management Policy that firmly addresses credit risk management, bad debt management and bad debt recovery. The policy addresses credit control measures which monitors activity on customer accounts and allow for remedial action, should the customer not comply with the Group's standard payment terms. Stringent controls that have been exercised to curb the late or non-payments include, limitation and discontinuation of water supply, interest on overdue accounts in line with Section 51(b)(i) of the PFMA, monthly reports of municipalities default status sent to National Treasury and Department of Water and Sanitation in compliance to Section 41 of the MFMA, and application for the withholding of equitable share allocation (invoking Section 216 of the Constitution) for non-performing municipalities not adhering to the Debt Settlement Agreements (DSA). Furthermore, the Group has recently adopted a multi-pronged collection approach from different collection strategies bucket which include among others interventions like the collaborative efforts with the Provincial Treasury, COGTA and participation in the Provincial COGTA IGR committee to address credit risk. The Group is also spending more time and focus on the high risk customers especially due to the impact they have on Rand Water's cash flow requirements. Other debt relief initiatives are also being rolled out to assist customers to liquidate their old debt sooner and ring-fence these debts in the balance sheet while they also benefit from the cash flow relief in the process.

Credit Loss Allowance

The Group recognises expected credit loss on classification of the following financial assets : • Trade and other receivables; • Loans receivable; • Bond investments measured at fair value through other comprehensive income; • Term deposit investment; and • Cash and cash equivalents.

Trade and other receivables

The Group calculated the expected credit losses for trade receivables for segments using a Simplified Approach applying a Provision Matrix and Time Value of Money (TVM) loss approach. The loss rates are calibrated based on historical loss experiences, taking into account the time value of money and further adjusted for forward looking information.

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Rand Water | Integrated Annual Report 2025