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)

Expected credit loss = Exposure at Default (EAD) x Probability of Default (PD) x Loss Given Default (LGD).

Investments in bonds consist of bonds issued by the South African government and SOE which are measured at fair value through OCI. The Group continued to recognise loss allowance based on 12-month ECL. The increase in the expected credit losses (ECL) on bond investments compared to the prior financial year is primarily attributable to changes in the probability of default and a higher exposure resulting from increased bond investments. Figures in Rand thousands Stage 1 Stage 2 Stage 3 Total

Reconciliation of credit loss allowance 1 July 2024 credit loss allowance - IFRS 9

33 050 17 855 50 905

- -

- -

33 050 17 855 50 905

Increase in loss allowance

30 June 2025 credit loss allowance - IFRS 9

-

-

Cash and cash equivalents and term deposit investments

The Group cash and cash equivalent and term deposit investments comprise of term deposits, notice deposits, Promissory Notes (PN), money market funds, and call deposits measured at amortised cost. The general approach was adopted by the Group towards determining the expected credit losses and the application of the ECL model remains unchanged from the prior financial year. The expected credit losses for financial assets measured at amortised is calculated as a product of Exposure at Default (EAD) x Probability of Default (PD) x Loss Given Default (LGD). The probability of default were based on directly observable information or indirectly observable information of similar counterparties. Exposure at default represents an amount still outstanding at the measurement date which includes only the principal amount and interest accrued up to the valuation date. The increase in the expected credit losses (ECL) is primarily driven by a marginal uptick in the probability of default associated with specific counterparties, coupled with a higher cash and cash equivalent balance. Figures in Rand thousands Stage 1 Stage 2 Stage 3 Total

Reconciliation of credit loss allowance 1 July 2024 credit loss allowance - IFRS 9

1 040 1 036 2 076

- -

- -

1 040 1 036 2 076

Increase in credit loss allowance

30 June 2025 credit loss allowance - IFRS 9

-

-

Liquidity Risk

Liquidity risk is the risk that the Group will be unable to meet all its financial obligations on a timely basis, when due, and in the right currency without incurring above normal costs. The Group’s approach to managing liquidity risk is to ensure there is sufficient available liquidity to meet its liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. To ensure that the Group has access and sufficient funds to meet its operational expenditures it: • Maintains a liquidity buffer of R2.2 billion. • Has committed facilities of R1.5 billion (2024: R1.5 billion) with various financial institutions as part of the Group's multi- banking strategy which R1.5 billion (2024: R1.5 billion) was unutilised. • Has ZAR 10 billion Domestic Medium Term Note (DMTN) programme with a headroom of R6.8 billion at 30 June 2025.

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Rand Water | Integrated Annual Report 2025