This Annual Report contains details about the core activities of Umgeni Water that illustrate its contribution to socio-economic development and to the creation of an enabling environment that allows reduction of the triple challenges of unemployment, poverty and inequality.
In response to some of the challenges experienced with water management and services over the recent period, the Department of Water and Sanitation (DWS) has developed a Five Pillar Turnaround Strategy, aspects of which will take effect in the 2019-2024 Medium Term Strategic Framework (MTSF).
The Five Pillars are fully embedded in the National Water and Sanitation Master Plan and the more detailed implementation plans will be finalised through an intensive round of stakeholder engagements, which will take place during 2019.
Performance results contained in this Annual Report are deliverables identified in the organisation’s Five-Year Corporate Plan and in the Shareholder Compact signed with the Minister of Water and Sanitation.
The period under review was defined by positive results in crucial areas of the business; however, this was tinged by reduced sales volumes in the first half of the financial year, caused by protracted low rainfall in the catchment areas feeding into the main and largest Mgeni System.
Financial results contained in this report reflect the impact of drought, and the fact that hard decisions had to be taken about implementation of prudent cost containment measures and reprioritising some infrastructure projects.
At the time of preparation of this Annual Report, there was a marked improvement in the Mgeni System’s water resource storage, and a request had been made to the Ministry of Water and Sanitation to lift mandatory water restrictions of 15% for commercial, industrial and residential uses and 50% for irrigation use, gazetted two years earlier.
The upside of this turnaround is that municipalities of eThekwini, Msunduzi and uMgungundlovu will now be able to quicken implementation of projects that had been affected by water shortages and industry can similarly revert to normal production due to the end of curtailments in water supply.
It is hoped that while consumers begin to again enjoy the benefits of improved water resource availability in the major systems, the unambiguous messages that emerged from the four-year drought are not forgotten.
Governance at Umgeni Water has been comprehensively strengthened following the appointment of a Board in the first quarter of the 2017/18 financial year. The appointment of a Board closed a gap that had resulted in questions and concerns being raised by investors. The current Board was appointed for a fixed period until a permanent Board takes office. It has full powers of an Accounting Authority and conducts its business with diligence and commitment.
In the reporting period, Board and Board Committee meetings were held according to the organisational Business Cycle and were well attended.
The appointment in May 2018 of a permanent Chief Executive (effective from July 2018) has also added strength to governance. The Chief Executive is Mr. Thami Hlongwa, who acted as Chief Executive from August 2017 until his permanent appointment.
The past year has been transformational for South Africa and the water sector as a whole. Umgeni Water has demonstrated its resilience by ending the year successfully. Supported by the Board and Executive that provided focussed leadership and decision-making during this period, the entity delivered plans, strategic initiatives, projects and programmes during the year that yielded successful results and outcomes.
These are summarised at a high level per outcome in this report with more detail provided in the various chapters of the full Annual Report.
Umgeni Water again illustrated its strong financial resiliency. In the reporting year, Group revenue totalled R2.90 billion and a net surplus of R1.19 billion was achieved, partly as a result of cost containment measures through optimisation of water production process and recovery from the drought in the second half of the financial year.
The surplus is crucial to implementation of infrastructure that is required by customers to improve assurance of supply and extend provision to communities that do not have or have difficult access to safe drinking water. It will also be used to repay debt and ensure that Umgeni Water is able to maintain its bulk potable water tariffs at affordable levels and in turn, make it possible for municipalities to supply water to consumers at an affordable cost.
The strength of the balance sheet and access to other strategic financial resources remain vital to Umgeni Water for expanding services to new areas and implementing the strategy of enabled and innovative growth.
A combination of solid enterprise-wide systems, backed by highly competent employees and robust leadership provided by the executive team and Board ensured that Umgeni Water’s performance was maintained at a high level during this reporting period.
The outlook is positive. The position of strength that has been carefully maintained within the entity provides a stable base that can be leveraged by Umgeni Water to implement its strategy of enabled and innovative growth. In so doing, Umgeni Water will serve its customers and the people of KwaZulu-Natal in a more effective manner, while braving the challenges and taking the opportunities presented by a changing future and almost certain changing world of work.