CITY POWER (PROPRIETARY LIMITED) Registration No: 2000/030051/07 (In terms of Section 121 of the Municipal Finance Management Act, 2003 and Section 46 of the Municipal Systems Act, 2000)
CITY POWER JOHANNESBURG (PROPRIETARY LIMITED) COMPANY INFORMATION: Company Name: City Power Johannesburg (Pty) Ltd Company Registration Number: 2000/030051/07 Physical Address: 40 Heronmere Road, Reuven Postal Address: PO Box 38766, Booysens, 2016 Phone Number: (+27) 011 490 7000 Fax Number: (+27) 011 490 7590 E-mail: electricity@citypower.co.za Web-site: www.citypower.co.za Customer Contact Centre: JoConnect at (+27) 011 375 5555 Bankers ABSA Bank of SA Limited Auditors Auditor-General What business are we in? City Power is in the business of sourcing, then distributing and selling electricity to its customers. Updated: 12/09/2014 14:27:40 Page 2 of 63
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FLORID A # MO FO LO CENTR AL DUBE MOFOLO ORANG E F ARM UNAVILLE AH JAGUAR LAKESIDE EXT.1 DISCOVER Y HAMBERG KLIPSPRU IT W EST W ILGEHEUWEL KLOOFENDAL (33/11) CONSTANTIA KLOOF RAND LEASES EXT.1 ELDO RADO PARK ZAKARIYYA PARK EXT.5 LOTUS 11TH SHAFT MOROKA ZANDSPRUIT EXT.10 FLORIDA PARK NURSERY FLORIDA # KLIPSPRU IT NANC EF IELD ROBERTVILLE FLEU RHOF MEADOW LANDS ORLANDO PIMVILLE ZONE 1 ELDORADO CHARTWELL 1 DALKEITH ESKOM 2 HONEYDEW LANSER IA CHRISTIAAN DE WET NANCEFIELD SUNDOW NER FAIRLAND QUELLER INA MARAISBUR G NOO RDGESIG KYA SAND BERARIO GREYMO NT FLORID A GLEN FLORIDA NO RTH BERGBRO N POWER PARK BARAGW ANATH DEVLAND ARMADALE RAND PARKRIF KELLAND VALERIEDENE BO SMO NT RISIDALE ROOSEVELT PARK NEW LANDS NAT URENA MALANSHOF BLACKHEAT H NORT HCLIFF TRIOMF INDUSTRIA WEST INDUSTRIA INDUSTRIA COMPTO NVILLE JO HAN NESBURG -NO RTH NOORDHANG NORT HGATE OLIVED ALE NORTHRIDING BELLAIRSPARK FAIRLAND ESKOM 9 DIEPKLOOF STORMILL DIEPSLOOT CHARTW ELL HOUTKOPPEN HOO GLAND SHARO NLEA BO SKRUIN MAROELADAL EXT.11 MEADOW HURST ST RIJDOMPARK W ESTBURY CROW N RIVERLEA NASREC MEREDALE # # HURST HILL DAINF ERN DAINFERN FERNDALE LIN DEN MONTGOMERY PARK AERO TON MO RET JACANLEE CREST A W IN DSOR FOURW AYS # MAYFAIR WEST MELVILLE MAYFAIR MAYFAIR ROBERTSHAM ROBERTSHAM ALAN MANOR DAINFERN RIDGE OSUMMIT FON TAINBLEAU SO UTHG ATE EIKENHOF KLEVEBANK FOURW AYS BRYANBRINK BOND ST HARLEY ST THETA W ITKOPPEN EMMARENTIA AMALGAM CROW N GARDENS EAGLES NEST KIBLER PARK SO UTHF ORK MOND EOR TANGANANI LEAZON IA EPSOM DOWNS CRAMERVIEW LYME PARK BO RDEAU X LONE HILL EXT.10 CRAIG HALL PARK PARKVIEW BRYANSTON HURLINGH AM CRAIG HALL PARKHURST GREENSIDE RICHMOND VREDEDO RP LONE HILL PAULSH OF MAG ALIESSIG BRYNORTH HURLINGH AM BORD EAUX W ESTC LIF F OPHIRTO N BO OYSENS REUVEN GILLVIEW SUIDERO ORD KLEVEHILL PARK PARKMORE SANDHUR ST ROSEBANK RIDGE PARKTO WN NEW TOW N FORD SBURG SELBY TURFF ONT EIN PAULSHOF RIVERCLUB MO OD IE HILL DALECRO SS BRAAMPARK FOREST HILL LEEU KOP ILLOVO GLENESK EDENBURG BIRDH AVEN RIVIERA KILLARNEY HOUGHTO N EST ATE BEREA MULBARTO N # DOORNFO NTEIN CITY AND SUBURBAN LA ROCHELLE OAKD ENE BASSONIA ATHOLL OAKLANDS BELLE-VUE BERTR AMS ROSETTENVILLE W EMM ER TOWN SVIEW FAIRW AY PRO LECON MULBARTON LIEFDE EN VREDE CROW RHOR NE BEAULIEU BARBEQUE DOWNS MEGAW ATT ST RAT HAVO N KYALAMI ESTATE SUNN INGHILL GALLO MANOR W YNBERG GLEN ATHOL WOLHUT ER BRAMLEY W AVERLEY NORW O OD CITY DEEP WILLAW AY KHYBER ROCK W OODLAN DS WEND YW O OD KELVIN MARLBORO MARLBORO EASTG AT E BEZUID ENHO UT VALLEY ALEXAN DRA OBSER VATORY KENSINGT ON JEPPESTO WN BENRO SE CITY SANDS VORNA VALLEY GRESSWO LD MARYVALE ROSEACR E DE W ET SHO F SO UTH HILLS RISANA VO RNA VALLEY WATER VAL EXT.2 OR CHARDS LINKSFIELD BUCC LEUCH BUC CLEUCH LYNDHURST # CYRILDENE BRUMA DENVER LOMBARDY WEST ELECTRON MOFFAT TULISA PARK COUNT RY VIEW NOO RDWYK FRANKENW ALD FAR EAST BANK GLENSAN CLEVELAND HERIO TDALE HEADWAY HILL NOORDW YK RAND JESPARK EXT.1 MIDRIDGE PAR K HALF W AY HO USE RAND JESFON TEIN PRESIDENT PARK WATERVAL MID RAND EDENVALE NOORDW YK (ESKOM) COMMERCIA # NORTHRAN D WESTFIELD GRAN D C ENTRAL KLIPFONTEIN VIEW PHOSPHATE 01 MAY 2006 EBONY PARK IVORY PARK RABIE RIDGE ALLENDALE KAALFONTEIN EXT.1 CHLOORKOP FOUNDER S HILL FOUNDER S HILL ESTHER PARK SEBEN ZA EXT.6 EDENVALE IN D City Power Annual Report 2007/08 Where do we sell the electricity? Geographic service delivery footprint of the City of Johannesburg, with City Power areas in pink on the right. Midrand DISTRIBUTION AREA NORTH Bryanston Roodepoort Randburg HurstHill DISTRIBUTION AREA SOUTH Reuven Siemert Alexandra DISTRIBUTION AREA NORTH Klipspruit Lenasia N W E S LEGEND DEPOT SITES # Alexandra # HurstHill # Lenasia # Midrand # Randburg # Reuven # Roodepoort # Siemert PUBLIC LIGHTING # Klipspruit # Bryanston Area Boundaries Distribution Areas Substation Zones City Power A rea Eskom Area Measure Indicator Unit 06/07 Actual 07/08 Actual Eskom supply points No 39 39 High voltage substations (bulk intake points) No 5 5 Medium voltage substations (major substations) No 82 82 excluding bulk intake substations Low voltage substations (devices) No 13 800 14 252 High voltage overhead transmission lines >44kV km 789.93 811.00 High voltage transmission cables >44kV km 93.68 93.68 Medium voltage overhead lines >20.5kV and <44kV km 5.95 11.20 Medium voltage cables >20.5kV and <44kV km 46.52 123.30 Ripple relays installed No 178 000 171 860 Ripple relays in-service No 87 000 103 700 Updated: 12/09/2014 14:27:40 Page 3 of 63
Customer Statistics Customer Type 06/07 Actual 07/08 Actual Agricultural 36 34 Key customers 153 162 Large power users 4 343 4 343 Business 12 542 12 524 Prepayment 86 768 94 854 Domestic 211 204 188 096 Total 315 030 300 013 City Power bulk purchases 06/07 Actual 07/08 Actual GWh 12 900 13 091 Direct cost (Rm) 2 439 175 2 795 652 To be a world-class electricity distributor Vision Mission To meet the expectations of customers and stakeholders by: Providing a sustainable, affordable, safe and reliable electricity supply Providing prompt and efficient customer service Being a preferred equal opportunity employer through development and incentives Undertaking our business in an environmentally acceptable manner Operating principles Be a customer-centric organisation Be a seamless value chain-driven organisation Maximise technology enablement Show zero tolerance for poor performance Make sure all investment decisions are business case-driven Provide one-stop service, and do it right the first time Values Resourceful Reliable Resilient Respectful Always with integrity Strategy Service People Infrastructure Management style Improve climate The right people in the right places Training in key areas Prioritise social transformation (public lighting/electrification) Seek more revenue Loss reduction Replacement and upgrades Expand network Maintenance Demand-side management Alternative energy sources Updated: 12/09/2014 14:27:40 Page 4 of 63
TABLE OF CONTENTS Chapter 1: Introduction and Corporate Profile... 7 Section 1: Corporate Profile / Overview of the entity... 7 Section 2: Strategic Objectives... 7 Section 3: Foreword by Member of the Mayoral Committee... 11 Section 4: Chairperson s Foreword... 12 Section 5: Managing Director s Report... 14 Section 6: Report by Audit Committee... 14 6.1 Report of the Audit Committee in terms of the regulation of section 12.4 of Municipal Finance Management Act... 14 Chapter 2: Performance Highlights... 16 Section 1: Highlights and Achievements... 16 Section 2: Financial Performance... 17 2.1. Revenue... 17 2.2. Results of Operations... 17 2.3. Balance Sheet... 19 2.4 Cash Flow... 20 Section 3: Capital Projects... 20 Section 4: Performance against Integrated Development Plan (IDP) and City Scorecard... 22 4.1 Assessment of Critical Areas... 24 4.2 Financial Performance... 30 4.3. Assessment of other IDP Criteria... 31 Section 5: Assessment of arrears on municipal taxes and service charges... 33 5.1 Assessment of municipal taxes and service charges owed to City Power... 33 5.2 Assessment owed by City Power for service charges... 33 5.3. Assessment of directors and senior managers municipal accounts... 33 Section 6: Statement on amounts owed by Government Departments and Public Entities... 35 Section 7: Recommendation and Plans for Next Financial Year... 40 7.1 Key Focus Areas for the 2008/09 Financial Year... 40 Chapter 3: Directors Report and Governance... 41 Section 1: Corporate Governance Statement... 41 Section 2: Board of Directors... 42 Section 3: Board Committees... 43 3.1 Audit Committee... 44 3.2 Human Resources and Remuneration Committee... 44 3.2 Pricing and Regulatory Committee... 44 3.3 Board Oversight Committee... 44 3.4 Ad Hoc EDI Working Group... 45 Section 4: Directors Remuneration... 45 Section 5: Company Secretarial Function... 46 Section 6: Risk Management and Internal Controls... 46 6.1 Overview... 46 6.2 Risk Management Process... 47 Section 7: Internal Audit Function... 53 Section 8: Response to the Auditor-General Report... 53 Section 9: Corporate Ethics and Organisational Integrity... 53 Section 10: Sustainability Report... 53 10.1. Social Development... 53 10.2. Environmental Development... 53 10.3 Economic Development... 54 Section 11: Corporate Social Responsibility Report... 54 11.1 Youth economic development... 54 11.2 Early childhood development... 54 11.3 Women Development... 54 Chapter 4: Human Resources and Organisational Management... 55 Updated: 12/09/2014 14:27:40 Page 5 of 63
Section 1: Human Resource Management... 56 Section 2: Employment Equity... 56 Section 3: Skills Development and Training... 56 Section 4: Performance Management... 57 Section 5: HIV/AIDS in the workplace... 57 5.1 HIV/Aids structures... 57 5.2 Education... 57 5.3 Monitoring and measuring performance... 57 5.4 Case management... 57 Section 6: Employee Benefits... 58 Section 7: Supply chain management and black economic empowerment... 58 Chapter 5: Functional Area Service Delivery Reporting... 59 5.1 Finance and Administration... 60 Chapter 6: Audited Statements and Related Financial Information... 62 ACRONMYS... 63 Updated: 12/09/2014 14:27:40 Page 6 of 63
Chapter 1: Introduction and Corporate Profile Section 1: Corporate Profile / Overview of the entity City Power Johannesburg (Pty) Ltd (City Power) was established in 2000 as an independent municipal entity, wholly owned by the City of Johannesburg, to supply electricity to approximately 300 000 customers; ranging from domestic to commercial and industrial properties. City Power is accountable for providing network services to all its customers. The City of Johannesburg (CoJ) provides retail customer services for all domestic customers, ie processing applications, customer queries, customer complaints, customer accounts and revenue management. City Power provides retail customer services to key customers, commercial and industrial customers and prepaid customers. The core competency of the business is the purchase, distribution and sale of electricity within the geographical footprint of the City of Johannesburg. The National Electricity Regulator of South Africa (NERSA) granted City Power a licence to trade on 19 December 2001. City Power is not the sole provider of electricity services for the CoJ. The areas not covered by City Power (predominantly Soweto and Sandton) are serviced by Eskom. Section 2: Strategic Objectives The CoJ has a growth and development strategy (GDS), which is translated into the integrated development plan (IDP). City Power influences the GDS s many sectors and principles, but most of the company s influence resides in the infrastructure and services sector. The company s priorities are in line with the GDS, IDP and strategic framework of the shareholder. The infrastructure and services sector s five-year sector plan is: A city with a backbone of efficient and well-maintained service infrastructure, extended to all, so that all citizens and stakeholders can access an expanding package of innovative, safe, reliable and affordable services. LONG-TERM GOALS LONG-TERM STRATEGIC INTERVENTIONS Eliminate all backlogs Access to basic services 5-YEAR STRATEGIC OBJECTIVES DELIVERY AGENDA FOR 2007/08 STATUS 1. Extend a differentiated package of service that is fit for purpose, affordable and reliable in accordance with national policy commitments and an agreed local definition of appropriate levels of service Distribute electricity to at least 95% of formalised households Provide street lighting to 95% of formal areas in Johannesburg however City Power will only achieve 65% because of continued budgetary constraints 17 000 dependent on housing and funding The target for 07/08 is 2%, which entails a move from 60% to 62% cumulative, taking the number of public lights to 182 000 9 057 new electrification customers 61% public lights provided Provide street lighting to 60% of informal settlements A target of 10% in identified high-crime areas 12% street lights provided in informal settlements 95% street lights provided in highcrime areas Increase allocation of free basic All households in the city s indigent list Free basic electricity Updated: 12/09/2014 14:27:40 Page 7 of 63
LONG-TERM GOALS LONG-TERM STRATEGIC INTERVENTIONS 5-YEAR STRATEGIC OBJECTIVES electricity to poor households and those with special needs DELIVERY AGENDA FOR 2007/08 are provided with free basic electricity STATUS provided to 230 408 2. Extension and maintenance of reliable and competitively priced services, as required by commercial and institutional consumers Contribute to meeting the management needs of the city, within a competitive industry environment Reduce losses from 2% to 1% Reduce electricity outages by 50% by year 2010 (bulk, medium and low voltage) however City Power will only achieve 30% because of budgetary constraints in 07/08 12% total losses, equal to R532m Develop an asset maintenance management strategy. City Power to reduce bulk outages to 104 and MV outages to 1 000. The planned/unplanned ratio to 75:25; to be able to reduce electricity outages by 30% in 2010, City Power and future energy distribution and demand requirement will be evaluated and a strategy developed to secure supply. This will include examining supply capacity from various supply points. Develop an asset maintenance management support services programme to enhance, support and sustain an improved plant maintenance strategy 12.63% Bulk outages: 80 Bulk outages NPR: 78 MV outages: 1 334 MV outages NPR: 916 Planned/ unplanned ratio= 75:25 Asset maintenance management strategy in place Meet the electricity needs of all commercial and bulk electricity users in the city, within the framework of RED Through efficiency improvements, reduce the cost per capita in operating Investigation of energy-use patterns in low-income residential areas, including the inner city; Investigation of relationship between use per capita and use per consumer unit; Identifying areas Implemented tariff plan Updated: 12/09/2014 14:27:40 Page 8 of 63
LONG-TERM GOALS LONG-TERM STRATEGIC INTERVENTIONS expenditure for running and maintenance of all service networks 5-YEAR STRATEGIC OBJECTIVES DELIVERY AGENDA FOR 2007/08 where a revised approach is necessary (eg tariff model to suit specific areas); and recommendations for tariff adjustments for 2007/08 will be prepared. STATUS 3. Service delivery is secured through welldesigned, wellintegrated and wellmaintained generation/ supply processing and distribution networks Ensure integrated design and maintenance planning for all infrastructure, to realise manageable recurrent costs and extended life of service networks Reduce illegal electricity connections Implement comprehensive strategy on reduction of illegal connections, subject to funding availability. This includes: *Continued customer education programmes in targeted areas *Working with JMPD to remove illegal connections *Continuous roll-out of protective structures, to reduce tampering with conventional meters and street light poles *Promote alignment with the city s debt write-off and indigence support programmes * Continued installation of prepayment meters Comprehensive strategy implemented 4. Display Ensure investments Implement at least Turbines reinstated Turbines leadership in that extend the five innovative subject to funding refurbished sponsoring and service life of technologies in adopting infrastructure are service delivery Roll out AMR AMR rolled our innovative, yet within costeffective thresholds DSM/EE Integrated energy locally relevant, and technical planning under technologies tolerances way and delivery capabilities Network protection Continued that enable technology research and Updated: 12/09/2014 14:27:40 Page 9 of 63
LONG-TERM GOALS new service offerings and ongoing efficiency improvement across all service areas LONG-TERM STRATEGIC INTERVENTIONS Contribute to research and industry development by sponsoring and, where appropriate, adopting new technologies that enable service efficiency and quality improvements, especially those relevant to developing world/city contexts 5-YEAR STRATEGIC OBJECTIVES Develop and implement comprehensive demand-side management programmes for energy DELIVERY AGENDA FOR 2007/08 Development and implementation of a demand-side energy management programme. By-law support for installation of ripple relays in hot water geysers in new developments. Environmental management unit will continue to address the conservation awareness programme in 07/08 financial year. STATUS implementation of NPT Demand-side energy management developed and implemented By-law currently being developed 5. Maintain a regime of responsible service delivery regulation and stakeholder interaction Maintain and improve service delivery efficiency levels through progressive and continuous improvement Support establishment of RED Currently participating at different structures. Supporting and taking direction from CoJ Updated: 12/09/2014 14:27:40 Page 10 of 63
Section 3: Foreword by Member of the Mayoral Committee The past year was an eventful and challenging period for the energy industry worldwide. The City of Johannesburg and City Power did not escape the impact of the global economic slowdown, nor the specific effects of the shortages experienced by the country s energy provider, Eskom. However, the fact that City Power managed to meet these challenges and continued to deliver on its mandate to provide affordable electricity to the people of Johannesburg speaks volumes about the quality of management, and the dedication and commitment of everybody in the organisation. We have reached the mid-term point of the current mandate of the City Council of Johannesburg. This enables us to reflect on our achievements in meeting our broad goals of creating a better life through the provision of affordable and reliable services and infrastructure of which electricity is an essential component. It is pleasing to note that City Power is meeting these objectives despite the challenging national and global energy environment. This is reflected in the reduced level of outages, increased expenditure on public lighting and expansion of our services into new areas. Our objectives for the next five years are set out in the City of Johannesburg s growth and development strategy, which includes the following key issues: Development and implementation of an energy plan Implementation of a street lighting programme Expanding the provision of street lighting in informal settlements Assisting in establishing the regional electricity distribution (RED4) area Eliminating backlogs in service infrastructure replacement and maintenance, and ensuring ongoing adherence to an asset maintenance and normalised life cycle replacement plan Stepping up city-wide education programmes on energy conservation Providing and implementing alternative energy sources to address demand-side management. The energy shortfalls experienced during the year have brought home the importance of energy efficiency and conservation to industrial, commercial and private consumers in the city. This, I believe, has opened fertile ground for robust education and information campaigns to inform the people of Johannesburg about the need for conservation, and show them ways in which they can contribute to demand-side management. It has also prompted City Power to look again at its own strategies and efficiencies, and to explore new avenues for energy generation. As the leading industrial and commercial city on the continent of Africa, Johannesburg, through City Power, has to be on the cutting edge of global trends in the energy field. In the midst of a hectic and challenging year, City Power again received an unqualified audit report. I want to recognise the effort and commitment of City Power s board and management. Your efforts have also inspired the employees of the organisation, and helped move us closer to our objective of delivering reliable, quality and affordable services to residents and businesses in the City of Johannesburg. Updated: 12/09/2014 14:27:40 Page 11 of 63
Section 4: Chairperson s Foreword This financial year has been the most challenging period in the young life of our company and arguably in the South African electricity industry. These external challenges have had a direct and indirect impact on the performance of the company. By providing electricity, City Power plays a central role in the economic and social life of all communities in our area of supply. This role often goes unnoticed, until those extremely regrettable times when our customers have to endure power interruptions. We acknowledge that our service delivery is perhaps the most visible, and therefore its sudden absence causes a considerable shock to the functioning of everyday life. The national capacity challenge City Power realised that South Africa faced a nation-wide crisis, and speedily responded with concrete options for dealing with the issue. We engaged all stakeholders and developed a workable compromise which piloted a controlled rotation of available electricity between all our customers on a four-hourly load-shedding cycle. This initiative was then rolled out by Eskom to the rest of the country and ensured an equitable sharing of the burden of shortages. City Power also took immediate steps to attempt to supplement the supply shortage from Eskom through alternate sources. Management engaged Kelvin Power to assist in increasing capacity from Kelvin Power Station. City Power also refurbished its own gas turbines. City Power s leadership helped avert a more drastic impact on the economy. This came, however, at huge financial cost to City Power. We are currently examining ways to finance the huge running costs of these initiatives to avoid load shedding wherever possible. However, the crisis will be with us for the foreseeable future, as Eskom forecasts that supply shortages will persist until at least 2013 when some of its new coal-fired and peaking stations come online. Demand-side management (DSM) In response to global warming, City Power realised early on that its customers would need to change their electricity-use habits. We live in a society whose lifestyle necessitates increasing demand for energy almost daily. On a global scale, some experts say our energy demands have already exceeded the sustainable use of resources like coal and oil. Prior to the load-shedding crisis, our commitments to reducing energy demands were linked to political commitments. With the advent of this crisis, we all experienced a real and shocking demonstration of the limitation of our resources. City Power, in partnership with the shareholder, is already at the forefront of managing demand by means of ripple control of geysers in a number of areas, and has embarked on an accelerated programme to roll these out to more areas. This helps us in mitigating load shedding. It also helps us to manage the use of electricity, to maintain a constant rate of use while avoiding massive peaks and dips in supply and demand. City Power is also investigating new technologies and other initiatives to promote energy efficiency, and obtain a sustainable reduction in load without affecting growth. As part of these initiatives, we are actively engaged in a programme to replace conventional geysers with solar water heaters. Financial performance In the 2007/08 financial year, City Power built on the successes of the previous financial year, especially in the area of governance and transparency that resulted in an unqualified audit for the second successive financial year. However, for the 2007/2008 financial year, City Power has recorded an accounting loss of about R48.3m. Capital expenditure City Power is committed to building additional capacity on the network while refurbishing the existing network. As in the previous year, we have met all our capital expenditure targets for this year. Our forward planning has resulted in an effective build programme, limited only by our ability to obtain funding for the related costs. Shareholder compact The board and management remain committed to continuous improvement in attaining strong financial and operational results, and contributing to the vision of a world-class African city. We gratefully acknowledge the Updated: 12/09/2014 14:27:40 Page 12 of 63
continuing support of the shareholder unit and the member of the mayoral committee: infrastructure services in helping the company achieve its deliverables. The strategic priorities of the shareholder, as always, drive our tactical plans. Significant attention is paid to ensuring that these priorities are implemented in the form of measurable deliverables. We continue to focus our attention on improving initiatives for expanded public works programmes, procurement from suppliers that comply to BEE, reducing outages, achieving a sustainable reliable quality of supply and increased expenditure on public lighting to ensure our delivery on the mayoral priorities. Conclusion City Power is fortunate to have had a stable board throughout the financial year, with the exception of the director of finance who resigned at the end of the period. I thank my fellow board members for their dedication and commitment to City Power. I also thank the chairpersons of the sub-committees for their unending assistance in making this an effective board. Finally, I thank the employees of City Power for their dedication and professionalism, particularly during one of the most challenging crises ever to face this business. We are now stronger, more agile, and more effective in our response to the needs of the communities we serve and our shareholder. The board and management are committed to ensuring good corporate governance and transparent compliance to legislation while delivering an improving, sustainable and reliable service. Updated: 12/09/2014 14:27:40 Page 13 of 63
Section 5: Managing Director s Report The period ending 30 June 2008 has been an exciting, yet challenging, one for the company. While we successfully faced the demanding task of reducing the high levels of outages experienced by our stakeholders in the previous year, we were challenged by Eskom s need to meet national demand for electricity. I am pleased to report that the company produced a commendable performance in the face of these challenges. Some highlights included: The conversion of high-consumption customers to automated meter reading An improvement in customer satisfaction targets Reduced query resolution times The installation of protective structures to curb illegal connections Reduction of outages The development of a disaster management strategy and implementation plan Improved planned maintenance and response times Exceeding electrification targets Exceeding the expanded public works programme (EPWP) job-creation targets The accreditation of the City Power training centre by E.SETA Achieving a clean audit report for the second year running. Unfortunately, there were some targets we were unable to meet, mostly due to Eskom s challenge in meeting national demand for electricity. Our response to this challenge resulted in significant additional costs in our operating expenditure. It is concerning to note that there were four public fatalities as a result of illegal connections. We will continue to educate the public on the dangers of illegal connections, and increase our efforts to remove such connections. Despite a comprehensive customer education programme, theft and vandalism on the network increased due to power interruption during load-shedding and the increased price of copper. These factors were responsible for the poor performance on some of our key performance indicators or KPIs. While City Power faces the serious challenges noted above, we are committed to continually improving our performance as reflected in our 2008/09 shareholder compact. City Power is a service delivery-oriented organisation and I acknowledge the individual and group contributions of our staff in striving to be a world-class service provider. Section 6: Report by Audit Committee 6.1 Report of the Audit Committee in terms of the regulation of section 12.4 of Municipal Finance Management Act The audit committee has adopted appropriate formal terms of reference as its committee charter, has regulated its affairs in compliance with this charter, and has discharged all the responsibilities contained therein. In the conduct of its duties, the audit committee has, inter alia, reviewed the following: The adequacy, reliability and accuracy of financial information provided by management and other users of such information Effectiveness of internal control systems Effectiveness of business planning and budget implementation Effectiveness of the risk management process The risk areas of the entity s operations covered in the scope of internal and external audits Accounting and auditing concerns identified by internal and external audits Compliance with legal and regulatory provisions Updated: 12/09/2014 14:27:40 Page 14 of 63
The effectiveness of the internal audit department The activities of the corporate internal audit department, including its annual work programme, coordination with the external auditors, reports of significant investigations and responses of management to specific recommendations The independence and objectivity of the external auditors. Based on the information and explanations provided by management and the corporate internal audit department, along with discussions with the Office of the Auditor-General on the result of its audits, the committee believes internal accounting controls are adequate to ensure that financial records may be relied on to prepare the financial statements, and that accountability for assets and liabilities is maintained. The committee is satisfied with the independence and objectivity of the external auditors. Nothing significant, other than issues detailed in the directors report, has come to attention of the audit committee to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the financial year under review. The audit committee is satisfied that the financial statements are based on appropriate accounting standards and policies, supported by reasonable and prudent judgements and estimates. The audit committee has evaluated the financial statements of the company for the year ended 30 June 2008 and, based on the information provided to the committee, considers that they comply, in all material respects, with the requirements of the Companies Act, 61 of 1973, as amended, and the Municipal Finance Management Act, 53 of 2003, as amended, and International Financial Reporting Standards. The committee concurs that the adoption of the going-concern principle in preparing the financial statements is appropriate. The committee therefore recommended, at its meeting on 7 November 2008, the adoption of the financial statements by the board of directors. Updated: 12/09/2014 14:27:40 Page 15 of 63
Chapter 2: Performance Highlights Section 1: Highlights and Achievements City Power has met and exceeded most key performance indicators for the 2007/08 financial year. Highlights of these achievements include: An unqualified audit report Prompt response to the national energy crisis The number of new electrifications was 9 057, surpassing the target of 5 800 Exceeding target on payment levels for both key customers at 100.38% and LPU customers at 99.42% Exceeding target on bulk outages 100% of the capital budget was spent on improving and upgrading the network Fault restoration times in general were within set targets. There were significant improvements to the 7.5- hour and 24-hour targets compared to the previous financial year. Compliance with NRS 048 standards, which relate to quality of supply, were exceeded in all categories, namely rural, industrial and domestic. Query resolution times of 3.37 days are significantly lower than the targeted 10 days, and the prior year s 14 days. 3 828 jobs were created in the expanded public works programme. The employment equity target for supervisory positions and above was 70%, which was achieved. The gender equity ratio of 24% exceeded the 22% target. The black empowerment expenditure on procurement for 07/08 at 73% of total exceeded the targeted 70%. Expenditure related to women-owned suppliers was 23% of total expenditure. NEW 45 MVA TRANSFORMER Updated: 12/09/2014 14:27:40 Page 16 of 63
INCOME STATEMENT Ytd Ytd Ytd City Power Annual Report 2007/08 Actual Actual Budget Total R000 Turnover June 07 June 2008 June 2008 Section 2: Financial Performance Other Cost of Income sales Gross profit margin Operating profit overheads % before interest and taxation 322,099 38.1% 179,563 34.8% 391,496 37.6% Taxation Interest Profit/loss Retained profit/(loss) before taxation for the period (42,283) Total R000 Turnover June 3,925,218 07 Other Cost Income 3,821,923 103,295 4,199,985 4,291,012 91,027 4,244,775 4,350,347 Gross of profit sales margin % (2,429,349) 1,495,869 38.1% (2,795,652) 1,495,360 (2,713,406) 1,636,941 105,572 Operating Interest Profit/loss overheads (1,173,770) (203,626) (1,315,797) (228,071) (1,245,445) Retained profit/(loss) before taxation for the period 118,473 (48,508) (246,450) 145,046 102,763 2.1. Revenue Turnover for the year under review was R4,3 billion, 1% below budget due to the impact of load-shedding. Turnover is R378 million higher than the previous year. Volumes were below budget by 1.3%. The decrease in volumes sold is due to load-shedding. The average selling price of 36.42c/kwh is 2.6% greater than the budget of 35.48c/kwh. Volumes sold are only 1.8% above the previous year, while the average selling price per unit is 8.6% higher than the prior year. Included in turnover are actual service connection fees of R37m, which were below budget by R35m due to decreased demand and capacity restrictions. Other income The income for the year of R91 million is R15 million below the budget of R105 million, resulting from the increased amortisation period for deferred income. 2.2. Results of Operations Cost of sales The year-to-date expenditure of R2.8 billion exceeds the budget of R2.7 billion by 3.0% or R82 million. Volumes are below budget by 0.5%. The average unit price of 21.28c/kwh is 4.3% greater than the budgeted cost due to higher purchase prices from Kelvin Power. Total losses Total volume losses for the year were 12.63%, 0.63% worse than the budgeted amount. Losses increased from the prior year s 12.1% with load-shedding being a major contributor. City Power has accepted the industry norm of 9% for technical losses. Billing losses were thus 3.63% compared to the budgeted 3.00%. Operating expenses Total operating expenditure for the financial year of R1 316 billion is 5.0% or R71 million more than the budget of R1 245 billion. Over-expenditure was attributable to the following factors. Repairs and maintenance expenditure of R197 million is 53% more than the budget of R128.7 million, given that essential repairs to the network have to be carried out when outages occur. Load-shedding Updated: 12/09/2014 14:27:40 Page 17 of 63
resulted in increased repairs to the network due to switching equipment off and on, network tampering and more cable theft incidents. General expenses of R423.5 million are 12.7% above the budget of R375.8 million because stores and materials, technology, meter-reading costs, security costs, cut-off fees, meter audits and illegal connections all exceeded budget. Expenditure is R142 million more than the prior year. The major increases were: Employee costs rose by R48 million as a result of inflationary increases and provision for bonuses. The company carried the cost of providing free electricity to Eskom customers living in the CoJ area (R20 million). Repairs and maintenance cost increased by R86 million as part of the effort to reduce outages because of the increase in cable theft and network tampering. Security costs increased by R8,5 million with the increased number of capital projects. Meter audits and illegal connections have increased by R12 million as improved metering initiatives were implemented. Depreciation increased by R21 million as a result of increased capital expenditure. This over-expenditure has been reduced by the following savings: Salaries, expenditure reflected against salaries of R447 million is R13 million less than budget. This is due to the fact that salary disparities and hot skills allowances, as budgeted, have not been effected. Bad debts provision is 19.4% or R27.3 million below budget. The current calculation for bad debt provision shows it is sufficient to cover debt older than 90 days. Depreciation of R127.1 million is 12.3% less than budget because actual expenditure was based on the new lifespan of assets as per the revised useful lives policy. Net interest Net interest of R228 million is R18 million below the budget of R246 million, because of: Interest payable to the city for new capital loans Fair value adjustments: R25 million more than budget, while interest receivable is R43 million higher than budget because of fair value adjustments. Updated: 12/09/2014 14:27:40 Page 18 of 63
2.3. Balance Sheet Details Actual Actual Budget 2006/2007 2007/2008 2007/2008 R000 R000 R000 Assets Non Current Assets Employment of Capital Fixed assets (net book values) 3,501,547 4,411,170 3,737,703 Current Assets 1,978,545 1,490,520 1,461,762 Total Employment of Capital 5,480,092 5,901,690 5,199,465 Equities and Liabilities Capital and Reserves 921,433 872,925 629,913 Non-Current Liabilities 3,295,242 3,747,040 3,258,976 Current Liabilities 1,263,417 1,281,725 1,310,576 Total Equities and Liabilities 5,480,092 5,901,690 5,199,465 Fixed assets Total fixed assets were R4.4 billion for the financial year under review. Capital expenditure of R1 billion was spent during the year. Current assets Total current assets of R1.49 billion compared to budget of R1.46 billion. The reasons for this variance of R28 million include: The variance on net debtors was R54 million less than budget because of the increase in payment levels Stock and inventory holdings of R28 million were R4 million more than budget primarily as more stock was purchased during June 2008 due to the increase in repairs and maintenance requirements. Shareholder funds Shareholder funds at 30 June 2008 amounted to R872 million which is better than budget due to the write back of deferred tax to retained income. Non-current liabilities Total non-current liabilities were R3.7 billion, R0.4 billion above budget of R3.3 billion. These variances relate to: Loans from shareholders of R2.7 billion being R0.5 billion more than budget Deferred income being R5 million below budget because of the adjustment of lower grants received Deferred tax write back to retained income. Current liabilities Current liabilities of R1.3 billion are R29 million less than budget. The main reasons are the short-term portion of the loans of R295 million is less than budget, while outstanding and trade creditors and accruals and provisions have exceeded budget. Updated: 12/09/2014 14:27:40 Page 19 of 63
2.4 Cash Flow The closing net cash position was R366 million, R295 million less than budget. City Power Annual Report 2007/08 Section 3: Capital Projects The 2007/8 year-end capital expenditure is at R1 037 720 000 against the total revised budget of R1 034 923 000; this translates to 100% capital expenditure for City Power. As part of the year-end budget revision, the following changes have been effected: Electrification budget has increased to R62.9 million, due to grants received from DME Service connection budget has increased to R140.4 million, due to the customer contribution resulting from an increase in service connections Load management/dsm also increased our budget by a factor of R100 million, of which 50% was spent on gas turbine refurbishment, and the balance on DSM-related initiatives (eg ripple controls, solar lighting, intelligent metering and energy-efficient initiatives, including communications). The controllable year-end expenditure is at R754.6 million, equalling the revised controllable budget (including DSM) and translating to 100% year-end expenditure. The non-controllable year-end expenditure also matched the total revised budget at R280.3 million, which translates to 100% year-end expenditure. Detailed analysis of 2007/8 projects was conducted in the third quarter to ascertain if the annual budget would be adequate to complete current projects under construction. The analysis revealed that if construction continued at the same pace as previous quarters, the current budget would be exceeded. As a result, to avoid over expenditure, it was resolved that some of the project scope will be reduced or deferred to future financial years. The table below highlights capital expenditure per category. The major budget reallocation took place between the categories of bulk infrastructure and upgrading electrical network infrastructure. This is due to challenges experienced in distribution infrastructure (upgrade of electrical network infrastructure) with network overload, unplanned outages and emergency replacements of obsolete distribution equipment. To accommodate the upgrading of electrical network category expenditure, some bulk infrastructure projects and delivery of major equipment were deferred to the 2008/9 financial year, due to restrictions on availability of funding. The lack of funding is affecting both the supply of electricity and the network, while delays in infrastructure upgrades and replacement will ultimately impact the profitability and the business as a going concern. Updated: 12/09/2014 14:27:40 Page 20 of 63
TABLE 1: CAPEX per category, July 07 to June 08 Details Original budget City Power Annual Report 2007/08 Revised total budget Total expenditure (incl accruals) Variance Electrification 15,000,000 62,893,911 60,553,171 2,340,740 Service connections 89,700,000 140,440,669 139,968,764 471,905 Township reticulation 8,000,000 12,092,815 12,092,815 0 Upgrading electrical network 93,500,000 272,033,061 277,881,711-5,848,650 Network development 3,959,485 3,959,485 0 Building alterations 500,000 2,743,365 1,487,465 1,255,900 Office equipment/computers 3,040,000 3,968,975 3,968,975 0 Computer software 17,160,000 15,216,296 15,216,296 0 Tools and loose gear 1,500,000 2,156,410 2,156,410 0 Plant and machinery 16,200,000 1,673,912 1,673,912 0 Meters 34,300,000 85,705,691 85,705,691 0 Load management 21,000,000 50,374,360 51,356,717-982,357 Scada 6,000,000 10,311,764 10,311,764 0 Protection 1,000,000 243,576 243,576 0 Furniture 100,000 991,769 991,769 0 Public lighting 41,000,000 54,400,277 55,237,656-837,379 Refurbish bulk infrastructure 528,200,000 297,963,510 297,928,561 34,949 Insurance 17,753,154 16,971,264 781,890 TOTALS 876,200,000 1,034,923,000 1,037,720,000 2,797 000 NEW 88kV JUNCTION YARD Updated: 12/09/2014 14:27:40 Page 21 of 63
Section 4: Performance against Integrated Development Plan (IDP) and City Scorecard Key performance indicator Unit of measure Actual 2006/2007 Target 2007/2008 Actual 2007/2008 Dwelling units with access to a No 326,990 326,990 300,013 basic level of electricity (excl Eskom areas) Prepaid customers No 86,768 86,768 94,854 Billed customers No 233,981 233,981 217,860 Prepaid conversions from No 1,511 1,511 1,355 indigencies Households with access to free No 233,981 233,981 230,408 basic electricity (lifeline tariff only) New electrification customers No 11,715 5,800 9,057 Revenue collected as percentage of total revenue billed: Key customers % 100.97 99.50 101.80 Top customers % 99.08 99.50 99.75 Domestic customers % 91.30 93.50 93.49 Unaccounted-for electricity as a percentage of electricity dispatched (total losses) Technical losses % 9 9.00 9.00 Non-technical losses % 3.13 3.00 3.63 Outages Bulk No 81 104 80 MV No 1,184 1,000 1,334 LV No N/A 1 No of public lights working in % 86 90 95 targeted high-crime areas 2 Provision of street lighting to % 60 62 61 formal areas Capex on public lighting as % of % 100 100 100 public lighting budget Provide street lighting to informal % 12 24 12 areas % compliance with NRS 048 % (quality of supply) Category 4 - domestic % 100 100 100 Category 3 rural % 100 100 100 Category 2 - industrial % 93 100 100 Implementation of disaster management plan by target date % 100 100 100 1 LV power outages used to be measured through number of calls received, a new measure to be implemented by Jan 2008 2 High-crime areas include Diepsloot, Ivory Park, Klipfontein Vlei, 50% in Soweto roll-out, Lenasia, Orange Farm, Lawley, Poortjie, Lakeside, inner-city starting with Ellispark, Bertrams, Yeoville, Jeppestown Updated: 12/09/2014 14:27:40 Page 22 of 63
Key performance indicator Unit of measure Actual 2006/2007 Target 2007/2008 Actual 2007/2008 Tasks undertaken to comply with No 5 5 5 CoJ environmental management framework % completion of environmental % 100 100 95 management system Employee disabling injury Ratio 0.37 1 0.87 frequency ratio (DIFR) Number of employee job-related No 0 0 3 fatalities Number of HIV/Aids workplace No 1 1 1 programmes in place Employment equity (AA ratio) % 70.18 70 70 Employment equity (gender % 23.54 20 24 equity ratio) Job creation as per EPWP policy Temporary No 2,455 2,455 3,828 Permanent No 0 Number of public fatalities No 4 0 4 Annual customer satisfaction index rating Key customers % 77 75.00 78.00 Top customers % 71.33 75.00 74.00 Domestic customers % 83.67 84.00 79.00 Total calls answered in 30 % 88.50 91.00 73.00 seconds as a percentage of total calls received Number of customer % 94.48 95.00 97.00 complaints/queries resolved per total calls received Average time taken for City Days 3.09 10.00 1.33 Power to resolve queries referred to it Procurement spent on BEE and % 73 73 73 SME as % of total budget procurement Engendered expenditure % 22 22 22 Fault restoration within specified time as a percentage of total faults reported (NRS 047) Within 1.5 hrs % 24.73 30 26 Within 3.5 hrs % 63.55 60 66 Within 7.5 hrs % 91.18 90 93 Within than 24 hrs % 98.68 98 99 Gross margin % 40.64 37.6 35.7 Opex spent on maintenance programmes as percentage of overall opex budget Capex spent on network as percentage of overall capex budget % 9.42 10.3 14.96 % 95 95 97 Updated: 12/09/2014 14:27:40 Page 23 of 63
Key performance indicator % of municipality entities (ME s) capital budget spent % variance against ME s operating budget Reconciliation of inter-company balances with CoJ Reconciliation of intra-company balances with other MEs Fully SA GAAP compliant register of assets % attainment of clean audit report attained by municipality owned entity (MOE) Unit of measure Actual 2006/2007 Target 2007/2008 Actual 2007/2008 % 100.5 100 100 % 5.33 0 (5) % 100 100 100 % 100 100 100 % 100 100 100 % 100 100 100 4.1 Assessment of Critical Areas The following section is an analysis of critical service delivery areas pertinent to City Power. 4.1.1 ELECTRIFICATION City Power Johannesburg has electrified over 50 000 previously disadvantaged dwellings over the past five years, and a further 28 000 electrical connections are being rolled out over two years, in line with the universal access to electricity by 2012 target. The table below illustrates areas proclaimed recently. This electrification process is currently under way, and the majority of these projects are at construction stage or near completion. The 2007/8 electrification programme began with 167 connections completed in quarter one (Q1) and 792 connections completed in Q2. To date, 9 057 connections have been LEHAE completed, which includes 1 387 HOUSEHOLDS connections completed in ELECTRIFIED Alexandra s normalisation project. More connections could have been achieved, however the lack of houses completed; slow relocation of beneficiaries to their proper demarcated stands and availability of bulk capacity has restricted City Power to the completed connections only. Updated: 12/09/2014 14:27:40 Page 24 of 63
The table below illustrates the total connections completed for 2006/7 and 2007/8 financial years. Project name Total number of stands 2006/7 2007/8 Electrification of Far East Bank Ext 7 1 400 690 587 Electrification of Tsepisong West (aka Ebumnandini) 3 000 487 371 Electrification of Lawley Township 7 754 2 020 3 584 Electrification of Pennyville (Zamimpilo) 2 800 100 848 Electrification of Kliptown RDP houses Phase 1 1 221 0 835 Electrification of Clermont (Kathrada) 500 0 483 Lehae Village Phase 1 2 500 1 778 964 Alexandra Normalisation (Phase 4.1) 8 500 6 000 1 385 Leratong Village 500 540 0 TOTAL 28 175 11 615 9 057 To date, 20 672 connections have been completed out of a possible 28 175. The balance will be completed in the near future as more houses are built, bulk infrastructure is made available and beneficiaries are allocated houses. 4.1.2 POWER OUTAGES In terms of the two HV outages-related KPIs (ALL and NPR network performance related), both year-end totals were well below target limits. In general, network performance has shown a notable improvement. With regard to the two MV outages-related KPIs, the target for NPR was met; however, in the ALL category, the year-end total exceeded target. This poor performance can be attributed to the effects of load-shedding, which placed undue stress on plants and cables, and escalating incidents of theft and vandalism which increased by a massive 323% over the previous year. 300 250 200 150 100 50 0 2002/3 2003/4 2004/5 2005/6 2006/7 200708 CAPEX 34 16 41 119 178 295 Outages 170 160 144 117 104 80 Updated: 12/09/2014 14:27:40 Page 25 of 63
4.1.3 PUBLIC LIGHTING Several targets were achieved with public lighting in high-crime areas. However, only minimal progress was possible due to limited funding for lighting in informal settlements. In addition, the escalating theft and vandalism of electrical infrastructure remains a major obstacle to the provision of public lighting in certain areas and is proving a drain on already-depleted resources. The public lighting unit continues to explore new technologies to reduce energy consumption and a number of area replacement projects involving the installation of energy-efficient luminaires have been completed. The initiative to replace obsolete luminaires with modern equipment is expected to continue in the new financial year. 4.1.4 DEMAND-SIDE MANAGEMENT Throughout the year, City Power continued its initiative to install load management systems throughout its areas of supply. The necessary application documents for submission to Eskom DSM for funding were completed. In addition, towards year end, 40 000 ripple control relays were purchased for installation in the new financial year. Good progress has also been made in identifying new technologies to assist in reducing energy demand, including the use of solar water heaters and energy-efficient installations. 4.1.5 INNER CITY The Inner City capital programme was developed five to six years ago, and is being reviewed annually to cater for current and future developments in the inner city. The average age of inner-city network infrastructure ranges between 40 and 45 years. This network comprises both 6.6 and 11kV at MV level and is impossible to integrate. Capital investment (in the network at both LV and MV) has thus been made in the following suburbs: Kensington Judith s Paarl Newtown Troyeville Mayfair Yeoville Crown Fordsburg Jeppestown Riviera These upgrades involved replacing old cables, miniature substations, obsolete switchgear and voltage conversions from 6.6 to 11kV, aimed at improving the transfer of capacity to allow for additional future developments. As can be seen from the table below, City Power s efforts to reduce the average age of inner-city network infrastructure and to accommodate current and future developments continue. The projects listed below started late in the 2006/7 financial year, and the majority of projects were completed or near completion at the end of the fourth quarter of the 2007/8 financial year. Updated: 12/09/2014 14:27:40 Page 26 of 63
Project Fordsburg 275kV refurbishment (final phase) John Ware transformer replacement Transformer for Fort substation Transformer 4 for Central B substation Transformer 1B for Central B substation Jeppestown 11kV conversion Phase 2 Establishment of new MSS and decommissioning of MSC Casa Mia Decommissioning of Selby substation Reduction in unplanned outages Fordsburg network upgrade % complete CAPEX budget 2007/2008 CAPEX actual spent Explanation notes 100% 2,536,244 53,632 Project completed 95% 1,026,139 892,601 In progress C0865. Need approx R400k to complete cable work outstanding 100% 6,639,845 6,519,682 Project completed 100% 3,945,158 102,451 Project completed 100% 1,340,109 190,126 Project completed 20% 1,177,215 1,003,594 Scope change project to be presented to GMC for additional funding 100% 650,000 601,378 Project completed 100% 1,727,169 1,727,169 100% 1,045,817 1,045,816 99% 876,000 758,308 Preliminary designs only engineering fees paid C1119 Only preliminary engineering fees paid C1125 In progress due for completion end July 2008 The remaining work on projects, such as John Ware transformer replacement and Fordsburg MV network upgrade, will be carried over to the first quarter of the new financial year 2008/2009 for completion by July and August 2008 respectively. Fordsburg Updated: 12/09/2014 14:27:40 Page 27 of 63
4.1.6 UNACCOUNTED-FOR ELECTRICITY This KPI shows the quantum of losses incurred in distributing electricity. In the year under review, the target was 12.0%, while the average distribution loss recorded was 12.4%, 0.4% above target. 4.1.7 PROCUREMENT SPENT ON BEE AND SME AS PERCENTAGE OF TOTAL BUDGET The target set for this KPI is 70%. City Power has consistently exceeded this target. For this financial year an, actual expenditure of 73% was achieved, translating to R1 363 077 928 spent on BEE companies. To ensure continued compliance to this KPI, City Power will continue to engage with large, predominantly white-owned companies, to encourage them to acquire BEE stakes in their shareholding. The award of new contracts is now geared at promoting BEE-compliant companies with acceptable or high BEE elements. 4.1.8 ENGENDERED EXPENDITURE The target for the year is 22%. The year end actual performance is 22% which translates to R300 537 777. There are initiatives in place to ensure we improve on this target. Also, the three-quote procurement process is now geared to focus more on engendered companies. 4.1.9 2010 PROJECTS The table below summarises high-level progress on all City Power 2010-related projects for bulk, medium voltage and public lighting infrastructure. In short, the 2010 infrastructure projects are on track for completion before the Confederations Cup. However, the two intake points are still at risk due to lack of funding. Type of project Bulk infrastructure Bulk infrastructure Bulk infrastructure Bulk infrastructure Project description Project status Year-to-date expenditure (m) Establishment of 132/11kV Crown substation Siemert Road S/S install third transformer, reconfigure 88kV busbar plus install 17-panel board 11kV switchgear Transmission: Orlando switching station - replace all 88kV switchgear with compact gas-insulated switchgear and introduce 275/88kV Quattro MTS Transmission: Kelvin - build new 275/88kV yard at Sebenza Tender awarded site established Bid evaluation committee recommendation awaits Exco approval Comments/progress/problems experienced R12.9 Tender awarded to Powertech IST payment of two transformers delivered in July 2008 R0 Budget provision R30 million in 2008/2009 Design phase R0 No budget provision. City Power submitted application for funding to the city. Design phase R0 City Power designs in final stages. Eskom designs in final stages. No budget provision City Power submitted application for funding to the city. City Power budget quote requests for 2 x 275kV line bays at Prospect made to Eskom. EIA applications still under way. Updated: 12/09/2014 14:27:40 Page 28 of 63
Type of project Training venues Ellis Park projects Project description Project status Year to date expenditure (mil) Cecil Payne, Ruimsig, Rand Stadium MV network upgrade - Ellis Park precinct Comments/progress/problems experienced Not started R0 Minor upgrades within stadiums. Budget provision allowed in 2009/2010 with expected completion date of December 2009 92% R28 previous years Public lighting 92% R3.92 current year Completion of MV infrastructure awaited for completion of Beit Street upgrade New street lights around precinct installed. All new street poles installed in Siemert Road, Silwerwright, Saratoga and at Transport Square. Funding for MV and public lighting is from the same project. Four high masts installed in Joe Slovo bridge Nasrec 11kV 300mm^2 3C XLPE cable MV network development Beit Street lighting to carried out once road has been upgraded roadworks under way 40% R0 Servitudes approval/access to site. In progress: 100% of cable servitude has been obtained. Soccer City 11kV cable works will begin soon TOTAL R16,820m Standby generators DME has confirmed the following status on sourcing standby generators: No: Task description/activity Status 1 DME: Expression of interest tender issued and closed 2 DME: Adjudication process completed and recommendations submitted to LOC (only FIFA-accredited suppliers) 3 LOC: Accept recommendation by DME and request funding from National Treasury 4 National Treasury: Approval of funding and allocation to host cities 5 DME: Allocation of service providers to host cities December 08 6 Host cities: Installation and commissioning of generators by service providers 7 DME, LOC, host cities: Facilitation of cost-recovery agreement between host cities and National Treasury Updated: 12/09/2014 14:27:40 Page 29 of 63
4.2 Financial Performance City Power committed to achieving the following areas of excellence (KPIs) in the 2007/08 financial year. 4.2.1 Gross Margin Gross margin is below budget. The gross margin KPI has not been achieved due to the increase in cost of sales, which in turn was influenced by the high coal price for primary energy in Kelvin during the period under review. 4.2.2 Percentage Maintenance Budget Spent This KPI ensures appropriate focus is given to maintaining the network. The amount spent as a percentage of operating expenditure is 14.96% above budget. Factors that contributed to this are load-shedding, cable theft, network tampering and vandalism. 4.2.3 Percentage Network Budget Spent This KPI ensures capital budgets are allocated to the network and the provision of services rather than non value-adding activities. The target for the year of 96% was exceeded with 100% achieved. 4.2.4 Percentage Capital Budget Spent This KPI ensures the total capital budget is spent by the entity. Failure to do so historically collates with poor service delivery. 100% of the capital budget for the year has been spent. 4.2.5 Percentage spent against Operating Budget The year-to-date total operating expenditure is 5.7% more than budget. The main contributing factors to over-expenditure are repairs and maintenance, meter-reading cost, security cost, cut-off fees, meter audits and illegal connections. 4.2.6 Reconciliation of Inter-company balances with the CoJ This KPI contributes to the successful completion of the audit, ensuring no late adjustments as a result of late processing of inter-company transactions. Reconciliation of inter-company balances ties back with other MOEs. 4.2.7 Fully SA GAAP-compliant register of assets The process to update the asset register is ongoing. City Power s asset register is fully compliant to SA GAAP which contributed to City Power obtaining an unqualified audit report for the review period. 4.2.8 Percentage attainment of clean audit report by entity The entity has attained a clean audit report for the year. Updated: 12/09/2014 14:27:40 Page 30 of 63
4.3. Assessment of other IDP Criteria 4.3.1 Number of households/dwelling units with access to basic levels of electricity (excluding Eskomsupplied areas) This indicator shows the number of free basic electricity (FBE) beneficiaries within City Power-supplied areas in line with CoJ-approved qualification criteria. Total for this financial year is 230 408 customers. 4.3.2 Revenue collected as a percentage of total revenue billed Total billing Total collection % collection Key customers (805,082,826.50) 819,904,758.37 101.8% Top customers (2,649,091,338.20) 2,642,368,385.78 99.7% Domestic customers (1,495,192,278.97) 1,397,838,903.41 93.5% 4.3.3 Percentage compliance with NRS048 (quality of supply) NRS048 is a regulatory standard used for monitoring quality of supply in the South African electricity industry. This standard acknowledges that quality of supply requirements differ between customer categories and per network type, eg customers supplied by dense underground networks often enjoy a better quality of supply compared to counterparts supplied by long rural feeders. Similarly, quality of supply requirements for industrial customers are more stringent than domestic customers. Currently there are about 106 sites that are monitored continuously, and they have all met the limits specified by the regulator, implying that City Power is compliant and has exceeded all set targets. 4.3.4 Implementation of disaster management plan Introduction of disaster steering committee CoJ risk service presented a business continuity plan Risk control personnel trained on disaster information software Commissioning of disaster management information software at Roodepoort and Reuven control room Communication of DRM strategy to CP employees with public relations Communications department 4.3.5 Number of tasks undertaken to comply with CoJ environmental management framework Reviewed integrated SHER policy and approved by MD Conducted EIA processes for projects Established HIRA committee Developed waste management strategy Developed site-specific impact and aspect register Energy efficiency strategy (2 nd floor energy efficiency lighting pilot project, Reuven solar panels installed and Zandspruit solar lights installed ) 4.3.6 Number of employee disabling injury frequency ratio The year-end figure of 0.87 was better than the internationally accepted standard of 1.0. This excellent performance reflects City Power s commitment to maintaining employee safety standards and safety awareness programmes. 4.3.7 Number of employee job-related fatalities During the period, three employee fatalities were recorded. Each incident was thoroughly investigated and recommendations/measures introduced to prevent similar accidents. Updated: 12/09/2014 14:27:40 Page 31 of 63
4.3.8 Number of HIV/Aids workplace programmes in place The HIV/Aids workplace programmes include: Continuous assessment of risks posed by HIV/Aids on the business Limiting the number of new infections among employees through planned interventions of ongoing education and information Ensuring employees living with HIV/Aids are aware of their rights and that their rights are respected and protected Providing case management and support to employees living with HIV/Aids. 4.3.9 Employment equity (AA ratio) With a target of 70% for affirmative action for the 2007/08 financial year, the company achieved a 69.41%. This compares very favourably with the 70.18% achieved in the previous financial year. 4.3.10 Employment equity (gender ratio) The company s target was 20% for the 2007/08 financial year. The actual ratio of 23.72% is slightly better than the 23.54% achieved in the prior period. 4.3.11 Job creation as per EPWP policy City Power has a target to create 2 455 jobs in line with the extended public works programme. Over the last 12 months, 3 828 temporary jobs were created, exceeding the annual target. 4.3.12 Number of public fatalities During the period, four public fatalities were recorded. In most instances, these can be attributed to illegal entry into live electrical enclosures or unauthorised tampering with electrical equipment. 4.3.13 Annual customer satisfaction rating City Power s independent surveys in 2007 both showed meaningful improvement on the prior year: June 07 October 07 Key customers - 77.00% vs 78.00% Large Power Users - 71.33% vs 73.67% Domestic customers - 83.67% vs 78.67% Results from the survey conducted from February to April 2008 were less positive due to intense load-shedding at that time. 4.3.14 Total calls answered in 30 seconds as a percentage of calls received The target for this KPI is 91% throughout the year. Large call volumes in May and June (over 15 000 above call centre capacity) as a result of outages due to cold spells and load-shedding put pressure on this KPI. The average annual performance was 73%. 4.3.15 Number of customer complaints closed versus total complaints received This KPI shows the percentage of customer complaints resolved. The annual performance is 97.00% compared to a target of 95%. 4.3.16 Average time taken for City Power to resolve queries referred to it This is a standard regulatory (NRS 047) KPI showing how long it takes on average for queries to be resolved. The internal target set for resolving queries is an average of 10 days compared to the baseline of 14 days as per NRS 047. This KPI has been amended and is now based on the Pega system which has information on queries and complaints for the following categories only: billing, meter reading, public lighting, new connections (requests for quotations), payment options and advisory services. The annual query/complaints average resolution time was 1.33days, compared to the annual target of 10 days. Updated: 12/09/2014 14:27:40 Page 32 of 63
4.3.17 Faults restoration in a specified time as a percentage of total faults reported (NRS047): within 1.5 hours; 3.5 hours; 7.5 hours and 24 hours City Power complied in three of the four categories, but failed to meet target in the 1.5 hour category. A notable improvement is expected in this category in coming months with the implementation of the new mobile data communication system between the dispatch centre and field resources, as well as the ongoing network customer data clean-up. 4.3.18 Percentage turnaround time on development applications submitted to utilities (60% in 30 days and 40% in 60 days) This KPI aims to ensure that comments on developments are done speedily and efficiently. Currently all submissions received have been responded to as per target. All pending applications require additional information from applicants and are, as a result, beyond City Power s control. Section 5: Assessment of arrears on municipal taxes and service charges 5.1 Assessment of municipal taxes and service charges owed to City Power Unit <30 days <60 days <90 days <120 days >121 days Total City Power R 110 100 4 633 21 395 14 549 142 858 293 535 CoJ R 145 107 70 523 43 823 35 731 1 058 573 1 353 757 R 255 207 75 156 65 218 50 280 1 201 431 1 647 292 5.2 Assessment owed by City Power for service charges City Power owes the following for service charges: Entity Total Johannesburg Roads Agency (reinstatement costs) 5 632 324 City of Johannesburg (rates and services) 5 130 849 Johannesburg Water (water) 76 424 City Parks (tree pruning) 3 509 867 Pikitup (waste removal) 32 951 Total 14 382 415 5.3. Assessment of directors and senior managers municipal accounts Name Designation Municipality Municipal account Account status name/number K Simelane Chairperson Johannesburg K Simelane Current 401900792 J Kumbirai Non-executive Tshwane J Kumbirai Current 2071470635 T Marwala Non-executive Johannesburg T Marwala Current 7130523696 K Garlipp Non-executive Tshwane K Garlipp Current 3302075561 G Badela Non-executive Johannesburg G Badela 30 days 302212072 H Mateya Non-executive Ekurhuleni H Mateya Current Renting S Zimu Managing Johannesburg S Zimu Current director 3000041614 B Leshnick Director finance Johannesburg B Leshnick Current 202089509 V Padayachee Director Johannesburg V Padayachee Current Updated: 12/09/2014 14:27:40 Page 33 of 63
Name Designation Municipality Municipal account name/number operations 201239060 S Xulu Director Johannesburg S Xulu engineering Brookfield Manor service L Mashao Director corporate services N Nsele Director - customer services (acting) Johannesburg Johannesburg L Mashao 900887297 N Nsele 205886943 S Masolo GM public relations Ekurhuleni S Masolo Morrison Estates M Mojapelo GM internal audit Johannesburg M Mojapelo Letting com A Lishivha GM legal Johannesburg K Molewa services 206521871 M Sibuta GM public Johannesburg Andrew Lucas lighting Real Estate GM continuous Emfuleni N Mbewu L Mbewu improvement 11114249 GM risk services Tshwane C Solomon C Solomon 3318468766 M Smith Company Johannesburg M Smith secretary 300949880 Account status Current 90 days Current Current Current Current 60 days Current Current Current Updated: 12/09/2014 14:27:40 Page 34 of 63
Section 6: Statement on amounts owed by Government Departments and Public Entities Government accounts as at 30 June 2008 Schools Acc no SCHOOLS Total Status Comments 220083813 East Bank High School 13,096.30 current 220082200 Bryanston Primary School 0.00 220065035 Athlone Boys High School 0.00 220077094 Laerskool Louw Geldenhuys 469.89 current 220025018 Preprimere Skool Die Mossie 13,153.38 current 220028700 Philip Kushlick School 0.00 220055421 Southview Secondary School 66,428.83 overdue Erratic payer 220075925 Western High School 0.00 current 220047406 Ennerdale Secondary School 2,240.17 current 220055608 Azara Secondary School 22,761.17 overdue Erratic payer 220058969 Penta-Rosa Primary School 29,270.17 overdue Erratic payer 220057299 Greyville Primary School 25,313.39 overdue Erratic payer 220057186 Lenasia Secondary School 0.00 220100709 Riverlea Laerskool 289,805.15 current Meter duplications 220091356 Kensington Secondary School 7,187.50 220057179 Alpha Primary School 19,698.48 overdue Erratic payer 220055453 Parkside Primary School 14,890.89 overdue Erratic payer 220059000 Topaas Secondary School 20,649.22 current Erratic payer 220025000 Hoerskool Die Fakkel 5,875.11 current 220057193 Model Primary School 10,316.90 current 220059095 JHB Abdm School 0.00 220096040 Winchester Ridge Pre-Primary School 0.00 current 220052276 St Marys School For Girls 0.00 220061143 Missourilaan Sekondere Skool 17,381.90 220079207 Northcliff High School 0.00 220075770 Laerskool Jan Celliers 0.00 220048142 Fairways Primary School 0.00 220004272 Hyde Park High School 24,839.04 current 220052036 Sandringham High School 0.00 current 220061150 Nancefield Laerskool 5,759.30 current 220082217 Laerskool Bryanston 0.00 220069777 Queens High School Hostel 0.00 220077369 Fordsburg Primary School 0.00 220078933 Hope School 0.00 220058951 Harmony Primary School 14,156.51 overdue Erratic payer 220025995 Mondeor High School 0.00 220067963 Athlone Girls High School 0.00 220078958 Ridge School 0.00 220025106 Frances Vorwergskool 0.00 220001063 Craighall Primary School 0.00 220079430 Delta Park Skool 0.00 220082440 Bryandale Primary School 0.00 220049918 Pridwin School 12,083.35 current 220082070 Michael Mount Waldorf School 0.00 220078651 Hoerskool Vorentoe 0.00 220069696 Parkview Senior School 0.00 220030850 Hoerskool Florida 0.00 Updated: 12/09/2014 14:27:40 Page 35 of 63
Government accounts as at 30 June 2008 Schools Acc no SCHOOLS Total Status Comments 220092166 Jeppe High Prep School 0.00 220070518 Auckland Park Preparatory School 0.00 220022360 Florida Park High School 0.00 220078387 Parkview Junior School 0.00 220037060 Randpark Primary School 0.00 220065596 Cyrildene Primary School 0.00 220027992 Harvest Christian School 0.00 220092208 Hillcrest Primary School 597.17 current 220070934 Blairgowrie Primary School 0.00 220025963 Mondeor Primary School 0.00 220078041 Northcliff Primary School 0.00 220072547 Emmarentia Primary School 0.00 220078676 Gen Christiaan De Wet Skool 0.00 220000253 Bramley Primary School 0.00 220077930 Esperanza Laerskool 0.00 220055929 Lenasia Muslim School 11,717.08 current 220088699 Fairview Junior School 6,765.09 current 220026942 Glenanda Primary School 0.00 220052283 St Mary's School For Girls 0.00 220061030 Silver-Oaks Sekondere Skool 14,010.69 overdue Erratic payer 220024991 Forest High School 499,501.10 overdue Query on adjustment 220057203 Park Primary School 14,930.57 current 220028562 Laerskool Danie Theron 0.00 220052318 Northview High School 11,568.42 overdue 220066991 Jeppe High School Roanhouse 0.00 current 220024751 Hoerskool President 1,124.10 current 220067586 Jeppe Boys High School 0.00 current 220024945 Sir John Adamson High School 0.00 current 220025882 Meredale Primary School 8,397.01 220091437 Jeppe High School For Girls 346.68 220044074 Robertsham Primary School 3,750.33 current TOTAL 1,188,084.89 Updated: 12/09/2014 14:27:40 Page 36 of 63
South African Police Services Acc no POLICE Total Status Comment 220093804 SAP Wynberg 0.00 220078806 SAP Radio Station 8,919.91 current 220028957 S A Police Station Honeydew 0.00 220052068 SAP Station Norwood 6,094.12 current 220057274 SAP Lenasia 0.00 220033682 SAP Station Booysens 0.00 220028435 SAP Motor Werkwinkel 0.00 220072040 SAP Brixton [Moord / Roof Afd] 0.00 220069512 Jeppe Police Station 0.00 220056954 Hospital Hill Police Station 0.00 220002412 Bramley Police Station 0.00 220059151 SAP Dodehuis En Kwartiere Pwd 14,014.17 current 220062250 Cleveland Police Station 0.00 220062242 SAP Cleveland P W D 9,443.06 current 220093794 Alexandria Police Station 0.00 220062732 Police & Civil Rights Union 0.00 220057080 SAP Sam Hancock Str (Pwd) 1,259.47 current 220056993 SAP Sam Hancock Str 619.88 current 220057059 SAP Sam Hancock 256.51 current 220057010 SAP Sam Hancock 591.91 current 220057066 SAP Sam Hancock Str (Pwd) 0.00 220057027 SAP Sam Hancock 931.88 current 220057041 SAP Sam Hancock 209.74 current 220933683 SAP Station Booysens 840.88 current 220080386 SAP Flats 84,375.06 current TOTAL 127,556.59 Courts Acc no COURTS Total Status Comments 220062002 Law Courts Lenasia 0.00 current 220061954 Kliptown Regional Court Pwd 0.00 current TOTAL 0.00 Public Works Acc no PUBLIC WORKS Total Status Comments 220035859 RSA Public Works & Land 0.00 220018973 DIE Senior Streekbestuurder_Mrood01 748.56 current 220052075 SAP Flats 100,717.85 current 220081414 R S A P A Afdelingsingeneur 0.00 220058479 Myntering Buro Pwd 23,343.42 current 220022970 Die Streeksverteenwoordiger 0.00 220008816 Die Hoofdirekteur 0.00 220078845 R S A Openbarewerke & Grondsake 0.00 220092430 7th Div Headquarters Pwd 74.08 220042510 R S A Public Works 0.00 220035859 R S A Public Works & Land 0.00 current 220028428 Ptn Mortuary For Coloureds Pwd 0.00 220058550 Pneumoconiosis Research Pwd 22,442.94 current 220058542 Old Medical Building Pwd 158.93 220016920 Openbare Werke En Grondsake 324,622.42 overdue query billing Updated: 12/09/2014 14:27:40 Page 37 of 63
Public Works Acc no PUBLIC WORKS Total Status Comments 220042510 R S A Public Works 0.00 TOTAL 472,108.20 Hospitals Acc no HOSPITALS Total Status Comments 220068999 Johannesburg Hospital 1,452,806.75 current 220028474 Baragwanath Hospital 1,448,801.74 current 220078757 JG Strydom Hospital 477,619.47 current 220091003 Jhb Hospital 44,947.17 current 220017137 South Rand Hospital 77,827.04 current 220028001 Mulbarton Hospital Limited 0.00 221038725 Edenvale Hospital 181,027.51 current 220030804 Discovery Hospital 35,067.12 current 220090433 Csf Emseni Hospital 39,531.92 current 220068100 Jhb Hospital 15,214.21 overdue 220989742 Barclays Hospital 31,403.19 overdue 220055414 Lenasia Hospital 16,734.07 current 220089741 Barclays Hospital 0.00 220078644 JG Strydom Hospital 1.18 current 220971939 Coronation Hospital 190,848.11 current TOTAL 4,011,829.48 Clinics Acc no CLINICS Total Status Comments 220094124 Alexander Clinic 22,471.08 current 220077513 Garden City Clinic 213,227.60 current 220082055 Medi-Clinic Ltd 0.00 220083154 Medi-Clinic Limited 84,994.41 current 221036090 Alexandra Womens Clinic 16,601.58 overdue Erratic payer 220071952 Rand Clinic 100,517.62 current 220091010 Rand Clinic 51,992.64 current 221036083 Eastbank Clinic 40,728.66 overdue Erratic payer 220004667 Shifa Clinic 0.00 220014136 Mayo Clinic 0.00 220055372 Lenmed Clinic Ltd 0.00 current 220052340 John Forthering Clinic 1,567.74 current TOTAL 532,101.33 Hostels Acc no HOSTEL Total Status Comments 220006400 City Deep Compound 9,958.83 current 220047332 SMLC Urban Dev Hostels (645) 94,887.65 current 221115063 Nobhuhle Men s Hostel 48,027.45 current 221115056 Madala Men s Hostel 63,028.54 221108267 Helen Joseph Women s Hostel 73,476.52 current 220062860 Selby Hostel 161,595.20 overdue Erratic 221087289 George Goch Men s Hostel 0.00 220001345 Gresswold Spec Hostel 0.00 TOTAL 450,974.19 Updated: 12/09/2014 14:27:40 Page 38 of 63
Housing Acc no HOUSING Total Status Comments 220100547 Troyeville Housing Co-Operative Ltd 165,231.79 overdue Erratic payer 220087134 Health & Housing: Housing 245 239,250.58 overdue Awaiting adjustment 220946570 Johannesburg Housing Co Ltd 0.00 220046804 Cope Tswelopele Housing Cooperative 44,805.57 current 220080530 Dept Housing and Local Govt 43,085.20 overdue Erratic payer 221051081 Johannesburg Housing Company (Carr) 505,504.64 overdue Disputing debit raised 220061009 Dept Housing and Local Govt 206,567.33 current 220990723 Simunye Housing Association 0.00 current 220100882 Johannesburg Housing Company 0.00 220044660 Dept Housing and Local Govt 18,376.34 current 220044726 Dept Housing and Local Govt 16,515.90 overdue Erratic Payer 220003543 Sa Legion Soldiers Housing Org 6,914.43 current 220044740 Dept Housing and Local Govt 20,338.19 current 220044765 Dept Housing and Local Govt 5,606.10 current 220044733 Dept Housing and Local Govt 18,490.00 overdue Erratic payer 220044719 Dept Housing and Local Govt 22,211.42 overdue Erratic payer 220080523 Dept Housing and Local Govt 8,556.97 overdue Erratic payer 220014633 New Housing Company 0.00 220089639 Health & Housing: Comm Hlth 230 42,094.13 overdue Erratic payer 220046441 Dept Housing and Local Govt 16,756.93 overdue Erratic payer 221064041 Jhb Housing Company Ltd 0.00 220046427 Dept Housing and Local Govt 16,097.15 current 220046434 Dept Housing and Local Govt 12,853.32 overdue Erratic payer 220044758 Dept Housing and Local Govt 13,989.70 overdue Erratic payer 220046498 Dept Housing and Local Govt 12,572.30 overdue Erratic payer 220044684 Dept Housing and Local Govt 0.00 220089607 Everest court housing ass 9,332.96 current 220044677 Dept Housing and Local Govt 26,257.17 overdue Erratic payer 220046508 Dept Housing and Local Govt 15,914.22 overdue Erratic payer 220046466 Dept Housing and Local Govt 15,039.57 overdue Erratic payer 220003529 Soldiers Housing ORG SA 1,405.21 current 220046522 Dept Housing and Local Govt 12,800.43 overdue Erratic payer 220046530 Dept Housing and Local Govt 12,549.57 overdue Erratic payer 220046515 Dept Housing and Local Govt 11,371.38 current 220046473 Dept Housing and Local Govt 13,479.90 overdue Erratic payer 220046480 Dept Housing and Local Govt 3,343.55 overdue Erratic payer 220016038 Johannesburg Housing Company 0.00 220067113 Johannesburg Housing Company 54,378.24 current 220046459 Dept Housing and Local Govt 13,778.25 overdue Erratic payer 220046554 Dept Housing and Local Govt 0.00 TOTAL 1,656,171.58 Correctional Services Acc no CORRECTIONAL SERVICES Total Status Comments 220091388 SA Defence 0.00 220028442 Diepkloof Prison P W D 0.00 TOTAL 0.00 Grand TOTAL 8,438,826.26 Updated: 12/09/2014 14:27:40 Page 39 of 63
INCOME STATEMENT Actual Budget Section R000 2007-2008 2008-2009 7: Recommendation and Plans for Next Financial Year The Total Turnover Other approved Income budget for the 2008/9 financial year is shown below: Cost of sales Gross profit overheads margin % 34.8% 35.3% Operating Interest profit Profit before % interest and taxation 179,563 493,581 Profit/loss Taxation Retained profit/(loss) before taxation for the period R000 Total Turnover 2007-2008 Other Cost Income 4,199,985 4,291,012 91,027 5,620,324 6,011,917 Gross of profit sales margin % (2,795,652) 1,495,360 34.8% (3,890,654) 2,121,263 391,593 Operating overheads Profit % (1,315,797) 5.66% (1,627,682) Interest Profit/loss before taxation (228,071) (283,700) 209,881 8.21% Taxation Retained profit/(loss) for the period (48,508) (58,767) 151,114 7.1 Key Focus Areas for the 2008/09 Financial Year 1 Work closely with CoJ treasury to secure additional funding to address: Capital backlog on network refurbishment Investment in additional capacity 2010 requirements Reduction in outages Expansion of public lighting network Electrification of previously disadvantaged areas 2 Improvement in call response times 3 Improve domestic collection levels in conjunction with CoJ revenue management unit 4 Continue to convert high-consumption customers to automated meters 5 Convert customers to prepaid meters 6 Improve short-term restoration time Updated: 12/09/2014 14:27:40 Page 40 of 63
Chapter 3: Directors Report and Governance Section 1: Corporate Governance Statement The board of directors and executives are committed to the principles of openness, integrity and accountability advocated by the second King report for corporate governance in South Africa (King II). Through this process, the shareholder and other stakeholders derive assurance that the company is ethically managed according to prudent risk parameters and in compliance with generally accepted corporate practices. Monitoring the company s compliance with King II forms part of the mandate of the audit committee. The company has complied with the code in all material respects during the year under review. The directors have adopted a board charter, which includes matters of ethics, procedure and conduct of committee members. The charter is aligned with the CoJ charter. Registers are kept and updated on the disclosure and declaration of interests of directors and senior management. The board and senior management ensure there is full material compliance to all relevant legislation. The company secretary has certified in terms of section 268(d) of the Companies Act that all statutory returns have been submitted to the Registrar of Companies. The board of directors ascribes to the City of Johannesburg s corporate governance protocol (the protocol), which, inter alia, regulates its relationship with the city as its sole shareholder and parent municipality in the interests of good corporate governance and good ethics. The protocol is premised on the principles enunciated in King II. City Power s practices are, in most material instances, in line with the principles set out in King II. Ongoing steps are taken to align practices with this report s recommendations and the board continually reviews progress to ensure the company improves on corporate governance. During the year under review, the company entrenched its risk management reviews, and reporting and compliance assessments were conducted in terms of the Companies Act and the Municipal Finance Management Act (MFMA). Annual board assessments and evaluations are conducted and an annual report for the previous year was efficiently completed in accordance with the prescripts of section 121 of the MFMA. The current annual report was guided by the same principles. Updated: 12/09/2014 14:27:40 Page 41 of 63
Section 2: Board of Directors City Power has a unitary board, which consists of executive and non-executive directors. The board is chaired by a non-executive director, Ms Getty Simelane. The board meets regularly, at least quarterly, and retains full control over the company. The board remains accountable to the City of Johannesburg Metropolitan Municipality (the company s sole shareholder) and its stakeholders, the citizens of Johannesburg. A service delivery agreement (SDA), concluded in accordance with the provisions of the Municipal Systems Act (MSA), governs the company s relationship with the City of Johannesburg. City Power has concluded a compact with its parent municipality for the year under review. The compact comprises annual performance objectives, measures, targets and indicators. The board provides monthly, quarterly, biannual and annual reports to its parent municipality on performance against these measures and service delivery as prescribed in the SDA, MFMA and MSA. These reports are submitted within the stipulated timeframes. Non-executive directors contribute an independent view to matters under consideration and add to the depth of experience of the board. The roles of chairperson and managing director of the company are separated, with responsibilities divided between them. The chairperson has no executive functions. Members of the board have unlimited access to the company secretary, who acts as an advisor to the board and its committees on matters including compliance with company rules and procedures, statutory regulations and best corporate practices. The board, or any of its members, may, in appropriate circumstances and at the expense of the company, obtain the advice of independent professionals. A director and peer review as well as a board evaluation are undertaken annually. The articles of association provide that the directors of the company will be elected by the shareholder and appointed by the board of directors. The managing director is appointed by the board. Updated: 12/09/2014 14:27:40 Page 42 of 63
For the year under review, the board consisted of eight non-executive directors: Ms G Simelane, Ms J Kumbirai, Prof T Marwala, Adv KDCO Garlipp, Mr G Badela and Mr T Mahlatsi and two executive directors, Mr SM Zimu, managing director, and Mr BN Leshnick, director finance. Executive directors are regarded as contract employees in terms of the company s conditions of service. Mr Leshnick resigned as an executive director on 30 June 2008. Mr T Mahlatsi resigned from the board on 31 July 2007. Attendance at meetings held during the year under review was as follows: Directors Board Board workshops (induction) Audit HR & remuneration Board oversight Pricing regulatory & Ad hoc EDI working group No of meetings held 4 3 8 8 4 4 1 G Simelane 4 3-8 4-1 T Marwala 3 3 - - 4 4 1 J Kumbirai 4 2 8 7 - - - K Garlipp 3 3 8 - - 4 1 H Mateya 4 3-7 - 4 - G Badela 4 3-8 4 - - S Zimu 2 3 4 4 3 3 1 B Leshnick 4 3 7-2 1 1 Independent audit committee members: D Dondur - - 8 - - - - H Moolla - - 8 - - - - Dates of meetings: 1 Jul 07 30 Jun 08 27 Sep 07 29 Nov 07 30 Jan 08 29 Apr 08 27 Jul 07 28 Jul 07 12 Oct 07 20 Jul 07 29 Aug 07 16 Oct 07 25 Oct 07 23 Nov 07 14 Feb 08 8 Apr 08 30 May 08 20 Sep 07 25 Oct 07 17 Jan 08 23 Jan 08 12 Feb 08 18 Mar 08 8 Apr 08 21 Apr 08 16 Aug 07 8 Nov 07 10 Mar 08 3 Jun 08 16 Aug 8 Nov 10 Mar 08 3 Jun 08 19 Feb 08 Section 3: Board Committees The board has the following committees to assist in carrying out its responsibilities. Each of the committees is chaired by a non-executive director. Audit committee Human resources and remuneration committee Pricing and regulatory committee Oversight committee Ad hoc EDI working group Updated: 12/09/2014 14:27:40 Page 43 of 63
3.1 Audit Committee The audit committee comprises the following non-executive directors: Ms J Kumbirai and Adv K Garlipp and two independent members, Ms D Dondur and Mr H Moolla. The role of the committee is to assist the board by performing an objective and independent review of the functioning of the company s finance and accounting control mechanisms. It exercises its functions through close liaison and communication with senior management and the internal and external auditors. The committee met six times during the year under review. The audit committee operates in accordance with a written charter authorised by the board, and provides assistance to the board on: Ensuring compliance with applicable legislation and the requirements of regulatory authorities Matters relating to financial accounting, accounting policies, reporting and disclosures Internal and external audit policy Activities, scope, adequacy and effectiveness of the internal audit function and audit plans Reviewing and recommending the approval of external audit plans, findings, reports and fees Compliance with the Code of Corporate Practices and Conduct Compliance with the code of ethics. The audit committee adequately addressed its responsibilities in terms of the charter during the review period. The committee met eight times. 3.2 Human Resources and Remuneration Committee The human resources and remuneration committee consists of the following non-executive directors: Ms G Simelane, Ms J Kumbirai, Mr H Mateya and Mr G Badela, and one executive director, Mr S Zimu. The committee advises the board on remuneration policies, remuneration packages and other terms of employment for all directors and senior management. Its specific terms of reference also include recommendations to the board on matters relating to general staff remuneration policy, profit bonuses, executive remuneration, director remuneration and fees and service contracts. The committee met eight times during the year under review. 3.2 Pricing and Regulatory Committee The pricing and regulatory committee comprises the following non-executive directors: Adv K Garlipp, Prof T Marwala and Mr H Mateya, and two executive directors, Mr S Zimu and Mr B Leshnick. The committee advises the board on strategic direction on electricity pricing strategies and policies, addresses regulatory changes in the electricity supply industry that affect the company, ensures the company complies with regulatory requirements on tariffs, recommends structural tariff changes to the National Electricity Regulator, and ensures compliance with NRS 047 (quality of service) and NRS 048 (quality of supply) regulations. The committee met four times during the year under review. 3.3 Board Oversight Committee The oversight committee consists of the following non-executive directors: Prof T Marwala, Ms G Simelane and Mr G Badela, and one executive director, Mr S Zimu. The committee advises the board on oversight responsibilities set out in the supply chain management policy and procedures which are in line with Municipal Finance Management Act regulations on supply chain management. The committee operates in accordance with a mandate authorised by the board, and assists the board in maintaining oversight over the implementation of supply chain management policies as contained in the supply chain management manual Monitoring and reporting on implementation of the supply chain management policy and procedures and the performance of supply chain management Updated: 12/09/2014 14:27:40 Page 44 of 63
Assessing deviations and exceptions from policy and procedures Advising on the multi-year business plan and annual budget plan Monitoring and reporting on company spend against the approved budget and business plan Assessing the achievements of outputs on projects. The oversight committee is informed of all emergency procurement and considers: Approving any spending planned outside approved plans Proactive approval of deviations/amendments from policy. The committee met four times during the year under review. 3.4 Ad Hoc EDI Working Group The ad hoc EDI working group is a joint executive and board working group formed to consider and advise the company on EDI restructuring developments and to prepare City Power for transition into a RED. The working group comprises the following non-executive directors: Ms G Simelane, Adv K Garlipp and Prof T Marwala, and two executive directors, Mr S Zimu and Mr B Leshnick. Mr V Padayachee, a member of the executive committee, is also a member of the working group. The committee met once during the year under review. Section 4: Directors Remuneration Directors fees Salary Other allowances Director fees Performance bonus Travel Total Directors R000's R000 G BADELA 133 5 138 Adv K D C GARLIPP 158 9 167 S J KUMBIRAI 263 12 275 TP MAHLATSI 3 3 Prof T MARWALA 125 2 127 JJH MATEYA 149 7 156 KPM SIMELANE 339 5 344 SM ZIMU 1619 35 203 128 1985 BN LESHNICK 1004 26 181 128 1339 Independent Audit Committee Members DLT DONDUR 73 2 75 H MOOLLA 76 1 77 Total 2623 61 1319 384 298 4686 Updated: 12/09/2014 14:27:40 Page 45 of 63
Executive committee members remuneration Salary Other allowances Performance bonus Travel Total R000's R000's MA LISHIVHA 334 12 57 128 531 MET MASHAO 671 16 141 128 956 CS MASOLO 507 12 59 51 629 NS MBEWU 475 12 36 62 586 MR MOJAPELO 408 21 57 133 618 T Z NKOSI 279 168 191 53 691 NP NSELE 491 12 62 84 650 VP PADAYACHEE 949 60 193 128 1330 SG XULU 594 28 77 131 831 MJ SMITH 447 12 40 93 592 Total 5155 355 913 990 7413 Section 5: Company Secretarial Function The primary function of the company secretary is to act as the link between the board and management and to facilitate good relationships with the shareholder. The company secretary is responsible for general administration and, more specifically, to ensure compliance with good corporate governance practices and provide guidance to directors on corporate governance principles and all relevant legislation. Section 6: Risk Management and Internal Controls 6.1 Overview Effective risk management is integral to the company s objective of consistently adding value. Management is continuously developing and enhancing its risk and control procedures to improve mechanisms for identifying and monitoring risks. Operating risk is the potential for loss to occur through a breakdown in control, information, business processes and compliance systems. Key policies and procedures are in place to manage operating risk and involve segregation of duties, transaction authorisation, supervision, monitoring and financial and managerial reporting. Financial risk management is dealt with in the financial statements. To meet its responsibility of providing reliable financial information, City Power maintains financial and operational systems of internal controls. These controls are designed to provide reasonable assurance that transactions are concluded in accordance with management authority, that assets are adequately protected against material loss or unauthorised acquisition, use or disposal, and transactions are properly authorised and recorded. The system includes a documented organisation structure and divisions of responsibility, established policies and procedures, including a code of ethics to foster a strong ethical climate. The system also includes the careful selection, training and development of people. Internal auditors monitor the operation of internal control systems and report findings and recommendations to management and the board of directors. Corrective actions are taken to address control deficiencies and other opportunities for improving the system. The board, operating through its audit committee, supervises the financial reporting process and internal control systems. Updated: 12/09/2014 14:27:40 Page 46 of 63
There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Even an effective internal control system can, accordingly, provide only reasonable assurance on the preparation of financial statements and safeguarding of assets. The effectiveness of internal control systems can also change with circumstances. A documented and tested business continuity plan exists to ensure the continuity of business-critical activities. The company assessed its internal control systems in relation to criteria for effective internal control over financial reporting described in its internal control manual. The internal control process has been in place up to the date of approval of the annual report and financial statements. Based on its assessment, the company believes that, as at 30 June 2008, its system of internal control over financial reporting and over safeguarding assets against unauthorised acquisitions, use or disposition, met the requisite criteria. 6.2 Risk Management Process 6.2.1 Background City Power is a municipal-owned enterprise (MOE), owned by the City of Johannesburg (CoJ). As such, City Power is continuously ensuring alignment and compliance to CoJ requirements. City Power s risk management process is aligned and has adopted the CoJ risk management framework. 6.2.2 Broad Definition Risk is defined as an event that may have an impact on the ability of the company to achieve its business objectives. 6.2.2.1. Risk Management Process City Power s risk management process has four broad steps: Risk identification Risk assessment and treatment Monitoring and reporting Auditing Figure 6.1: Risk management process Risk identification Risk assessment and treatment Auditing Monitoring and reporting 6.2.2.2 Risk Identification The City Power risk identification process is aligned to the CoJ framework. Company risks are identified annually and form part of the risk register. These risks are influenced by the executive committee, taken before the audit committee of the board and then approved by the board. Approved risks are incorporated in the business plan. Updated: 12/09/2014 14:27:40 Page 47 of 63
6.2.2.3 Risk Assessment and Treatment Once risks have been identified, they must be subjected to a consistent assessment process to ensure City Power achieves an objective and holistic result that can inform its risk profile. Risk is measured in two ways: By the likelihood or frequency of the risk occurring By the severity/impact on City Power of the risk occurring The City of Johannesburg has developed a two-stage assessment process to assess and quantify identified risks. 6.2.2.3.1 Stage One Impact and likelihood The first stage involves an assessment of the potential impact (or severity) of each risk, and then the likelihood of the event actually occurring. Each risk is scored on a scale of one to five. Table 6.1 shows the criteria used to assess the potential impact/severity of each risk occurring. Table 6.1: The criteria used to assess the potential impact/severity of each risk occurring Assessment of impact/severity Financial Reputation Stakeholders Customers 1 2 3 4 5 Not significant Minor Moderate Event would have little financial impact on either income or budget Event would have moderate financial impact (>2%) on either income or budget Event would have serious financial impact (>4-6%) on either income or budget Contained within the individual service area. From a regulatory perspective, minor fines or penalties may have been suffered Affects a significant number of service areas, but with likely short-term impact on public memory. From a regulatory perspective, fines or penalties >R50k may have been suffered. Customers may have been impacted so that complaints result in media coverage (suburban newspapers) Regulator inquiry with medium-term impact on public memory. From a regulatory perspective, fines or penalties >R100k may have been suffered. Customers may have been impacted so that complaints result in media coverage (local newspaper, not front page) Employees may have suffered minor first aid injuries. Event may have resulted in localised staff morale problems Employees may have suffered temporary disabling injuries. Event may have resulted in staff loss with minor to moderate consequences Employees may have suffered multiple temporary disabling injuries. Event may have resulted in staff loss with serious consequences Customers may have been minimally impacted. Event may impact minimally on a performance target achievement Event may impact on a performance target achievement where a major milestone was missed by more than one month, impacting on a client segment Event may impact on a performance target achievement where a major milestone was missed by more than three months and subsequent interruption over several days to customers Updated: 12/09/2014 14:27:40 Page 48 of 63
6 7 Major City Power Annual Report 2007/08 Assessment of impact/severity Financial Reputation Stakeholders Customers Event would have very serious financial impact (>8%) on either income or budget 8 9 Catastrophic Event would have catastrophic financial impact (>15 to 25%) on either income or budget Medium-term public impact with minor political implications. From a regulatory perspective, fines or penalties >R150k may have been suffered. Customers may have been impacted so that complaints result in media coverage (national TV headlines) and loss of service >1 month Long-term impact on public memory and major political implications. From a regulatory perspective, fines or penalties >R500k may have been suffered. Customers may have been impacted so that complaints result in media coverage (national TV headlines) and loss of service >6 months Table 6.2 shows the criteria used to assess the likelihood of the risk occurring. Employees may have suffered multiple permanent disabling injuries. Event may have resulted in staff loss with very serious consequences Employees may have suffered fatalities. Event may have resulted in staff loss with catastrophic consequences Event may impact on a performance target achievement where a major milestone was missed by more than six months, resulting in a major customer impact Event may impact on a performance target achievement where a major milestone was missed by more than eight months to over one year Table 6.2: Criteria used to assess likelihood of risk occurring Likelihood Description descriptor Event has occurred within the last year Almost certain 8-9 repeatedly Probability Event is certain to occur within this financial year. Likely 6-7 Possible 4-5 Unlikely 2-3 Rare 1 Event has occurred within the last financial year Event has a probability of occurring at some time in the next year Very few recorded or known incidents. Reasonable opportunity of occurring as it has occurred in other organisations in the sector Event may occur in exceptional circumstances. No recorded incidents or little opportunity for occurrence Event is likely to occur in this financial year. Event has been recorded within organisation as well as in sector in the last two years Event may occur at some time in the next two years No event recorded in the last three years The product of this stage-one assessment of impact and likelihood is an inherent risk score, which can range from a minimum of 1 to a maximum of 25, by multiplying the frequency and impact scores. Updated: 12/09/2014 14:27:40 Page 49 of 63
6.2.2.3.2 Stage two Development of Risk Drivers and Risk Causal Model Risk drivers are those elements that tend to be the cause of the risk occurring. Risk drivers are a key process in risk management as they provide indepth understanding of the risk and analysis of the drivers leads to effective monitoring of the risk, as well as development of controls to mitigate or manage the risk. These will be measured and monitored as per the next phase of this project. The formulation of risk drivers is to assist with understanding the risk (ie make the risk more tangible) and in formulating controls, both pre- and post, and to manage/minimise the risk drivers, which in turn reduces the overall headline risk. If drivers are not identified, then the process is only providing a snapshot of risks at a point in time. 6.2.2.4 Monitoring and Reporting Monthly, quarterly and annual reporting on progress with status of action items. 6.2.2.5 Auditing This process will be audited continuously 6.2.2 City Power s Top 13 Risks Using this process, City Power has identified 13 risks and developed mitigating strategies for each as listed below. Strategic risk number Risk description Background to risk 1 Cable theft Increase in copper price led to increase in network tampering and vandalism 2 Kelvin s failure to perform on power purchase agreement (PPA) 3 Eskom's capacity problems 4 Business's inability to fund high capital and operational requirements out of current cash flows or future tariff applications High pass-through costs as a result of poor efficiencies relates to fixed and variable costs. *Inability of Kelvin Power substation to supply at required levels in terms of PPA Eskom s failure to supply (generation and transmission) *Ability of Eskom network to sustain new capacity demand Unable to meet GDS, IDP, and business plan targets, including electrification, 2010, inner-city project, public light, etc. *Unable to refurbish aging network at acceptable rate. *Insufficient funds to upgrade network, eg 4th and 5th intake points. *Compliance to MFMA requirements Current controls Increased security in hot spots. Increased roll out of CCTV cameras Penalties on poor delivery. Hold monthly meetings City Power has applied for increased capacity from Eskom. *Investigating distributed generation options. *Implementing DSM program. Resuscitate gas turbines Looking at alternative sources of funding: PPP, revenue-generating projects, additional grant funding Actions to improve management of risk Invest more in information technology solutions Management of current controls Investigating alternative sources of energy, eg piloting solar-powered street lights KFW (German Bank) consultant in South Africa has met with treasury. City's CFO has agreed to isolate this issue from the rest of the city's process. Awaiting approval at the next lekgotla Updated: 12/09/2014 14:27:40 Page 50 of 63
Strategic risk number Risk description 5 Impact of HIV/Aids on productivity in the company 6 Nontechnical losses 7 Customer satisfaction levels 8 Management of domestic revenue collection 9 Network interruptions 10 Organisational change due to restructuring 11 Not achieving an unqualified audit report Background to risk Alignment with mayoral priority. Increased absenteeism, due to sick leave, impacting on overall performance Meter tampering. Illegal connections. Faulty meters and inability to bill customers Causes include: outages, capacity demand, etc *Low level of positive public opinion (company image) Issues relating to management of credit control for domestic accounts Age of the network. Uncontrollable events such as insufficient capital for upgrading and refurbishment of MV and LV network Establishment of Phakama and its implications on staff morale and productivity Previous years qualified audit report. Mayoral priority Current controls Reinforcing partnership with CoJ. Increase access to city s helpline. Provision of immune boosters and nutrition. Dispense and administer ARVs Meter tampering - semi AMR and tamper-proof meters with protective structures have been installed. Illegal connections removed and replaced with tamperproof meters with protective structures. Currently using JMPD to enforce by-laws. Continuous audits Call centre and walk-in centres have been capacitated. Ongoing training for call centre, walk-in centre and billing employees. More accessibility to customers and increased number of vending stations Conversion from conventional to prepaid. Manage service level agreement with the city Capital investment programme in place. *Crime intelligence (risk control). Way leave processes and implementation of asset management maintenance system Engage relevant stakeholders and staff communication Actively addressing all issues raised in previous year's management report Actions to improve management of risk Capacitation of wellness department Established a revenue protection department to ensure implementation and effectiveness of controls Improved shift roster, call resolution and navigation. Increased number of service providers to allow for better footprint (vending machines) Management of SLA and conversion from conventional to prepaid Crime intelligence needs to be improved. Access controls to be increased on load centres. Penalties to be put in place for third parties damaging our network Engage relevant stakeholders and staff communication Corrective action implemented and monitored monthly Updated: 12/09/2014 14:27:40 Page 51 of 63
Strategic risk number Risk description 12 Impact of restructuring of electricity industry 13 Insufficient skills capacity to support the business Background to risk New areas of supply burden new areas of supply will put on existing resources. *Impact of new areas of supply on profitability. *Employee productivity about implications of EDI restructuring. Different standards and tariffs Ineffective talent management. Insufficient skills pool Current controls EDI restructuring workgroups established Prioritisation of skills focus. Create a pool for talent release. Capacitating skills level Actions to improve management of risk Implementing current controls Formulating training strategy that supports core business functions. Centralisation of budget. Implementation of retention strategy. Definition of critical skills Updated: 12/09/2014 14:27:40 Page 52 of 63
Section 7: Internal Audit Function City Power s internal audit department has a current staff complement of 10 qualified people. It has a specific mandate from the audit committee and independently appraises the adequacy and effectiveness of the company s systems, financial internal controls and accounting records, reporting its findings to divisional management and the audit committee. The internal audit general manager (head of internal audit) reports administratively to the managing director and functionally to the audit committee. The head of internal audit has direct access to the chairman of the board. The internal audit coverage plan is based on risk assessments performed at each operating unit. The coverage plan is updated annually, based on the risk assessment, company business plan and results of audit work performed. This ensures that audit coverage is focused and addresses the entire audit universe. Section 8: Response to the Auditor-General Report City Power obtained an unqualified audit report for the financial year 2007/08. There were no matters of emphasis reported by the Auditor-General. This is a significant improvement for the company to obtain an unqualified audit report for two consecutive years. The Auditor-General has applauded management for the improvement in the quality of information. Management has committed itself to strengthening and improving processes to ensure items raised by the Auditor-General are corrected and will not reoccur. Section 9: Corporate Ethics and Organisational Integrity The company has a code of conduct that has been fully endorsed by the board as part of the supply chain management policy and procedure and applies to all its directors and employees. This code is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism. In summary, the code requires that, at all times; all company directors and employees act with utmost integrity and objectivity and in compliance with the letter and spirit of both the law and company policies. Failure by employees to act in terms of the code results in disciplinary action. The policy and procedure is discussed with each new employee as part of induction training and all employees are asked to sign a declaration confirming their compliance with the code. A copy of the code is available to interested parties on request. A toll-free anonymous telephone facility exists for reporting non-adherence to the code or ethics-related matters. Furthermore, any breach of the code is considered a serious offence and is dealt with accordingly; as a result, this acts as a deterrent. Section 10: Sustainability Report 10.1. Social Development The company is actively involved in promoting social development in terms of learnership and internship programmes. The company awarded a total of 64 bursaries to young unemployed people of whom 38.4% are women. This initiative will continue, and plans are in place to increase the number of bursaries in the 2009 academic year. In the 2007/08 financial year, a total of R3.8 million was spent on employees attending conferences and seminars, and R3.3 million on employees attending training courses. This directly supports the empowerment of employees to create a learning organisation. During the year, 44 employees resigned, seven were dismissed and 21 retired. This equates to 4.84% of the staff complement. The company performs exit interviews with all staff resigning and the outcomes of these interviews are incorporated into the staff retention plan. With the national skills shortage, resignations are a risk to the company, but skills development and training initiatives in the form of learnerships (20), retraining existing artisans, annual intake of bursars and an annual intake of technicians in training are being implemented to mitigate this risk.. 10.2. Environmental Development City Power has an environmental management system in place, aligned with CoJ systems. Policies and procedures have been approved by the relevant governance bodies and implement action targets have all been met. Updated: 12/09/2014 14:27:40 Page 53 of 63
The company is extremely proud of its safety record. The number of workplace injuries has declined over the years and currently the measure for such injuries (DIFR) is at 0.87, compared to the industry norm of 1. There is an ongoing process to improve management practice and develop a culture of safety to ensure all possible accidents are prevented. 10.3 Economic Development Providing electricity to all residents of the CoJ supply area is an integral part of the City Power supply mandate. That, and electrification of new areas, is a critical component of the capital budget. Chapter 2 section 3 provides a detailed overview of major capital projects affecting the community. During the year, over R1 billion was spent on BEE companies (73% of the value of tender awards). City Power is a tax-paying entity. However, and with the large capital programme in place, the associated tax allowances ensure that the company will not be in a tax-paying position for a number of years. Section 11: Corporate Social Responsibility Report City Power s social responsibility projects have become an integral part of the City of Johannesburg s community dvelopment projects. While the utility has sufficient capacity to embark on its own projects and initiatives, the CoJ regards these as part of its own community development initiatives. It has thus become necessary for City Power to align its projects with those conducted by CoJ. 11.1 Youth economic development One of the major challenges facing the youth of South Africa is the issue of employment. It is noteworthy that South Africa appears to be the only country in the world with an organisation of unemployed youths, formed with the aim of challenging employers to employ youths who graduate from universities and colleges. City Power has taken this opportunity to extend business opportunities to some youth companies in the area of corporate gifts, branding materials, labour contracts, design and layout and a few other areas where these companies excel. 11.2 Early childhood development In a country like South Africa, and in a city such as Johannesburg, the importance of developing children at the early stage of their lives cannot be overemphasised. City Power has therefore selected early childhood development as one of its areas of support. City Power went into Finetown, south of Johannesburg, and built a preschool, contributing about R170 000 towards the project. This building has three classrooms and a kitchen. City Power donated some R170 000 to Noah s Ark, a charity organisation in Zondi, Soweto. City Power staff collected clothes and food for donations for various charities in our area of supply. City Power also donated food to soup kitchens in our area of supply. Donations were made through charity golf days to the Vincent Tshabalala Educational Trust. 11.3 Women Development The City of Johannesburg s community development strategy considers the upliftment of women as one of the major challenges the city has to overcome. City Power has spent over 22% of its BEE budget on women-owned companies. One of the major challenges facing this target group is the reality that much of the equipment City Power procures is produced by international original equipment manufacturers (many of which are not owned by either blacks, youths or women). It is therefore difficult for City Power to increase this particular procurement within the timeframes the company would want. Updated: 12/09/2014 14:27:40 Page 54 of 63
Chapter 4: Human Resources and Organisational Management The organisational structure of City Power at June 2008 is shown below: Updated: 12/09/2014 14:27:40 Page 55 of 63
Section 1: Human Resource Management Following the implementation of the human resources strategy in July 2005, the emphasis was on developing and implementing a job-grading system, remuneration philosophy and strategy, attraction and retention strategy, skills audit and enhancing the existing performance management system. Based on the approved strategy, the following were delivered: The TASK job-evaluation system was implemented and approximately 98% of all positions in the company graded. A moderation committee was appointed to maintain the job-evaluation process internally. A remuneration philosophy and strategy was rolled out to the business and due recognition is being given to attracting and retaining scarce skills. This is further supported by the implementation of technical and nontechnical salary bands. Good progress was made with rolling out the skills audit, and plans are under way to accelerate technical training in the new financial year. Ongoing initiatives are in place to enhance the existing performance management system and related processes. Section 2: Employment Equity City Power submitted an employment equity report, dated 1 October 2007, as part of its compliance with the national legislative requirements of the Employment Equity Act. The company target on affirmative action (AA) for the 2007/8 financial year was 70%. The company achieved a 69.41% affirmative action rate for supervisory levels and above. The company target on gender equity (GE) for the 2007/8 financial year was 20%. By 30 June 2008, the company s gender equity ratio was 23.72% (supervisor and above). Clearly, the company has delivered in terms of employment equity numbers, and structures and policies are in place to govern this area. However, these documents still require some improvement and enhancement because the organisation is dynamic. Challenges remain on specific employment equity targets: 1. On disability management (holistic approach), although some advancements were made in making our environment more accessible to people with disabilities 2. Other related employment equity programmes, eg a. Diversity management b. Setting numerical goals c. Taking due cognisance of employment equity when recruiting for vacant positions d. Communication of employment equity initiatives e. Close and ongoing monitoring. Section 3: Skills Development and Training For City Power to be successful and deliver on its shareholder compact, it is critical that a pool of skills, and the attributes and capabilities of its human resources be continually developed. As a direct result, the company is targeting building a sustainable skills and competence base through ongoing human resource development initiatives. Our skills development programmes are in line with the requirements of the Skills Development Act and our workplace skills plan (WSP) is aligned to our business plan. Focus is placed on occupation-specific programmes, management development and legally required training. Emphasis was placed on developing leadership within the company and, as a result, four levels of management development were rolled out during this financial year. Supervisors and managers were routed through a foundation programme, and modules covering management development, leadership development and executive development. Currently enrolled with the company are 15 bursars doing their S2, S3 and S4 levels. They consist of 10 African males, two Indian males and three African females. Seven bursars are busy with their work-back period. Since Updated: 12/09/2014 14:27:40 Page 56 of 63
2005, the company has awarded 64 bursaries to young unemployed people. This initiative will continue, and plans are in place to increase the number of bursars in the new academic year. Section 4: Performance Management Performance management was implemented for all occupational levels in the company. Focus areas for the past year included adjusting scoring principles for individuals and the company to begin aligning these to principles adopted by the shareholder. This resulted in improved individual performance, improved team performance and the attainment of company objectives. This balanced scorecard forms the basis for our performance management processes and practices. Performance indicators are linked to business plans and the IDP scorecard as required by the shareholder. Substantial emphasis was placed on complying with the MFMA and obtaining a clean audit report. The forthcoming 2010 FIFA World Cup remains a firm objective, and has already been factored into our strategies and operational plans. We will, however, continue to strive for operational effectiveness and, with our customers and stakeholders, will collectively focus on improving the environmental well-being of our society. Section 5: HIV/AIDS in the workplace 5.1 HIV/Aids structures A comprehensive structure is in place, including comprehensive case management, HIV/Aids steering committee, availability of trained peer educators, voluntary counselling and testing, 24-hour employee helpline, etc. 5.2 Education The company has a fully-fledged clinic, manned by professional health practitioners (a doctor, social workers and occupational health nurses). This clinic was extended to other geographical areas in the company. An ongoing education programme has been instituted with the assistance of these practitioners, among other duties. This initiative is progressing well. 5.3 Monitoring and measuring performance Monthly, quarterly and annual reporting to SHER committee and board Case management of infected employees Quality assurance by City Power HIV/Aids steering committee Alignment with national policy and World Health Organisation Networking with non-governmental organisations Benchmarking with prominent and well-established organisations Aligning City Power policy and strategy with CoJ policy. 5.4 Case management Employees who have declared their status have been put on a treatment regime, ie immune boosters and ARVs, nutrition support, depending on the stage of their infection. Number and cost to employer of all health personnel: Number Cost / per annum - Professional (doctors/specialists) contract 1 R600, 000 - Professional (nurses ) and non-professional (gym staff ) 6 R1, 162, 600 - Non-professional (clinic staff ) administrator 1 R102, 000 - Professional HIV/Aids consultant and EAP consultants 4 R1, 078, 000 - Temporary 0 0 - Contract 0 0 Total annual patient headcount for service provided by the entity: 300 x 1900 R57, 000 Total operating cost of health (clinic) function: R3, 599, 600 Updated: 12/09/2014 14:27:40 Page 57 of 63
Section 6: Employee Benefits The company is a participating employer in a number of retirement funds through which the CoJ and its associated utilities, agencies and companies (UACs) provide post-employment benefits to all permanent employees through three defined contribution funds and five defined benefit funds. The following funds provide retirement benefits for City Power employees: Defined contribution funds: (In the case of these defined contribution funds, contributions paid have been expensed as required in terms of AC 116). E-Joburg Retirement Fund City Power Retirement Fund Municipal Employees Gratuity Fund Defined benefit funds: Johannesburg Municipal Pension Fund City of Johannesburg Pension Fund Municipal Employees Pension Fund Soweto City Council Pension Fund Joint Municipal Pension Fund Section 7: Supply chain management and black economic empowerment Function: Sub-function: Other administration (procurement) reporting level Detail Total Analysis of function: 1 Details of tender/procurement activities: Total number of times tender committee met during year: o Bid specification committee o Bid evaluation committee o Exco adjudication committee o Bid adjudication committee level 2 o Bid adjudication committee level 1 Total number of tenders considered: o Exco adjudication committee o Bid adjudication committee level 2 o Bid adjudication committee level 1 Total number of tenders approved: o Exco adjudication committee o Bid adjudication committee level 2 o Bid adjudication committee level 1 Average time taken from tender advertisement to award: Three months for massive tenders which are advertised for 30 days; small tenders may take three weeks but vary with complexity of project). 2 Details of tender committee: Executive committee bid adjudication committee S Zimu (chair) B Leshnick, V Padayachee, L Mashao, S Xulu, N Nsele, M Mojapelo, A Lishivha, S Masolo, E Sibuta, L Mbewu, C Solomon, M Smith 264 312 110 51 29 124 17 15 96 14 12 Updated: 12/09/2014 14:27:40 Page 58 of 63
Chapter 5: Functional Area Service Delivery Reporting Electricity distribution Reporting Detail Total Cost level Includes bulk purchase and distribution of electricity Analysis of function: 1 Total quantity and cost of bulk electricity purchases in kilowatt-hours and rand Bulk electricity purchases not broken down into consumer categories 2 Total quantity and receipts for bulk electricity sales in kilowatt-hours and rand Revenue split not known at this point 3 Total electricity losses in kilowatt-hours and rand (GWh) 13,100,882 (GWh) 11,464,426 (GWh) 444,840 R (2,783,271) R (4,199,397) R (163,612) 4 Number of households with electricity access, 300,013 and type and cost of service: 5 Number of new connections: Cost per new connection 6 Number and cost of disconnections and reconnections Disconnections 4,317 Reconnections 48,958 7 Number and total value of electrification projects planned and current: - Current - Planned (future years) 8 Estimated backlog in number (and cost to provide) of connections: There are no electrification backlogs. As housing projects are proclaimed, they are electrified immediately 9 Free basic service provision: - Quantity (number of households affected) 230,408 R (30,120) R (000) - Quantum (value to each household) 50kWh/m (R40.80) All households on the Lifeline tariff enjoy 50kWh of free electricity per month This R21.62pm R259.44pa includes 94 854 prepaid customers and 135 554 conventionally metered customers 10 Total operating cost of electricity distribution function R000 Updated: 12/09/2014 14:27:40 Page 59 of 63
Street lighting Reporting level Detail Total Cost (Rm) Overview: Includes all activities associated with provision of street lighting to the community Analysis of function: 1 Number and total operating cost of street lights servicing population: 2 Total bulk kilowatt hours consumed for street lighting: - 55.2 186 000 80 100m kwh 25 5.1 Finance and Administration 5.1.1 Debtor billings CoJ City Power Total July 164 131 944 254 588 340 418 720 284 August 164 401 303 279 238 989 443 640 292 September 157 767 373 245 045 594 402 812 967 October 115 939 634 203 262 446 319 202 080 November 119 539 487 166 245 290 285 784 776 December 116 000 982 207 396 758 323 397 740 January 2008 106 697 939 196 723 706 303 421 645 February 111 351 735 195 741 267 307 093 002 March 101 073 663 220 716 856 321 790 519 April 95 916 875 241 345 881 337 262 756 May 107 997 384 232 738 189 340 735 573 June 132 957 812 263 166 176 396 123 988 Total 1 493 776 132 2 706 207 490 4 199 985 622 5.1.2 Debtor collections CoJ City Power Total July 127 737 440 229 210 184 356 947 624 August 140 201 782 269 746 040 409 947 822 September 144 690 971 241 631 026 386 321 998 October 129 947 061 242 823 008 372 770 070 November 128 880 605 215 681 816 344 562 421 December 104 045 376 190 060 184 294 105 560 January 2008 111 415 753 194 748 773 306 164 527 February 95 282 298 201 332 587 296 614 885 March 104 199 076 194 560 736 298 759 812 April 94 057 824 202 234 359 296 292 183 May 111 218 334 202 729 403 313 947 737 June 106 162 383 248 960 182 355 122 565 Total 1 397 838 903 2 633 718 298 4 031 557 202 Updated: 12/09/2014 14:27:40 Page 60 of 63
5.1.3 Write-off of debts: number and value of debts written off City Power Annual Report 2007/08 CoJ City Power Total July 2007 3 672 508 3 672 508 August 2007 2 356 856 2 356 856 September 2007 956 259 956 259 October 2007 1 051 148 1 051 148 November 2007 710 484 710 484 December 2007 122 806 122 806 January 2008 99 366 99 366 February 2008 226 081 226 081 March 2008 April 2008 138 014 138 014 May 2008 51 458 51 458 June 2008 Total 9 384 980 9 384 980 5.1.4 Credit payments Current <30 <60 <90 <120 Total Eskom 333 415 695 2 083 171 1 589 151 337 088 017 5.1.5 External loans Total loans received and paid during the year Balance 30 June 08 Balance 1 July 07 Loans received Loans repaid Loans accrued Shareholder loans 581 814 023 581 814 023 Shareholder loan - Midrand 42 978 817 42 978 817 Conduit loan 373 615 310 70 516 802 303 098 509 Conduit loan - Midrand 19 958 807 2 925 230 17 033 578 Capex loan 2002 71 609 587 14 332 074 57 277 514 Capex loan 2003 160 144 294 23 661 107 136 483 188 Capex loan 2004 132 075 672 15 774 582 116 301 091 Capex loan 2005 291 037 462 29 972 250 261 065 212 Capex loan 2006 403 978 736 34 363 693 369 615 043 Capex loan 2007 629 637 358 145 446 723 40 052 219-199 035 000 535 996 862 Capex loan 2008 367 565 806 14 314 320 256 434 193 609 685 679 Total 2 706 850 068 513 012 529 245 912 277 57 399 193 3 031 349 516 5.1.6 Delayed and defaulted payment None 5.1.7 Number of indigent customers The number of indigent customers is 230 408 The quantum of the subsidy they received is R59 777 051 Updated: 12/09/2014 14:27:40 Page 61 of 63
Chapter 6: Audited Statements and Related Financial Information Annexure A: Audited financial statements Annexure B: Auditor-General report Updated: 12/09/2014 14:27:40 Page 62 of 63
ACRONYMS AA affirmative action AMR automated meter reader AMP amperes BEE black economic empowerment BSC balanced scorecard CAIDI measures on average how long a customer was out CAIFI customer average interruption frequency index CAPEX capital expenditure CoJ City of Johannesburg DIFR disabling injury frequency rate DME Department of Minerals and Energy DSM demand-side management EDI electricity distribution industry EE energy efficiency EPWP expanded public works programme GAAP generally accepted accounting principles GDS growth development strategy GE gender equity HV high voltage IDP integrated development plan IEP integrated energy planning ISD Infrastructure and Services Department (ISD) JDA Johannesburg Development Agency JMPD Johannesburg Metro Police Department JRA Johannesburg Roads Agency KPI key performance indicator KVA kilovolt ampere KWH kilowatt hour LPU large power users LV low voltage MV medium voltage MVA megavolt amperes MFMA Municipal Finance Management Act MOE municipal-owned entity MSA Municipal Systems Act NERSA National Energy Regulator of South Africa NPR network performance related OPEX operating expenditure RED regional electricity distributor SAIDI system average interruption duration index SAIFI System average interruption frequency index SCADA supervisory control and data acquisition SDA service delivery agreement SHER safety, health, environmental and risk SHU shareholder s unit SPU small power users Updated: 12/09/2014 14:27:40 Page 63 of 63