Annual report08 Rev7-Edited - City Power Reports/2007_2008 City... · KLOOFENDAL (33/11) HARLEY ST...

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 Annual Report 2007/08

Updated: 12/09/2014 14:27:40 of 63

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: [email protected]

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 of 63

Where do we sell the electricity?

Geographic service delivery footprint of the City of Johannesburg, with City Power areas in pink on the right.

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)

excluding bulk intake substations

No 82 82

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

#

#

#

#

#

#

#

#

#

BRYANSTON

FERNDALE

ZOLA

LIN DEN

FAIRLAND

DUBE

JABAVU

KENSINGT ON

HOUGHTO N EST ATE

JABULANI

PARKTO WN

GRASMERE

ALEXAN DRA

KELVIN

NALEDI

BUCC LEUCH

KIBLER PARK

EDENBURG

MORO KA

TLAD I

HORISON

CHIAW ELO

ENNERDALE SOUTH

BRUMA

DOBSONVILLE

NANC EF IELD

FLORIDA PARK

MAPETLA

UNAVILLE AH

MAYFAIR

EMDENI

FLORIDA

W YNBERG

FOURW AYS

PARKVIEW

NAT URENA

PARKMORE

CRAIG HALL PARK

BEREA

PRO TEA NORT H

NEW LANDS

BO SMO NT

KLOOF ENDAL

SANDHUR ST

SELBY

DAINF ERN

ZOND I

ROBERTSHAM

ATHOLL

MO LAPO

TRIOMF

TURFF ONT EIN

CYRILDENE

BRAMLEY

LAW LEY ESTATE

PO ORTJE

W ITPOO RTJ IE

BERARIO

FINETO W N

MELVILLE

NASREC

NORT HCLIFF

W AVERLEY

W ESTC LIF F

MID- ENNERDALE

JEPPESTO WN

OAKD ENE

HURLINGH AM

SUIDERO ORD

VO RNA VALLEY

MO FO LO CENTR AL

OAKLANDS

DISCOVER Y

LAW LEY EXT.1

MOLETSANE

ELDO RADO PARK

MARLBORO

CRAIG HALL

KLIPSPRU IT

LYNDHURST

LAKESIDE EXT.1

RIVERLEA

LENASIA SO UTH

LENASIA EXT.9

TULISA PARK

FLEU RHOF

BASSONIA

LINKSFIELD

BEZUID ENHO UT VALLEY

GREENSIDE

ROSEBANK

NORW O OD

ROODEPO ORT

MARAISBUR G

SO UTH HILLS

QUELLER INA

ROSETTENVILLE

WEND YW O OD

DE W ET SHO F

LINDHAVEN

NOO RDGESIG

GLENESKBO OYSENSMOFO LO NO RTH

HELDERKRUIN

ALAN MANOR

MEREDALE

PAULSHOF

INDUSTRIA

CHLOORKOP

KYA SAND

MAYFAIR WEST

DENVER

RABIE RIDG E

PROTEA GLEN

OPHIRTO N

SUNN INGHILL

ORANG E F ARM

W ILROPARK

LENASIA

HAMBERG

EBONY PARK

RIVERCLUB

GREYMO NT

KLIPSPRU IT W EST

EMMARENTIA

W OODLAN DS

BIRDH AVENRISIDALE

CROW N GARDENS

BLACKHEAT H

BELLE-VUE

DEVLAND

RISANA

KILLARNEY

MO NTG OMERY PARK

AERO TON

FOREST HILL

LOMBARDY W EST

MALANSHOF

INDUSTRIA W EST

BERTR AMS

GALLO MANOR

HORISO N PARK

FLORIDA NO RTH

MMESI PARK

MEADOW LANDS

MULBARTO N

PIMVILLE Z ONE 1

LA RO CHELLE

DHLAMINI

RAND PARKRIF

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ELECTRON

CITY AND SUBURBAN

GRESSWO LD

LONE HILL

DOORNFO NTEIN

ENNERDALE

COUNT RY V IEW

GILLV IEW

LONE HILL EXT .10

KLIPRIV IERSO OG

VREDEDO RP

NOO RDWYK

HURST HILL

LYME PARK

KLEVEHILL PARK

RICHMOND

VALERIEDENE

KYALAMI ESTATE

REUVEN

LIEFDE EN VREDE

TANGANANI

DAINF ERN RIDG E

AMALGAM

ANCHORVILLE

PO WER PARK

TOWN SVIEW

HEADW AY HILL

THETA

HERIO TDALE

KAALFONTEIN EXT .1

MO RET

BERGBRO N

KELLAND

CONSTANTIA KLOOF

SUNDOW NER

W ILGEHEUWEL

EPSOM DOW NS

CREST A

FOUNDER S HILL

EASTG AT E

COMPTO NVILLE

ROO DEKRANS

FAR EAST BANK

FRANKENW ALD

DAVIDSON VILLE

JO HAN NESBURG -NO RTH

LENASIA EXT.4

CITY DEEP

WOLHUT ER

OSUMMIT

JACANLEE

ST RET FO RD EXT .3

CLEVELAND

ORLANDO

BENRO SE

W ITKOPPEN

DALECRO SS

HONEYDEW

ARMADALE

NOORDHANG

ZANDSPRUIT EXT .10

FAIRW AY

SHARO NLEA

GLEN ATHOL

BO SKRUIN

SO UTHG ATE

ROSEACR E

ZAKARIYYA PARK EXT.5

SO UTHF ORK

LENASIA SO UTH EXT.20

MARO ELADAL EXT .11

MAG ALIESSIG

STORMILL

LENASIA SOUTH EXT.6

BARBEQUE DO WNS

RAND JESFON TEIN

MEADOW HURST

BRYANBRINK

ST RIJDOMPARK

RAND LEASES EXT.1

MARYVALE

W ESTBURY

GLENSAN

ILLOVO

MO OD IE HILL

PRINCESS

BRAAMPARK

W ILFOR DON

TRES J O LIE .

KHYBER ROCK

COMMERCIA

CRAMERVIEW

RAND JESPARK EXT .1

LENASIA EXT.12

BELLA IRSPARK

WILLAW AY

HOO GLAND

HALF W AY HO USE

PRO LECON

NORT HGATE

BATAVIA

EAGLES NEST

RUIMSIG

W AT ER VAL EXT .2

PRESIDENT PARK

ST RAT HAVO N

PROTEA INDUSTRIAL PARK

MIDRIDGE PAR K

DRIEZ IEK

FOUNDER S HILL

SEBEN ZA EXT.6

Lenasia

Midrand

Siemert

Randburg

Alexandra

HurstHill

Bryanston

Roodepoort

Klipspruit

Reuven

BO RDEAU X

ESKOM 1

RUGGRAAT

ESKOM 2

EIKENHOFMULBARTON

ZOLA W EMM ER

CROW RHOR NE

MOROKA

DALKEITH

PETER ROAD

LANSER IA

CHARTW ELL

DIEPSLOOT

NIRVANA

KADETT

ELDORADO

SENTRA

OLIVED ALE

PARKHURST

FOURW AYS

NORTHRAN D

ESKOM

LOTUS

ROOSEVELT PAR K

MAPETLA

MOND EOR

ESKOM 9

PAULSH OF

LEAZON IA

LUN AR

MARLBORO

ROBERTSHAM

VORNA VALLEY

CHRISTIAAN DE W ET

GRAN D C ENTRAL

WESTFIELD

W ILROPAR K

BRYNORTH

CROW N

GLEN

PENNY ST

MAYFAIR

DIEPKLOOF

NOORDW YK

W ATERVAL MID RAND

OR CHARDS

NANCEFIELD

MOFOLO

FAIRLAND

BUC CLEUCH

NURSERY

IVOR Y PARK

HOUTKOPPEN

FLORID A

LENASIA

MOFFAT

INDUSTRIA

OBSER VATORY

NORTHRIDING

ESTHER PARK

11TH SHAF T

DOORNKOP

LENASIA SOUTH

MEGAW ATT

ALLENDALE

ON TDEKKERS

ENN ERDALE

CITY SANDS

W IN DSOR

LEEU KOP

BORD EAUX

NOORDW YK (ESKOM)

BEAULIEU

JAGUAR

ROBERTVILLE

KLEVEBANK

EDENVALE IN D

PHOSPHATE

RIDGE

FLORID A GLEN

EDENVALE

DAINFERN

HOPEFIELD

FON TAINBLEAU

MANUFACTA

RIVIERA

BOND ST

COOKE 1

KLOOFEND AL (33 /11)

HARLEY ST

BARAGW ANATH

HURLINGH AM

KL IPFONTEIN V IEW

CHARTW ELL 1

NEW TOW N

FORD SBURG

N

EW

S

City Power A rea

Eskom Area

Distribution Areas

Area Boundaries

DEPOT SITES

# Alexandra

# Bryanston

# HurstHill

# Klipspruit

# Lenasia# Midrand# Randburg# Reuven# Roodepoort# Siemert

Substation Zones

LEGEND

PUBLIC LIGHTING

01 MAY 2006

DISTRIBUTION AREA SOUTH

DISTRIBUTION AREA NORTH

DISTRIBUTION AREA NORTH


Updated: 12/09/2014 14:27:40 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

Vision

To be a world-class electricity distributor

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 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 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 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

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

Eliminate all

backlogs

Access to basic

services

Distribute

electricity to at

least 95% of

formalised

households

17 000 dependent on

housing and funding

9 057 new

electrification

customers

Provide street

lighting to 95% of

formal areas in

Johannesburg…

however City

Power will only

achieve 65%

because of

continued

budgetary

constraints

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

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 high-

crime areas

Increase allocation

of free basic

All households in the

city’s indigent list

Free basic

electricity


Updated: 12/09/2014 14:27:40 of 63

LONG-TERM

GOALS

LONG-TERM

STRATEGIC

INTERVENTIONS

5-YEAR

STRATEGIC

OBJECTIVES

DELIVERY AGENDA

FOR 2007/08

STATUS

electricity to poor

households and

those with special

needs

are provided with

free basic electricity

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%

12% total losses,

equal to R532m

12.63%

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

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

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 of 63

LONG-TERM

GOALS

LONG-TERM

STRATEGIC

INTERVENTIONS

5-YEAR

STRATEGIC

OBJECTIVES

DELIVERY AGENDA

FOR 2007/08

STATUS

expenditure for

running and

maintenance of all

service networks

where a revised

approach is

necessary (eg tariff

model to suit specific

areas); and

recommendations for

tariff adjustments for

2007/08 will be

prepared.

3. Service

delivery is

secured

through well-

designed, well-

integrated and

well-

maintained

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

leadership in

sponsoring and

adopting

innovative, yet

locally

relevant,

technologies

and delivery

capabilities

that enable

Ensure investments

that extend the

service life of

infrastructure are

within cost-

effective thresholds

and technical

tolerances

Implement at least

five innovative

technologies in

service delivery

Turbines reinstated

subject to funding

Turbines

refurbished

Roll out AMR AMR rolled our

DSM/EE Integrated energy

planning under

way

Network protection

technology

Continued

research and


Updated: 12/09/2014 14:27:40 of 63

LONG-TERM

GOALS

LONG-TERM

STRATEGIC

INTERVENTIONS

5-YEAR

STRATEGIC

OBJECTIVES

DELIVERY AGENDA

FOR 2007/08

STATUS

new service

offerings and

ongoing

efficiency

improvement

across all

service areas

implementation

of NPT

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

Develop and

implement

comprehensive

demand-side

management

programmes for

energy

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.

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 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 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


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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.


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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


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• 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.


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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


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Section 2: Financial Performance INCOME STATEMENT INCOME STATEMENT INCOME STATEMENT INCOME STATEMENT YtdYtdYtdYtd YtdYtdYtdYtd YtdYtdYtdYtdActualActualActualActual ActualActualActualActual BudgetBudgetBudgetBudgetR000R000R000R000 June 07June 07June 07June 07 June 2008June 2008June 2008June 2008 June 2008June 2008June 2008June 2008Total IncomeTotal IncomeTotal IncomeTotal Income 3,925,218 4,291,012 4,350,347 TurnoverTurnoverTurnoverTurnover 3,821,923 4,199,985 4,244,775Other IncomeOther IncomeOther IncomeOther Income 103,295 91,027 105,572Cost of salesCost of salesCost of salesCost of sales (2,429,349) (2,795,652) (2,713,406)Gross profit marginGross profit marginGross profit marginGross profit margin 1,495,869 1,495,360 1,636,941Gross profit %Gross profit %Gross profit %Gross profit % 38.1%38.1%38.1%38.1% 34.8%34.8%34.8%34.8% 37.6%37.6%37.6%37.6%Operating overheadsOperating overheadsOperating overheadsOperating overheads (1,173,770) (1,315,797) (1,245,445)Operating profit before interest and taxationOperating profit before interest and taxationOperating profit before interest and taxationOperating profit before interest and taxation 322,099 179,563 391,496InterestInterestInterestInterest (203,626) (228,071) (246,450)Profit/loss before taxationProfit/loss before taxationProfit/loss before taxationProfit/loss before taxation 118,473 (48,508) 145,046TaxationTaxationTaxationTaxation (42,283)Retained profit/(loss) for the period Retained profit/(loss) for the period Retained profit/(loss) for the period Retained profit/(loss) for the period 118,473 (48,508) 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


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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.


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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.


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2.4 Cash Flow

The closing net cash position was R366 million, R295 million less than budget.

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.


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TABLE 1: CAPEX per category, July 07 to June 08

Details

Original

budget

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


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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

basic level of electricity (excl

Eskom areas)

No

326,990 326,990 300,013

Prepaid customers No 86,768 86,768 94,854

Billed customers No 233,981 233,981 217,860

Prepaid conversions from

indigencies

No 1,511 1,511 1,355

Households with access to free

basic electricity (lifeline tariff

only)

No 233,981 233,981 230,408

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/A1

No of public lights working in

targeted high-crime areas2

%

86 90 95

Provision of street lighting to

formal areas

% 60 62 61

Capex on public lighting as % of

public lighting budget

% 100 100 100

Provide street lighting to informal

areas

% 12 24 12

% 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

1LV power outages used to be measured through number of calls received, a new measure to be implemented by Jan 2008

2High-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


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2006/2007

Target

2007/2008

Actual

2007/2008

Tasks undertaken to comply with

CoJ environmental management

framework

No

5 5 5

% completion of environmental

management system

%

100 100 95

Employee disabling injury

frequency ratio (DIFR)

Ratio

0.37 1 0.87

Number of employee job-related

fatalities

No

0 0 3

Number of HIV/Aids workplace

programmes in place

No 1 1 1

Employment equity (AA ratio) % 70.18 70 70

Employment equity (gender

equity ratio)

% 23.54 20 24

Job creation as per EPWP policy

• Temporary

• Permanent

No

No

2,455

0

2,455

3,828

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

seconds as a percentage of total

calls received

%

88.50 91.00 73.00

Number of customer

complaints/queries resolved per

total calls received

%

94.48 95.00 97.00

Average time taken for City

Power to resolve queries referred

to it

Days

3.09 10.00 1.33

Procurement spent on BEE and

SME as % of total budget

procurement

% 73 73 73

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

% 9.42 10.3 14.96

Capex spent on network as

percentage of overall capex

budget

% 95 95 97


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2006/2007

Target

2007/2008

Actual

2007/2008

% of municipality entities (ME’s)

capital budget spent

% 100.5 100 100

% variance against ME’s

operating budget

% 5.33 0 (5)

Reconciliation of inter-company

balances with CoJ

% 100 100 100

Reconciliation of intra-company

balances with other MEs

% 100 100 100

Fully SA GAAP compliant

register of assets

% 100 100 100

% attainment of clean audit report

attained by municipality owned

entity (MOE)

% 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

completed, which includes 1 387

connections completed in

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.

LEHAE HOUSEHOLDS ELECTRIFIED


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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.

0

50

100

150

200

250

300

CAPEX 34 16 41 119 178 295

Outages 170 160 144 117 104 80

2002/3 2003/4 2004/5 2005/6 2006/7 200708


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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 of 63

Project %

complete

CAPEX

budget

2007/2008

CAPEX actual

spent Explanation notes

Fordsburg 275kV

refurbishment (final phase) 100% 2,536,244 53,632 Project completed

John Ware transformer

replacement 95% 1,026,139 892,601

In progress – C0865. Need

approx R400k to complete

– cable work outstanding

Transformer for Fort

substation 100% 6,639,845 6,519,682 Project completed

Transformer 4 for Central

B substation 100% 3,945,158 102,451 Project completed

Transformer 1B for

Central B substation 100% 1,340,109 190,126 Project completed

Jeppestown 11kV

conversion Phase 2 20% 1,177,215 1,003,594

Scope change – project to

be presented to GMC for

additional funding

Establishment of new MSS

and decommissioning of

MSC Casa Mia

100% 650,000 601,378 Project completed

Decommissioning of Selby

substation 100% 1,727,169 1,727,169

Preliminary designs – only

engineering fees paid

C1119

Reduction in unplanned

outages 100% 1,045,817 1,045,816

Only preliminary

engineering fees paid –

C1125

Fordsburg network

upgrade 99% 876,000 758,308

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 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

Project description Project status Year-to-date

expenditure

(m)

Comments/progress/problems

experienced

Bulk

infrastructure

Establishment of

132/11kV Crown

substation

Tender

awarded – site

established

R12.9 Tender awarded to Powertech IST

– payment of two transformers

delivered in July 2008

Bulk

infrastructure

Siemert Road S/S –

install third transformer,

reconfigure 88kV busbar

plus install 17-panel

board 11kV switchgear

Bid evaluation

committee

recommendation

awaits Exco

approval

R0 Budget provision R30 million in

2008/2009

Bulk

infrastructure

Transmission: Orlando

switching station -

replace all 88kV

switchgear with compact

gas-insulated switchgear

and introduce 275/88kV

Quattro MTS

Design phase R0 No budget provision. City Power

submitted application for funding

to the city.

Bulk

infrastructure

Transmission: Kelvin -

build new 275/88kV

yard at Sebenza

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 of 63

Type of

project

Project description Project status Year to date

expenditure

(mil)

Comments/progress/problems

experienced

Training

venues

Cecil Payne, Ruimsig,

Rand Stadium

Not started R0 Minor upgrades within stadiums.

Budget provision allowed in

2009/2010 with expected

completion date of December

2009

Ellis Park

projects

MV network upgrade -

Ellis Park precinct

92% R28

previous years

Completion of MV infrastructure

awaited for completion of Beit

Street upgrade

Public lighting 92% R3.92

current year

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

Beit Street lighting to carried out

once road has been upgraded –

roadworks under way

Nasrec 11kV

300mm^2 3C

XLPE cable

MV network

development

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 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 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 Eskom-

supplied 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 (2nd 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 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 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

name/number

Account status

K Simelane Chairperson Johannesburg K Simelane

401900792

Current

J Kumbirai Non-executive Tshwane J Kumbirai

2071470635

Current

T Marwala Non-executive Johannesburg T Marwala

7130523696

Current

K Garlipp Non-executive Tshwane K Garlipp

3302075561

Current

G Badela Non-executive Johannesburg G Badela

302212072

30 days

H Mateya Non-executive Ekurhuleni H Mateya

Renting

Current

S Zimu Managing

director

Johannesburg S Zimu

3000041614

Current

B Leshnick Director finance Johannesburg B Leshnick

202089509

Current

V Padayachee Director Johannesburg V Padayachee Current


Updated: 12/09/2014 14:27:40 of 63

Name Designation Municipality Municipal account

name/number

Account status

operations 201239060

S Xulu Director

engineering

service

Johannesburg S Xulu

Brookfield Manor

Current

L Mashao Director

corporate

services

Johannesburg L Mashao

900887297

90 days

N Nsele Director -

customer services

(acting)

Johannesburg N Nsele

205886943

Current

S Masolo GM public

relations

Ekurhuleni S Masolo

Morrison Estates

Current

M Mojapelo GM internal audit Johannesburg M Mojapelo

Letting com

Current

A Lishivha GM legal

services

Johannesburg K Molewa

206521871

Current

M Sibuta GM public

lighting

Johannesburg Andrew Lucas

Real Estate

60 days

L Mbewu

GM continuous

improvement

Emfuleni N Mbewu

11114249

Current

C Solomon

GM risk services Tshwane C Solomon

3318468766

Current

M Smith Company

secretary

Johannesburg M Smith

300949880

Current


Updated: 12/09/2014 14:27:40 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 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 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


220057066 SAP Sam Hancock Str (Pwd) 0.00



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 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 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


220044726 Dept Housing and Local Govt 16,515.90 overdue Erratic Payer

220003543 Sa Legion Soldiers Housing Org 6,914.43 current






220014633 New Housing Company 0.00

220089639 Health & Housing: Comm Hlth 230 42,094.13 overdue Erratic payer


221064041 Jhb Housing Company Ltd 0.00





220044684 Dept Housing and Local Govt 0.00

220089607 Everest court housing ass 9,332.96 current




220003529 Soldiers Housing ORG SA 1,405.21 current






220016038 Johannesburg Housing Company 0.00

220067113 Johannesburg Housing Company 54,378.24 current


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 of 63

Section 7: Recommendation and Plans for Next Financial Year

The approved budget for the 2008/9 financial year is shown below: INCOME STATEMENT INCOME STATEMENT INCOME STATEMENT INCOME STATEMENT ActualActualActualActual BudgetBudgetBudgetBudgetR000R000R000R000 2007-20082007-20082007-20082007-2008 2008-20092008-20092008-20092008-2009Total IncomeTotal IncomeTotal IncomeTotal Income 4,291,012 6,011,917 TurnoverTurnoverTurnoverTurnover 4,199,985 5,620,324Other IncomeOther IncomeOther IncomeOther Income 91,027 391,593Cost of salesCost of salesCost of salesCost of sales (2,795,652) (3,890,654)Gross profit marginGross profit marginGross profit marginGross profit margin 1,495,360 2,121,263Gross profit %Gross profit %Gross profit %Gross profit % 34.8%34.8%34.8%34.8% 35.3%35.3%35.3%35.3%Operating overheadsOperating overheadsOperating overheadsOperating overheads (1,315,797) (1,627,682)Operating profit before interest and taxationOperating profit before interest and taxationOperating profit before interest and taxationOperating profit before interest and taxation 179,563 493,581Operating Profit %Operating Profit %Operating Profit %Operating Profit % 5.66% 8.21%InterestInterestInterestInterest (228,071) (283,700)Profit/loss before taxationProfit/loss before taxationProfit/loss before taxationProfit/loss before taxation (48,508) 209,881TaxationTaxationTaxationTaxation (58,767)Retained profit/(loss) for the period Retained profit/(loss) for the period Retained profit/(loss) for the period Retained profit/(loss) for the period (48,508) 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


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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.


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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.


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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


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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


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• 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

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

R000


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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.

Executive committee members’ remuneration

Salary

Other

allowances

Performance

bonus Travel Total

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

R000's


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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

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.

Risk assessment

and treatment Risk

identification

Monitoring

and reporting

Auditing


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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

No

t si

gn

ific

ant Event would have little

financial impact on

either income or

budget

Contained within the

individual service area.

From a regulatory

perspective, minor fines or

penalties may have been

suffered

Employees may have

suffered minor first

aid injuries. Event

may have resulted in

localised staff morale

problems

Customers may have

been minimally

impacted. Event may

impact minimally on

a performance target

achievement

2 – 3

Min

or

Event would have

moderate financial

impact (>2%) on either

income or budget

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)

Employees may have

suffered temporary

disabling injuries.

Event may have

resulted in staff loss

with minor to

moderate

consequences

Event may impact on


achievement where a

major milestone was

missed by more than

one month, impacting

on a client segment

4 – 5

Mod

erat

e

Event would have

serious financial

impact (>4-6%) on

either income or

budget

Regulator inquiry with

medium-term impact on

public memory. From a



have been suffered.




(local newspaper, not front

page)

Employees may have

suffered multiple

temporary disabling

injuries. Event may

have resulted in staff

loss with serious

consequences

Event may impact on


achievement where a

major milestone was

missed by more than

three months and

subsequent

interruption over

several days to

customers


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Assessment of impact/severity

Financial Reputation Stakeholders Customers

6 – 7

Maj

or

Event would have very

serious financial

impact (>8%) on either

income or budget

Medium-term public impact

with minor political

implications. From a



have been suffered.




(national TV headlines) and

loss of service >1 month

Employees may have

suffered multiple

permanent disabling

injuries. Event may

have resulted in staff

loss with very serious

consequences

Event may impact on


achievement where a

major milestone was

missed by more than

six months, resulting

in a major customer

impact

8 – 9

Cat

astr

ophic

Event would have

catastrophic financial

impact (>15 to 25%)

on either income or

budget

Long-term impact on public

memory and major political

implications. From a



have been suffered.




(national TV headlines) and

loss of service >6 months

Employees may have

suffered fatalities.

Event may have

resulted in staff loss

with catastrophic

consequences

Event may impact on


achievement where a

major milestone was

missed by more than

eight months to over

one year

Table 6.2 shows the criteria used to assess the likelihood of the risk occurring.

Table 6.2: Criteria used to assess likelihood of risk occurring

Likelihood

descriptor

Description Probability

Almost certain – 8-9 Event has occurred within the last year

repeatedly

Event is certain to occur within this

financial year.

Likely – 6-7 Event has occurred within the last financial

year

Event is likely to occur in this

financial year.

Possible – 4-5

Event has a probability of occurring at some

time in the next year

Event has been recorded within

organisation as well as in sector in the

last two years

Unlikely – 2-3

Very few recorded or known incidents.

Reasonable opportunity of occurring as it has

occurred in other organisations in the sector

Event may occur at some time in the

next two years

Rare – 1

Event may occur in exceptional circumstances.

No recorded incidents or little opportunity for

occurrence

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.


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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 Current controls

Actions to improve

management of risk

1 Cable theft Increase in copper price

led to increase in network

tampering and vandalism

Increased security in hot

spots. Increased roll out

of CCTV cameras

Invest more in information

technology solutions

2 Kelvin’s

failure to

perform on

power

purchase

agreement

(PPA)

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

Penalties on poor

delivery. Hold monthly

meetings

Management of current

controls

3 Eskom's

capacity

problems

Eskom’s failure to supply

(generation and

transmission)

*Ability of Eskom

network to sustain new

capacity demand

City Power has applied

for increased capacity

from Eskom.

*Investigating distributed

generation options.

*Implementing DSM

program. Resuscitate gas

turbines

Investigating alternative

sources of energy, eg piloting

solar-powered street lights

4 Business's

inability to

fund high

capital and

operational

requirements

out of current

cash flows or

future tariff

applications

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

Looking at alternative

sources of funding: PPP,

revenue-generating

projects, additional grant

funding

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


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Strategic

risk

number

Risk


Actions to improve

management of risk

5 Impact of

HIV/Aids on

productivity

in the

company

Alignment with mayoral

priority. Increased

absenteeism, due to sick

leave, impacting on

overall performance

Reinforcing partnership

with CoJ. Increase access

to city’s helpline.

Provision of immune

boosters and nutrition.

Dispense and administer

ARVs

Capacitation of wellness

department

6 Non-

technical

losses

Meter tampering. Illegal

connections. Faulty

meters and inability to

bill customers

Meter tampering - semi

AMR and tamper-proof

meters with protective

structures have been

installed. Illegal

connections removed and

replaced with tamper-

proof meters with

protective structures.

Currently using JMPD to

enforce by-laws.

Continuous audits

Established a revenue

protection department to

ensure implementation and

effectiveness of controls

7 Customer

satisfaction

levels

Causes include: outages,

capacity demand, etc

*Low level of positive

public opinion (company

image)

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

Improved shift roster, call

resolution and navigation.

Increased number of service

providers to allow for better

footprint (vending machines)

8 Management

of domestic

revenue

collection

Issues relating to

management of credit

control for domestic

accounts

Conversion from

conventional to prepaid.

Manage service level

agreement with the city

Management of SLA and

conversion from conventional

to prepaid

9 Network

interruptions

Age of the network.

Uncontrollable events

such as insufficient

capital for upgrading and

refurbishment of MV and

LV network

Capital investment

programme in place.

*Crime intelligence (risk

control). Way leave

processes and

implementation of asset

management maintenance

system

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

10 Organi-

sational

change due to

restructuring

Establishment of

Phakama and its

implications on staff

morale and productivity

Engage relevant

stakeholders and staff

communication

Engage relevant stakeholders

and staff communication

11 Not

achieving an

unqualified

audit report

Previous years’ qualified

audit report.

Mayoral priority

Actively addressing all

issues raised in previous

year's management report

Corrective action

implemented and monitored

monthly


Updated: 12/09/2014 14:27:40 of 63

Strategic

risk

number

Risk


Actions to improve

management of risk

12 Impact of

restructuring

of electricity

industry

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

EDI restructuring

workgroups established

Implementing current

controls

13 Insufficient

skills

capacity to

support the

business

Ineffective talent

management. Insufficient

skills pool

Prioritisation of skills

focus. Create a pool for

talent release.

Capacitating skills level

Formulating training strategy

that supports core business

functions. Centralisation of

budget. Implementation of

retention strategy. Definition

of critical skills


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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.


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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.


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Chapter 4: Human Resources and Organisational Management

The organisational structure of City Power at June 2008 is shown below:


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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 non-

technical 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


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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


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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


264

312

110

51

29

Total number of tenders considered:




124

17

15

Total number of tenders approved:




96

14

12

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


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Chapter 5: Functional Area Service Delivery Reporting

Electricity distribution

Reporting

level Detail Total Cost

Includes bulk purchase and distribution of

electricity

Analysis of

function:

1 Total quantity and cost of bulk electricity

purchases in kilowatt-hours and rand (GWh)

13,100,882

R

(2,783,271)

Bulk electricity purchases not broken down

into consumer categories

2 Total quantity and receipts for bulk electricity

sales in kilowatt-hours and rand (GWh)

11,464,426

R

(4,199,397)

Revenue split not known at this point

3 Total electricity losses in kilowatt-hours and

rand

(GWh)

444,840

R (163,612)

4 Number of households with electricity access,

and type and cost of service: 300,013

5 Number of new connections: Cost per new connection

6 Number and cost of disconnections and

reconnections R (30,120)

Disconnections 4,317

Reconnections 48,958

7 Number and total value of electrification

projects planned and current:

R (000)

- 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

- Quantum (value to each household) 50kWh/m (R40.80)

All households on the Lifeline tariff enjoy

50kWh of free electricity per month This

includes 94 854 prepaid customers and

135 554 conventionally metered customers

R21.62pm

R259.44pa

10 Total operating cost of electricity distribution

function

R000


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Street lighting

Reporting

level Detail Total

Cost

(Rm)

Overview: Includes all activities associated with provision

of street lighting to the community

- 55.2

Analysis of

function:

1 Number and total operating cost of street lights

servicing population:

186 000 80

2 Total bulk kilowatt hours consumed for street

lighting:

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


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


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5.1.3 Write-off of debts: number and value of debts written off


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 1 July 07 Loans received Loans repaid Loans accrued

Balance

30 June 08

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


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Chapter 6: Audited Statements and Related Financial Information

Annexure A: Audited financial statements

Annexure B: Auditor-General report


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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

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