Water Services Act, 1997 (Act No. 108 of 1997)NoticesNorms and Standards for Tariff Setting, 2024 - effective 1 April 2026Norms and Standards in respect of Tariffs for Bulk Water Services8. Financial targets |
| (1) | Every bulk water service provider must annually set financial targets and include those targets in its shareholders compact if it is a water board or in its Infrastructure Development Plan (IDP) if it is a municipality or any relevant plan for any other institution. |
| (2) | The financial targets must include at least:— |
| (a) | future capital and refurbishment expenditure on infrastructure; |
| (b) | the targeted capital structure, and |
| (c) | the targeted surplus where applicable, where:— |
| (i) | it is recognised that accounting surpluses will need to be generated to redeem loans, to fund future capital expenditure and refurbishment and to make provision for contingencies; and |
| (ii) | targeted surpluses will be negotiated on a case-by-case basis each year as an important component of the shareholders compact or Infrastructure Development Plan after taking cognisance of the bulk WSP's current capital structure, targeted capital structure, and the period within which the targeted capital structure must be achieved. |
| (3) | A bulk WSP's financial model should be based on the following assumptions:— |
| (a) | volume of water sales should be conservatively based on an analysis of historic trends as well as new information regarding customers; |
| (b) | CPI and other economic projections may be sourced from the accredited Institutions; and |
| (c) | the relationship between variable direct scheme costs such as raw water costs, energy and chemicals, and water sales should be recognised in the model. |
| (4) | The following norms shall be reflected in a bulk WSP's financial model:— |
| (a) | loans to be raised for funding plant and equipment should generally be assumed to be repaid over a period of less than or equal to a reasonable period; |
| (b) | assets must at all times exceed liabilities; |
| (c) | current assets must at all times exceed current liabilities or, if this is not the case, a facility must be available to raise funds to meet short-term obligations; |
| (d) | the bulk WSP should strive to in all years make a reasonable accounting surplus; |
| (e) | the ring-fenced operations of the bulk water service provider should in all years make a positive operating cash flow surplus after all costs are funded; and |
| (f) | the borrowing limits imposed must not be exceeded. |
| (5) | A WSP's financial model must show at least the following parameters using a format substantially similar to the table in Annexure A: |
| (a) | projected water sales; |
| (b) | revenue, costs and surpluses; |
| (c) | capital expenditure; |
| (d) | outstanding debt; |
| (e) | dividends (where applicable); |
| (f) | accumulated reserves; |
| (g) | Property, Plant and Equipment (PPE); |
| (h) | trade and other receivables; and |
| (i) | interest bearing borrowings. |