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State Owned Enterprises Business Case Analysis Compiled by: Merafe Moloto & Yousuf Sujee March 2012.

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Presentation on theme: "State Owned Enterprises Business Case Analysis Compiled by: Merafe Moloto & Yousuf Sujee March 2012."— Presentation transcript:

1 State Owned Enterprises Business Case Analysis Compiled by: Merafe Moloto & Yousuf Sujee March 2012

2 The terms of reference of the Presidential Review Committee are intended to assist Government in its evaluation of the effectiveness of State Owned Enterprises (SOEs) in facilitating the achievement of South Africa’s developmental objectives. The seminal problem statement is: how can SOEs optimally contribute to the development and transformation of South Africa while remaining viable and effective? To this end, the Business Case and Viability work stream (BC) is charged with evaluating the financial robustness and viability of all SOEs. The BC work stream commissioned the consulting services of KPMG to compile an exhaustive database on the state of SOEs, (As-Is Analysis), with a particular focus on the BC work stream’s mandate, which primarily hinges on an in-depth financial analysis. This report purports to synthesize the findings of KPMG’s As-Is Analysis in a succinct and more easily digestible format by way of extracting key historical, sectoral and demographic data with a particular emphasis on Major Public Entities, Sectoral Education and Training Authorities (SETAs) and Water Boards. This report is substantially informed by the KPMG database and is buttressed by the literature in KPMG’s assessment reports. The scope of this consulting project does not contemplate further data collection nor data verification of KPMG’s data. Engagement & Scope 2

3 Definitions of Key Financial Terms  Net Profit Margin (%): Profitability ratio calculated as net profit / revenues.  Return on Assets (%): An indicator of a company’s profitability relative to its assets, calculated as net income / book value of assets.  Current Ratio (x): Current assets / current liabilities. A proxy for a company’s ability to pay back its short term liabilities with its short term assets. This is a liquidity ratio. The benchmark for most companies is a current ratio of 2:1.  Solvency Ratio (x): Total assets / total liabilities. A proxy for a company’s ability to meet its long-term debt obligations. Solvency ratio of 1 is satisfactory.  Interest Coverage Ratio (x): Earnings before interest and taxes / interest expense. A ratio used to determine how easily a company can pay interest on outstanding debt.  Debt Service Coverage Ratio (DSCR) (x): Operating cash flow / (principal due + interest expense).  Gearing Ratio (x): Book value of debt / total equity.  CAGR (%): Compound Annual Growth Rate. Year-over-year growth over a specified period of time. 3

4 Major Public Entities

5 Major Public Entities 5 Year Global Analysis 5

6  All major public entities, as defined in Schedule 2 of the KPMG report, made revenue contributions amounting to an average of 8.7% of GDP from 2006 to 2010. A total of 21 entities are listed in the KPMG database, which is in line with the entities listed in the PFMA schedules.  Total aggregate revenue grew by a CAGR of 6.9% from 2006 to 2010.  Net profit margins have improved dramatically from 13.8% in 2006 to 22.6% 1 in 2010. The average net profit margin for the entire universe was 13.8% for the four year period.  Total assets grew by a CAGR of 13.4% from 2006 to 2010, amounting to R723 billion in 2010.  Along a similar trajectory, total liabilities grew by a CAGR of 13.6% in the same period, presumably largely to fund significant increases in capital expenditures, (particularly given the dominance of capital intensive sectors), which grew by a CAGR of 32.1% from 2006 to 2010, levelling off at R74 billion for the 2010 year.  Global ROA figures are disappointingly low showing an average of 0.7% from 2006 to 2010. By most cross-sectoral standards, this data would suggest that capital, particularly in such large quanta, is not being optimally deployed.  Conversely, an average liquidity ratio of 2.3x is encouraging, particularly when buttressed by commendable average solvency ratios of 4.0x for the periods 2006 to 2010.  On the other hand interest coverage is abysmal, peaking at -764x in 2006 and settling at -154x in 2010.  Similarly, debt service coverage ratios have been very poor & erratic, improving from -57.7x to - 18.9x from 2006 to 2010, with an average of -61.7x in the same period.  Though variable, with a peak of 9.7x in 2008, understandably, gearing ratios are generally trending downwards and levelled off at 1.1x in 2010, averaging 3.3x from 2006 to 2010. 6 1 This 2010 number is materially distorted by the profit proceeds accrued from the sale of Vodacom, which amounted to approximately R44 billion. This was reflected in Telkom’s profit numbers.

7 Major Public Entities 5 Year Global Analysis  Taxation paid has shown an erratic trend, with a negative CAGR of -3.2%, levelling off at R8.4 billion in 2010.  Dividend payments increased by a CAGR of 22.3% from 2006 to 2010, accruing to R11.7 billion in 2010 and averaged R6.3 billion over the 5 year period.  The Majors’ cash position has significantly increased from R43.4 billion in 2006 to R61.7 billion in 2010, growing by a CAGR of 9.2%. This may be distorted by the Vodacom unbundling proceeds.  Global cash flows from operating activities have been positive, though growth has trended downwards with a -12.7% CAGR from 2006 to 2010.  Government subsidies have grown by a CAGR of 10.3% from 2006 to 2010, however, even in 2010, they remain below R1 billion. Government subsidies as a percentage of revenue have been relatively constant at an average of 0.4% from 2006 to 2010, also remaining below R1 billion.  On the other hand, Government guarantees have grown by a CAGR of 89% from R16.6 billion in 2006 to R211 billion in 2010.  Total employee numbers have generally remained constant, with a slight negative CAGR of -2.1% from 2006 to 2010.  Contrariwise, revenues per employee have shown a steady and slight upward trend growing by a CAGR of 9.3% from 2006 to 2010. This is a meaningful number since it includes employee data for all the largest entities including ACSA, Eskom, SAA, South African Post Office, Telkom and Transnet. 7

8 Air Traffic & Navigation Services Company Limited Sector: Transport 8

9  2010 Revenue: R737 million  2010 Total Assets: R1.3 billion  2010 Audit Opinion: Unqualified  Steady increase in revenue growing at a CAGR of 7.8% from 2006 to 2010.  In the same period, steep decline in net profit margins from 18% to 6.4%.  Overall liquidity & solvency status has been precarious, with an average current ratio of 1.1x from 2006 to 2010, dipping below 1.0x in the years 2007 & 2008.  Significant decline in the ability to cover interest payments from 21.5x in 2006 to 3.3x in 2010.  Debt Service Coverage Ratio has been erratic with from 3.9x in 2006 to 2.9x in 2010, with an average of 0.4x.  Taxation paid has declined from R37 million to R19 million from 2006 to 2010, despite the reverse trend in revenues.  Zero dividends declared for the last 5 years. 9

10  Healthy average gearing ratio for the last 5 years of 0.6x.  Although positive operating cash flow for the past 5 years the cash balance has decreased by a CAGR of -15.7%.  Capital expenditures have increased by a modest CAGR of 2.4%, leveling off at R147 million.  Zero Government subsidies.  Zero Government guarantees.  Consistently increased its asset base by a CAGR of 9.1%, with a corresponding decrease in ROA from 3% in 2006 to 1% in 2010.  Employee information: No data.  For the period 2008 to 2010, 9 Key Performance Indicators (KPI) identified, 4 were not achieved.  Management of transport costs and infrastructure contribution to ASGISA were consistently not achieved in all 3 years. Air Traffic & Navigation Services Company Limited Sector: Transport 10

11 Airports Company of South Africa Limited (ACSA) Sector: Transport 11

12 Airports Company of South Africa Limited (ACSA) Sector: Transport  2010 Revenue: R3.5 billion  2010 Total Assets: R27.9 billion  2010 Audit Opinion: Unqualified  Consistent increase in revenue growing at a healthy CAGR of 12.9% from 2006 to 2010.  Net profit margins of 25.5% in 2010, with a sharp decrease in margins in 2009. ACSA generated average net profit margins of 24.4% for the period 2006 to 2010.  Overall liquidity status is poor, with an average current ratio of 0.5x from 2006 to 2010, however the average solvency ratio of 1.9x is satisfactory.  Declining interest coverage ratio from 8.3x in 2006 to 2.3x in 2010.  Poor levels of DSCR ranging from -1.0x to -.04x from 2006 to 2010.  Taxation paid has shown a declining trend, with a negative 25.7% CAGR from 2006 to 2010, leveling off at R94.2 million in 2010.  Last dividend paid in 2007 amounting to R136 million. No dividends declared thereafter. 12

13  Average gearing ratio for the last 5 years of 1.4x with a steady incline in gearing from 0.6x in 2006 to 2.1x in 2010..  Operating cash flow have remained fairly stagnant growing at mere CAGR of 3%. Of more concern is the decline the cash balance from R1.4 billion in 2006 to R433 million in 2010.  This is possibly be explained by robust capital expenditure increasing by a CAGR of 48% from R1.3 billion in 2006 to R5.2 billion in 2010.  Zero Government subsidies.  Zero Government guarantees.  Consistently increased its asset base by a CAGR of 29%, with a decrease in ROA from 2% in 2006 to 1% in 2010.  An increase in the number of employees from 1,804 in 2006 to 2,225 in 2010 with a corresponding 7% positive CAGR in revenue per employee.  8 KPIs identified from 2008 to 2010, of which 4 were not achieved.  Failure to conduct aviation security audits was consistent in all 3 years. Airports Company of South Africa Limited (ACSA) Sector: Transport 13

14 Alexkor Limited Sector: Mining 14

15 Alexkor Limited Sector: Mining  2010 Revenue: R164 million  2010 Total Assets: R657 million  2010 Audit Opinion: Unqualified with emphasis of matter  Although revenue grew by 29% in 2010, historically revenue has been volatile with a meager 1.4% CAGR from 2006 to 2010.  Net profit margin increased from -50.4% in 2009 to 21.9% in 2010, it has also been volatile over the last 5 years with an average net profit margin of -31.2%.  Although the current ratio has decreased from 3.7x in 2006 to 1.6x in 2010, liquidity still remains robust. However; the decrease in the solvency ratio from 1.7x in 2006 to 0.9x in 2010 is of concern.  The Company has tremendously improved its ability to cover interest payments; achieving a coverage ratio of 1.9x in 2010 from -12.3x in 2009.  2006 DSCR data appears statistically irrelevant, though it has dramatically improved to 1.3x in 2010.  Taxes Paid: No meaningful trend data.  Zero dividends declared for the last 5 years. 15

16  Poor average gearing ratio for the last 5 years of -7.7x.  Although the cash balance has increased at a CAGR of 85% from 2006 to 2010, it is of concern that operating cash flows average R-18 million over the same period, leveling off at a positive R8 million in 2010.  Capital expenditure trends have shown a U- shaped trend, leveling off at R4.5 million in 2010.  Zero Government subsidies.  Zero Government guarantees.  The asset base grew by a CAGR of 5% over the last 5 years, however the ROA has averaged a disappointing -2% for the same period.  Increasing revenues per employee from R84 million in 2006 to R213 million in 2010, largely attributable to a decrease in the number of employees from 1,850 in 2006 to 770 in 2010.  For the period 2008 to 2010, 35 KPIs were identified, with 11 not achieved.  The exiting of non core assets was the major common KPI that was not achieved over the same period. Alexkor Limited Sector: Mining 16

17 Armaments Corporation of South Africa Limited Sector: Other – Defense and Military 17

18 Armaments Corporation of South Africa Limited Sector: Other – Defense and Military  2010 Revenue: R1.1 billion  2010 Total Assets: R817 million  2010 Audit Opinion: Unqualified with emphasis of matter  Stagnant revenue growth evidenced by a CAGR of 0% from 2006 to 2010.  A steep decline in net profit margins from 1.4% in 2006 to -1.4% in 2010.  Liquidity & solvency metrics have generally been decent over the last 5 years, however the current ratio has dipped below 2x in 2010.  Interest Coverage Ratio show an alarming swing from 24.7x in 2009 to -34.5x in 2010.  Debt Service Coverage Ratios have shown an improving trend from 5.9x in 2009 to 8.5x in 2010.  Taxes paid: Zero.  Zero dividends declared for the last 5 years. 18

19  Steady average gearing ratio for the last 5 years of 0.5x.  The cash balance has increased steadily at a CAGR of 8.7% from 2006 to 2010, supported by an average positive operating cash flow generation of R38.5 million for the same period.  Capital expenditure has shown steady increases from R14.8 million in 2006 to R26.6 million in 2010.  Average Government subsidies of R417 million for the period 2006 to 2010, representing 30% of revenue generated during the corresponding period.  Zero Government guarantees.  The asset base has increased by a CAGR of 7% for the past 5 years, however ROA has decreased sharply from a peak of 2% in 2007 to 0% in 2010.  Number of employees has increased from 952 in 2008 to 1,324 in 2010. Revenue per employee has declined by a GAGR of 26% in the same period.  For the period 2008 to 2010, 34 KPIs were identified, 11 were not achieved.  Acquisition, support, maintenance and servicing of defense material and technology being chief amongst these. Armaments Corporation of South Africa Limited Sector: Other – Defense and Military 19

20 Broadband Infrastructure Company (Pty) Ltd Sector: Communications 20

21 Broadband Infrastructure Company (Pty) Ltd Sector: Communications  2010 Revenue: R306 million  2010 Total Assets: R1.7 billion  2010 Audit Opinion: Unqualified  Revenue growth at a CAGR of 65% from 2008 to 2010.  In the same period, steep decline in net profit margins from 20.1% to -9.2%.  Strong liquidity & solvency with an average current ratio of 7.1x and an average solvency ratio of 11.8x from 2008 to 2010.  Sharp decrease in the ability to cover interest payments from 1.1x in 2008 to -19.9x in 2010.  This is corroborated by a rapidly declining and abysmal DSCR of -291.3x in 2010.  Taxes paid declined from R10 million in 2008 to a tax credit of –R11.5 million in 2010.  Zero dividends declared for the last 3 years. 21

22  Improved gearing ratio from 1.1x in 2008 to 0.1x in 2010.  A healthy cash balance and positive operating cash flows averaging R539 million and R56 million respectively over for the past 3 years.  Capital expenditure has declined from R612 million in 2008 to R245 million in 2010.  Zero Government subsidies.  Zero Government guarantees.  An increase in its asset base by a CAGR of 14% from 2008 to 2010.  Zero ROA.  Employee information: No data.  For the period 2009 to 2010, 8 KPIs identified, 4 were not achieved.  Major areas of non achievement include: failure to restore networks timeously, lack of network availability, failure to meet targets of bringing projects to commercial operation and failure in meeting revenue targets. Broadband Infrastructure Company (Pty) Ltd Sector: Communications 22

23 Central Energy Fund (PTY) Ltd 1 Sector: Energy 1 PetroSA, as the largest company under the purview of the CEF, accounted for 95% of revenue, 71% of total assets and 79% of total liabilities in the 2010 financial year, according to the Company’s financial statements. 23

24 Central Energy Fund (PTY) Ltd Sector: Energy  2010 Revenue: R8.6 billion  2010 Total Assets: R33 billion  2010 Audit Opinion: Unknown  2009 Audit Opinion: Unqualified with emphasis of matter  Although revenue grew at a CAGR of 3% for the period 2006 to 2010, revenue decreased significantly in 2010 by 31%.  A consistent decline in net profit margins from 37% in 2006 to -1% in 2010.  Strong liquidity & solvency position evidenced by an average current ratio of 7.8x and an average solvency ratio of 3.7x.  Steep decline in the interest coverage ratio from 22.7x in 2006 to -3.3x in 2010, along with a reduction in the debt service coverage ratio from 13.8x in 2006 to -0.9x in 2010.  Taxation paid has been extremely erratic, peaking at R695 million in 2008 and leveling off at a tax credit of R293 million in 2010.  Zero dividends declared for the last 5 years. 24

25  Robust gearing ratio over the last 5 years with an average of 0.4x.  Positive operating cash flow though has declined from R4.8 billion in 2006 to R413 million in 2010, a -46% CAGR, however the cash balance has grown by a CAGR of 5.8% in the same period, to R15.3 billion in 2010.  Capital expenditure has remained relatively constant averaging R1.5 billion from 2006 to 2010.  Zero Government subsidies.  Government guarantees for 2010 amount to R318 million, decreasing from a peak of R735 million in 2006.  A sharp decline in ROA from 3% in 2006 to 0% in 2010, as a result of a decrease in profitability and an increase in the asset base by a CAGR of 12% over the same period.  Employee information: No data.  For the period 2008 to 2010, 13 KPIs were identified, 10 were not achieved.  Major areas of non-achievement include: contribute towards renewable energy targets, development of human capacity & investment in relevant energy research, including alternative clean technology initiatives. Central Energy Fund (PTY) Ltd Sector : Energy 25

26 Denel (Pty) LTD Sector: Industrial 26

27 Denel (Pty) LTD Sector: Industrial  2010 Revenue: R3.6 billion  2010 Total Assets: R5.1 billion  2010 Audit Opinion: Unqualified with emphasis of matter  Revenue growth has been fairly stable over the past 5 years, growing at a strong CAGR of 7% during this period.  Although net profit margin improved drastically from -47.3% in 2006 to -6.8% in 2010, it remains a concern.  Liquidity and solvency status is poor with average current ratio and solvency ratios of 0.9x and 1.2x respectively  The ability to cover interest and debt repayments is weak with an interest coverage ratio and DSCR of -0.9x and -0.1x respectively, in 2010.  Taxation paid has been erratic, averaging R16.7 million from 2006 to 2010.  Zero dividends declared for the last 5 years.  The entity is highly geared with a gearing ratio 6.9x in 2010 and averaging 5.4x from 2006 to 2010. 27

28 Cash balance has grown from R730 million in 2006 to R1 billion in 2010. Capital expenditure has averaged R199 million from 2006 to 2010, declining by a CAGR of 9.5% over the same period. Zero Government subsidies. Government guarantees provided from 2006 to 2010 averaged R1.1 billion. The asset base has grown slightly by a CAGR of 2%, which has assisted in an improvement in ROAs from -7.0% in 2006 to -1.0% in 2010. Staff complement has decreased from 8,850 in 2006 to 5,090 in 2010, allowing revenue per employee to increase by a CAGR of 18% in the same period. 56 KPIs identified between 2008 and 2010, of which 9 were not achieved. The most critical of these being: failure in improving debtor collection periods, liquidity ratios and GP margins. Denel (Pty) LTD Sector: Industrial 28

29 Development Bank of Southern Africa Sector: Financial Services 29

30 Development Bank of South Africa Sector: Financial Services  2010 Revenue: R3.6 billion  2010 Total Assets: R45 billion  2010 Audit Opinion: Unqualified with emphasis of matter  Revenue has grown steadily at a CAGR of 13% from 2006 to 2010.  In the same period, net profit margin has declined drastically from 41.4% to 17.3%, with the big drop-off occurring in 2010.  The liquidity position is robust with an average current ratio of 2.3x from 2006 to 2010, however the solvency ratio has decreased from 2.0x in 2006 to 1.7 x in 2010.  The ability to cover interest and debt repayments is weak and showing a declining trend, with an interest coverage ratio and DSCR of 0.5x and 0.7x respectively, in 2010.  Zero taxes paid from 2006 to 2010.  Zero dividends declared for the last 5 years.  Although gearing has increased from a ratio of 1x in 2006 to 1.5x in 2010, it remains healthy. 30

31  Although operating cash flows have been positive over the last 5 years, they have decreased by 8% from R621 million in 2006 to R451 million in 2010, however the cash balance has grown by a CAGR of 17% in the same period, to R2.7 billion in 2010.  Capital expenditure has increased by a CAGR of 30% from 2006 to 2010, to a level of R92 million in 2010.  Zero Government subsidies.  Zero Government guarantees.  The asset base has grown by a CAGR of 14% from R26 billion in 2006 to R45 billion in 2010.  For the same period ROA has decreased from 1% in 2006 to 0% in 2010.  Staff complement: 578 in 2008 with revenue per employee of R4.9 million.  25 KPIs identified between 2008 and 2010, of which 9 were not achieved.  Major areas of non-achievement include: failure to reduce cost to income ratio, maintain staff competency levels and to provide assistance for client social and economic infrastructure. Development Bank of South Africa Sector: Financial Services 31

32 Eskom Sector: Energy 32

33 Eskom Sector: Energy  2010 Revenue: R71 billion  2010 Total Assets: R246 billion  2010 Audit Opinion: Unqualified  Revenue has grown by a healthy CAGR of 19% from 2006 to 2010.  Although net profit margin has increased from -18% in 2009 to 5.1% in 2010, it is low when compared to a margin of 12.3% in 2006 and 18% in 2007.  The solvency status is satisfactory, with an average solvency ratio of 1.6x for the period 2006-2010, however the liquidity position is poor with an average current ratio of 1.3x for the same period.  The interest coverage ratio improved from -2.7x in 2009 to 2.5x in 2010, however the DSCR of -2.9x is of concern.  Taxation paid in 2010 was R2 billion, though has been erratic from 2006 to 2010.  Zero dividends declared for the last 5 years.  Deteriorating gearing ratio from 1.5x in 2006 to 2.5x in 2010, with an average 1.9x over the period. 33

34  Positive operating cash flows averaging R11.4 billion for the past 5 years, facilitating an increase in the cash balance from R10 billion in 2006 to R15.5 billion in 2010.  Capital expenditure has increased by a CAGR of 46% from 2006 to 2010, leveling off at R48 billion.  A government subsidy of R149 million was provided to Eskom in 2009.  Government guarantees provided from 2006 to 2010 averaged R70 billion, peaking at R176 billion in 2009 and 2010.  The asset base has grown by a CAGR of 18% from R128 billion in 2006 to R246 billion in 2010.  For the same period ROA has decreased from 1% in 2006 to 0% in 2010.  Staff complement has increased by 4% from 31,548 in 2006 to 39,222, however revenue per employee has also increased over the period by a CAGR of 12%.  59 KPIs identified between 2008 and 2010, of which 25 were not achieved.  Major areas of non-achievement include: transmission system minutes lost, generation unplanned capacity lost, capital expansion, financial efficiency and infrastructure and capital expenditure. Eskom Sector: Energy 34

35 Independent Development Trust Sector: Development / Public Works 35

36 Independent Development Trust Sector: Development / Public Works  2010 Revenue: R37 million  2010 Total Assets: R731million  2009 & 2010 Audit Opinion: No data  Revenue has increased by a CAGR of 55% from 2006 to 2010.  Net profit margins have dramatically decreased from -240% in 2006 to -863% in 2010.  The solvency status has also dramatically deteriorated from 73x in 2006 to 14.4x in 2010, yet the liquidity position has improved substantially from 3.0x to 11.2x in the same period.  The interest coverage ratio has dramatically decreased from -11x to -1487x, in the same vein, DSCR declined from 19.7x to -14x from 2006 to 2010.  Zero taxation paid from 2006 to 2010.  Zero dividends declared for the last 5 years.  Neutral and low gearing ratio over the 2006 to 2010 period, averaging 0x. 36

37  Negative and consistently declining operating cash flows from R-19 million in 2006 to R-291 million in 2010, as a result of this the cash balance has decreased at a CAGR of -42%.  Capital expenditure has increased by a CAGR of 36% from 2006 to 2010, leveling off at R8.9 million in 2010.  Zero Government guarantees.  Zero Government subsidies.  The asset base has declined by a CAGR of -18%.  For the same period ROA has decreased from 0% in 2006 to -11% in 2010.  Staff complement was 353 in 2007.  7 KPIs identified between 2008 and 2010, of which all were achieved. Independent Development Trust Sector: Development / Public Works 37

38 Independent Development Corporation of South Africa Limited (IDC) Sector: Development 38

39 Industrial Development Corporation of South Africa Limited (IDC) Sector: Development  2010 Revenue: R8 billion  2010 Total Assets: R89 billion  2010 Audit Opinion: Unqualified  Revenue increased by a CAGR of 15% from 2006 to 2010.  Net profit margins have dramatically declined from a peak of 84% in 2007, though respectable at a level of 29% in 2010.  The solvency status is strong and has improved from 5.3x in 2008 to 9.8x in 2010.  Solid liquidity ratio averaging 2.0x from 2006 to 2010.  The interest coverage ratio is at a healthy 3.8x in 2010, though it has declined from a high of 9.3x in 2009.  Steep decline in DSCR from 4.1x in 2006 to -3.9x in 2010.  Though erratic (underlying investments), average taxes paid from 2006 to 2010 were R245.8 million.  Steady increase in dividends paid, averaging R86 million from 2006 to 2010.  Low gearing ratio of 0.1x in 2010, averaging 0.2x from 2006 to 2010. 39

40  Cash balance has decreased slightly by a CAGR of 5.3% from 2006 to 2010, although the company has generated average positive operating cash flows of R1.5 billion over the same period.  Capital expenditure has been robust, averaging R1.9 billion from 2006 to 2010.  Government guarantees have grown by a CAGR of 54% from 2006 to 2010, leveling off at R2.3 billion in 2010.  Zero Government subsidies.  The asset base has grown by a CAGR of 16.5% from 2006 to 2010.  For the same period, ROA has averaged a disappointing 1.2%.  Staff complement increased from 2,950 in 2006 to 2,963 in 2007 with a corresponding increase in revenue per employee from R1.5 million in 2006 to R1. 7 million in 2007.  No performance information available for analysis. Industrial Development Corporation of South Africa Limited (IDC) Sector: Development 40

41 Land and Agricultural Development Bank of South Africa Sector: Financial Services 41

42 Land and Agricultural Development Bank of South Africa Sector: Financial Services  2010 Revenue: R1.8 billion  2010 Total Assets: R16.9 billion  2010 Audit Opinion: Unqualified with emphasis of matter  Revenue increased by a CAGR of 2% from 2006 to 2010.  Net profit margins have dramatically improved from 0.9% to 20.2% for the 2006 to 2010 period.  Solvency has improved from 1.1x in 2006 to 1.3x in 2010.  Liquidity ratios have averaged 0.3x from 2006 to 2010.  The interest coverage ratio: Zero.  The DSCR declined from 1.4x in 2006 to 0.0x in 2010.  Zero taxes paid from 2006 to 2010.  Zero dividends paid from 2006 to 2010.  Gearing ratio has dramatically improved from 10.4x in 2006 to 3.6x in 2010. 42

43  Declining operating cash flows from 2006 to 2010. 2010 cash flows were -R279 million. Similarly, there is a decline in the cash balance by a CAGR of -3.2% from 2006 to 2010.  Capital expenditure has averaged R21 million from 2006 to 2010.  Government guarantees averaged R1.4 billion from 2006 to 2010.  Zero Government subsidies.  The asset base has declined by a CAGR of -4%.  For the same period ROA has improved from 0% in 2006 to 1% in 2010.  2010 staff complement of 575 people.  2010 revenue per employee was R3 million.  13 KPIs identified of which 4 were not achieved.  These included: loan book quality, growth in value of loans and stabilisation and sustainability of the turnaround plan. Land and Agricultural Development Bank of South Africa Sector: Financial Services 43

44 South African Airways (Pty) Limited Sector: Transport 44

45 South African Airways (Pty) Limited Sector: Transport  2010 Revenue: R22 billion  2010 Total Assets: R14 billion  2010 Audit Opinion: Unqualified with emphasis of matter  Relatively flat revenue growth of 3.5% CAGR from 2006 to 2010 and showing a decline of 16% in the most recent period.  Erratic net profit margins averaging -1.0% from 2006 to 2010, though recently rebounded well from -4.9% in 2008 to 2.6% in 2010.  Both current & solvency ratios are consistently below 2x, averaging 0.8x and 1.1x respectively.  Though demonstrating an upward trend, interest coverage ratios have been inconsistent, with a weak 2006 – 2010 average of 0.1x.  Erratic DSCRs averaging 1.2x from 2006 to 2010.  Taxation paid has been erratic with an average R15 million from 2006 to 2010.  Dividends have increased from R137 million in 2008 to R233 million in 2010. 45

46  Steep gearing ratio of 12.6x in 2010 and averaging 8.7x from 2006 to 2010.  Generally positive operating cash flow except in 2009, further evidenced by a growth in the cash balance by a CAGR of 24% for the last 5 years.  Capital expenditure generally trending upwards, with an average of R375 million from 2006 to 2010.  Zero Government subsidies.  Government guarantees have averaged R1.7 billion over the past 5 years, peaking at R2.9 billion in 2008 & 2009.  Steady maintenance of its asset base with meaningful improvements in ROA from a 2007/8 low of -2% to 1% in 2010.  From a base of 11,524, staff complement has decreased by 30% from 2006 to 2010. In the same period, revenues per employee have improved from R1.7 million to R2.8 million.  For the period 2008 to 2010, 20 Key KPIs were identified, of which 13 were not achieved. Passenger load factors, average fare per passenger, turnover per aircraft and daily block hours being chief amongst these. South African Airways (Pty) Limited Sector: Transport 46

47 South African Broadcasting Corporation (SABC) Limited Sector: Communications 47

48 South African Broadcasting Corporation (SABC) Limited Sector: Communications  2010 Revenue: R4.7 billion  2010 Total Assets: R4.6 billion  2010 Audit Opinion: No data  2009 Audit Opinion: Unqualified  5% CAGR in revenue from 2006 to 2010.  Dramatic decline in net profit margins from 9.7% in 2006 to -10.4% in 2010.  Respectable though declining current & solvency ratios averaging 2.0x and 2.0x respectively from 2006 to 2010.  Steep decline in interest coverage from 42.5x in 2006 to -2.5x in 2010. Similarly, DSCR has declined from 2.5x in 2006 to -2.6x in 2010.  Taxation paid has shown a declining trend, averaging R33.9 million from 2006 to 2010.  Zero dividends paid from 2006 to 2010.  Deteriorating gearing ratio from 0.7x in 2006 to 3.3x in 2010, with an average 1.5x over the period. 48

49  Decline in operating cash flow from R615 million in 2006 to -R215 million in 2010. In the same period, the cash balance has also declined by CAGR of -5.7%.  Capital expenditure has shown an increasing trend, growing by a CAGR of 20% from 2006 to 2010, leveling off at R409 million in 2010.  Zero Government guarantees.  Zero Government subsidies.  Asset base has grown by an 8.7% CAGR from 2006 to 2010.  In the same period, ROA has declined from 3.0% to -3.0%.  Staff complement: No data.  For the period 2008 to 2010, 50 KPIs were identified with 10 not being achieved  Major areas of non-achievement include: financial stability, reducing reliance on commercial revenue through increased public funding, investing in capacity building, optimising TV licence funding and balancing mandate delivery with commercial imperatives by being cost effective. South African Broadcasting Corporation (SABC) Limited Sector: Communications 49

50 South African Express (Pty) Limited Sector: Transport 50

51 South African Express (Pty) Limited Sector: Transport  2010 Revenue: R1.6 billion  2010 Total Assets: R1.7 billion  2010 Audit Opinion: Unqualified with emphasis of matter  14% CAGR in revenue from 2006 to 2010.  Relatively stable net profit margins averaging 15% from 2006 to 2010 with a 3% decline over the period.  Respectable and improving current & solvency ratios from 1.0x to 2.9x and 0.8x to 3.5x respectively from 2006 to 2010.  Dramatic improvements in interest coverage ratios from 2.2x in 2006 to 56.9x in 2010.  Dramatic improvement in DSCR from 0.4x in 2006 to 9.7x in 2010.  Steady increases in taxation paid, averaging R57 million from 2006 to 2010.  Zero dividends paid.  Improving gearing ratio from 5.4x in 2007 to 0.4x in 2010. 51

52  Improving operating cash flow from operations from –R80 million in 2006 to R135 million in 2010. With that said, operating cash flows peaked at R471 million in 2008.  Similarly the cash balance has increased from R6 million in 2006 to R74 million in 2010.  Capital expenditure has increased by a CAGR of 55% from 2006 to 2010, leveling off at R185 million in 2010.  Zero Government guarantees.  Zero Government subsidies.  Asset base has grown by a 14% CAGR from 2006 to 2010.  In the same period, ROA has remained relatively flat, averaging 4% over the period 2006 to 2010.  Staff complement has grown by a CAGR of 13% from 2006 to 2010 with 931 employees in 2010.  In the same period, revenues per employee have remained within a band of R1.6 million to R1.8 million from 2006 to 2010.  Key Performance Indicators: No measurable data available. South African Express (Pty) Limited Sector: Transport 52

53 South African Forestry Company Limited (SAFCOL) Sector: Other 53

54 South African Forestry Company Limited (SAFCOL) Sector: Other  2010 Revenue: R432 million  2010 Total Assets: R3.8 billion  2010 Audit Opinion: Unqualified  Declining revenue at a CAGR of -13% from 2007 to 2010.  Dramatic year-on-year erosion of net profit margins from 122.5% in 2007 to -5% in 2010.  Improving current and solvency ratios averaging 5.7x and 4.0x respectively from 2007 to 2010.  Declining interest coverage ratios from 556x in 2007 to -1800x in 2010.  Dramatically declining DSCR from 13.3x in 2007 to -99.5x in 2010.  Taxation paid averaged R136 million from 2007 to 2010, ending with a tax credit of R120 million in 2010.  Zero dividends paid from 2006 to 2010.  Low and relatively flat gearing ratio averaging 0.3x from 2007 to 2010. 54

55  Operating cash flow has declined from a surplus of R140 million in 2007 to a shortfall of R117 million in 2010, amounting to a -194% CAGR.  In the same period the cash balance has decreased by a CAGR of -28%, R126 million in 2010.  Capital expenditure has averaged R58 million a year from 2007 to 2010.  Asset base has grown by an 11% CAGR from 2007 to 2010.  In the same period, ROA has dramatically declined from 7% in 2006 to 0% in 2010.  Zero Government guarantees.  Zero Government subsidies.  Staff complement has grown by a modest 2.5% CAGR from 2007 to 2010, with 2,120 employees in 2010.  In the same period, revenues per employee have declined by -15% CAGR, averaging R325k from 2007 to 2010.  15 KPIs identified between 2008 and 2010, of which 3 were not achieved.  The most critical of these being SAFCOL’s failure to meet short and long term financial and commercial sustainability. South African Forestry Company Limited (SAFCOL) Sector: Other 55

56 South African Nuclear Energy Corporation Limited Sector: Energy 56

57 South African Nuclear Energy Corporation Limited Sector: Energy  2010 Revenue: R1.5 billion  2010 Total Assets: R1.5 billion  2010 Audit Opinion: Unqualified with emphasis of matter  Robust revenue growth at an impressive 26% CAGR from 2006 to 2010.  Dramatic improvement in net profit margins from -0.2% in 2006 to 10.8% in 2010.  Improving current and solvency ratios averaging 1.6x and 1.1x respectively from 2006 to 2010.  Improving, though erratic interest coverage ratio from 0.2x in 2006 to 7.8x in 2010. On average interest coverage has been 5.7x over the same period.  Relatively flat DSCR, averaging 4.1x from 2006 to 2010.  Taxation paid has increased strongly, averaging R29 million from 2007 to 2010.  Zero dividends paid from 2006 to 2010.  Dramatically improved gearing ratio falling from a peak of 194x in 2008 to 1.7x in 2010. 57

58  Operating cash flow and the cash balance have dramatically increased at a CAGR of 20% and 34% respectively from 2006 to 2010.  Capital expenditure has increased from R35 million in 2006 to R90 million in 2010, a 27% CAGR.  Asset base has grown by 35% CAGR from 2006 to 2010.  In the same period, ROA has improved from 0% in 2006 to 3% in 2010.  Zero Government subsidies.  Government guarantees have increased by a CAGR of 133% from 2007 to 2010, where they are currently at R2 million.  Staff complement has increased from 1,521 in 2006 to 2,113 in 2010.  In the same period, revenues per employee have increased by a CAGR of 13%.  33 KPIs identified between 2008 and 2010, of which 13 were not achieved.  The most critical of these being: poor investment and upgrading of infrastructure, shortage of technical and research staff, poor R&D capabilities and poor management of nuclear waste disposal. South African Nuclear Energy Corporation Limited Sector: Energy 58

59 South African Post Office Limited Sector: Communications 59

60 South African Post Office Limited Sector: Communications  2010 Revenue: R5.2 billion  2010 Total Assets: R9.3 billion  2010 Audit Opinion: Unqualified  Steady revenue growth at a 6% CAGR from 2006 to 2010.  Net profit margin erosion from 11.3% in 2006 to 5.4% in 2010.  Improving liquidity and solvency ratios increasing from 1.0x to 1.2x and 1.2x to 1.3x respectively from 2006 to 2010.  Erratic and declining interest coverage ratio averaging 6.2x from 2006 to 2009.  Declining DCSR ratio from 2.6x in 2006 to -14.8x 2010 and averaging -1.8x from 2006 to 2010.  Taxation paid declined by a CAGR of 23.8%, averaging R128 million from 2006 to 2010.  Zero dividends paid in the past 5 years.  Improving gearing ratio from 5.1x in 2006 to 3.2x in 2010. 60

61  Operating cash flow has remained positive from 2006 to 2010, increasing by a 12% CAGR. The cash balance has grown by a CAGR of 14%.  Capital expenditure has remained relatively flat, averaging R173 million from 2006 to 2010.  Asset base has grown by a 15% CAGR from 2006 to 2010, to a quantum of R9.3 billion.  In the same period, ROA has declined from 2% in 2006 to 1% in 2010.  Government subsidies have remained relatively stable, averaging R354 million and 7.5% of revenues over the 5 year period.  Government guarantees have decreased from R39 million in 2006 to R8 million in 2010.  Staff complement has remained relatively stable increasing by a CAGR of 3%. From 2006 to 2010.  Similarly and in the same period, revenues per employee have increased by a CAGR of 3%.  18 KPIs were identified with 4 not being met.  These included decreasing fraud and crime, improving the social environment and improving and strengthening the income statement and balance sheet. South African Post Office Sector: Communications 61

62 Telkom SA Limited Sector: Communications 62

63 Telkom SA Limited Sector: Communications  2010 Revenue: R37 billion 1  2010 Total Assets: R57 billion  2010 Audit Opinion: Unqualified with emphasis of matter  Revenue has declined by a CAGR of -6% from 2006 to 2010.  Dramatic increase in net profit margins from 20% in 2006 to 100% in 2010.  While liquidity is weak at an average of 0.8x from 2006 to 2010, solvency is generally respectable and improving at 2.1x in 2010.  Dramatic improvements in already strong interest coverage ratios from 11.0x in 2006 to 33x in 2010.  Improving DSCR from 0.7x in 2006 to 4.3x in 2010.  Taxation Paid has taken a U shaped trend, averaging R3.2 billion from 2006 to 2010.  R11.4 billion paid in dividends in 2010, increasing by a CAGR of 24% from 2006 to 2010.  Relatively stable gearing ratio, averaging a respectable 1.1x times from 2006 to 2010.  Improved operating cash flow from R9.5 billion in 2006 to R11.4 billion in 2009 with a significant decline to -R3.3 billion in 2010. 63 1 This 2010 number is materially distorted by the profit proceeds accrued from the sale of Vodacom, which amounted to approximately R44 billion. This is reflected in Telkom’s profit numbers.

64  Although showing a negative CAGR of -6% for the last 5 years, the cash balance has steadily increased from R749 million in 2007 to R3.9 billion in 2010.  Capital expenditure has been robust, averaging R9.4 billion from 2006 to 2010.  Dramatic decrease in Government guarantees from R4.3 billion in 2006 to R109 million in 2010.  Zero Government subsidies.  Asset base has generally increased over the 5 year period with a decline in 2010, resulting in a -0.3% decline in CAGR from 2006 to 2010.  In the same period, ROA has dramatically improved from 4% in 2006 to 17% in 2010.  Staff complement has shrunk by a CAGR of -5%. 2010 employees amounted to 25,274.  In the same period, revenues per employee remained relatively flat declining by a CAGR of -0.6%.  15 KPIs were identified with 1 not being achieved from 2008 to 2010. Namely, growing profitable revenue internationally. Telkom SA Limited Sector: Communications 64

65 Trans-Caledon Tunnel Authority Sector: Water 65

66 Trans-Caledon Tunnel Authority Sector: Water  2010 Revenue: R2.8 billion  2010 Total Assets: R24.7 billion  2010 Audit Opinion: Unqualified  Revenue has increased by a CAGR of 12% from 2006 to 2010.  Increasing net profit margins though still negative averaging -12% from 2006 to 2010.  Weak liquidity and solvency positions averaging 0.5x and 0.9x respectively from 2006 to 2010.  Relatively flat though strained interest coverage ratios averaging 0.7x from 2006 to 2010.  Weak DSCR averaging 0.1x from 2006 to 2010.  Zero taxation paid from 2006 to 2010.  Zero dividends paid in the same period.  Dramatically declining and very weak gearing ratios averaging -6.8x from 2006 to 2010. 66

67  Negative cash flow from operating activities averaging -R436 million, corroborated by a decline in the cash balance to zero in 2010 from R16 million in 2009.  Capital expenditure has been erratic, averaging R694 million from 2006 to 2010.  Government guarantees amounted to R27 billion in 2009 and 2010.  Zero Government subsidies.  Asset base has increased by a CAGR of 10% from 2006 to 2010.  In the same period, ROA has improved from -1% in 2006 to 0% in 2010.  Staff complement: No data.  1 KPI was identified and not achieved. Namely, to deliver on directives in an efficient manner in accordance with key stakeholder expectations. Trans-Caledon Tunnel Authority Sector: Water 67

68 Transnet Limited Sector: Transport 68

69 Transnet Limited Sector: Transport  2010 Revenue: R36 billion  2010 Total Assets: R139 billion  2010 Audit Opinion: Unqualified with emphasis of matter  Revenue has increased at a CAGR of 8% from 2006 to 2010.  Declining net profit margins from 17% in 2006 to 8.6% in 2010.  While liquidity is stable at an average of 1.0x from 2006 to 2010, solvency is generally stronger averaging 1.9x in the same period.  Respectable, though declining interest coverage ratio averaging 3.6x from 2006 to 2010.  Declining DSCR from 0.8x in 2006 to -0.7x in 2010.  Taxation paid has been consistent, averaging R2 billion from 2006 to 2010.  Zero dividends paid from 2006 to 2010.  Improving gearing ratio from 1.8x in 2006 to 1.2x in 2010. 69

70  Improved operating cash flow levels increasing by a CAGR of 20% from 2006 to 2010 to a quantum of R12 billion. Similarly, the cash balance has improved by a CAGR of 54.2% over the same period, to R8 billion.  Capital expenditure has increased from R1.8 billion in 2006 to R9.6 billion in 2010.  Zero Government guarantees.  Zero Government subsidies.  Asset base has increased by a CAGR of 16% from 2006 to 2010.  In the same period, ROA has remained flat averaging 1.2% from 2006 to 2010.  Staff complement has shrunk by a CAGR of -6% from 2006 to 2010. 2010 employees amounted to 45,564.  In the same period, revenues per employee improved substantially, increasing by a CAGR of 15%.  23 KPIs were identified with 5 not being achieved from 2008 to 2010. Consistently through the period, the major failure included delivering directives in an efficient manner for all stakeholders. Transnet Limited Sector: Transport 70

71 Sector Education & Training Authority (SETAs)

72 Sector Education and Training Authorities 5 Year Global Analysis 72

73 Sector Education and Training Authorities 5 Year Global Analysis  All Sector Education and Training Authorities (SETAs) in Schedule 3a of the KPMG report received an average of R4.9 billion in grants from 2006 to 2010. This amounted to an average of 0.2% of GDP for the same period. A total of 23 entities are listed in the KPMG database which is in line with the Standard Industrial Classification (SIC) for SETAs.  Total grants received grew by a CAGR of 4.4% from 2006 to 2010.  Total assets grew by a CAGR of 4.9% from R4.1 billion in 2006 to R5 billion in 2010.  Contrarily, total liabilities have declined from R1 billion in 2006 to R827K in 2010, a CAGR of -6.4%.  In that vein, SETA liquidity is very strong, averaging 5.5x from 2006 to 2010.  Cash on hand has increased moderately from R3.2 billion in 2006 to R3.8 billion in 2010.  Of note, is that cash on hand as a percentage of grants received is high, averaging 80% from 2006 to 2010, which would suggest that corporate claims are low, resulting in low disbursement rates.  Cash on hand as a percentage of assets peaked at 89% in 2008 and averaged 80% from 2006 to 2010. Again, this metric is indicative of a lazy industry-wide balance sheet and requires further interrogation into why these cash balances are not being optimally disbursed.  Accounts payable, though a monthly metric, is included as a directional proxy to try and ascertain whether SETAs are disbursing claims timeously or efficiently, (given that the major creditor would be the companies that need to claim for training services rendered). Accounts payable as a percentage of grants received has averaged 13%.  Government subsidies have remained relatively flat from 2006 to 2010 growing by a meagre CAGR of 0.6%. The average subsidy amount during the period was R1 billion, which amounts to a meaningful contribution of 21.5% of total grants received.  Government guarantees are generally immaterial in this space, averaging a very low R163K from 2006 to 2010.  The 2010 staff complement of SETAs was 1,103. Employee numbers have grown by a CAGR of 11.6%. In the same period, grants received per employee are showing a declining trend from R5.9 million to R4.5 million. The average from 2006 to 2010 was R6.1 million. 73

74 Agricultural Sector Education and Training Authority Sector: Education 74

75 Agricultural Sector Education and Training Authority Sector: Education  2010 Grants Received: R170 million  2010 Total Assets: R167.5 million  2010 Audit Opinion: Unqualified with emphasis of matter  Steady increase in grants received growing at a CAGR of 12.2% from 2006 to 2010.  Cash on hand has grown by a CAGR of 7% and amounted to R159 million in 2010.  Cash on hand as percentage of grants received has been erratic and high, averaging 104.1% from 2006 to 2010, suggesting low disbursement levels.  Cash as a percentage of assets has averaged 89.5% from 2006 to 2010.  Liquidity ratios are strong, averaging 4.5x from 2006 to 2010.  Government subsidies: Zero.  Government guarantees: Zero.  2010 staff complement was 35 people and grants received per employee have been relatively flat from 2006 to 2010, amounting to R5.1 million.  30 KPIs were identified from 2008 to 2010, 8 of which were not achieved. Chiefly, these included: assisting designated groups to participate in accredited work-based programmes, promoting & accelerating quality training. 75

76 Banking Sector Education and Training Authority Sector: Education 76

77 Banking Sector Education and Training Authority Sector: Education  2010 Grants Received: R352 million  2010 Total Assets: R128 million  2010 Audit Opinion: Unqualified with emphasis of matter  Moderate increase in grants received growing at a CAGR of 10% from 2006 to 2010.  Cash on hand has grown moderately by a CAGR of 8.6% and amounted to R126 million in 2010.  Cash on hand as percentage of grants received has averaged 39.4% 2006 to 2010.  Cash as a percentage of assets has shown a robust increase from 64.2% in 2006 to 98.3% in 2010, averaging 82.9% over the period.  Liquidity ratios are strong, averaging 2.6x from 2006 to 2010 and peaking at 4.3x in 2009.  Government subsidies: Zero.  Government guarantees: Zero.  2010 staff complement was 31 people and grants received per employee have shown a slight decline from 2006 to 2010, amounting to R11.4 million in 2010 from a high of R13.4 million in 2006.  21 KPIs were identified from 2008 to 2010, all of which were achieved. 77

78 Chemical Industries Education and Training Authority Sector: Education 78

79 Chemical Industries Education and Training Authority Sector: Education  2010 Grants Received: R292 million  2010 Total Assets: R301 million  2010 Audit Opinion: Unqualified with emphasis of matter  Grants received have increased by a CAGR of 15% from 2006 to 2010.  Cash on hand has increased by a robust CAGR of 29.2% from 2006 to 2010, and amounted to R295 million in 2010.  Cash on hand as percentage of grants received has increased dramatically, growing from 63% in 2006 to 101% in 2010, an alarming peak suggesting weak and declining disbursement trends and quite possibly no disbursements.  Cash as a percentage of assets has shown a robust increase from 69% in 2006 to 98% in 2010, averaging 87.2% over the period.  Liquidity ratios are erratic and improving, averaging 4.9x from 2006 to 2010 and peaking at 10.2x in 2009.  Government subsidies: Zero.  Government guarantees: Zero.  2010 staff complement was 33 people and grants received per employee were R8.8 million for the same year.  37 KPIs were identified from 2008 to 2010. 15 areas of non-achievement, mainly including: promoting & accelerating quality training, improving the quality and relevance of provision, assisting designated groups to participate in accredited work based programs. 79

80 Clothing, Textiles, Footwear & Leather Sector Education and Training Authority Sector: Education 80

81 Clothing, Textiles, Footwear & Leather Sector Education and Training Authority Sector: Education  2010 Grants Received: R64.4 million  2010 Total Assets: R60 million  2010 Audit Opinion: Unqualified  Grants received have shown a slight decline by a CAGR of -4% from 2006 to 2010.  Cash on hand has increased by a 16.7% CAGR from 2006 to 2010 and amounted to R59.4 million in 2010.  Cash on hand as percentage of grants received has more than doubled, growing from 42% in 2006 to 92.2% in 2010, suggesting declining disbursement trends.  Cash as a percentage of assets has shown an increase from 74% in 2006 to 99% in 2010, averaging 91% over the period.  Liquidity ratios are strong, averaging 4.0x from 2006 to 2010 and peaking at 5.4x in 2009.  Government subsidies: Zero.  Government guarantees: Zero.  2010 staff complement was 22 people and grants received per employee were R2.9 million for the same year, declining from a peak of R4 million in 2006.  22 KPIs were identified from 2008 to 2010, with 11 areas of non-achievement, mainly including: quality assuring and certification of qualifications, accreditation and annual monitoring of training providers, quality training and maintaining a national database of all learners achievements. 81

82 Education, Training & Development Practices Education and Training Authority Sector: Education 82

83 Education, Training & Development Practices Education and Training Authority Sector: Education  2010 Grants Received: R295 million  2010 Total Assets: R268 million  2010 Audit Opinion: Unqualified with emphasis of matter  Grants received have increased by a CAGR of 10.8% from 2008 to 2010.  Cash on hand has declined by a CAGR of -3.9% from 2008 to 2010 and amounted to R265 million in 2010.  Cash on hand as percentage of grants received has been on a declining trend, though it remains high at 90% in 2010, and averaging 106.6% from 2008 to 2010, suggesting low disbursement trends.  Cash as a percentage of assets has remained high and flat, averaging 98.5% from 2008 to 2010.  Liquidity ratios are very strong, averaging 9.7x from 2008 to 2010.  Government subsidies: Zero.  Government guarantees: Zero.  2010 staff complement was 89 people and grants received per employee have grown by a CAGR of 14% from 2006 to 2010, settling at R3.3 million in 2010.  No performance information was available for analysis. 83

84 Energy Sector Education and Training Authority Sector: Education 84

85 Energy Sector Education and Training Authority Sector: Education  No data for 2009 and 2010  2008 Grants Received: R111 million  2008 Total Assets: R88 million  2008 Audit Opinion: Adverse / Disclaimer  Grants received have increased moderately, by a CAGR of 4.8% from 2006 to 2008.  Cash on hand has declined by a CAGR of -12.6% from 2006 to 2008 and amounted to R75 million in 2008.  Cash on hand as percentage of grants received has been on a declining trend, decreasing from 96.8% in 2006 to 67.4% in 2008.  Cash as a percentage of assets has taken a bell-shaped trend, peaking at 98% in 2007 and settling at 85% in 2008.  Liquidity ratios are strong, though declining, averaging 2.9x from 2006 to 2008.  A R1 million Government subsidy was received in 2006, amounting to 1% of grants received for that year.  Government guarantees: Zero.  Staff complement : No data.  6 KPIs were identified in 2008, with 2 not being achieved. Areas of non-performance included improving the quality and relevance of provision and promoting employability and sustainable livelihoods through skills development. 85

86 Food and Beverages Manufacturing Education and Training Authority Sector: Education 86

87 Food and Beverages Manufacturing Education and Training Authority Sector: Education  2010 Grants Received: R181 million  2010 Total Assets: R155 million  2009 Audit Opinion: Unqualified with emphasis of matter  Grants received have increased by a CAGR of 12.7% from 2006 to 2010.  Cash on hand has increased by a robust CAGR of 23% from 2006 to 2010 and amounted to R133 million in 2010.  Cash on hand as percentage of grants received has increased, growing from 52% in 2006 to 73% in 2010.  Similarly, cash as a percentage of assets has increased from 67% in 2006 to 86% in 2010, with a high average of 85% for the same period.  Liquidity ratios are erratic and improving, averaging 6.0x from 2006 to 2010 and peaking at 8.7x in 2009.  Government subsidies: Zero.  Government guarantees: Zero.  2010 staff complement was 37 people, showing a CAGR increase of 9.2% from 2006 to 2010. Grants received per employee were R4.9 million in 2010, improving by a CAGR of 3.2% in the same period.  32 KPIs were identified from 2008 to 2010. One area of non-achievement was identified: poor NGO and CBO organisational support. 87

88 Forest Industries Sector Education and Training Authority Sector: Education 88

89 Forest Industries Sector Education and Training Authority Sector: Education  2010 Grants Received: R87 million  2010 Total Assets: R52 million  2010 Audit Opinion: Unqualified with emphasis of matter  Grants received have increased by a CAGR of 9% from 2006 to 2010.  Cash on hand has shown a declining trend from R53 million in 2006 to R50 million in 2010.  Cash on hand as percentage of grants received has had a bell shaped trajectory, peaking at 113% in 2007 and declining to 58% by 2010.  On the other hand, cash as a percentage of assets has increased from 83% in 2006 to 98% in 2010.  Liquidity ratios are been erratic and declining, averaging 3.7x from 2006 to 2010 and settling at a defensible 2.2x in 2010.  Government subsidies amounted to a negligible R16,000 in 2010.  Government guarantees: Zero.  2010 staff complement was 20 people, doubling from 10 people in 2009. Grants received per employee were R4.4 million in 2010.  12 KPIs were identified from 2008 to 2010. Two areas of non-achievement were identified: assisting new entrants to participate in accredited work programmes and improving the quality and relevance of provision. 89

90 Health and Welfare Sector Education and Training Authority Sector: Education 90

91 Health and Welfare Sector Education and Training Authority Sector: Education  2010 Grants Received: R240 million  2010 Total Assets: R341 million  2010 Audit Opinion: Unqualified with emphasis of matter  Grants received have increased by a CAGR of 13.7% from 2006 to 2010.  Similarly cash on hand has shown a consistently growing trend from R205million in 2006 to R331 million in 2010, a CAGR of 12.7%.  Cash on hand as percentage of grants received has been extremely high and greater than 100% from 2006 to 2010, averaging 145% over the period, suggesting very poor disbursement trends.  In the same vein, cash as a percentage of assets has increased from 91% in 2006 to 97% in 2010.  As expected, liquidity ratios are very strong averaging 11.6x from 2006 to 2010 and settling at a high of 15.6x in 2010.  Government subsidies : Zero.  Government guarantees: Zero.  2010 staff complement was 70 people, increasing by a CAGR of 6.2% from 2006 to 2010. Grants received per employee were R3.4 million in 2010, having increased by a CAGR of 7.1% in the same period.  32 KPIs were identified from 2008 to 2010, with 16 not being achieved. These included: promoting and accelerating quality training in the workplace, assisting designated groups and promoting employability. 91

92 IT, Electronics & Telecommunications Sector Education and Training Authority Sector: Education 92

93 IT, Electronics & Telecommunications Sector Education and Training Authority Sector: Education  2010 Grants Received: R379 million  2010 Total Assets: R265 million  2010 Audit Opinion: Unqualified with emphasis of matter  Grants received have increased by a CAGR of 9.6% from 2006 to 2010.  Cash on hand has increased from R135 million in 2006 to R262 million in 2010.  Cash on hand as percentage of grants received has had a U shaped trajectory, peaking at 69.2% in 2010.  Cash as a percentage of assets has been very high, leveling off at 98.8% in 2010.  Liquidity ratios have improved from 2.8x in 2006 to 7.6x in 2010. The average for the period was a healthy 3.9x.  Government subsidies : Zero.  Government guarantees: Zero.  2010 staff complement was 30 people and declined by a CAGR of -9.6% from 2006 to 2010. Grants received per employee increased by a CAGR of 21.3% from 2006 to 2010 and equated to R12.6 million in 2010.  39 KPIs were identified from 2008 to 2010. One area of non-achievement was identified, namely, assisting designated groups, including new entrants to participate in accredited work-based programmes. 93

94 Insurance Sector Education and Training Authority Sector: Education 94

95 Insurance Sector Education and Training Authority Sector: Education  No 2010 Data  2009 Grants Received: R209 million  2009 Total Assets: R171 million  2009 Audit Opinion: Unqualified with emphasis of matter  Grants received have increased by a CAGR of 10.4% from 2006 to 2009.  Cash on hand has increased from R93 million in 2006 to R168 million in 2009.  Cash on hand as percentage of grants received has increased from 60.2% in 2006 to 80.6% in 2009.  Similarly, cash as a percentage of assets has increased from 75.6% in 2006 to 98.2% in 2009.  Liquidity ratios have improved from 2.7x in 2006 to 4.3x in 2009. The average for the period was a healthy 3.4x.  Government subsidies grew by a CAGR of 9% from 2006 to 2009, increasing from R148 million to R192 million in the same period. Government subsidies as a percentage of grants received have been consistently high, averaging 94% from 2006 to 2009.  Government guarantees: Zero.  Staff complement was 23 people in 2008 with grants received per employee amounting to R8 million in the same year.  29 KPIs were identified from 2008 to 2009. 9 areas of non-achievement were identified. Chiefly, these included assisting new entrants into the labour market and quality workplace training programmes. 95

96 Local Government and Water Sector Education and Training Authority Sector : Education 96

97 Local Government and Water Sector Education and Training Authority Sector : Education  2008 Grants Received: R218 million  2008 Total Assets: R321 million  2008 Audit Opinion: Unknown  A slight increase in grants received growing at a CAGR of 2.3% from 2006 to 2008.  Cash on hand has grown by a CAGR of 14.2% and amounted to R310 million in 2008.  Cash on hand as a percentage of revenue has been increasing and is high, averaging 126.8% from 2006 to 2008, suggesting low disbursement levels.  Cash as a percentage of assets has averaged 93.3% from 2006 to 2008.  Liquidity ratios are strong, averaging 11.3x from 2006 to 2008.  Government subsidies of R39 million and R24 million were received in 2006 and 2007 respectively.  Zero government guarantees.  Staff complement: No data.  For the period 2006 to 2008, 8 KPIs identified, 1 was not achieved, being the failure to assist designated groups to participate in work based programmes. 97

98 Manufacturing and Engineering Sector Education and Training Authority Sector : Education 98

99 Manufacturing and Engineering Sector Education and Training Authority Sector : Education  2010 Grants Received: R819 million  2010 Total Assets: R1 billion  2010 Audit Opinion: Unqualified  Grants received has grown steadily at a CAGR of 11% from 2006 to 2010.  Cash on hand has decreased from R515 million in 2006 to R89 million in 2010.  Cash on hand as a percentage of grants received has decreased from 95.2% in 2006 to 10.8%, suggesting regular disbursements.  Cash as a percentage of assets has averaged 48.2% from 2006 to 2010.  Liquidity ratios are strong, averaging 9.4x from 2006 to 2010.  Government subsidies were received for the last 3 years, peaking at R22 million in 2010.  Zero government guarantees.  2010 staff complement of 220 people and grants received per employee amounted to R3.7 million in the same year.  For the period 2008 to 2010, 15 KPIs identified, 2 were not achieved. The main one being the failure to promote employability through skills development. 99

100 Media, Advertising, Publishing, Printing and Packaging SETA Sector : Education 100

101 Media, Advertising, Publishing, Printing and Packaging SETA Sector : Education  2010 Grants Received: R172 million  2010 Total Assets: R200 million  2010 Audit Opinion: Unqualified with emphasis of matter  Slight increase in grants received growing at a CAGR of 3.6% from 2006 to 2010.  Cash on hand has grown by a CAGR of 2.2% and amounted to R196 million in 2010.  Cash on hand as a percentage of grants received has been erratic and is high, averaging 112.5% from 2006 to 2010, suggesting low disbursement levels.  Cash as a percentage of assets has averaged 93.1% from 2006 to 2010.  Liquidity ratios averaged 2.9x from 2006 to 2010.  Government subsidies have more or less equaled grants received, averaging 97.7% of grants received from 2006 to 2010.  Zero government guarantees.  2010 staff complement of 48 people and grants received per employee averaged R3.6 million from 2006 to 2010.  No performance information was available for analysis. 101

102 Mining Qualifications Authority Sector : Education 102

103 Mining Qualifications Authority Sector : Education  2009 Grants Received: R548 million  2009 Total Assets: R458 million  2009 Audit Opinion: Unknown  Steady increase in grants received growing at a CAGR of 16.5% from 2006 to 2009.  Cash on hand has grown significantly by a CAGR of 27.7% and amounted to R453 million in 2010.  Cash on hand as a percentage of grants received has risen from 62.8% in 2006 to 82.7% in 2009, suggesting a decreasing trend in disbursements.  Cash as a percentage of assets has averaged 85.9% from 2006 to 2009.  Liquidity ratios average 2.6x from 2006 to 2009.  Government subsidies have been erratic, averaging R3.3 million from 2006 to 2009.  Zero government guarantees.  2009 staff complement of 71 people and grants received per employee averaging R6.6 million from 2006 to 2009.  For the period 2008 to 2009, 12 KPIs identified, 2 were not achieved, being the failure to promote employability through skills development. 103

104 Public Sector Education and Training Authority Sector : Education 104

105 Public Sector Education and Training Authority Sector : Education  2010 Grants Received: R989k  2010 Total Assets: R17 million  2009 Audit Opinion: Unqualified with emphasis of matter.  A decrease in grants received evidenced by a CAGR of -23.2% from 2008 to 2010.  In the same period, cash on hand also decreased by a CAGR of -18.7%.  Cash on hand as a percentage of grants received has been increasing from 914% in 2008 to 1023% in 2010, suggesting a decreasing trend in disbursements.  Cash as a percentage of assets has been erratic averaging 64.1% from 2008 to 2010.  Although liquidity ratios average 4x from 2008 to 2010, it has decreased from 8.2x in 2008 to 2x in 2010.  Government subsidies has been averaging R562k from 2008 to 2010.  Zero Government guarantees.  Staff complement has grown to 23 people in 2010, with grants received per employee decreasing to R43k in 2010 from R88k in 2008.  For the period 2008 to 2010, 12 KPIs identified, 5 were not achieved.  Major areas of non achievement include: failure to assist designated groups to participate in work based programmes and failure to promote quality training. 105

106 Safety and Security Sector Education and Training Sector : Education 106

107 Safety and Security Sector Education and Training Sector : Education  2010 Grants Received: R184 million  2010 Total Assets: R197 million  2010 Audit Opinion: Unqualified  Grants received has grown at a CAGR of 16.1% from 2006 to 2010.  Cash on hand has grown at a CAGR of 8.6% and amounted to R190 million in 2010.  Cash on hand as a percentage of grants received has been erratic and is high, averaging 116.6% from 2006 to 2010, suggesting low disbursement levels.  Cash as a percentage of assets has averaged 94.6% from 2006 to 2010.  Liquidity ratios are robust, averaging 9.7x from 2006 to 2010.  Government subsidies have grown at a CAGR of 15.3% from 2006 to 2010. In the same period government subsidies as a percentage of grants received averaged 90.1%.  Zero government guarantees.  Staff complement has increased from 41 people in 2006 to 89 people in 2010 with grants received per employee averaging R2.2 million.  For the period 2008 to 2010, 13 KPIs identified, 8 were not achieved.  Major areas of non achievement include: failure to train young people, failure to establish two provider institutes in each province and failure to increase the number of BEE firms that are supported by skills development. 107

108 Services Sector Education and Training Authority Sector : Education 108

109 Services Sector Education and Training Authority Sector : Education  2010 Grants Received: R871 million  2010 Total Assets: R765 million  2010 Audit Opinion: Unqualified  Grants received has grown at a CAGR of 18.4% from 2006 to 2010.  Cash on hand has grown at a CAGR of 49.1% from R137 million in 2006 to R676 million in 2010.  Cash on hand as a percentage of grants received has been erratic, averaging 72% from 2006 to 2010, suggesting moderate disbursement levels.  Cash as a percentage of assets has averaged 85.2% from 2006 to 2010.  Liquidity ratios are robust, averaging 5.3x from 2006 to 2010.  Zero government subsidies.  Zero government guarantees.  2010 staff complement of 214 people with grants received per employee amounting to R4 million.  For the period 2008 to 2010, 42 KPIs identified, 10 were not achieved.  Major areas of non achievement include: failure to train young people, failure to provide work experience to learners and failure to assist unemployed to enter learnership programmes. 109

110 SETA for Finance, Accounting, Management Consulting and Other Financial Services Sector : Education 110

111 SETA for Finance, Accounting, Management Consulting and Other Financial Services Sector : Education  2010 Grants Received: R216 million  2010 Total Assets: R97million  2010 Audit Opinion: Unqualified with emphasis of matter.  Grants received has grown at a CAGR of 6.8% from 2006 to 2010.  Cash on hand : No data.  Cash on hand as a percentage of grants received: No data.  Cash on hand as a percentage of assets: No data.  Liquidity ratios are satisfactory, averaging 2x from 2006 to 2010.  Government subsidies have grown at a CAGR of 6.1% from 2006 to 2010 and as percentage of grants received averaged 94% for the same period.  Zero government guarantees.  Staff complement has remained relatively flat growing from 18 people in 2006 to 21 people in 2010, with grants received per employee amounting to R9.7 million in 2010.  For the period 2008 to 2010, 27 KPIs identified, of which all were achieved. 111

112 Tourism, Hospitality & Sport Education and Training Authority Sector : Education 112

113 Tourism, Hospitality & Sport Education and Training Authority Sector : Education  2010 Grants Received: R159 million  2010 Total Assets: R19 million  2010 Audit Opinion: Unqualified with emphasis of matter  Grants received has grown at a moderate CAGR of 7.9% from 2006 to 2010.  Cash on hand has decreased steeply from R142 million in 2006 to R14 million in 2010.  Cash on hand as a percentage of grants received has declined from 120.6% in 2006 to 8.6% in 2010, suggesting improved distribution levels.  Cash on hand as a percentage of assets has averaged 88.5% from 2006 to 2010.  Liquidity ratios are strong, averaging 3.3x from 2006 to 2010.  Zero government subsidies.  Zero government guarantees.  2010 staff complement of 31 people with grants received per employee amounting to R5.1 million.  For the period 2008 to 2010, 4 KPIs identified, of which all were achieved. 113

114 Transport Education and Training Authority Sector : Education 114

115 Transport Education and Training Authority Sector : Education  2010 Grants Received: No data.  2010 Total Assets: No data  2010 Audit Opinion: Unknown  Grants received in 2006 and 2007 amounted to R129 million and R130 million respectively.  Cash on hand averaged R132 million from 2006 to 2007.  Cash on hand as a percentage of grants received has declined from 110.5% in 2006 to 93% in 2007.  Cash on hand as a percentage of assets has averaged 83.7% from 2006 to 2007.  Liquidity ratios are strong, averaging 5.4x from 2006 to 2007.  Government subsidies amounted to R86 million and R101 million for 2006 and 2007 respectively.  Zero government guarantees.  2007 staff complement of 38 people with grants received per employee amounting to R3.4 million for the same year.  For the period 2006 to 2007, 15 KPIs identified, 6 were not achieved.  Major areas of non achievement include: failure to promote quality training, failure to promote employability and failure to assist designated groups to acquire critical skills. 115

116 Wholesale and Retail Sector Education and Training Authority Sector : Education 116

117 Wholesale and Retail Sector Education and Training Authority Sector : Education  2010 Grants Received: R467 million  2010 Total Assets: R914 million  2010 Audit Opinion: Unqualified  Grants received has grown at a moderate CAGR of 9.7% from 2006 to 2010.  Cash on hand has grown at a CAGR of 20.3% and amounted to R904 million in 2010.  Cash on hand as a percentage of grants received has been increasing and is high, averaging 159.5% from 2006 to 2010, suggesting low disbursement levels.  Cash as a percentage of assets has averaged 96.4% from 2006 to 2010.  Liquidity ratios are robust, averaging 10.9x from 2006 to 2010.  Government subsidies have grown at a CAGR of 10.2% from 2006 to 2010. In the same period government subsidies as a percentage of grants received averaged 99.6%.  Zero government guarantees.  Staff complement has increased by 13 people from 2006 to 90 people in 2010. In the same period, grants received per employee has grown by a CAGR of 5.6% and averaged R4.7 million over the same period.  For the period 2008 to 2010, 9 KPIs identified, of which all were achieved. 117

118 Water Boards

119 Water Boards 5 Year Global Analysis 119

120 Water Boards 5 Year Global Analysis  All major Water Boards as defined in Schedule 3b of the KPMG report made revenue contributions amounting to an average of 0.3% of GDP from 2006 to 2010. Of the 27 entities in Schedule 3b, this report covers all 14 of the water boards or water companies as defined in the PFMA schedules.  Total aggregate revenue grew by a CAGR of 10.2% from 2006 to 2010.  Net profit margins; however, have experienced a declining trend from 15.6% in 2006 to 12% in 2010. They have; however, averaged at 16.6% for the same period.  Total assets grew by a CAGR of 12.2% from 2006 to 2010, amounting to R16 billion in 2010.  Also on a growing trajectory, though at a lower pace, total liabilities increased by a CAGR of 4% from 2006 to 2010, amounting to R5.6 billion in 2010.  ROA has had a U shape performance curve, peaking at 2.8% in 2010.  Capital expenditure has shown robust growth increasing by a CAGR of 34.6% from R457 million in 2006 to R1.5b billion in 2010. This suggests that South African is attempting to deal with its issues of low water quality, ostensibly evidenced by aggressive maintenance capital.  Cash flows from operating activities have been consistently positive, though they grew at a meagre CAGR of 0.7% from 2006 to 2010.  Cash balances have shown an upward trend improving from R693 million in 2006 to R1.4 billion in 2010, demonstrating a CAGR of 19.1%.  Water Boards have maintained respectable liquidity ratios averaging 2.3x from 2006 to 2010.  Similarly they demonstrated impressive solvency ratios averaging 5.0x from 2006 to 2010.  On the other hand, interest coverage is extremely variable, declining from a high of 190,000x in 2007 to a low of -35.8x in 2010. 120

121 Water Boards 5 Year Global Analysis  Debt service coverage ratios have been erratic and poor, averaging 0.3x from 2006 to 2010.  Gearing ratios are low, averaging 0.7x from 2006 to 2010.  According to the database, the Government collected zero taxes from Water Boards from 2006 to 2010.  Similarly, zero dividend payments were received.  Government subsidies have grown by a CAGR 42% from 2008 to 2010, averaging R20 million in the same period.  Government subsidies as a percentage of revenue have been relatively constant at an average of 0.3% from 2008 to 2010.  On the other hand, Water Boards have received zero Government guarantees from 2006 to 2010.  Total employee numbers have increased by a CAGR of 16.5% from 2006 to 2010, levelling off at a mere 2,102 employees in 2010.  Revenue per employee has declined by a CAGR of -5.4% with an average revenue contribution per employee of R4,2 million. 121

122 Albany Coast Water Board Sector : Water 122

123 Albany Coast Water Board Sector : Water  2010 Revenue: R3.4 million  2010 Total Assets: R10 million  2010 Audit Opinion: Unknown  Revenue has increased at a CAGR of 20% from 2007 to 2010.  Net profit margins have shown a steep decline from 22.4% in 2007 to -28.8% in 2010.  Liquidity ratios have shown a dramatic decline from 20.1x in 2007 to 1.3x in 2010, averaging 6.8x during the period. Solvency ratios, though strong, have halved from 18.5x in 2007 to 9.1x in 2010.  Interest coverage has shown a dramatically declining trend from 10.1x in 2007 to -492.5x in 2010.  DSCR: Conversely, and very curiously, DSCR have improved from 1.3x in 2007 to 3x in 2010.  Taxes Paid: Zero.  Dividends paid: Zero.  Healthy average gearing ratio of 0.1x from 2007 to 2010. 123

124  Cash balances have remained relatively flat from 2007 to 2010, averaging R983k and declining by a meager -1.3% CAGR over the same period. Cash flows from operating activities have shown a steady and encouraging increases to almost R2 million in 2010, evidenced by a positive CAGR of 36% from 2007 to 2010.  Capital expenditure has increased from R340k million in 2007 to R2 million in 2010, representing a CAGR of 80.7%.  Zero Government guarantees.  Zero Government subsidies.  Asset base has shown an slow decline from R13.6 million in 2007 to R10.2 million in 2010, a CAGR of -9%.  In the same period ROA has declined from 1% in 2007 to -2% in 2010.  Employee information: No data.  No performance information was available for analysis. Albany Coast Water Board Sector : Water 124

125 Amatola Water Board Sector : Water 125

126 Amatola Water Board Sector : Water  2010 Revenue: R240 million  2010 Total Assets: R437 million  2010 Audit Opinion: Unqualified  Revenue has increased at a CAGR of 28.4% from 2006 to 2010.  Net profit margins have declined from 6.4% in 2006 to -7.3% in 2010, averaging 2% over the same period.  Liquidity has remained stable and respectable, averaging 1.5x from 2006 to 2010. In the same period solvency ratios have declined significantly from 6.1x to 3.6x in the same period.  Interest coverage ratios have been consistently erratic, averaging -5.0x from 2006 to 2010, peaking at -21.5x in 2010.  DSCRs have deteriorated dramatically from 7.5x in 2006 to -1.4x in 2010.  Taxes Paid: Zero.  Dividends paid: Zero.  Respectable gearing ratio averaging 0.3x for the last 5 years.  The cash balance has decreased from R57 million in 2006 to R27 million 2010, declining at a CAGR of -17.1%. Similarly, operating cash flows have declined dramatically from R32 million in 2006 to -R16 million in 2010. 126

127  Capital expenditure has increased by a CAGR of 39% from 2006 to 2010, to a level of R41 million in 2010.  Zero Government guarantees.  Zero Government subsidies.  Asset base has increased by a CAGR of 5.7% from 2006 to 2010.  In the same period ROA has shown a reverse U trajectory with a long tail, going from 0% in 2006 to -1.0% in 2010.  Staff complement has grown by a CAGR of 12% from 2006 to 2010, leveling off at 367 staff members in 2010.  Revenue per employee has increased almost two-fold from R380k in 2006 to R652k in 2010, representing a CAGR of 14.5%.  10 KPIs were identified with 4 not being achieved from 2008 to 2010.  Areas of non-achievement include: Promoting and influencing institutional reform, supporting national, provincial & local government imperatives, and to promote & influence institutional reform. Amatola Water Board Sector : Water 127

128 Bloem Water Sector : Water 128

129 Bloem Water Sector : Water  No Data for 2010  2009 Revenue: R222 million  2009 Total Assets: R992 million  2009 Audit Opinion: Unknown  Revenue has increased at a CAGR of 11% from 2007 to 2009.  Net profit margins have increased from 14.5% in 2007 to 19.9% in 2009, averaging 19% over the same period.  Strong liquidity ratios averaging 3.4x from 2007 to 2009. Similarly solvency ratios have averaged a healthy 2.6x over the same period.  Satisfactory interest coverage ratios and DSCRs, both averaging 1.7x from 2007 to 2009.  Taxes Paid: Zero.  Dividends paid: Zero.  Stable gearing ratio of 0.6x for each of the years presented.  The cash balance has increased substantially, growing at a CAGR of 129% from 2007 to 2009 and peaking at R238.4 million in 2009. 129

130  Capital expenditure has averaged R10 million from 2007 to 2010, growing significantly at a CAGR of 121% over the same period.  Zero Government guarantees.  Zero Government subsidies.  Asset base has increased by a CAGR of 8.4% from 2007 to 2009.  In the same period ROA has remained flat at 1.0% for the same period.  Staff complement has grown from 183 employees in 2008 to 240 in 2009.  In the same period, revenue per employee has declined by -14%.  42 KPIs were identified with 14 not being achieved from 2008 to 2010.  The areas of non-achievement included: enhanced business structure, contracts being aligned to government’s model, customer satisfaction, capacity building, sufficient water supply, skills development, stakeholder relationships, enhanced water forums, organisational efficiency and corporate financial performance being principal amongst these. Bloem Water Sector : Water 130

131 Botshelo Water Sector : Water 131

132 Botshelo Water Sector : Water  2010 Revenue: R110 million  2010 Total Assets: R132 million  2010 Audit Opinion: Unknown  Revenue has almost doubled from R56 million in 2008 to R110 million in 2010.  Net profit margins have declined significantly from 16.2% in 2008 to 2.4% in 2010, with a disappointing dip to - 5.8% in 2009.  Poor liquidity ratios averaging 0.6x from 2008 to 2010. Similarly weak solvency ratios averaging 0.8x over the same period.  Interest coverage: Zero according to the database.  DSCR: Zero according to the database.  Taxes Paid: Zero.  Dividends paid: Zero.  Increasing gearing ratio from -2.6x in 2008 to 5.1x in 2010. 132

133  The cash balance has decreased substantially, from R23million in 2008 to –R12 million in 2010.  Capital expenditure has increased significantly by a CAGR of 149% from 2006 to 2010, leveling off at R18 million in 2010.  Zero Government guarantees.  Government subsidies averaged R22 million in 2008 and 2009, falling off to zero in 2010. Subsidies as a percentage of revenue have declined from a high of 38% in 2008 to 16.5% in 2009.  Asset base has grown from R49 million in 2008 to R132 million in 2010.  In the same period ROA has declined from 5% in 2008 to 0% in 2010.  Employee information: No data.  17 KPIs were identified with 4 not being achieved from 2008 to 2010.  The areas of non-achievement included: internal business excellence, business development, treatment of sewage and sewage quality control. Botshelo Water Sector : Water 133

134 Bushbuckridge Water Board Sector : Water 134

135 Bushbuckridge Water Board Sector : Water  No data for 2008, 2009 & 2010  2007 Revenue: R60 million  2007 Total Assets: R80 million  2007 Audit Opinion: Qualified  Revenue increased by a CAGR of 35% over the two years.  Net profit margins have declined dramatically from 43% in 2006 to 1.7% in 2007.  Liquidity appeared strong though declining slightly from 4.8x in 2006 to 3.5x in 2007. Similarly, solvency was strong though declining from 7.7x in 2006 to 4.2x in 2007.  Interest coverage took a wild decline from 369.4x in 2006 to -.05x in 2007.  DSCR also declined though less aggressively from 0.7x in 2006 to -1.6x in 2007.  Taxes Paid: Zero.  Dividends paid: Zero.  Gearing ratios remained relatively flat averaging 0.2x and 0.3x in 2006 and 2007, respectively. 135

136  The cash balance has decreased substantially, from R4.6 million in 2006 to R1.9 million in 2007.  Capital expenditure increased by a CAGR of 213% from R999k in 2006 to R3 million in 2007.  Zero Government guarantees.  Zero Government subsidies.  Asset base has grown from R71 million in 2006 to R80 million in 2007.  In the same period ROA has declined from 7% in 2008 to 0% in 2010.  Employee information: 251 employees in 2007.  No performance information was available for analysis. Bushbuckridge Water Board Sector : Water 136

137 Lepelle Northern Water Sector : Water 137

138 Lepelle Northern Water Sector : Water  2010 Revenue: R245 million  2010 Total Assets: R843 million  2010 Audit Opinion: Unknown  Revenue increased by a CAGR of 9.3% from 2006 to 2010.  Net profit margins have declined dramatically from 34% in 2006 to 19% in 2010.  Liquidity is strong averaging 2.6x from 2006 to 2010. Similarly, solvency ratios are robust averaging 3.9x in the same period.  Interest coverage is erratic, peaking at 12x in 2007 and tapering off to 4.3x in 2010. The average for the period was 6.2x.  DSCRs have been erratic peaking at 10.9x in 2009 and declining to 2.7x in 2010. The average for the period was 5.7x.  Taxes Paid: Zero.  Dividends paid: Zero.  Gearing ratios remained flat and low, averaging 0.4x from 2006 to 2010. 138

139  The cash balance has grown at an impressive 48% CAGR to R354 million in 2010.  Capital expenditure has increased from R4 million in 2007 to R30 million in 2010, a 96% CAGR.  Zero Government guarantees.  Zero Government subsidies.  Asset base has grown at a respectable CAGR of 8.6% from 2006 to 2010.  In the same period ROA has declined from 2% in 2006 to 1% in 2010.  Employee information: No data.  13 KPIs were identified of which 4 were not achieved.  These included expansion of existing services, effective financial procedures and policies, improved stakeholder relations and replacement and rehabilitation of ageing infrastructure. Lepelle Northern Water Sector : Water 139

140 Magalies Water Sector : Water 140

141 Magalies Water Sector : Water  No data for 2006, 2007 & 2010.  2009 Revenue: R167 million.  2009 Total Assets: R1 billion  2010 Audit Opinion: Unknown  Revenue increased by a CAGR of 5.7% from 2008 to 2009.  Net profit margins have declined from 31% in 2008 to 19% in 2009.  Liquidity is strong averaging 5.9x over 2008 and 2009. Similarly, solvency ratios are robust averaging 15.1x in the same period.  Interest coverage is erratic, peaking at 11.1x in 2008 and falling off to -41.6x in 2009.  Similary the debt service cover declined from 3.1x in 2008 to -41.4x in 2009;  Taxes Paid: Zero.  Dividends paid: No data.  Gearing ratios remained flat and low, averaging 0.1x over the two year period between 2008 and 2009. 141

142  The cash balance declined by -29.7% CAGR between 2008 and 2009.  Capital expenditure increased from R18 million in 2008 to R20 million in 2009.  Zero Government guarantees.  Zero Government subsidies.  Asset base grew by a 2.6% CAGR between 2008 and 2009.  In the same period ROA remained flat at 1%.  Employee information: No data.  7 KPIs were identified of which 1 was not achieved.  This being maintaining bulk sanitation performance. Magalies Water Sector : Water 142

143 Mhlathuze Water Sector : Water 143

144 Mhlathuze Water Sector : Water  2010 Revenue: R192 million  2010 Total Assets: R509 million  2010 Audit Opinion: Unqualified  Revenue has increased at a CAGR of 13.8% from 2007 to 2010.  Net profit margins increased steadily from 18.5% in 2007 to 25.9% in 2009, however dramatically decreased in 2010 to 8.7%.  Liquidity is poor with an average of 1.1x from 2007 to 2010 and dipping to 0.3x in 2010, however the solvency is satisfactory with an average of 1.8x in the same period.  Interest coverage ratio is healthy at an average of 3.6x for the period 2007 to 2010.  The DSCR is poor and erratic, declining from a peak of 1.5x in 2008 to -5.1x in 2010.  Taxes Paid: Zero.  Dividends paid: Zero.  Improving gearing ratio from 1.7x in 2007 to 1.0x in 2010. 144

145  Although the cash balance decreased from R97 million in 2009 to R23 million 2010, operating cash flows remain robust with an average of R45million from 2007 to 2010.  Capital expenditure increased by a CAGR of 42% from R53 million in 2007 to R150 million in 2010.  Zero Government guarantees.  Zero Government subsidies.  Asset base has increased by a CAGR of 8.3% from 2007 to 2010.  In the same period ROA averaged 1.8%, decreasing sharply from 2% in 2009 to 1% in 2010.  Employee information: No data.  5 KPIs were identified with 4 not being achieved from 2008 to 2010.  These include: winning new contracts, meeting sales budget and the developing of new business were amongst these. Mhlathuze Water Sector : Water 145

146 Namqua Water Board Sector : Water 146

147 Namqua Water Board Sector : Water  The Namaqua data is incomplete and it appears that the data for 2007 and 2008 is the same. Hence not much reliance can be placed on this data and the analysis performed below.  2010 Revenue: No data  2010 Total Assets: No data  2010 Audit Opinion: No data  2009 Audit Opinion: Unknown  Revenue has increased insignificantly at a CAGR of 0.1% from 2007 to 2009.  Net profit margins dramatically increased from 27.3% in 2008 to 177.2% in 2009.  Liquidity is weak with an average of 0.4x from 2007 to 2009.  The solvency status is healthy with an average of 8.6x in the same period.  Improving interest coverage ratio from 2.2x in 2007 to 8.1x in 2009.  Declining DSCR from 5.9x in 2007 to 0.4x in 2010.  Taxes Paid: Zero.  Dividends paid: Zero.  Healthy average gearing ratio of 0.1x for the period 2007 to 2010. 147

148  A decrease in the cash balance from R165k in 2008 to –R351K in 2009, further evidenced by a shortfall in operating cash flows of R1.2 million in 2009.  Capital expenditure: Zero.  Zero Government guarantees.  Zero Government subsidies.  As a result of a decrease in the asset base by a CAGR of -8.2% from 2007 to 2009, ROA has increased from 1% in 2007 to 5% in 2009.  The staff complement of 38 personnel remained stagnant between 2007 and 2008. No employee data for 2009.  No KPI information in the KPMG report. Namqua Water Board Sector : Water 148

149 Overberg Water Sector : Water 149

150 Overberg Water Sector : Water  2010 Revenue: R11 million  2010 Total Assets: R5 million  2010 Audit Opinion: Unknown  Revenue has declined at a CAGR of 10.8% from 2006 to 2010.  In the same period net profit margins averaged 20.4%, increasing significantly to 33.8% in 2010 from 12.2% in 2009.  Overall liquidity and solvency status is strong with an average current ratio of 3.7x and an average solvency ratio of 3.5x over the last 5 years.  Interest coverage ratio data appears meaningless.  The company's ability to service debt has declined dramatically from 1.2x in 2006 to -3.9x in 2009.  Taxes Paid: No data  Zero dividends declared over the last 5 years.  An improvement of the gearing ratio from 1.2x in 2006 to 0.1x in 2010. 150

151  The cash balance is healthy, increasing from R-632k in 2006 to R3.5million in 2010, which is further evidenced by cash flows from operating activities increasing at a CAGR of 28.2% in the same period.  Capital expenditure has increased by a CAGR of 41.3% from 2006 to 2010 to R1.4 million in 2010.  Zero government guarantees.  Zero government subsidies.  Asset base has dramatically decreased by a CAGR of 45.5% from R59 million in 2006 to R5 million in 2010. As a result ROA have improved significantly from 1% in 2006 to 18% in 2010.  Employee information: No data.  No KPI information. Overberg Water Sector : Water 151

152 Pelladrift Water Board Sector : Water 152

153 Pelladrift Water Board Sector : Water  2010 Revenue: R12 million  2010 Total Assets: R11 million  2010 Audit Opinion: Unknown  Revenue has grown at a CAGR of 20.1% from 2006 to 2010.  In the same period net profit margins have been very erratic peaking in 2010 at 22.2% and averaging a disappointing -2.3%.  Overall liquidity status is poor with an average current ratio of 0.7x for the last 5 years, however the solvency ratio for the same period is more than respectable with an average of 5x.  Interest Coverage Ratio: No data.  DSCR: No data.  Taxes Paid: No data.  Zero dividends declared over the last 5 years.  Healthy average gearing ratio of 0.3x from 2006 to 2010. 153

154  The cash balance has been fairly stagnant over the past 5 years with an average of R1.3 million. In the same period, operating cash flows have been inconsistent averaging R-65k.  Capital expenditure: Zero data.  Zero government guarantees.  Zero government subsidies.  Asset base has remained flat from 2006 to 2010. ROA has shown improvement from -1% in 2006 to 6% in 2010, averaging 0.2% during the period.  Employee information: No data.  5 KPIs were identified of which all were achieved. Pelladrift Water Board Sector : Water 154

155 Rand Water Sector : Water 155

156 Rand Water Sector : Water  2010 Revenue: R5 billion  2010 Total Assets: R8.4 billion  2010 Audit Opinion: Unqualified  An increase in revenue growing at a CAGR of 8.0% from 2006 to 2010.  Although averaging 14.4% over the past 5 years, net profit margins have been volatile, decreasing from 12.7% in 2009 to 6.0% in 2010.  Strong liquidity & solvency status with an average current ratio of 1.8x and an average solvency ratio of 3.8x from 2006 to 2010.  Even though the interest coverage ratio decreased from 5.2x in 2006 to 3.0x in 2010, it remains healthy.  DSCRs have shown a declining trend from 0.5x in 2006 to -1.1x in 2010.  Taxes Paid: Increased from a negative balance in 2006 to R5.3 billion in 2010.  Zero dividends declared over the last 5 years.  A robust average gearing ratio of 0.4x from 2006 to 2010. 156

157  The cash balance has consistently been increasing growing at a healthy CAGR of 16.0% from 2006 to 2010.  Capital expenditure has increased by a CAGR of 26% to R910 million from 2006 to 2010.  Zero government guarantees.  Zero government subsidies.  The asset base grew by a CAGR of 11.9% over the past 5 years.  ROA has decreased from 3% in 2006 to 1% in 2010.  The number of employees increased slightly from 733 in 2009 to 755 in 2010.  Revenue per employee also increased slightly from R6.3 million in 2009 to R6.6 million in 2010.  35 KPIs identified between 2008 and 2010, of which 12 were not achieved.  The most critical of these being: internal audit, employment equity, health and safety, operational performance, financial performance and commercial equity. Rand Water Sector : Water 157

158 Sedibeng Water Sector : Water 158

159 Sedibeng Water Sector : Water  2010 Revenue: R407 million  2010 Total Assets: R1.3 billion  2010 Audit Opinion: Unqualified with emphasis of matter  Revenue increased by a CAGR of 14.6% from 2006 to 2010.  Net profit margins have been erratic though improving from 5.5% in 2006 to 10.9% in 2010.  Liquidity is reasonable averaging 1.6x between 2006 and 2010. Solvency ratios have improved from 1.9x in 2006 to 2.9x in 2010.  Interest coverage has followed an inverted U trend, going from 1.5x in 2006, peaking at 2.6x in 2007 and settling at 1.3x in 2010. The average for the period was 1.5x.  DSCR averaged 1.2x from 2006 to 2010.  Taxes Paid: Zero.  Dividends paid: Zero.  Gearing ratios have shown improvement from 1.1x in 2006 to 0.5x in 2010. 159

160  The cash balance has grown by a CAGR of 20% from 2006 to 2010, leveling off at R69.6 million in 2010.  Capital expenditure has increased dramatically by a CAGR of 134% from 2006 to 2010.  Zero Government guarantees.  Government subsidies are reflected for 2009 and 2010, averaging R13.5 million.  Asset base has grown by an impressive 20.3% CAGR from 2006 to 2010.  In the same period ROA remained relatively flat averaging 1% from 2006 to 2010.  Staff complement in 2010, was a curious 17 people, each generating an impressive R24 million in revenues.  9 KPIs were identified of which 5 were not achieved.  These included reliability of supply, increased access to services, water losses, positive internal audit reports and water quality compliance. Sedibeng Water Sector : Water 160

161 Umgeni Water Sector : Water 161

162 Umgeni Water Sector : Water  2010 Revenue: R1.6 billion  2010 Total Assets: R4.3 billion  2010 Audit Opinion: Unqualified  Revenue increased by a CAGR of 10.8% from 2006 to 2010.  Net profit margins have improved strongly from 12.7% in 2006 to 33.1% in 2010.  Liquidity strength has doubled from 1.2x in 2006 to 2.4x in 2010. Solvency ratios have also shown a strong positive trajectory from 1.2x in 2006 to 1.9x in 2010.  Interest coverage ratios have also shown an upward trend from 0.9x in 2006 to 2.7x in 2010.  DSCR have has had a bell shape trajectory going from 0.3x in 2006, peaking at 2.1x in 2008 and leveling off at 0.6x in 2010.  Taxation information for 2006 only, reflecting a meager R35,000.  Dividends paid: Zero.  Gearing ratios have shown significant improvement from 6.7x in 2006 to 1.1x in 2010. 162

163  The cash balance has declined dramatically from R13.4 million in 2006 to R1.7 million in 2010. A CAGR of -40.4%.  Capital expenditure has increased dramatically by a CAGR of 42% from R82 million in 2006 to R334 million in 2010.  Government guarantees: Zero.  A Government subsidy of R29.6 million was received in 2010, amounting to 1.8% of revenue for that year.  Asset base has grown by a CAGR of 9.5% from 2006 to 2010.  In the same period ROA improved from 1% in 2006 to 3% in 2010, averaging 2.4% over the period.  Staff complement has remained relatively flat, growing by a mere 1.5% from 2006 to 2010 and leveling off at 963 staff members in 2010.  Revenues per employee have grown by an impressive 9.2% CAGR from 2006 to 2010, amounting to R1.7 million in 2010.  12 KPIs were identified of which 2 were not achieved.  These included exceeding customer expectations and growing & increasing the customer base. Umgeni Water Sector : Water 163


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