Portfolio Committee on Water and Environmental Affairs Committee Room 3, 90 Plein Street Building 4 November 2009 SAWS 2008-09 Annual Report presented.

Portfolio Committee on Water and Environmental Affairs

Committee Room 3, 90 Plein Street Building

4 November 2009

SAWS 2008-09 Annual Report

presented by

Dr Linda Makuleni (Chief Executive Officer)

Table of Contents

1. Overview

2. Strategic Goals/Key Focus Areas

3. An Overview of Financial Performance

4. Performance Against Targets

5. Challenges/Opportunities

6. Concluding Remarks

7. Questions/Comments

1. Overview

• Reporting period coincides with:• 1st year of the new Board appointed 1st April 2008• Change in administration (from the then DEAT to DWEA)

• Support appreciated from the Shareholder and Other Stakeholders, in particular:• SAWS Board, Management and Staff• The then Ministry and Dept of Environmental Affairs & Tourism• The new Ministry and Dept of Water & Environmental Affairs• The then Portfolio Committee on Environmental Affairs & Tourism; and • The new Portfolio Committee on Water and Environmental Affairs; and• Other Stakeholders

• Performance/Achievements• Unqualified Audit Report• 84% overall customer satisfaction on SAWS products and services

(Perception Survey conducted by an independent service provider)

1. Overview (continued)

Human Capital Management

• Total Staff Profile• Total staff compliment is 386• 79% of employees are from the Historically Disadvantaged Background• 35% of the overall figure is female• Representation of the disabled stands at 2% fairly spread at different rational

categories• Employment Equity Plan approved

• Human Capital Development initiatives being implemented• Skills Development plan• Attraction and Retention Strategy• Succession Planning

2. Strategic Goals and Objectives

Strategic Goals Objectives

SG1:Ensure financial viability andsustainability

• To ensure that the Organisation is financially sustainable in

the long-term as a going concern by increasing the

commercial income, establishing an investment fund subject

to Treasury Approval, as well as a research and

development fund and securing Government funds for

effective delivery of public good and commercial

products/services.

SG2:Ensure corporate governance and strategic leadership

• To manage the Organisation on sound business principles, ensuring compliance with the relevant legislation and adherence to principles of good governance.

• To take a Meteorological leadership role in SADC Region and the Continent.

2. Strategic Goals and Objectives (continued)

Strategic GoalsObjectives

SG3:Ensure becomes a learning Organisation

To ensure that SAWS employees are innovative, knowledgeable and encourages a continuous transformation process by creating a pool of atmospheric scientists, technologists and researchers.

SG4:Create a client-centric Organisation

To disseminate reputable weather, climate & related environmental products and services that are geared at meeting and exceeding client’s specific needs.

2. Strategic Goals and Objectives (continued)

Strategic Goals Objectives

SG5:Reputable provider of weather, climate & related environmental products and services

To collect, process, research and develop reputable services and products using cutting edge technology and scientific excellence.

3. An Overview of Financial Performance (continued)

An Overview of the Audit Report

The Auditor-General (AG) reported that:

Opinion • The Financial Statements present fairly, in all material respects, the financial

position of SAWS as at 31 March 2009

• Without qualifying his Opinion, attention is drawn to the following matters, among others:

• The basis of accounting as reflected in note 1 of the Financial Statements• Irregular expenditure to the amount of R1,1 million incurred, as disclosed in

note 23 to the Financial Statements

3. An Overview of Financial Performance (continued)

An Overview of the Management Report• AG believes that the evidence obtained indicates that governance policies and

practices operated effectively and appropriately during the year under review.

• There were no significant findings.

• AG noted management’s disclosure of the irregular expenditure.

• Other important matters include strengthening the Supply Chain Management (SCM) Policy. The SCM Policy has already been revised, approved by the SAWS EXCO and will be tabled at the November Board meeting for approval.

• It is worth noting that none of the findings had been raised in previous years.

3. An Overview of Financial Performance (continued)

An Overview of the Audit & Risk Committee• Committee Structure and Charter reviewed in line with governance best

practices• Internal and External Audit Plans reviewed and approved• Risk management processes reviewed, enhanced and monitored on an ongoing

basis• Reviewed

• Audited Annual Financial Statements included in the Annual Report;• Auditor-General’s Management Letter and response by SAWS

Management;• Changes in the accounting Policies and Practices; and• Significant adjustments resulting from the audit

• No significant or material non-compliance issues were noted and/or reported; other than Management’s disclosure of the irregular expenditure

• Committee satisfied with the effectiveness of internal controls

3. An Overview of Financial Performance (continued)

Accounting Policies

• Financial Statements prepared in accordance with GAAP, including any

interpretations of such statements issued by the Accounting Practices Board.

• Financial Statements in conformity with GAAP and GRAP which require the

use of certain financial statements accounting estimates; and also that Management exercises its judgment in the process of applying the Entity’s accounting policies.

3. An Overview of Financial Performance (continued)

Income Statement

R'million 2009 YTD 2008 YTD Variance % VarianceTotal Revenue 193,707,720 186,280,093 7,427,627 4%Admin Expenses (11,818,985) (10,521,243) (1,297,742) -12%Employee Benefits (108,153,642) (93,799,032) (14,354,610) -15%Amortisation (2,425,638) (1,070,475) (1,355,163) -127%Depreciation (12,800,281) (13,411,402) 611,121 5%Other Operating Expenses (60,396,816) (66,343,563) 5,946,747 9%Finance Costs (1,001,627) (1,087,629) 86,002 8%Operating Surplus/(deficit) (2,889,269) 46,749 (2,936,018) -6280%Gains/(Loss) from fair value Adjustments (1,321,550) 3,563,776 (4,885,326) -137%Surplus/(Shortfall) (4,210,819) 3,610,525 (7,821,344) -217%

3. An Overview of Financial Performance (continued)

REVENUE 2008/9

3. An Overview of Financial Performance (continued)

3. An Overview of Financial Performance (continued)

3. An Overview of Financial Performance (continued)

Key Employee Cost Drivers

• In the 2006/7 financial year, the Organisational structure was re-aligned to support the SAWS strategic direction enhancing the placement of employees with expertise at appropriate levels, which had a financial impact of approximately R3.1 million

• In the 2007/8 financial year, the Organisation augmented its critical & scarce skills with 53 appointments of which 39 were in scientific and technical fields.

• Had all 53 been appointed at the beginning of the financial year, the annual impact would have been R5.6 million. However the appointments were spread throughout the year, hence the minimal increase in the 2007/8 financial year.

• 2008/9 financial year:• The full impact of the above appointments was felt on the 2008/9 financial year,

resulting in an increase to cost to company of approximately R5.6 million before factoring the 10% increment

• As part of the attraction and retention strategy SAWS also paid R5.2 million in respect of critical & scarce skills to qualifying employees in the scientific and technical fields

2006/7 2007/8 2008/9Annual Increments 6% 6.7% 10%

3. An Overview of Financial Performance (continued)

3. An Overview of Financial Performance (continued)

STATEMENT OF CHANGES IN NET ASSETS

3. An Overview of Financial Performance (continued)

CASH FLOW STATEMENT

Performance Against Targets

4. Performance Against Targets

KPA1 Ensuring financial viability and sustainability

• Growth of commercial revenue• 93% aviation income achieved – under recovery due to late promulgation of aviation tariffs and liquidation of certain Airlines (e.g. Nationwide)

• Growth of R & D Funding - R3.6m achieved

• Effective utilisation of the Grant• 97% of budget spent in line with the acceptable variance of 10%

• Increase in operating expenses kept at 5.5%

• Decrease in other operating expenses by 9% (from R66.34m to R60.40m)

• Non-financial revenue growth of 49.3% (from R7.52m – R11.23m) compared to prior year

4. Performance Against Targets (continued)

KPA2 Ensuring corporate governance leadership & sustainability

• Compliance with legislative and governance frameworks, hence an unqualified Audit Report

• Compliance with national and international obligations and leadership role• Acknowledgment of SAWS’ leadership role in the implementation of Severe Weather Forecast Demonstration Project (SWFDP)• SAWS’ appointment as both Meteorological Association of Southern Africa (MASA) Chair and Secretariat• SAWS’ role as WMO’s Regional Specialised Meteorological Centre• Publication of the 2008/09 Meteorological Authority Annual Report in compliance with ICAO requirements/standards

• Effective Stakeholder Management• 3 CSI Programmes implemented• International Relations Framework developed and implemented

3. Performance Against Targets (continued)

KPA2 Ensuring corporate governance leadership & sustainability

• SAWS’ governance structures and frameworks reviewed and enhanced where appropriate

• Internal controls reviewed and enhanced (through review of Policies and risk management processes)

3. Performance Against Targets (continued)

KPA3 Ensuring SAWS becomes a learning Organisation

• Growth & development of critical & scarce skills• Accreditation of SAWS Training Centre by TETA• SAWS Bursary Scheme – with 40 bursaries awarded (R2.4 m) Bursaries targeted mostly to PDIs

• Talent Management• Development and implementation of Attraction and Retention Strategy• Implementation of the Performance Management System

• Effective knowledge management• Succession Policy and Plan developed and implemented

• Strategic Partnerships established with academic institutions (e.g. UNIZUL, Fort Hare and UP)

• Effective Organisational transformation• Employment Equity Plan approved• Learnership Programme ( 8 appointed)

3. Performance Against Targets (continued)

KPA4 Creating a client-centric Organisation

• Investigation of appropriate financial model for SAWS• Funding Model developed and approved by the Board (and submitted to Shareholder)

• Development and dissemination of client specific products & services:

• Memoranda of Understanding concluded with:• The then Departments of Provincial & Local Government (DPLG), Environmental Affairs and Tourism (DEAT) and Water Affairs & Forestry (DWAF)

• Agricultural Research Council

• SANERI

3. Performance Against Targets (continued)

KPA5Ensuring that SAWS becomes a reputable provider of weather, climate and related environmental products and services

• Infrastructure upgrade (National Weather Radar Network)

• Installation of the South African Air Quality Information System

• Participated in:• the 2nd phase of the Queensland Cloud Seeding Research Project in Australia (rainfall enhancement techniques)• Research to improve Nowcasting and Flash-flood Guidance System and the use of Numerical Weather Prediction documentation of weather-related indigenous knowledge

• Severe Weather Forecast Demonstration extended to SADC

• Customer-specific products developed• Automatic Weather Stations (for small Airports)• Aviation Website• Web portals for specific users• Road Hazard Warning System

Challenges/Opportunities

5. Challenges/Opportunities (continued)

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

April May June July August September October November December January February March

2006/7 Actuals

2007/8 Actuals

2008/9 Actuals

2009/10 Budget

2009/10 Actuals

2010/11 Budget

AVIATION VOLUMES OVER THE YEARS

5. Challenges/Opportunities (continued)

MTEF Submission

R million 2009/2010 2010/2011 2011/2012 2012/2013

OPEX Grant ENE 130,537 130,537 138,369 146,671Additional OPEX: 42,225 45,777 53,519TOTAL OPEX GRANT 130,537 172,762 184,146 200,190CAPEX Grant ENE 55,207 100,154 10,202Additional CAPEX: 0 0 25,000TOTAL CAPEX GRANT 55,207 100,154 10,202 25,000

7. Concluding Remarks

SAWS enlists your continued support in pursuing the following initiatives:

1. Securing an appropriate level of Government funding as per the funding model

2. Enhancement of aviation income recovery through the regulatory process.

The appropriate level of funding would enable SAWS to focus more on:• Commercialisation of activities• Modernisation of infrastructure • Human Capital Development• Regional cooperation• Climate change and variability

8. Questions/Comments