Erwat Annual 2012

report erwat 2011 woensdag11_erwat report 2012/11/19 8:16 AM Page 1
Our vision
The water company of choice
TABLE OF CONTENTS
About ERWAT .................................................................................
Chairpersons review ......................................................................
Executive management structure ................................................
Managing Directors review...........................................................
Corporate governance ...................................................................
Company details..............................................................................
Annual financial statements .........................................................
General information.........................................................................................
Index ....................................................................................................................
Directors responsibilities and approval......................................................
Report of the Auditor-General .....................................................................
Directors report ..............................................................................................
Statement of financial position ......................................................................
Statement of financial performance..............................................................
Statement of changes in net assets ..............................................................
Statement of cash flows ..................................................................................
Accounting policies ..........................................................................................
Notes to the annual financial statements ...................................................
Predetermined objectives .............................................................
Our mission
To provide sustainable,
affordable, quality water
services through innovative,
effective organizational practices
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ABOUT ERWAT
In a world in which a number of
new approaches are being
applied in the management of
wastewater, ERWAT (the East
Rand Water Care Company), is a
South African pioneered
approach to wastewater management based on technical expertise, scientific knowledge and
proven success.
ERWAT provides sustainable,
affordable quality wastewater
services through innovative, effective organizational practices to
clients.
ERWAT currently manages and

operates 19 wastewater treatment works, servicing the needs
of three metropolitan municipalities, more than 2000 industries
and some 3,5 million people.
ERWAT also renders services
related to the wastewater industry, such as technical support
through the provision of electrical
and mechanical maintenance and
related services, research and
development in water-related
areas as well as industry-specific
training.
ERWATs laboratory is accredited
to ISO/IEC 17025 by the South
African National Accreditation
System (SANAS) and renders
advanced chemical, bacteriological
and micro-biological laboratory
services for the analysis of water,
wastewater, activated sludge,
sewage sludge and soil.
ERWAT
area of
operation
COMPANY DETAILS
Company Secretary
Mr Wim Louw
(resigned 31 January 2011)
Ms Marlene Hilton-Khumalo
(appointed 1 February 2011)
BUSINESS ADDRESS
R25 (Bapsfontein/Bronkhorstspruit)
Kempton Park
GPS co-ordinates:
S 26 01 25.8 and E 28 17 10.0
POSTAL ADDRESS
P O Box 13106
NORKEM PARK
1631
Tel no: +27 11 929 7000

Fax no: +27 11 929 7031
E-mail: mail@erwat.co.za
www.erwat.co.za
INNOVATIVE WASTEWATER SOLUTIONS
CHAIRPERSONS REVIEW
It gives me great pleasure to report that ERWAT has once again,
under difficult circumstances, performed well. The 2010/11 year
was, after the excitement of the 2010 Soccer World Cup, very
much a year of consolidation.
The positive energy derived from the previous year was also
experienced in ERWAT and the company re-affirmed its commitment to provide service excellence to all its
clients. As we look ahead into 2012, it is time for us to refocus our energy to address our countrys unique
water needs and challenges.
ERWATs strategic focus is the optimization of capacity. Some of the main components of our strategy are
aimed at meeting the Department of Water Affairs 2010 standards for water quality. The development and
implementation of a sustainable sludge management strategy is also the subject of particular attention by
ERWAT.
Our vision, namely to be the water company of choice was continuously expressed during 2011. The companys mission statement reflects the provision of sustainable, affordable, quality water services through innovative, effective organizational practices.
ERWAT is taking the strategic direction of our major shareholder, the Ekurhuleni Metropolitan Municipality
(EMM), into consideration and the company redefined its Facilities Development Plan, FDP 2025 model, in
alignment with EMMs planning for the future of the region.
One of ERWATs biggest challenges is the financing of new extensions. The success of future projects, as with
those of the past, will continue to depend on the availability of funding. The role that our parent municipality, EMM, will play in securing future funding will remain crucial.
A R550 million loan was secured from Nedbank that will be utilised to finance the new 50 megalitre per day
(Ml/day) extension at Welgedacht, as well as sludge management at the Waterval wastewater treatment
works (WWTW).
ERWAT strives to keep abreast of the latest in wastewater research management through regular liaison and
contact with other institutions, such as the Water Research Commission (WRC), water institutions, academia, as well as government departments such as the Department of Water Affairs (DWA). ERWAT is a member of the International Water Association (IWA) and a patron member of the Water Institute of South Africa
(WISA).
ERWATs success is a result of dedication, focus and concerted efforts of many role-players.Therefore I would
like to express my sincere appreciation to my colleagues on the Board of Directors, as well as the Managing
Director, Executive Management and staff. The strategic direction and unwavering support of Ekurhuleni
Metropolitan Municipality (EMM) made it possible for ERWAT to achieve its strategic and operational objectives.
Tatis Phasha
Chairperson
BOARD OF DIRECTORS
Managing Director
Pat Twala
EXECUTIVE MANAGEMENT
STRUCTURE
Chief
Financial Officer
Executive Manager
Laboratory Services
Executive Manager
Business Development/
Marketing
Executive Manager
Technical Services
NP Twala
Thabani Mhlongo
Obed Sebiloane
Wim Louw
Dries Louw
EM Phasha
MM Mochatsi
Executive Manager
Human Resources
Executive Manager
Development
4
Executive Manager
Corporate Services
Executive Manager
Operations
Rodney Barnes
Koos Wilken
EE Themba
Jurie Terblanch
Marlene Hilton-Khumalo
(appointed 1 Feb 2011)
N Sidondi
ZE Letjan
MANAGING DIRECTORS REVIEW

Pat Twala
Introduction
Mostofusinthewaterindustrywillagreethatthepastfewyearshavebeenparticularlychallenging.While
wemayhavebeenunderextremepressureduetoratesincreases, electricitytariffadjustmentsandother
events, wefeelthateveryopportunitywasutilisedbyourcompanytogrowandsecureourpositioninthe
industry.
InERWAT,wecontinuethespiritofpossibilityandachievementandwemanagedtosignificantlyimproveour
financialposition.
During 2010/11 ERWATs unwavering dedication to quality service and perseverance, despite challenging
economiccircumstances, paidoff.AprofitofR18.2millionin2009/10ultimatelyimprovedtoR49millionin
2010/11.
ThecompanyscashflowimprovedwithsomeR53million,mainlybecauseofstrictexpenditurecontroland
rigorouscashflowmanagement.
Financial results
The 2010/11 financial year
The companys financial statements are attached.
COMPANY RESULTS
RAND MILLIONS
2011
2010
Totalincome
405.3
336.3
Expenditure
332.5
318.1
72.3
18.2
Depreciation
(29.0)
(29.1)
Netsurplusbeforedepreciation
101.3
47.3
Netsurplusfortheyear
Funding plan
TheERWATfundingplanincorporatestheidentificationofcapacityneeds,usingafacilitiesdevelopmentplan
(FDP),whichenablesthecompanytodetermine,withareasonabledegreeofaccuracy,whenandwherefacilitiesareneeded.Thisinformationisusedinconjunctionwithalong-termfinancialmodel,indicatingtheimpact
oflargeprojectsoncashflowsandtariffsforthecompany.Theoptimaltimingoftheseprojectscombined,with
thenegotiationofthebestpossibletermsandconditionsonlongtermloanfunding, aswellascarefulcash
management,haveenabledERWATtokeeptariffstoaminimumovertheninteenyearsofitsexistence.
Tariffs
With the establishment of ERWAT nineteen years ago, huge economies of scale were achieved. Despite difficult economic conditions and increased demands on capacity, ERWAT still effectuates signi-ficant savings on
wastewater treatment costs for its members. In 2009/10 the tariffs were R1.11 per kilolitre, while the final
tariff cost for 2010/11 was R1.17 per kilolitre.
The water business

ERWAT provides a proficient wastewater treatment service to some 2000 industries and more than 3.5
million people, who have access to sanitation.It is currently the custodian of19 wastewater treatment works,
treating a combined capacity of some717 megalitres (Ml) of wastewater, both domestic and industrial, per
day. The smallest plant treats some 0.4 Ml per day, while the largest plant treats up to 150 Ml of wastewater
per day. Most of ERWATs operations are located in the Ekurhuleni Metropolitan Municipality (EMM) in the
eastern parts of Gauteng.
Receiving flows
Flows entering ERWATs wastewater treatment
works are continuously increasing in almost all cases.
Despite this, the company has managed to meet the
requirements as determined by the Department of
Water Affairs (DWA). Major infiltration and stormwater ingress, prevalent during the rainy season, combined with extensive deve-lopment in the region,
place huge demands on ERWATs nineteen works.
The company is constantly evaluating capacity needs,
in order to meet the increased demand.
ERWAT currently operates the following WWTWs:

WWTW
2010/2011
Annual average flows
Plant design
capacity
36.85
10.53
17.28
3.15
9.61
13.96
12.00
8.46
19.5
71.52
82.13
61.9
0.64
31.31
18.19
112.01
205.97
41
16
12.5
2
16
15
10
13
12
35
105
45
0.4
36
36
83
155
Ancor
Benoni
Herbert Bickley
Carl Grundlingh
Daveyton
JP Marais
Jan Smuts
Rynfield
Tsakane
Welgedacht
Olifantsfontein
Hartebeestfontein
Esther Park
Dekema
Rondebult
Vlakplaats
Waterval
Like many other sectors in the country, the water industry is

experiencing increased pressure as a result of the worldwide
economic downturn. The rising cost of electricity resulted in
high variable costs incurred in all ERWATs operations.
ERWAT is constantly looking at ways to incorporate new
technologies at its plants to cope with the increased
demands, while adhering to DWA standards.
Licensing
Section 40 of the National Water Act (No 36 of 1998)
requires all wastewater treatment works to be licensed by
the Department of Water (DWA). Old permits issued in
terms of the previous Water Act are to be replaced with
licenses. Waterval, Heidelberg and Ratanda WWTW have
already been licensed, while Welgedacht and
Hartebeestfontein will be licensed during the planned
upgrades to the works. Esther Park, ERWATs smallest wastewater care works, does not require a license, but operates
under the General Authorisation (GA). ERWAT is still awaiting licenses from DWA after applications were made for 13
WWTWs.
Green Drop certification
DWA launched the Green Drop certification programme

for wastewater care works in late 2008. This initiative is an
effort to ensure that wastewater care works progressively
improve their operations so as not to impact negatively on
the water bodies into which they discharge their product.
The system aims at awarding water service authorities with
Blue and/or Green Drop status if they comply with drinking water and wastewater legislation and other best practices required by the DWA. This incentive-based
regulatory approach is a first for South Africa, and is internationally regarded as unique in the drinking-water
regulatory domain.
During the 2010/2011 financial year ERWAT achieved an overall score of 78.8 percent during the Green
Drop assessment in October 2010, improving from a score of 67 percent in the previous year.
In terms of Regulation 2834 of the National Water Act (No 36 of 1998), it is required that all wastewater
care works be classified according to size and technology. In preparation for the next Green Drop classification, ERWAT has received classification certificates from DWA for each of its works, ranging from Class A
for the bigger works to Class D for the smallest.
ERWAT also received classification for operators and process controllers in terms of relevant qualifications
and experience. During the financial year under review, 36 operators have been classed accordingly.
The Department of Water Affairs (DWA) has announced that in future, assessments for the Blue Drop and
Green Drop will be done biennially on an interchanging basis. The 2010/11 Green Drop progress report will
be announced by the Minister of Water Affairs during the next WISA conference, taking place during May
2012.
In line with its strategic objectives, ERWAT has implemented a riskbased assessment of all the WWTWs, while a Wastewater Risk
Abatement Plan for Drainage District 3 (DD3) was also completed.
A Green Drop Acceleration Plan has been developed to streamline the processes towards the achievement of the companys
strategic objectives. In this planning document, a list of projects is
coupled with the budget that is needed to optimise, refurbish and
upgrade the relevant WWTWs in order to achieve Green Drop
status.
Retrofitting: Waterval WWTW

During the financial year under review, the installation of a new fine
bubble diffused aeration system (FBDA) at the module 2 reactors
north and south (35 Ml/day) was completed.
The R4.3 million project entailed the removal/stripping of old
obsolete pipes and diffusers, as well as the installation of 2 836 PIK
(ABS) 300mm diffusers mounted on uPVC branches to improve
aeration in the basins. Twelve MSV wafer type knife isolating and
control valves were also installed.
Wastewater quality compliance

The graphs in Table A, B and C on page 10 present the ERWAT
annual wastewater quality compliance, split according to the three
drainage districts, namely DD3, DD5 and DD6. The wastewater
quality compliance is presented as a percentage in three categories, according to the Green Drop requirements. The first is the
Physical Category, which represents the following determinants:
Suspended Solids, pH and Electrical Conductivity.The second is the
Chemical Category, which represents the following determinants:
COD, Ammonia, Nitrates and Phosphates. The third category is
the Micro Category, which represents the following determinant:
E. Coli. The average is an average of the three categories and represents the total annual compliance of each WWTW.
Table A
Table B
10
10
Table C
The compliance of the determinants in Tables A, B and C are

measured against the standards/limits as set out in Table D.
Table D
Licence/Exemption/General Standards
EC
mS/m
COD
mg/l
NH3
mg/l
NO3
mg/l
PO4
mg/l
SS
mg/l
E. coli
cfu/100ml
Type of
authorization
ANCOR
6.5 - 8.5
BENONI
6.5 - 8.5
C. GRUNDLINGH 5.5 - 9.5
105
105
150
55
55
75
4
4
10
6
6
15
0.6
0.6
1.0
15
15
25
0
0
1000
DEKEMA
5.5 - 9.5
150
75
10
15
1.0
25
1000
DAVEYTON
ESTHER PARK
HARTEBEESTFONTEIN
HEIDELBERG
H. BICKLEY
JAN SMUTS
JP MARAIS
OLIFANTSFONTEIN
RATANDA
RONDEBULT
6.5 - 8.5
5.5 - 8.0
105
80
55
70
4
1
6
15
0.6
0.9
15
20
0
150
Exemption
Exemption
General
standards
General
standards
Exemption
Exemption
5.5
6.5
6.5
6.5
6.5
8.0
8.5
8.5
8.5
8.5
80
70
105
105
105
70
55
55
55
55
1
4
4
4
4
10
6
6
6
6
0.9
0.6
0.6
0.6
0.6
20
25
15
15
15
150
0
0
0
0
Exemption
License
Exemption
Exemption
Exemption
5.5 - 8.0
6.5 - 8.5
5.5 - 9.5
80
70
150
65
55
75
1
4
10
15
6
15
0.9
0.6
1.0
15
25
25
150
0
1000
RYNFIELD
TSAKANE
VLAKPLAATS
6.5 - 8.5
6.5 - 8.5
5.5 - 9.5
105
105
150
55
55
75
4
4
10
6
6
15
0.6
0.6
1.0
15
15
25
0
0
1000
WELGEDACHT
5.5 - 9.5
150
75
10
15
1.0
25
1000
WATERVAL
6.0 - 8.5
80 +
intake
70
0.7
20
500
Exemption
License
General
standards
Exemption
Exemption
General
standards
General
standards
License
WWTW
pH
11
De?e5896 ent
The main focus of the approved facilities development plan (FDP), is the management and provision of capacity for wastewater care works, the supply of pipelines and re-use systems. A backlog has developed for new
capacity that needs to be addressed as soon as possible. This was confirmed during a strategic session and
the necessary plans are to be put in place to meet this demand.
12
Northern catchment area:

Hartebeestfontein WWTW - The project to enhance the present plant capacity with an additional
13Ml/d was not completed during this financial year as expected. Apart from the two new 38Ml/d final
effluent tanks that were to be finished at a contract value of R25 million, additional work will be required
to upgrade the sludge management capacity.
Rietvlei WWTW As a first stage, a new 50Ml/d WWTW is planned for a new greenfieds site. This plant
will receive flow mainly from Ekurhuleni, but also from Tshwane. The demand for new capacity in this
immediate catchment area reduced somewhat due to the economic downturn. The environmental
impact assessment (EIA) process as well as the identification and securing of a suitable site, are in
progress.
Blesbokspruit River catchment area:
Daveyton WWTW - The restoration of the Daveyton WWTW to its original 16Ml/d is still in process
and the installation of the mechanical, electrical and instrumentation for the inlet works upgrading is 95%
complete. This, however, does not include other work that contributes to the 16Ml/d restoration, including pumpstations A, B and E, the refurbishment of the primary settling tanks and the digestors.
Heidelberg WWTW - The original design capacity of the Heidelberg WWTW was 8Ml/day. This was
later downgraded to 5Ml/day as a result of the decommissioning of the old carousel plant. This project,
to restore the original capacity, has been completed.
Welgedacht WWTW Tenders, which included provisions for alternative designs and technology, closed
on 17 May 2011. The expectation was that ERWAT would receive the required Record of Decision
(ROD)/waste license, during the tender evaluation and adjudication period, to enable commencement
of construction. Some of the environmental issues include the consideration of alternatives to the releasing of effluent back into the river.
Southern drainage area:
Waterval WWTW Although this plant will need further extensions soon, the last phase of the previous extension i.e. the sludge digestion and dewatering, received attention during this period. This project
includes the construction of additional anaerobic sludge digesters, installing associated sludge mixing and
heating equipment, the sludge dewatering facility and an out-loading area. The civil work is progressing
well and the tenders for the mechanical, electrical and instrumentation work closed on 10 June 2011.
Resear-h an. De?e5896 ent (R D)

Beneficial use of sludge
ERWAT has supported and has been involved in a research project on the beneficial use
of sludge in agricultural applications. This project is undertaken by the University of
Pretoria (UP), in co-operation with ERWAT and co-funded by the Water Research
Commission (WRC), Sasol and THRIP. This project has been running over a three year
period and is expected to be finalised in the next financial year.
Previous studies on beneficial agricultural use of sludge were conducted in the northern
hemisphere, where soil-climate combinations are quite different to our Southern African
conditions. Since processes regulating nitrogen availability for crop uptake from sludgeamended soils are governed by climatic (temperature and water availability) and edaphic
factors, locally based trials were essential.
The objectives of the research are mainly to establish a safe and controlled method of
applying stabilized sewage sludge on land for agricultural purposes, as well as the environmental, social and health aspects of such an application on South African oils. In addition
the business-related issues are also researched.
Research and new technologies
ERWAT was further involved with and supported research mainly through research projects of the WRC in the following areas:
OFWAT anaerobic process for treating wastewater and urban gardening; and
Co-digestion of sludge with industrial waste.
ERWAT also considered a number of possible new technologies, namely:
Sulphate reduction and effluent treatment in the leather industry;
Different aeration methods
Quick fixes
Sludge disposal
Sludge disposal is a very expensive operation. In addition, different methods of disposing
sewage also have their own drawbacks. For instance, incineration has the risk of polluting
the environment by releasing toxic chemicals, which can have much greater carcinogenic
effects than disposal in sacrificial sites, oceans and seas. Land-filling generates landfill gas,
which is dominated by methane. This causes a green-house effect 20 times greater than
CO2 contributing to global warming. It is therefore necessary to find affordable and environmentally responsible sludge utilization systems which are beneficial for both the wastewater treatment works (WWTW) as well as urban communities paying for municipal
services.
Beneficial use of sewage sludge on agricultural lands is a very well-known practice around
the world. The benefits include: being a source of essential crop nutrients, improvement of
soil quality, minimising soil erosion and runoff, and playing a significant role to combat global warming through carbon sequestration. Beneficial agricultural use accounts for 28% of
the total sludge produced from South African wastewater treatment works. This is despite
13
the enormous pressure on South African wastewater treatment works to dispose of or utilize their sludge
in an environmentally sustainable way. The poor public perception of sludge use and the lack of thorough
local field scale studies have exacerbated the current low usage rates in agriculture.
14
Joint research studies conducted by scientists from the University of Pretoria, the Water Research
Commission and ERWAT proved that municipal sludge application to agricultural lands, improve crop yield.
It was apparent from the study that high sludge application rates, above crop nutrient requirements (agronomic and pasture crops), could lead to ground and/or surface water body pollution from nitrate leaching
or phosphate losses through runoff. Therefore, balancing the nutrient supply from sludge with crop demand
is vital for sustainability. The study has clearly demonstrated that the nutrient requirements of a cropping system depends on crop type, cropping intensity, management practices, water availability and sludge nutrient
content. In addition, a large fraction of the essential element, nitrogen(N), in sewage sludge is not readily available for consumption by plants (organic). It firstly has to be transformed into a plant available form (inorganic), before plants can utilize it. Processes involved in the transformation of organic N to inorganic form, are
influenced by various complex factors and interaction between factors. This makes it difficult to extrapolate
field studies, that are conducted across regions, as it can compromise both the environment and crop production. On the other hand, conducting medium to long-term field studies across various ecological zones,
soil types, sludge types, and cropping systems, is not only expensive, but also logistically impractical. A validated mathematical model could play a significant role to extrapolate field data. Therefore the team added
nitrogen and phosphorus models into an existing generic mechanistic crop growth and irrigation management model, called Soil Water Balance (SWB). The model was calibrated and validated for maize and oats
with acceptable accuracy, proving its potential as a reasoning support tool for sludge application to agricultural lands.
In certain instances, the nutrient content of sludge produced by municipal water treatment works, often far
exceeds the requirements of nearby crops. Transporting sludge further afield is not always economically
viable. In such situations, excess sludge could be exported through turf-grass sod production. Studies conducted by the research group, demonstrated several advantages to large-volume sludge application on turf
for sod production, with minimal environmental impacts through nitrate leaching.
Additional studies were conducted to evaluate the quality of compost that could be made from various
sludge types. A tool box tool kit of technologies are generated, where one must assess the situation and
decide which solution or suite of solutions may work better.
Lab8rat8rA Ser?i-es
ERWAT Laboratory Services is accredited to ISO/IEC 17025 by the South African
National Accreditation System (SANAS), which is recognised by government as the
sole accreditation body in South Africa. Its accreditation activities are widely recognised and promote global acceptance of South African products, personnel and services.
In addition to its well-established chemical and microbiological laboratory services for
the analysis of water, wastewater, activated sludge, sewage sludge and soil, the
ERWAT laboratory has recently extended its services to include the identification of
waterborne pathogens (PCR analysis), GC-MS analysis, and automated photometric
low-range specialized chemical analysis on potable water and boreholes. The industrial section of the laboratory focuses more on external industrial services.
The composition of domestic and industrial wastewater poses numerous challenges
for modern day treatment plants in terms of the monitoring, treatment and control
functions of unknown hazardous substances. Many organic contaminants are regarded as persistent organic pollutants, which may occur at low to trace levels in raw
effluent, but may build up in the environment over time.
The laboratory is a modern state-of-the-art, spacious facility and caters for analyses
which form the basis of understanding the environmental factors and supporting the
best technology to manage wastewater.
ERWAT Laboratory Services provides a multifunctional service to other organisations and individuals in the water sector, as well as to ERWATs 19 WWTWs, with a
special focus on Green Drop certification.
15
Water services authorities may receive Green Drop or Blue Drop status only
when they comply with comprehensive and stringent criteria determined.
Amongst others a suitable quality monitoring programme and sample analysis in
an accredited laboratory is one of the criteria.
16
The use of specialised high technology equipment and methods has highlighted the
need for South African legislation to address the need for regulations and guidelines concerning organic and petrochemical contamination in wastewater, groundwater and potable water systems. ERWAT Laboratory Services is committed to
remain updated with technological advances in wastewater analysis and management, as well as research related projects such as endocrine disruptors (e.g.
oestrogens) in wastewater, from both natural and synthetic sources.
The influence of the activated sludge process on the reduction of complex long
chain organic compounds and other pollutants may also be a critical factor influencing the design and upgrading of modern day wastewater care works for
domestic, as well as industrial wastewater. This, therefore, points to the need for
test methods which can offer low limits of detection, whilst maintaining high levels
of target analysis specificity and reliability.
The industrial section is continuously involved in the development of new business
and support functions to private industries, local authorities and the private sector. This section is involved in major projects for government departments, private
institutions and private industries.
Projects for the provision of monitoring, quality control, skills audits, site assessments and process advisory services form part of this sections activities.
This section also operates ten wastewater treatment plants on industrial sites in
the Eastern Gauteng area, as well as Hammanskraal.
Te-hni-a5 Ser?i-es
In 2009 the pump station division was ring-fenced in terms of manpower and resources to operate in isolation from the maintenance
division, which provides services to ERWAT WWTWs. This was done
to improve service delivery to both ERWAT and the EMM.
The departmental structure was developed to meet organisational
needs and was aligned to strategic objectives. Day-to-day technical
operations were strengthened by appointing supervisors to support
maintenance managers and artisans with an aim of improving quality of
service delivered to clients.
The reliability and electrical engineering division was reinforced by the
addition of the planning section and new appointments were made to
support the structure.
The contracts and projects division saw the establishment of the PMU
(project management unit) section, with its main objective being the
focus on the management of capital projects, as well as contract/tender work.
Contracts on critical work were initiated, including repair and rewinding of electrical motors, general cleaning and grass cutting on pump stations, as well as grit removal and sump cleaning on pump stations.
The establishment of a technical repair workshop at Hartebeestfontein
WWTW contributed to minimized stripping costs and resulted in a
more competitive and transparent bidding process on major repairs.
Training programmes such as engineer-in-training, in-service training
and apprenticeship programmes were initiated to develop technical
expertise in scarce engineering skills.
17
Hu6 an -a9ita5 . e?e5896 ent an. re5ati8ns

People management
Skills development, compensation, leadership development and succession planning, employee wellness and
HIV/AIDS programs received attention in the preceding twelve months. This will remain on the strategic agenda of the organization with more intense focus on transformational issues. Real transformation will only be
manifested when we achieve all equity targets, reach our full potential in our social responsibility and deliver
the right mix of black economic empowerment supply to our organization.
Skills development
Skills development is conducted within the framework of the Skills Development Act and Workplace Skills
Plan and is reviewed annually within the organizations consultative structures. ERWATs focus on the acquisition of scares skills, hence the introduction of apprenticeships and the continuation of graduate cadet, learnership and bursary programs, will assist a great deal in the acquisition of appropriate skills in future.
Employment equity statistics

Table 1 and Table 2 indicate how ERWAT has progressed towards achieving employment equity at all levels
in the organization. With the imminent retirement of two Executive Managers (E-Band), this will assist a great
deal in addressing equity at the most senior level within the company.
Table 1
18
PATERSON
PROFILE
LEVEL
F
E
D
C
B
A
AFRICAN
WHITE
B
1
2
10
47
88
174
3
1
1
1
1
TOTAL
322
1
2
18
16
26
4
11
7
M
1
4
9
25
2
63
22
40
TOTAL
% EQUITY
100.00%
8
25
105
115
201
50.00%
64.00%
76.19%
98.26%
100.00%
455
Table 2
PERMANENT EMPLOYEES
African
Coloured
Indian
White
Total
385
62
455
Age analysis of permanent staff on 30 June

2011
By regularly monitoring the age profile as per Table 3 within
ERWAT, it affords us the opportunity to bring in young graduates on a regular basis to fill these positions to be vacated
by retirees.
Table 3
Occupational categories
20-35
Age analysis
35-55
56-60
61-65
>65
Total
Clerks
Elementary occupations
Legislators, senior officials and managers
13
70
1
24
103
5
3
17
1
1
19
3
0
1
0
41
210
10
Plant / Machine operators

Professionals
Service and sales workers
Skilled agricultural workers
Technicians/Associated Professionals
8
7
0
10
35
35
13
0
0
45
16
3
1
0
2
11
1
0
0
4
2
0
0
0
1
72
24
1
10
87
TOTAL PERMANENT
144
225
43
39
455
Non-permanent employees
102
TOTAL ON PAYROLL
246
102
225
HIV and Aids

A strong focus on prevention of HIV/Aids has continued in
the preceding year. ERWAT will continue with intervention
programs in a positive and non-discriminatory manner, by
educating through formal workshops an information sessions. Peer counsellors received refresher courses. By means
of a KAP survey and Voluntary Testing and Counselling, the
prevalence of HIV & AIDS is monitored. At this stage it
remains quite low, due to these intervention programs.
43
39
557
19
Mar4etin1 an. -86 6 uni-ati8n

With a wide and varying target audience, ERWAT combines all the elements and techniques to communicate with all its target markets. These include branding, image-building, advertising, public relations, media liaison and electronic communication.
The company also regards its employees as ambassadors for ERWAT and communicates with staff on a regular basis through newsletters, an intranet and electronic mails.
As some of ERWATs wastewater care works are situated in residential areas, ERWAT takes its social
responsibility role seriously, specifically with regard to education and awareness campaigns.
Campaigns are held to establish and raise awareness about the group amongst its communities and organisations such as corporate companies, secondary and high schools, youth organisations, non-government
organisations (NGOs) and welfare organisations. ERWAT also participates in a number of national events
like National Water Week, National Sanitation Week and National Youth Day.
A-4n8w5e. 1e6 ents

I would like to thank our major shareholders, namely Ekurhuleni Metropolitan Municipality, Johannesburg
Metropolitan Municipality and Lesedi Municipality for their continued commitment and contributions to
ERWAT.
20
I would also like to thank all our key strategic partners, the Department of Water Affairs, the Department
of International Relations and Co-operation, the Department of Trade and Industry, the Water Research
Commission (WRC), the Water Institute of South Africa (WISA), the Department of Local Government
(DPLG) and the South African Local Government Association (SALGA).
Without the excellent service provided by our auditors, legal representatives, contractors and suppliers,
ERWATs successes would not have been possible. A special word of thanks is extended to you.
I also thank the Executive Management and all ERWAT employees for their insight, diligence and energy in
executing our vision, goals and operational responsibilities. I look forward to the future, especially with this
team behind me.
Pat Twala
Managing Director
21
CORPORATE GOVERNANCE
Introduction
Sound corporate governance structures are in operation at ERWAT, referring to the set of processes, customs, policies, laws and institutions affecting the way in which the company is directed, administered and controlled.
22
ERWAT supports the concept of more transparent and accountable corporate governance, as contained in
the King Committee Report.
The Board of Directors

The Board of non-executive Directors and the Managing Director meet once a month to consider matters,
make resolutions and take note of departmental activities.
Audit Committee
In terms of the Local Government Municipal Finance Management Act, ERWAT falls under the jurisdiction
of the Ekurhuleni Metropolitan Municipalitys Audit Committee.
Remuneration Committee
This committee reviews remuneration policies and practices in the company and determines levels of remuneration and terms and conditions of employment of senior executives.
Code of ethics
ERWAT is committed to a strong set of values, which is shared, known and supported by everyone in the
company. ERWAT strives to conduct its business in an ethical manner, and has adopted a set of values dealing with beliefs, norms, standards, people, traditions and customs.
These values are:

integrity
professionalism
reliability
enabling
customer orientation
excellence.
Financial statements
The Directors assume responsibility for preparing financial statements that fairly present the financial position of the Group at the end of each financial year and the result of its operations and cash flows for that
year. The external auditors are responsible for independent reviews and reporting on those financial statements.
The financial statements are prepared by management in accordance with generally accepted and appropriate accounting practice. These accounting policies are applied consistently, and are supported by reasonable and prudent judgements and estimates.
Internal control
The Groups internal accounting controls and systems are designed to provide reasonable assurance regarding the integrity and reliability of its financial information and to safeguard its assets. These controls include
proper delegation of responsibilities, effective accounting procedures and adequate segregation of duties.
They are monitored throughout the Group and all employees are required to act with integrity under all
circumstances. The internal audit function is now performed by the Internal Audit Department of the
Ekurhuleni Metropolitan Municipality.
Board of Directors
The directors of the company during 2010/11 and at the date of this report were:
Mr EM Phasha (Chair)
Mr NP Twala (Managing)
Mr ZE Letjan
Adv MM Mochatsi
Ms N Sidondi
Dr RS Nene (resigned 7 March 2011)
Ms EE Themba (resigned 30 June 2011)
23
24
ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 UNE 011
GENERAL INFORMATION
ACCOUNTING OFFICER
NP Twala
CHIEF FINANCIAL OFFICER
WI Louw
DIRECTORS
EM Phasha (Chairperson)
MM Mochatsi
RS Nene
EE Themba
N Sidondi
ZE Letjan
NP Twala (Chief Executive Officer))
Appointment date 29 June 2009

Appointment date 27 November 2009
REGISTERED OFFICE AND BUSINESS ADDRESS

Hartebeestfontein Office Park
R25 (Bapsfontein / Bronkhorstspruit), Kempton Park
POSTAL ADDRESS
P O Box 13106, Norkem Park 1631
BANKERS
ABSA Bank, Kempton Park
AUDITORS
Auditor-General, 61 Central Street, Houghton
COMPANY SECRETARY
WI Louw (Resigned 31 January 2011)
M Hilton-Khumalo (Appointed 1 February 2011)
COUNTRY OF INCORPORATION
South Africa
NATURE OF BUSINESS
The principal activity of the company is the conveyance and treatment
of waste water and the provision of related engineering services.
COMPANY REGISTRATION NUMBER
1992/005753/08
25

The reports and statements set out below comprise the annual financial statements presented to
the members:
INDEX
Directors responsibilities and approval
Report of the Auditor-General
Directors report
Statement of financial position
Statement of financial performance
Statement of changes in net assets
Statement of cash flow
Accounting policies
Notes to the annual financial statements
Page
26
28
32
36
37
38
39
40
59
DIRECTORS RESPONSIBILITIES AND APPROVAL
26
The directors are required by the Municipal Finance Management Act (Act 56 of 2003), to maintain adequate
accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is the responsibility of the directors to ensure that the annual financial statements fairly represent the state of affairs of ERWAT as at the end of the financial year and the
results of its operations and cash flows for the period ended. The external auditors are engaged to express an
independent opinion on the annual financial statements and was given unrestricted access to all financial records
and related data.
The annual financial statements have been prepared in accordance with Standards of Generally Recognised
Accounting Practices (GRAP), including any interpretations, guidelines and directives issued by the Accounting
Standards Board.
The annual financial statements are based upon appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates.
The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the entity and place considerable importance on maintaining a strong control environment. To enable
the directors to meet these responsibilities, the accounting officer sets standards for internal control aimed at
reducing the risk of error or deficit in a cost effective manner. The standards include the proper delegation of
responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of
duties to ensure an acceptable level of risk. These controls are monitored throughout ERWAT and all employees are required to maintain the highest ethical standards in ensuring ERWATs business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in ERWAT is on identifying, assessing, managing and monitoring all known forms of risk across ERWAT. While operating risk cannot
be fully eliminated, ERWAT endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.
Abbreviations
DBSA
Development Bank of South Africa
SA GAAP South African Statements of Generally Accepted Accounting Practice
GRAP
Generally Recognised Accounting Practice
GAMAP
Generally Accepted Municipal Accounting Practice
IAS
International Accounting Standards
IMFO
Institute of Municipal Finance Officers
IPSAS
International Public Sector Accounting Standards
MEs
Municipal Entities
MFMA
Municipal Finance Management Act
MIG
Municipal Infrastructure Grant (Previously CMIP)
The directors are of the opinion, based on the information and explanations given by management, that the
system of internal control provides reasonable assurance that the financial records may be relied on for the
preparation of the annual financial statements. However, any system of internal financial control can provide
only reasonable, and not absolute, assurance against material misstatement or deficit.
The directors have reviewed ERWATs cash flow forecast for the year to 30 June 2012 and, in the light of
this review and the current financial position, they are satisfied that ERWAT has access to adequate resources
to continue in operational existence for the foreseeable future.
ERWAT is wholly dependent on Ekurhuleni Metropolitan Municipality for continued funding of operations.
The annual financial statements are prepared on the basis that ERWAT is a going concern and that the
Ekurhuleni Metropolitan Municipality has neither the intention nor the need to liquidate or curtail materially the scale of the entity.
Although the accounting officer is primarily responsible for the financial affairs of ERWAT, he is supported by
the entitys external auditors.
The external auditors are responsible for independently reviewing and reporting on ERWATs annual financial statements. The annual financial statements have been examined by ERWATs external auditors and their
report is presented on pages 28 to 31.
The annual financial statements set out on pages 32 to 105, which have been prepared on the going concern basis, were approved by the board of directors on 12 April 2012 and were signed on its behalf by:
Mr EM Phasha (Chairperson)
Mr NP Twala (Chief Executive Officer)
27

REPORT OF THE AUDITOR-GENERAL TO THE GAUTENG PROVINCIAL LEGISLATURE
AND THE COUNCIL ON THE EAST RAND WATER CARE COMPAMY
Re98rt 8n the finan-ia5 state6 ents

Introduction
1
I have audited the accompanying financial statements of the East Rand Water Care Company (ERWAT),
which comprise the statement of financial position as at 30 June 2011, statement of financial performance, statement of changes in net assets and statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory information, and the accounting officers
report as set out on pages 32 to 105.
Accounting Officers responsibility for the financial statements

2
The accounting officer is responsible for the preparation and fair presentation of these financial statements in accordance with the South African Standards of Generally Recognised Accounting Practice
(SA Standards of GRAP) and the requirements of the Municipal Finance Management Act, 2003 (Act
No. 56 of 2003) (MFMA) and the Companies Act, 2008 (Act No. 71 of 2008). The accounting officer
is also responsible for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.
Auditor-Generals responsibility
3
As required by section 188 of the Constitution of South Africa, 1996 and section 4 of the Public Audit
Act, 2004 (Act No. 25 of 2004) (PAA), my responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with the International Standards on Auditing and General Notice
1111 of 2010 issued in Government Gazette 33872 of 15 December 2010. Those standards require
that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditors judgement, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entitys
preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my
audit opinion.
28
Opinion
7
In my opinion the financial statements present fairly, in

all material respects, the financial position of the East
Rand Water Care Company as at 30 June 2011, its
financial performance and its cash flows for the year
then ended in accordance with South African
Standards of Generally Recognised Account Practice
(SA Standard of GRAP) and the requirements of the
Municipal Finance Management Act, 2003 (Act No. 56
of 2003) and the Companies Act of South Africa, 2008
(Act No. 71 of 2008).
Emphasis of matter
8
I draw attention to the matters below. My opinion is not modified in respect of these matters:
Material impairment
9
As disclosed in note 3 of the financial statements, material losses to the amount of R22 996 855 were
incurred as a result of impairment of the Grootvlei-Biosure plant.
Under spending of the budget

10 As disclosed in note 37, the municipal entity has materially under spent its capital budget to the amount
of R 69 515 415. As a consequence, the implementation of the capital development programme and the
availability of the new plant capacity, will be at a later date.
11 As disclosed in note 37, the municipal entity has materially under spent on its maintenance expenditure
budget to the amount of R 19 798 582. This was the result of implementation of a new maintenance strategy and implementing new service contracts. As a consequence the maintenance function was not effective in the period.
Irregular expenditure
12 As disclosed in note 31 to the financial statements, the entity incurred irregular expenditure to the amount
of R 2 029 778 as a result of non-compliance with the supply chain management regulations.
Re98rt 8n 8ther 5e1a5 an. re1u5at8rA re: uire6 ents

13 In accordance with the PAA and in term of General notice 1111 of 2010, issued in Government Gazette
33872 of December 2010, I include below my findings on material non-compliance with laws and regulations applicable to the municipal entity.
Predetermined objectives
14 There were no material findings on the report of pre-determined objectives as set out on page 24.
29
Compliance with laws and regulations

National Water Act
15 The entity did not comply with the Government Notice (GN) 399 of 26 March 2004: Revision of the
General Authorisations in terms of section 39 of the National Water Act, 1998 (Act No. 36 of 1998), in
relation to irrigation of any land with waste or water containing waste generated through an industrial
activity or by a waterwork. Two of the nineteen plants did not comply for certain months with the
Chemical Oxygen Demand. Furthermore two of the nineteen plants did not comply for certain months
with respect to Suspended Solids.
Budgets
16 The board of directors did not approve the annual budget at least 30 days before the start of the financial year, as required by section 87(4) of the MFMA.
Municipal Finance Management Act (MFMA)

17 The accounting officer did not take all reasonable steps to ensure that the entity has and maintains effective, efficient and transparent systems risk management, as there was no fraud prevention plan in place
as required by section 95(c)(i) of the MFMA.
30
18 The accounting officer did not take all reasonable steps to ensure that the entity has and maintains effective, efficient and transparent systems of internal audit
complying with and operating in accordance with prescribed norms and standards, as required by section
95(c)(ii) of the MFMA.
19 The accounting officer of the municipal entity did not perform his responsibilities to manage the assets of the entity, including safeguarding and maintenance of those assets
as plant and machinery and motor vehicles were not adequately insured as at year end as required by section
(96)(1)(a) of the MFMA.
Internal audit
20 The internal audit unit did not function as required by
section 165(2)(b) in that it did not report to the audit
committee on the implementation of the internal audit
plan, and did not advise the accounting officer and report
to the audit committee on matters relating to internal
controls and accounting procedures and practises.
Procurement and contract management

21 The accounting officer did not perform his responsibilities
of recording reasons for any deviations and reporting
them to the next meeting of the board of directors on
deviations from the procurement process, as required by

regulation 36(2) of the supply chain management policy.
Expenditure management
22 The accounting officer did not take reasonable steps to
prevent irregular expenditure, as required by section
95(d) of the MFMA.
Interna5 -8ntr85
23 In accordance with the PAA and in terms of General
notice 1111 of 2010, issued in
Government Gazette 33872 of 15 December 2010,1 considered internal control relevant to my audit, but not for
the purpose of expressing an opinion on the effectiveness of internal control. The matters reported below are
limited to the significant deficiencies that resulted in the
findings on the compliance with laws and regulations
included in this report.
Leadership
24 Effective leadership on good governance and protecting the best interests of the entity was not provided in certain instances.
25 The accounting officer did not exercise adequate oversight to ensure compliance with all laws and and
the preparation of financial statements.
Financial and performance management

26 Management did not exercise adequate oversight to ensure compliance with all laws and regulations and
preparation of financial statements.
Governance
27 There was no adequately functioning internal audit unit that identified internal control deficiencies and
recommended corrective action effectively.
28 Appropriate risk management activities were not implemented to ensure consideration of the fraud prevention plan.
Johannesburg
30 November 2011
SOUTHAFRICA
31
DIRECTORS REPORT
The directors submit their report for the year ended 30 June 2011.
1 Review of activities
Main business and operations
ERWAT is a municipal entity. The principal activity of the company is the conveyance and treatment of
wastewater and the provision of related engineering services and products. The operating results and state
of affairs of the company are fully set out in the attached annual financial statements and do not, in our opinion, require any further comment. The Board of Directors was appointed on 29 June 2009, except for ZE
Letjan who was appointed on 27 November 2009. RS Nene resigned as director on 7 March 2011 and
EE Themba resigned as director on 30 June 2011. Net surplus of the entity for 2011 is R49 742 316 (2010:
surplus R 18 243 163).
ERWAT has obtained a Nedbank loan facility of R550 000 000 to upgrade the Waterval and Welgedacht
plants. The entity has not yet withdrawn any funds from the facility. The loan is guaranteed by Ekurhuleni
Metropolitan Municipality.
2 Going concern
We draw attention to the fact that at 30 June 2011, the entity had accumulated surpluses of R633 275 299
and that ERWATs total assets exceed its liabilities by R635 936 093.
32
The annual financial statements have been prepared on the basis of accounting policies applicable to a going
concern. This basis presumes that funds will be available to finance future operations and that the realisation
of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary
course of business.
The existence of ERWAT is dependent on the continued support of Ekurhuleni Metropolitan Municipality
by way of service charges for treatment of wastewater and the provision of related engineering services
paid each year in terms of a service delivery agreement entered into between ERWAT and Ekurhuleni
Metropolitan Municipality.
3 Subsequent events
The directors are not aware of any other matters or circumstances arising since the end of the financial year
except for the impairment of the Grootvlei plant. The total impairment is R22 996 855 and is disclosed
under note 3.
4 Share capital / contributed capital

ERWAT does not have share capital, since it is a Non Profit Company.
5 Secretary
WI Louw resigned as company secretary on 31 January 2011
and was replaced by M Hilton-Khumalo who was appointed
on 1 February 2011 as the new company secretary.
The secretary of the entity is M Hilton-Khumalo of:
Business address
Hartebeestfontein Office Park
R25 (Bapsfontein / Bronkhorstspruit)
KEMPTONPARK
1619
33
DIRECTORS REPORT (CONTINUED)

6 Key management emoluments
Remuneration of
non-executive directors
EM Phasha (Chairperson)
MM Mochatsi
CD Modise (resigned 27 Nov 2009)
N Sidondi
EE Themba
RS Nene (resigned 7 March 2011
ZE Letjan (appointed 27 Nov 2009)
Chief Executive Officer

NP Twala
34
Executive Managers
WI Louw (CFO)
AS Louw
TS Mhlongo
RW Barnes
O Sebiloane
JW Wilken
JS Terblanch
M Hilton-Khumalo
Salary
or fees
(R)
Bonuses and
performance
related
payments
(R)
Retirement
fund
contributions
(R)
108864
90720
541 744
1 024 897
103 100
200 905
786 823
772 385
778 725
760 517
586 647
771 973
796 191
315 610
95 631
98 490
95 110
91 890
1 000
96 250
95 730
150 137
155 918
155 321
154 422
119 167
156 751
154 769
69 434
5 568 871
574 101
1 115 919
90720
90720
70 000
90720
7 Auditors
Auditor-General South Africa will continue in office for the next financial year.
Medical
contributions
(R)
Expense
allowance
(R)
Other
5 093
6 621
741
112
565
167
113 957
97 341
96 461
96 832
73 565
91 887
28 299
570 043
572 820
32 592
33 442
120000
1514 936
1213649
5
6
3
1
(R)
Total
package 2011
(R)
Total
package 2010
(R)
112
94
49
92
93
93
35
776
799
720
808
549
780
388
35
57 820
38 928
42 946
57 051
39 208
38 928
8 887
11 899
21 871
102
84
96
78
116
69
94
283 768
33 770
639 860
000
000
000
000
000
600
260
1
1
1
1
204 310
149 721
125 156
127 775
879 865
1 133 782
1 201 749
393 931
1 023 684
1 025 827
912 090
1 011 729
901 759
1 011 616
1 024 767
8 216 289
6 911 472
STATEMENT OF FINANCIAL POSITION

Figures in Rand
2011
2010
Assets
Current assets
Trade and other receivables from exchange
transactions
Available-for-sale-investments
Cash and cash equivalents
6
5
7
33
4
70
107
Non-current assets
Property, plant and equipment
Intangible assets
Available for sale investments
3
4
5
731 881 529

1 715 206
733 596 735

841 349 285
Total assets
36
087
110
554
752
604
862
084
550
30 014 265
17 244 891
47 259 156
737
1
3
742
789
186
744
324
256
515
987
559
775
321
477
Liabilities
Current liabilities
Trade and other payables from exchange
transactions
Provisions
Current portion of long term borrowings
11
10
9
31
24
12
68
255
561
642
458
315
154
167
636
25
18
11
55
716
223
643
583
407
480
871
758
Non-current liabilities
Long term borrowings
Provisions
9
10
133
3
136
205
635
315
638
954
413
936
837
719
556
192
093
146
2
148
204
585
073
419
493
077
438
831
768
599
357
120
Total liabilities
Net assets
Net assets
Reserves
Mark to market reserve
Accumulated surplus
Total net assets
2 660 794
633 275 299
635 936 093
1 905 133
583 532 987
585 438 120
STATEMENT OF FINANCIAL PERFORMANCE

Figures in Rand
Revenue
Service charges
Other income
Government grants received
Interest received
Dividends received
Total revenue
Expenditure
Employee related costs
Depreciation and amortisation
Impairment loss/reversal of impairments
Finance costs
Debt impairment
Repairs and maintenance
Bulk purchases
General expenses
Total expenditure
Loss on disposal of assets
Surplus for the year
Notes
13
14
12
18
18
16
19
20
17
22
15
2011
339
54
9
5
058
685
934
668
65
409 412
2010
193
944
166
840
577
720
264943032
50 112 246
23 197 539
3443896
27321
341 724 034
(120 520 603)

(29 001 379)
(23 101 826)
(13 967 317)
(805 382)
(25 429 147)
(111 689 006)
(34 674 211)
(359 188 871)
(481 533)
49 742 316
(111216423)
(29187244)
(26904)
(16276734)
(12 035 394)
(29288314)
(90752568)
(34 552 456)
(323 336 037)
(144834)
18243163
37
STATEMENT OF CHANGES IN NET ASSETS

Figures in Rand
Balance at 1 July 2009
Changes in net assets
Available for sale mark to market
Total changes
Balance at 1 July 2010
Changes in net assets
Available for sale mark to market
Net income recognised directly in
net assets
Total recognised income and expenses
for the year
Total changes
Balance at 30 June 2011
Note
38
Mark to market
reserve
Accumulated
surplus
Total
net assets
565289824
566669921
525036
525036
1905133
18243163
18243163
583532983
525036
18243163
18768199
585438116
755 661
755 661
755 661
49 742 316
755 661
49 ,742 316
755 661
755 661
2 660 794
8
49 742 316
49 742 316
633 275 299
50 497 977
50 497 977
635 936 093
1380097
STATEMENT OF CASH FLOW

Figures in Rand
Notes
Cash flows from operating activities

Receipts
Interest income
Dividends received
Other receipts
5 668
65
396 878
402 612
Payments
Suppliers and employee costs
Finance costs
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of other intangible assets
Net cash flows from investing activities
23
3
4
Cash flows from financing activities

Repayment of long term borrowings
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
7
2011
2010
840
577
544
961
3443896
27320
325085629
328556845
(276 326 826)

(13 967 317)
(290 294 143)
112 318 818
(257587737)
(16276734)
(273864471)
54692374
(47 396 610)

338 326
(241,650)
(47 249 934)
(31257286)
(1505789)
(32763074)
39
(11 759 691)

(11 759 691)
(10949628)
(10949628)
53 309 193
17 244 891
70 554 084
10979672
6265219
17244891
ACCOUNTING POLICIES
1 PRESENTATION OF ANNUAL FINANCIAL STATEMENTS
The annual financial statements have been prepared in accordance with Standards of Generally Recognised
Accounting Practice (GRAP), including any interpretations, guidelines and directives issued by the Accounting
Standards Board. These annual financial statements have been prepared on an accrual basis of accounting and
are in accordance with historical cost convention, unless specified otherwise. They are presented in South
African Rand.
A summary of the significant accounting policies, which have been consistently applied, are disclosed below.
These accounting policies are consistent with the previous period.
1.1
Significant judgements and sources of estimation uncertainty
In preparing the annual financial statements, management is required to make estimates and assumptions that
affect the amounts represented in the annual financial statements and related disclosures. Use of available
information and the application of judgement is inherent in the formation of estimates. Actual results in the
future could differ from these estimates which may be material to the annual financial statements. Significant
judgements include:
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Trade receivables and other receivables and/or loans

ERWAT assesses its trade receivables, held to maturity investments and loans and receivables for impairment
at the end of each reporting period. In determining whether an impairment loss should be recorded in surplus or deficit, the surplus makes judgements as to whether there is observable data indicating a measurable
decrease in the estimated future cash flows from a financial asset.
The impairment for trade receivables, held to maturity investments and loans and receivables is calculated
on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date, that correlate with defaults on the portfolio. These
annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence
period.
Available-for-sale financial assets
ERWAT follows the guidance of IAS 39 to determine when an available-for-sale financial asset is impaired.
This determination requires significant judgment. In making this judgment, ERWAT evaluates, among other
factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector
performance, changes in technology and operational and financing cash flow.
Fair value estimation
The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for
financial assets held by ERWAT is the current bid price.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate
their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the
future contractual cash flows at the current market interest rate that is available to ERWAT for similar financial instruments.
Impairment testing
The recoverable amounts of cash-generating units and individual assets have been determined based on the
higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumption may change, which may then impact our
estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.
ERWAT reviews and tests the carrying value of assets when events or changes in circumstances suggest that
the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable
cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that
impairment may have occurred, estimates are prepared of expected future cash flows for each group of
assets. Expected future cash flows used to determine the value in use of tangible assets, are inherently uncertain and could materially change over time.
Provisions
Provisions were raised and management determined an estimate based on the information available.
Additional disclosure of these estimates of provisions are included in note 10 - Provisions.
1.2
Carrying amount is the amount at which an asset is recognised after deducting any accumulated depreciation
and accumulated impairment losses.
Class of property, plant and equipment means a grouping of assets of a similar nature or function in an entitys
operations, that is shown as a single item for the purpose of disclosure in the financial statements.
Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to
acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to
that asset when initially recognised in accordance with the specific requirements of other Standards of GRAP.
Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value.
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.
Entity-specific value is the present value or service potential of the cash flows an entity expects to arise from
the continuing use of an asset and from its disposal at the end of its useful life or expects to incur when settling a liability.
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1.2
Property, plant and equipment (continued)
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arms length transaction.
An impairment loss of a cash-generating asset is the amount by which the carrying amount of an asset exceeds
its recoverable amount.
An impairment loss of a non-cash-generating asset is the amount by which the carrying amount of an asset
exceeds its recoverable service amount.
Property, plant and equipment are tangible items that:
(a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and
(b) are expected to be used during more than one reporting period.
Recoverable amount is the higher of a cash-generating assets net selling price and its value in use.
Recoverable service amount is the higher of a non-cash-generating assets fair value less costs to sell and its
value in use.
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The residual value of an asset is the estimated amount that an entity would currently obtain from disposal of
the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.
Useful life is:
(a) the period over which an asset is expected to be available for use by an entity, or
(b) the number of production or similar units expected to be obtained from the asset by an entity.
Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held
for use in the production or supply of goods or services, rental to others, or for administrative purposes, and
are expected to be used during more than one period.
Recognition
The cost of an item of property, plant and equipment is recognised as an asset when:
it is probable that future economic benefits or service potential associated with the item will flow to the
entity; and
the cost of the item can be measured reliably.
Major spare parts and stand-by equipment qualify as property, plant and equipment when the entity expects
to use them during more than one period. Similarly, if the spare parts and servicing equipment can be used
only in connection with an item of property, plant and equipment, they are accounted for as property, plant
and equipment.
The entity evaluates under this recognition principle all its property, plant and equipment costs at the time
they are incurred. These costs include costs incurred initially to acquire or construct an item of property, plant
and equipment and costs incurred subsequently to add to, replace part of, or service it.
Measurement at recognition
Property, plant and equipment is initially measured at cost.
Where an asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at the date of acquisition.
An item of property, plant and equipment may be gifted or contributed to the entity. An asset may also be
acquired at nil or nominal consideration through the exercise of powers of sequestration. Under these circumstances the cost of the item is its fair value as at the date it is acquired.
The cost of an item of property, plant and equipment comprises:
its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
any costs directly attributable to bringing the asset to the location and condition necessary for it to be
capable of operating in the manner intended by management; and
the initial estimate of the costs of dismantling and removing the item and restoring the site on which it
is located, the obligation for which an entity incurs either when the item is acquired or as a consequence
of having used the item during a particular period for purposes other than to produce inventories during that period.
Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the
item is in the location and condition necessary for it to be capable of operating in the manner intended by
management.
The cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. If
payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the
total payment is recognised as interest over the period of credit, unless such interest is recognised in the carrying amount of the item in accordance with the allowed alternative treatment in the Standard of GRAP on
Borrowing Costs.
One or more items of property, plant and equipment may be acquired in exchange for a non-monetary asset
or assets, or a combination of monetary and non-monetary assets. The following refers to an exchange of
one non-monetary asset for another, but it also applies to all exchanges described in the preceding sentence.
The cost of such an item of property, plant and equipment is measured at fair value unless (a) the exchange
transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given
up is reliably measurable.The acquired item is measured in this way, even if an entity cannot immediately derecognise the asset given up. If the acquired item is not measured at fair value, its cost is measured at the carrying amount of the asset given up.
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1.2
The fair value of an asset for which comparable market transactions do not exist, is reliably measurable if:
the variability in the range of reasonable fair value estimates is not significant for that asset or
the probabilities of the various estimates within the range can be reasonably assessed and used in
estimating fair value.
If the entity is able to determine reliably the fair value of either the asset received or the asset given up, then
the fair value of the asset given up is used to measure the cost of the asset received unless the fair value of
the asset received is more clearly evident.
,
The cost of an item of property, plant and equipment held by a lessee under a finance lease is determined
in accordance with the Standard of GRAP on Leases.
Measurement after recognition
Property, plant and equipment are carried at cost less accumulated depreciation and accumulated
impairment losses.
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Depreciation
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total
cost of the item is depreciated separately. A significant part of an item of property, plant and equipment may
have a useful life and a depreciation method that are the same as the useful life and the depreciation method
of another significant part of that same item. Such parts might in some instances be grouped in determining
the depreciation charge.
The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset.
Depreciable amount and depreciation period
The depreciable amount of an asset is allocated on a systematic basis over its useful life.
The residual value and the useful life of an asset is reviewed at least at each reporting date and, if expectations differ from previous estimates, the change(s) is accounted for as a change in an accounting estimate in
accordance with the Standard of GRAP on Accounting Policies, Changes in Accounting Estimates and Errors.
Residual values are currently considered to be negligible and immaterial seeing that the useful life and economic life of property, plant and equipment is considered to be the same. The entity currently utilizes property, plant and equipment for its entire economic life.
Depreciation is recognised even if the fair value of the asset exceeds its carrying amount, as long as the assets
residual value does not exceed its carrying amount.
Depreciation of an asset begins when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset
ceases when the asset is derecognised. Therefore, depreciation does not cease when the asset becomes idle
or is retired from active use and held for disposal unless the asset is fully depreciated.
Land and buildings are separable assets and are accounted separately, even when they are acquired together. Land has an unlimited useful life and therefore is not depreciated. Buildings have a limited useful life and
therefore are depreciable assets. An increase in the value of the land on which a building stands does not
affect the determination of the depreciable amount of the building.
If the cost of land includes the costs of site dismantlement, removal and restoration, the portion of the land
asset is depreciated over the period of benefits or service potential obtained by incurring those costs. In some
cases, the land itself may have a limited useful life, in which case it is depreciated in a manner that reflects the
benefits or service potential to be derived from it.
Depreciation method
The depreciation method used reflects the pattern in which the assets future economic benefits or service
potential are expected to be consumed by the entity.
The depreciation method applied to an asset is reviewed at least at each reporting date and, if there has been
a significant change in the expected pattern of consumption of the future economic benefits or service potential embodied in the asset, the method is changed to reflect the changed pattern. Such a change is accounted for as a change in an accounting estimate in accordance with Standard of GRAP on Accounting Policies,
Changes in Accounting Estimates and Errors.
Impairment
To determine whether an item of property, plant and equipment is impaired, the entity applies the Standards
of GRAP on Impairment of Assets. The Standards of GRAP on Impairment of Assets explains how an entity
reviews the carrying amount of its assets, how it determines the recoverable amount or recoverable service
amount of an asset and when it recognises, or reverses the recognition of, an impairment loss.
Compensation from third parties for items of property, plant and equipment that were impaired, lost or given
up is included in surplus or deficit when the compensation becomes receivable.
The estimated useful lives are as follows:
Item
Land
Leased plant
Plant and machinery
Buildings and civil structure
Electrical components
Mechanical components
Fencing
Roads
Furniture and fixtures
Motor vehicles
Office equipment
IT equipment
Computer software
Implements
Average useful life

Infinite
Lease period
5-80 years
3-20 years
3-20 years
3-20 years
3-20 years
3-33 years
5-25 years
3-33 years
3-16 years
5-14 years
3-26 years
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1.2
Derecognition
Items of property, plant and equipment are derecognised when the asset is disposed of or when there are
no further economic benefits or service potential expected from the use of the asset.
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in
surplus or deficit when the item is derecognised. Gains are not classified as revenue.
The gain or loss arising from the derecognition of an item of property, plant and equipment is determined
as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
Leased Assets: Right of use assets
The entity has exclusive rights to use certain leased water care works for specified periods in return for a
series of payments.
These rights are capitalised and are depreciated over the repayment period of the loan. Lease charges are
amortised over the duration of the loan agreement on the effective interest rate method, which takes into
account the effective interest charge to the lease.
1.3 Fully depreciated assets still in use
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If the entity made an appropriate estimate of the useful lives, residual values and depreciation method of an
asset based on the information available at the previous reporting dates, it continues to measure the assets
at R0. The entity discloses the fact that such asset has been fully depreciated and is still in use.
Where the entity did not appropriately review the useful life, residual values and depreciation and amortisation method in accordance with GRAP 17 and GRAP 102, and the asset is fully depreciated or amortised,
but still being used, this constitutes a prior period error. The error is corrected and disclosed in accordance
with the requirements of GRAP 3.
1.4
Intangible assets
An intangible asset is an identifiable, non-monetary asset without physical substance. Intangible assets are
identifiable resources controlled by the economic entity from which the economic entity expects to derive
future economic benefits or service potential. Intangible assets are identifiable when they can be separated
from the economic entity, i.e. is capable of being separated or divided from the economic entity and sold,
exchanged, licensed or, when they arise as a result of a contractual or other legal right, excluding those legal
rights that arise from statute.
The economic entity recognises an intangible asset in its statement of financial position only when it is probable that the expected future economic benefits or service potential that are attributable to the asset will
flow to the economic entity; and the economic entity can measure the cost or fair value of the asset reliably.
An intangible asset is measured initially at cost. Where the economic entity acquires intangible assets, it recognises them as assets in the statement of financial position at cost.
Intangible assets are subsequently carried at cost less accumulated amortisation and accumulated impairment
loss.The economic entity assesses whether the useful life or service potential of an intangible asset is finite or
indefinite. The economic entity regards an intangible asset as having an indefinite useful life when there is no
foreseeable limit to the period over which the entity expects the asset to generate net cash inflows or service potential for the entity. Intangible assets with indefinite useful lives are not amortised.
The economic entity tests intangible assets with finite useful lives for impairment where there is an indication
that an asset may be impaired. An assessment of whether there is an indication of possible impairment is
done at each reporting date. Where the carrying amount of an item of an intangible asset is greater than the
estimated recoverable amount (or recoverable service amount), it is written down immediately to its recoverable amount (or recoverable service amount) and an impairment loss is charged to the Statement of
Financial Performance. The useful life of an intangible asset that arises from contractual or legal rights does
not exceed the period of the contractual or legal rights, but may be shorter depending on the period over
which the economic entity expects to use the asset. The economic entity reviews the amortisation method,
useful lives and residual values of intangible assets annually.
The estimated useful lives are as follows:
Item
Useful life
Computer software
1.5
5-14 years
Financial instruments
Classification
The entity classifies financial assets and financial liabilities
into the following categories:
Loans and receivables
Available-for-sale financial assets
Financial liabilities measured at amortised cost

Classification depends on the purpose for which the financial instruments were obtained/incurred and takes
place at initial recognition. Classification is re-assessed on an annual basis.
Initial recognition and measurement
When a financial asset or financial liability is recognised initially, the economic entity measures it at its fair value
plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs
that are directly attributable to the acquisition or issue of the financial asset or financial liability.
The best evidence of fair value is quoted prices in an active market. If the market for a financial instrument
is not active, the economic entity establishes fair value by using a valuation technique. The objective of using
a valuation technique is to establish what the transaction price would have been on the measurement date
in an arms length exchange motivated by normal business considerations.
Valuation techniques include using recent arms length market transactions between knowledgeable, willing
parties, if available, reference to the current fair value of another instrument that is substantially the same,
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1.5
Financial instruments (continued)
discounted cash flow analysis and option pricing models. If there is a valuation technique commonly used by
market participants to price the instrument and that technique has been demonstrated to provide reliable
estimates of prices obtained in actual market transactions, the economic entity uses that technique. The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments.
Periodically, the economic entity calibrates the valuation technique and tests it for validity using prices from
any observable current market transactions in the same instrument (i.e. without modification or repackaging)
or based on any available observable market data. The fair value of a financial liability with a demand feature
(e.g. a demand deposit) is not less than the amount payable on demand, discounted from the first date that
the amount could be required to be paid. The economic entity assesses at the end of each reporting period
whether there is any objective evidence that a financial asset or financial assets is impaired. If any such evidence
exists, the economic entity applies the following to determine the amount of any impairment loss:
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Financial assets carried at amortised cost: If there is objective evidence that an impairment loss on loans
and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the
difference between the assets carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred) discounted at the financial assets original
effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the
loss is recognised in surplus or deficit.
Financial assets carried at cost: If there is objective evidence that an impairment loss has been incurred
on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an
unquoted equity instrument, the amount of the impairment loss is measured as the difference between
the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not
reversed.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Loans and receivables are subsequently measured at amortised cost using the
effective interest method. The effective interest method is a method of calculating the amortised cost of a
financial asset or a financial liability (or of financial assets or financial liabilities) and of allocating the interest
income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or,
when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When
calculating the effective interest rate, the economic entity estimates cash flows considering all contractual
terms of the financial instrument but does not consider future credit losses. The calculation includes all fees
and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. In those rare cases when it is not possible to
estimate reliably the cash flows or the expected life of a financial instrument the economic entity uses the
contractual cash flows over the full contractual term of the financial instrument.
Avalaible-for-sale financial assets

ERWAT has classified its investments in Old Mutual Unit Trusts, Sanlam and Old Mutual demutualisation
shares as available-forsale investments. The investments are mark to market on annual basis, with changes in
fair value being recognised directly in equity. Investments that have no maturity date will be classified as available-for-sale. Available-for-sale financial assets are those nonderivative financial assets that are designated as
available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets
at fair value through profit or loss. Available-for-sale financial assets are subsequently measured at fair value
with changes in fair value recognised in net assets. Impairment losses, interest income and dividend income
are reported in surplus or deficit.
Other financial liabilities
Other financial liabilities are subsequently measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial
liability (or of financial assets or financial liabilities) and of allocating the interest income or interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter
period to the net carrying amount of the financial asset or financial liability. When calculating the effective
interest rate, the economic entity estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses.
The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. In those rare
cases when it is not possible to estimate reliably the cash flows or the expected life of a financial instrument
the economic entity uses the contractual cash flows over the full contractual term of the financial instrument.
Derecognition
Financial assets
A financial asset is derecognized where the contractual rights to receive cash flow from the asset have
expired, or the economic entity has transferred the asset and the transfer qualifies for de-recognition. A transfer qualifying for derecognition occurs when the economic entity transfers the contractual rights to receive
the cash flows of the financial asset. Where the economic entity has transferred its rights to the cash flows
from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognized to the extent of the economic entitys continuing
involvement in the asset.
Financial liabilities
A financial liability is derecognised when the
obligation specified in the contract is discharged, cancelled or expired.
Categorisation
The economic entity has various types of
financial instruments and these can be
broadly categorised as either financial assets
or financial liabilities.
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1.5
Financial instruments (continued)
A financial asset is any asset that is:

cash
a contractual right to receive cash or to receive another financial asset from another entity
a contractual right to exchange financial instruments on potentially favourable terms
an equity instrument of another entity
a contract that may or will be settled in the entitys own equity instruments (subject to certain conditions).
The economic entity has the following types of financial assets as reflected on the face of the statement of
financial position or in the notes thereto:
Trade and other receivables
Investments.
In accordance with IAS 39.09 the financial assets of the economic entity are classified as follows into one of
the four categories allowed by this standard:
Type of financial asset classification in terms of IAS 39.09
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Trade and other receivables from exchange transactions

Investments

Available-for-sale
Available-for-sale
A financial liability is any liability that is:

a contractual obligation to deliver cash or to deliver another financial asset; or
a contractual obligation to exchange financial instruments on potentially unfavourable terms.
The economic entity has the following types of financial liabilities as reflected on the face of the statement
of financial position or in the notes thereto:
Non-current long term liabilities
Trade and other payables
Current portion of long term liabilities
There are two main categories of financial liabilities, classified based on how they are measured.
Any other financial liabilities are classified as financial liabilities that are not measured at fair value through
profit or loss.
In accordance with IAS 39.09 the financial liabilities of the economic entity are classified only as financial liabilities that are not measured at fair value through profit or loss, because none of the following instruments
are held for trading.
Type of financial liability classification in terms of IAS 39.09:

Financial liabilities:
Long term liabilities (current & non-current)
Tade and other payables from exchange tranactions
Financial liability that is not measured at fair value

through profit or loss
Financial liability that is not measured at fair value
through profit or loss
Impairment of financial assets

Consumer debtors, long term receivables and other debtors are stated at cost less a provision for bad debts.
The provision is made on an individual basis or based on expected cash flows.
At each reporting date an assessment is made of whether there is any objective evidence of impairment of
financial assets. If there is evidence the recoverable amount is estimated and an impairment loss is recognised
in accordance with IAS 39 as an expense in the statement of financial performance. Separate classes of loans
and receivables were assessed for impairment using the following methodology:
ERWAT assesses at each statement of financial position date whether a financial asset or group of financial assets is impaired.
Assets are carried at amortised cost.
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has
been incurred, the amount of the loss is measured as the difference between the assets carrying amount and
the present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial assets original effective interest rate (i.e. the effective interest rate computed at
initial recognition). The carrying amount of the asset shall be reduced either directly or through the use of an
allowance account. The amount of the loss shall be recognised in surplus or deficit. The entity first assesses
whether objective evidence of impairment exists individually for financial assets that are individually significant,
and individually or collectively for financial assets that are not individually significant. If it is determined that no
objective evidence of impairment exists for an individually assessed financial asset, whether significant or not,
the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognised are not included in a collective assessment of
impairment.
1.6
Tax
ERWAT is a Non Profit Company and not liable for taxation.
1.7
Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
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1.7
Leases (continued)
Finance leases - lessee

Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal
to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The
corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.
Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.
Any contingent rents are expensed in the period in which they are incurred.
Operating leases - lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an
operating lease asset or liability. Minimum lease payments shall be apportioned between the finance charge
and the reduction of the outstanding liability. The finance charge shall be allocated to each period during the
lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Contingent rents shall be charged as expenses in the periods in which they are incurred.
1.8
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Impairment of cash-generating assets
Cash-generating assets are those assets held by the entity with the primary objective of generating a commercial return. When an asset is deployed in a manner consistent with that adopted by a profit-orientated
entity, it generates a commercial return.
Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the assets future economic benefits or service potential through depreciation (amortisation).
Carrying amount is the amount at which an asset is recognised in the statement of financial position after
deducting any accumulated depreciation and accumulated impairment losses thereon.
A cash-generating unit is the smallest identifiable group of assets held with the primary objective of generating a commercial return that generates cash inflows from continuing use that are largely independent of the
cash inflows from other assets or groups of assets.
Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs
and income tax expense.
Depreciation (amortisation) is the systematic allocation of the depreciable amount of an asset over its useful
life.
Fair value less costs to sell is the amount obtainable from the sale of an asset in an arms length transaction
between knowledgeable, willing parties, less the costs of disposal.
Recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its
value in use.
Useful life is either:
(a) the period of time over which an asset is expected to be used by the entity; or
(b) the number of production or similar units expected to be obtained from the asset by the entity.
Criteria developed by the entity to distinguish cash-generating assets from non-cash-generating assets are as
follows:
1.9
Impairment of non-cash-generating assets
Cash-generating assets are those assets held by the entity with the primary objective of generating a commercial return. When an asset is deployed in a manner consistent with that adopted by a profit-orientated entity, it generates a commercial return.
Non-cash-generating assets are assets other than cash-generating assets.
Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the assets future economic benefits or service potential through depreciation (amortisation).
Carrying amount is the amount at which an asset is recognised in the statement of financial position after
deducting any accumulated depreciation and accumulated impairment losses thereon.
A cash-generating unit is the smallest identifiable group of assets held with the primary objective of generating a commercial return that generates cash inflows from continuing use that are largely independent of the
cash inflows from other assets or groups of assets.
Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs
and income tax expense.
Depreciation (amortisation) is the systematic allocation of the depreciable amount of an asset over its useful
life.
Fair value less costs to sell is the amount obtainable from the sale of an asset in an arms length transaction
between knowledgeable, willing parties, less the costs of disposal.
Recoverable service amount is the higher of a non-cash-generating assets fair value less costs to sell and its
value in use.
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1.9
Impairment of non-cash-generating assets (continued)
Useful life is either:

(a) the period of time over which an asset is expected to be used by the entity; or
(b) the number of production or similar units expected to be obtained from the asset by the entity.
1.10
Employee benefits
Defined contribution plans

Where an employee has rendered services to the economic entity during the year, the economic entity recognises the contribution payable to a defined contribution plan in exchange for that service immediately as an
expense.
Other post retirement obligations
The entity provides post-retirement health care benefits upon retirement to some retirees.The entitlement
to post-retirement health care benefits is based on the employee remaining in service up to retirement age
and the completion of a minimum service period. The expected costs of these benefits are accrued over the
period of employment. An annual charge to income is made to cover the liability.
1.11
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Provisions and contingencies
Provisions are recognised when:

the entity has a present obligation as a result of a past event;
it is probable that an outflow of resources embodying economic benefits or service potential will be
required to settle the obligation; and
a reliable estimate can be made of the obligation.
a)
Post retirement medical provision

ERWAT provides post retirement medical benefits to some of its already retired employees and a provision is thus raised for the obligation.
b)
Bonus provision
A provision for 13th cheques to be paid in November is raised.
c)
Incentive bonus provision

A provision for incentive bonuses is raised. The bonuses will only be approved by the board of directors if they are satisfied with ERWAT's performance at the end of the financial year.
d)
Leave pay provision

The liability is based on the total accrued leave days at year end.
e)
Other provisions
This includes a provision for water and electricity accounts not received yet, based on an estimate of
previous months usage and workmen's compensation commission based on estimates.
Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 25.
1.12
Revenue from exchange transactions
Revenue is the gross inflow of economic benefits or service potential during the reporting period when those
inflows result in an increase in net assets, other than increases relating to contributions from owners.
An exchange transaction is one in which ERWAT receives assets or services, or has liabilities extinguished, and
directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other
party in exchange.
1.13
Revenue from non-exchange transactions
Non-exchange transactions are defined as transactions where the entity receives value from another entity
without directly giving approximately equal value in exchange.
.Revenue is the gross inflow of economic benefits or service potential during the reporting period when
those inflows result in an increase in net assets, other than increases relating to contributions from owners.
1.14
Borrowing costs
Borrowing costs that are directly attributed to the acquisition, construction or production of a qualifying asset
are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The
amount of borrowing costs eligible for capitalisation is determined as follows:
Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less
any investment income on the temporary investment of those borrowings.
Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the
purpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.
The capitalisation of borrowing costs commences when all the following conditions have been met:
expenditures for the asset have been incurred;
borrowing costs have been incurred; and
activities that are necessary to prepare the asset for its intended use or sale are undertaken.
When the carrying amount or the expected ultimate cost of the qualifying asset exceeds its recoverable
amount or recoverable service amount or net realisable value, the carrying amount is written down or written off in accordance with the accounting policy on Impairment of Assets as per accounting policy number
1.8 and 1.9. In certain circumstances, the amount of the write-down or write-off is written back in accordance
with the same accounting policy.
Capitalisation is suspended during extended periods in which active development is interrupted.
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1.14
Borrowing costs (continued)
Extended periods are periods that exceed three months.

Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its
intended use or sale are complete.
When the entity completes the construction of a qualifying asset in parts and each part is capable of being
used while construction continues on other parts, the entity ceases capitalising borrowing costs when it completes substantially all the activities necessary to prepare that part for its intended use or sale.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
1.15
Comparative figures
When the presentation or classification of items in the annual financial statements is amended, prior period
comparative amounts are reclassified. The nature and reason for the reclassification is disclosed. Where
accounting errors have been identified in the current year, the correction is made re-trospectively as far as
is practicable, and the prior year comparatives are restated accordingly. Where there has been a change in
accounting policy in the current year, the adjustment is made retrospectively as far as is practicable, and the
prior year comparatives are restated accordingly.
1.16
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Unauthorised expenditure
Unauthorised expenditure is expenditure that has not been budgeted for, expenditure that is not in terms
of the conditions of an allocation received from another sphere of government, municipality or organ of state
and expenditure in the form of a grant that is not permitted in terms of the Municipal Finance Management
Act (Act No. 56 of 2003). Unauthorised expenditure is accounted for as an expense in the statement of
financial performance and where recovered, it is subsequently accounted for as revenue in the statement of
financial performance.
1.17
Fruitless and wasteful expenditure
Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised.
All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement
of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in
the statement of financial performance.
1.18
Irregular expenditure
Irregular expenditure is expenditure that is contrary to the Municipal Finance Management Act (Act No. 56
of 2003), the Municipal Systems Act (Act No. 32 of 2000), and the Public Office Bearers Act (Act No. 20 of
1998) or is in contravention of the economic entitys supply chain management policy. Irregular expenditure
excludes unauthorised expenditure. Irregular expenditure is accounted for as expenditure in the statement
of financial performance and where reco-vered, it is subsequently accounted for as revenue in the statement
of financial performance.
1.19
Use of estimates
The preparation of annual financial statements in conformity with Standards of GRAP requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of
applying the entitys accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the annual financial statements are disclosed in the
relevant sections of the annual financial statements. Although these estimates are based on managements
best knowledge of current events and actions they may undertake in the future, actual results ultimately may
differ from those estimates.
1.20
Presentation of currency
These annual financial statements are presented in South African Rand.
1.21
Assets available-for-sale reserve
Available-for-sale financial assets are held for an indefinite period of time and may be sold in response to
needs for liquidity or changes in equity prices. Unrealised gains or losses arising from the changes in the fair
value of annual financial statement assets are recognised in equity. On disposal of annual financial statement
assets, the fair value adjustments accumulated in equity are recognised in the statement of financial performance.
1.22
Conditional grants and receipts
Revenue received from conditional grants, donations and funding are recognised as revenue to the extent
that the entity has complied with any of the criteria, conditions or obligations embodied in the agreement. To
the extent that the criteria, conditions or obligations have not been met a liability is recognised.
1.23
Research and development expenditure
Research costs are charged against operating surplus as incurred. Development costs are recognised as an
expense in the period in which they are incurred unless the following criteria are met:
The product or process is clearly defined and the costs attributable to the process or product can be
separately identified and measured reliably
The technical feasibility of the product or process can be demonstrated
The existence of a market or, if to be used internally rather than sold, its usefulness to the entity can be
demonstrated
Adequate resources exist, or their availability can be demonstrated, to complete the project and then
market or use the product or process; and
The asset must be separately identifiable.
Where development costs are deferred, they are written off on a straight-line basis over the life of the
process or product, subject to a maximum of five years. The amortisation begins from the commencement
of the commercial production of the product or use of the process to which they relate.
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1.24
Going concern
These annual financial statements have been prepared on a going concern basis.
1.25
Related parties
In accordance with IPSAS 20 related parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating
decisions or if the related party entity and another entity are subject to common control. Disclosure of certain related party relationships and related party transactions and the relationship underlying those transactions is necessary for accounting purposes and enable users to better understand the financial statements of
the reporting entity. In respect of transactions between related parties the entity should disclose:
a) The nature of the related parties relationships;
b) The types of transactions that have occurred;
c) The elements of the transactions necessary to clarify the significance of these transactions to its operations and sufficient to enable the financial statements to provide relevant and reliable information for
decisions making and accountability purposes.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
NEW STANDARDS AND INTERPRETATIONS

2.1
Standards and interpretations issued, but not yet effective
The entity has not applied the following standards and interpretations, which have been published and are
mandatory for the entitys accounting periods beginning on or after 01 July 2011 or later periods:
GRAP 18: Segment Reporting
Segments are identified by the way in which information is reported to management, both for purposes of
assessing performance and making decisions about how future resources will be allocated to the various
activities undertaken by the entity. The major classifications of activities identified in budget documentation
will usually reflect the segments for which an entity reports information to management.
Segment information is either presented based on service or geographical segments. Service segments
relate to a distinguishable component of an entity that provides specific outputs or achieves particular operating objectives that are in line with the entitys overall mission. Geographical segments relate to specific
outputs generated, or particular objectives achieved, by an entity within a particular region.
This Standard has been approved by the Board but its effective date has not yet been determined by the
Minister of Finance. The effective date indicated is a provisional date and could change depending on the
decision of the Minister of Finance.
Directive 2 - Transitional provisions for public entities, municipal entities and constitutional institutions, state
that no comparative segment information needs to be presented on initial adoption of this Standard.
Directive 3 - Transitional provisions for high capacity municipalities state that no comparative segment information needs to be presented on initial adoption of the Standard. Where items have not been recognised
as a result of transitional provisions under the Standard of GRAP on Property, Plant and Equipment, recognition requirements of this Standard would not apply to such items until the transitional provision in that
Standard expires.
Directive 4 Transitional provisions for medium and low capacity municipalities state that no comparative
segment information needs to be presented on initial adoption of the Standard. Where items have not been
recognised as a result of transitional provisions in the Standard of GRAP on property, plant and equipment
and the Standard of GRAP on Agriculture, the recognition requirements of the Standard would not apply
to such items until the transitional provision in that standard expires.
The effective date of the standard is for years beginning on or after 1 April 2013.
The entity expects to adopt the standard for the first time in the 2014 annual financial statements.
It is unlikely that the standard will have a material impact on the entitys annual financial statements.
GRAP 23: Revenue from non-exchange transactions
Revenue from non-exchange transactions arises when an entity receives value from another entity without
directly giving approximately equal value in exchange. An asset acquired through a non-exchange transaction shall initially be measured at its fair value as at the date of acquisition.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)

NEW STANDARDS AND INTERPRETATIONS (CONTINUED)
This revenue will be measured at the amount of increase in net assets recognised by the entity.
An inflow of resources from a non-exchange transaction recognised as an asset shall be recognised as revenue, except to the extent that a liability is recognised for the same inflow. As an entity satisfies a present
obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction
recognised as an asset, it will reduce the carrying amount of the liability recognised as an amount equal to
that reduction.
Minister of Finance. The effective date indicated is provisional and could change depending on the decision
of the Minister of Finance.
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GRAP 24: Presentation of budget information in the financial statements

Subject to the requirements of paragraph .19, an entity shall present a comparison of the budget amounts
for which it is held publicly accountable and actual amounts either as a separate additional financial statement or as additional budget columns in the financial statements currently presented in accordance with
Standards of GRAP. The comparison of budget and actual amounts shall present separately for each level
of legislative oversight:
the approved and final budget amounts;
the actual amounts on a comparable basis; and
by way of note disclosure, an explanation of material differences between the budget for which the
entity is held publicly accountable and actual amounts, unless such explanation is included in other public documents issued in conjunction with the financial statements, and a cross reference to those documents is made in the notes.
Where an entity prepares its budget and annual financial statements on a comparable basis, it includes the
comparison as an additional column in the primary annual financial statements. Where the budget and
annual financial statements are not prepared on a comparable basis, a separate statement is prepared called
the Statement of Comparison of Budget and Actual Amounts. This statement compares the budget
amounts with the amounts in the annual financial statements adjusted to be comparable to the budget.
A comparable basis means that the budget and annual financial statements:
are prepared using the same basis of accounting i.e. either cash or accrual;
include the same activities and entities;
use the same classification system; and
are prepared for the same period.
Minister of Finance. The effective date indicated is provisional and could change depending on the decision
of the Minister of Finance. The effective date of the standard is for years beginning on or after 1 April 2012.
GRAP 103: Heritage assets
GRAP 103 defines heritage assets as assets which have cultural, environmental, historical, natural, scientific,
technological or artistic significance and are held indefinitely for the benefit of present and future generations.
Certain heritage assets are described as inalienable items, thus assets which are retained indefinitely and cannot be disposed of without consent as required by law or otherwise.
A heritage asset should be recognised as an asset only if:
it is probable that future economic benefits or service potential associated with the asset will flow to
the entity; and
the cost of fair value of the asset can be measured reliably.
The standard required judgment in applying the initial recognition criteria to the specific circumstances surrounding the entity and the assets.
GRAP 103 states that a heritage asset should be measured at its cost unless it is acquired through a nonexchange transaction which should then be measured at its fair value as at the date of acquisition.
In terms of the standard, an entity has a choice between the cost and revaluation model as accounting policy for subsequent recognition and should apply the chosen policy to an entire class of heritage assets.
The cost model requires a class of heritage assets to be carried at its cost less any accumulated impairment
losses.
The revaluation model required a class of heritage assets to be carried at its fair value at the date of the
revaluation less any subsequent impairment losses. The standard also states that a restriction on the disposal of a heritage asset does not preclude the entity from determining the fair value.
GRAP 103 prescribes that when determining the fair value of a heritage asset that has more than one purpose, the fair value should reflect both the assets heritage value and the value obtained from its use in the
production or supply of goods or services or for administrative purposes.
If a heritage assets carrying amount is increased as a result of a revaluation, the increase should be credited directly to a revaluation surplus. However, the increase should be recognised in surplus or deficit to the
extent that it reverses a revaluation decrease of the same heritage asset previously recognised in surplus or
deficit. If a heritage assets carrying amount is decreased as a result of a revaluation, the decrease should be
recognised in surplus or deficit. However, the decrease should be debited directly to a revaluation surplus
to the extent of any credit balance existing in the revaluation surplus in respect of that heritage asset.
Grap 103 states that a heritage asset should not be depreciated but an entity should assess at each reporting date whether there is an indication that it may be impaired.
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In terms of the standard, compensation from third parties for heritage assets that have been impaired, lost
or given up, should be included in surplus or deficit when the compensation becomes receivable.
For a transfer from heritage assets carried at a revalued amount to property, plant and equipment, investment property, inventories or intangible assets, the assets deemed cost for subsequent accounting should
be its revalued amount at the date of transfer. The entity should treat any difference at that date between
the carrying amount of the heritage asset and its fair value in the same way as a revaluation in accordance
with this Standard. If an item of property, plant and equipment or an intangible asset carried at a revalued
amount, or investment property carried at fair value is reclassified as a heritage asset carried at a revalued
amount, the entity applies the applicable Standard of GRAP to that asset up to the date of change. The entity treats any difference at that date between the carrying amount of the asset and its fair value in accordance with the applicable Standard of GRAP relating to that asset. For a transfer from investment property carried at fair value, or inventories to heritage assets at a revalued amount, any difference between the
fair value of the asset at that date and its previous carrying amount should be recognised in surplus or
deficit.
The carrying amount of a heritage asset should be derecognised:
on disposal, or
when no future economic benefits or service potential are expected from its use or disposal.
The gain or loss arising from the derecognition of a heritage asset should be determined as the difference
between the net disposal proceeds, if any, and the carrying amount of the heritage asset. Such difference is
recognised in surplus or deficit when the heritage asset is derecognised.
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The impact of this standard is currently being assessed.
IGRAP 1 (Interpretation of GRAP):
Applying the probability test on initial recognition of exchange revenue
An entity assesses the probability of each transaction on an individual basis when it occurs. Entities shall not
assess the probability on an overall level based on the payment history of recipients of the service in general when the probability of revenue is assessed at initial recognition.
The full amount of revenue will be recognised at initial recognition. Assessing impairment is an event that
takes place subsequent to initial recognition. Such impairment is an expense. Revenue is not reduced by this
expense.
The effective date of the interpretation is for years beginning on or after 1 April 2010.
The entity has adopted the interpretation for the first time in the 2011 annual financial statements.
The impact of the interpretation is set out in note Changes in Accounting Policy.
GRAP 21: Impairment of non-cash-generating assets
Non-cash-generating assets are assets other than cash-generating assets.
When the carrying amount of a non-cash-generating asset exceeds its recoverable service amount, it is
impaired.
An entity assesses at each reporting date whether there is any indication that a non-cash-generating asset
may be impaired. If any such indication exists, an entity estimates the recoverable service amount of the
asset.
The present value of the remaining service potential of a non-cash-generating asset is determined using one
of the following approaches:
Depreciated replacement cost approach
Restoration cost approach
Service units approach
If the recoverable service amount of a non-cash-generating asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable service amount.This reduction is an impairment loss.
An impairment loss is recognised immediately in surplus or deficit. Any impairment loss of a revalued noncash-generating asset is treated as a revaluation decrease.
An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for a noncash-generating asset may no longer exist or may have decreased. If any such
indication exists, an entity estimates the recoverable service amount of that asset.
A reversal of an impairment loss for a non-cash-generating asset is recognised immediately in surplus or
deficit. Any reversal of an impairment loss of a revalued non-cash-generating asset is treated as a revaluation increase.
GRAP 26: Impairment of cash-generating assets
Cash-generating assets are those assets held by an entity with the primary objective of generating a commercial return. When an asset is deployed in a manner consistent with that adopted by a profit-orientated
entity, it generates a commercial return.
When the carrying amount of a cash-generating asset exceeds its recoverable amount, it is impaired.
An entity assesses at each reporting date whether there is any indication that a cash-generating asset may
be impaired. If any such indication exists, an entity estimates the recoverable amount of the asset.
When estimating the value in use of an asset, an entity estimates the future cash inflows and outflows to
be derived from continuing use of the asset and from its ultimate disposal and an entity applies the appropriate discount rate to those future cash flows.
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If the recoverable amount of a cash-generating asset is less than its carrying amount, the carrying amount
of the asset is reduced to its recoverable amount. This reduction is an impairment loss. An impairment loss
is recognised immediately in surplus or deficit. Any impairment loss of a revalued cash-generating asset is
treated as a revaluation decrease.
If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, an entity determines the recoverable amount of the cash-generating unit to which the asset belongs (the assets cash-generating unit).
If an active market exists for the output produced by an asset or group of assets, that asset or group of
assets is identified as a cash-generating unit, even if some or all of the output is used internally. If the cash
inflows generated by any asset or cash-generating unit are affected by internal transfer pricing, an entity
uses managements best estimate of future price(s) that could be achieved in arms length transactions in
estimating:
the future cash inflows used to determine the assets or cash-generating units value in use; and
the future cash outflows used to determine the value in use of any other assets or cash-generating
units that are affected by the internal transfer pricing.
Cash-generating units are identified consistently from period to period for the same asset or types of
assets, unless a change is justified.
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An impairment loss is recognised for a cash-generating unit if the recoverable amount of the unit is less
than the carrying amount of the unit. The impairment is allocated to reduce the carrying amount of the
cash-generating assets of the unit on a pro rata basis, based on the carrying amount of each asset in the
unit. These reductions in carrying amounts are treated as impairment losses on individual assets. Where a
non-cash-generating asset contributes to a cash-generating unit, a proportion of the carrying amount of
that non-cash-generating asset is allocated to the carrying amount of the cash-generating unit prior to estimation of the recoverable amount of the cash-generating unit.
An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for a cash-generating asset may no longer exist or may have decreased. If any such
indication exists, an entity estimates the recoverable amount of that asset.
A reversal of an impairment loss for a cash-generating asset is recognised immediately in surplus or deficit.
Any reversal of an impairment loss of a revalued cash-generating asset is treated as a revaluation increase.
GRAP 25: Employee benefits

The objective of GRAP 25 is to prescribe the accounting and disclosure for employee benefits.The Standard
requires an entity to recognise:
a liability when an employee has provided service in exchange for employee benefits to be paid in the
future; and
an expense when an entity consumes the economic benefits or service potential arising from service
provided by an employee in exchange for employee benefits.
GRAP 25 must be applied by an employer in accounting for all employee benefits, except share based payment transactions.
GRAP 25 defines, amongst others, the following:
Employee benefits as all forms of consideration given by an entity in exchange for service rendered by
employees;
Defined contribution plans as post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further
contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods;
Defined benefit plans as post-employment benefit plans other than defined contribution plans;
Multi-employer plans as defined contribution plans (other than state plans and composite social security programmes) or defined benefit plans (other than state plans) that:
pool the assets contributed by various entities that are not under common control; and
use those assets to provide benefits to employees of more than one entity, on the basis that contribution and benefit levels are determined without regard to the identity of the entity that
employs the employees concerned;
Other long-term employee benefits as employee benefits (other than post-employment benefits and
termination benefits) that is not due to be settled within twelve months after the end of the period in
which the employees render the related service;
Post-employment benefits as employee benefits (other than termination benefits) which are payable
after the completion of employment;
Post-employment benefit plans as formal or informal arrangements under which an entity provides
post-employment benefits for one or more employees;
Short-term employee benefits as employee benefits (other than termination benefits) that are due to
be settled within twelve months after the end of the period in which the employees render the relat-ed service;
State plans as plans other than composite social security programmes established by legislation which
operate as if they are multi-employer plans for all entities in economic categories laid down in legislation;
Termination benefits as employee benefits payable as a result of either:
an entitys decision to terminate an employees employment before the normal retirement date;
or
an employees decision to accept voluntary redundancy in exchange for those benefits;
Vested employee benefits as employee benefits that are not conditional on future employment.
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The standard states the recognition, measurement and disclosure requirements of:
short-term employee benefits:
all short-term employee benefits;
short-term compensated absences;
bonus, incentive and performance related payments;
post-employment benefits: defined contribution plans;
other long-term employee benefits; and
termination benefits.
The standard states post-employment benefits: distinction between defined contribution plans and defined
benefit plans:
multi-employer plans;
defined benefit plans where the participating entities are under common control;
state plans;
composite social security programmes; and
insured benefits.
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The standard states, for post-employment benefit: defined benefit plans, the following requirements:
recognition and measurement;
presentation;
disclosure;
accounting for the constructive obligation;
statement of financial position;
asset recognition ceiling;
asset recognition ceiling when a minimum funding requirement may give rise to a liability;
statement of financial performance.
The standard prescribes recognition and measurement for:
Present value of defined benefit obligations and current service cost:
Actuarial valuation method;
Attributing benefits to periods of service;
Actuarial assumptions;
Actuarial assumptions: Discount rate;
Actuarial assumptions: Salaries, benefits and medical costs;
Actuarial gains and losses;
Past service cost.
Plan assets:
Fair value of plan assets;
Reimbursements;
Return on plan assets.
The standard also deals with entity combinations and curtailments and settlements.
GRAP 104: Financial instruments
The standard prescribes recognition, measurement, presentation and disclosure requirements for financial
instruments. Financial instruments are defined as those contracts that result in a financial asset in one entity and a financial liability or residual interest in another entity. A key distinguishing factor between financial
assets and financial liabilities and other assets and liabilities, is that they are settled in cash or by exchanging
financial instruments, rather than through the provision of goods or services.
One of the key considerations in initially recognising financial instruments is the distinction, by the issuers of
those instruments, between financial assets, financial liabilities and residual interests. Financial assets and financial liabilities are distinguished from residual interests, because they involve a contractual right or obligation
to receive or pay cash or another financial instrument. Residual interests entitle an entity to a portion of
another entitys net assets in the event of liquidation and, to dividends or similar distributions paid at managements discretion.
In determining whether a financial instrument is a financial asset, financial liability or a residual interest, an
entity considers the substance of the contract and not just the legal form.
Where a single instrument contains both a liability and a residual interest component, the issuer allocates
the instrument into its component parts. The issuer recognises the liability component at its fair value and
recognises the residual interest as the difference between the carrying amount of the instrument and the
fair value of the liability component. No gain or loss is recognised by separating the instrument into its component parts.
Financial assets and financial liabilities are initially recognised at fair value. Where an entity subsequently
measures financial assets and financial liabilities at amortised cost or cost, transactions costs are included in
the cost of the asset or liability. The transaction price usually equals the fair value at initial recognition, except
in certain circumstances, for example, where interest free credit is granted or where credit is granted at a
below market rate of interest.
Concessionary loans are loans either received by or granted to another entity on concessionary terms, e.g.
at low interest rates and flexible repayment terms. On initial recognition, the fair value of a concessionary
loan is the present value of the agreed contractual cash flows, discounted using a market related rate of
interest for a similar transaction. The difference between the proceeds either received or paid and the present value of the contractual cash flows is accounted for as non-exchange revenue by the recipient of a
concessionary loan in accordance with Standard of GRAP on Revenue from Non-exchange Revenue
Transactions (Taxes and Transfers), and using the Framework for the Preparation and Presentation of
Financial Statements (usually as an expense) by the grantor of the loan.
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Financial assets and financial liabilities are subsequently measured either at fair value or, amortised cost or
cost. An entity measures a financial instrument at fair value if it is:
a derivative;
a combined instrument designated at fair value, i.e. an instrument that includes a derivative and a nonderivative host contract;
held-for-trading;
a non-derivative instrument with fixed or determinable payments that is designated at initial recognition to be measured at fair value;
an investment in a residual interest for which fair value can be measured reliably; and
other instruments that do not meet the definition of financial instruments at amortised cost or cost.
Derivatives are measured at fair value. Combined instruments that include a derivative and non-derivative
host contract are accounted for as follows:
Where an embedded derivative is included in a host contract which is a financial instrument within the
scope of this Standard, an entity can designate the entire contract to be measured at fair value, or it
can account for the host contract and embedded derivative separately using GRAP 104. An entity is
however required to measure the entire instrument at fair value if the fair value of the derivative cannot be measured reliably.
Where the host contract is not a financial instrument within the scope of this Standard, the host contract and embedded derivative are accounted for separately, using GRAP 104 and the relevant
Standard of GRAP.
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Financial assets and financial liabilities that are non-derivative instruments with fixed or determinable payments, for example deposits with banks, receivables and payables, are measured at amortised cost. At initial recognition, an entity can however designate such an instrument to be measured at fair value.
An entity can only measure investments in residual interests at cost, where the fair value of the interest cannot be determined reliably.
Once an entity has classified a financial asset or a financial liability, either at fair value or amortised cost or
cost, it is only allowed to reclassify such instruments in limited instances.
An
entity derecognises a financial asset, or the specifically identified cash flows of an asset, when:
the cash flows from the asset expire, are settled or waived;
significant risks and rewards are transferred to another party; or
despite having retained significant risks and rewards, an entity has transferred control of the asset to
another entity.
An entity derecognises a financial liability when the obligation is extinguished. Exchanges of debt instruments
between a borrower and a lender are treated as the extinguishment of an existing liability and the recognition of a new financial liability. Where an entity modifies the term of an existing financial liability, it is also
treated as the extinguishment of an existing liability and the recognition of a new liability.
An entity cannot offset financial assets and financial liabilities in the statement of financial position unless a
legal right of set-off exists, and the parties intend to settle on a net basis.
GRAP 104 requires extensive disclosures on the significance of financial instruments for an entitys statement of financial position and statement of financial performance, as well as the nature and extent of the
risks that an entity is exposed to as a result of its annual financial statements. Some disclosures, for example the disclosure of fair values for instruments measured at amortised cost or cost and the preparation
of a sensitivity analysis, are encouraged rather than required.
GRAP 104 does not prescribe principles for hedge accounting. An entity is permitted to apply hedge
accounting, as long as the principles in IAS 39 are applied.
The impact of this amendment is currently being assessed.
IGRAP 2: Changes in existing decommissioning, restoration and similar liabilities
The interpretation applies to changes in the measurement of any existing decommissioning, restoration or
similar liability that is both:
recognised as part of the cost of an item of property, plant and equipment in accordance with the
Standard of GRAP on property, plant and equipment (as revised in 2010); and
recognised as a liability in accordance with the Standard of GRAP on provisions, contingent liabilities
and contingent assets (as revised in 2010) .
The interpretation addresses how the effect of the following events, that change the measurement of an
existing decommissioning, restoration or similar liability, should be accounted for:
a change in the estimated outflow of resources embodying economic benefits (e.g. cash flows) or service potential required to settle the obligation;
a change in the current market-based discount rate as defined in paragraph .52 of the Standard of
GRAP on Provisions, Contingent Liabilities and Contingent Assets (as revised in 2010) (this includes
changes in the time value of money and the risks specific to the liability); and
an increase that reflects the passage of time (also referred to as the unwinding of the discount).
The entity expects to adopt the interpretation for the first time in the 2012 annual financial statements.
It is unlikely that the amendment will have a material impact on the entitys annual financial statements.
69

IGRAP 3: Determining whether an arrangement contains a lease

This interpretation of the Standards of GRAP does not apply to arrangements that are, or contain, leases
excluded from the scope of the Standard of GRAP on leases (as revised in 2010).
The issues addressed in this interpretation of the standards of GRAP are:
how to determine whether an arrangement is, or contains, a lease as defined in the Standard of GRAP
on Leases (as revised in 2010);
when the assessment or a reassessment of whether an arrangement is, or contains, a lease should be
made; and
if an arrangement is, or contains, a lease, how the payments for the lease should be separated from payments for any other elements in the arrangement.
70
IGRAP 4: Rights to interests arising from decommissioning, restoration and environmental rehabilitation
funds
This interpretation of the Standards of GRAP applies to accounting in the financial statements of a contributor for interests arising from decommissioning funds that have both of the following features:
The issues addressed in this interpretation of the Standards of GRAP are:
the assets are administered separately (either by being held in a separate legal entity or as segregated
assets within another entity); and
a contributors right to access the assets is restricted.
A residual interest in a fund that extends beyond a right to reimbursement, such as a right to distributions
once all the decommissioning has been completed or on winding up the fund, may be an equity instrument
within the scope of the Standard of GRAP on Financial Instruments and is not within the scope of this
Interpretation of the Standards of GRAP.
how should a contributor account for its interest in a fund?
when a contributor has an obligation to make additional contributions, for example, in the event of the
liquidation of another contributor, how should that obligation be accounted for?
IGRAP 5: Applying the restatement approach under the Standard of GRAP on financial reporting in
hyperinflationary economies
This interpretation of the Standards of GRAP provides guidance on how to apply the requirements of the
Standard of GRAP on financial reporting in hyperinflationary economies (as revised in 2010) in a reporting
period in which an entity identifies the existence of hyperinflation in the economy of its functional curren-
cy, when that economy was not hyperinflationary in the prior period, and the entity therefore restates its
financial statements in accordance with the Standard of GRAP on financial reporting in hyperinflationary
economies (as revised in 2010).
The questions addressed in this interpretation of the Standards of GRAP are:
How should the requirement stated in terms of the measuring unit current at the reporting date
in paragraph .10 of the Standard of GRAP on financial reporting in hyperinflationary economies (as
revised in 2010) be interpreted when an entity applies the Standard of GRAP?
Is a contributors right to access the assets and restricted?
IGRAP 6: Loyalty programmes
This interpretation of the Standards of GRAP applies to customer loyalty award credits that:
an entity grants to its customers as part of a transaction i.e. a sale of goods, rendering of services or
use by a customer of entity assets; and
subject to meeting any further qualifying conditions, the customers can redeem in the future for free
or discounted goods or services.
The interpretation of the Standards of GRAP addresses accounting by the entity that grants award credits
to its customers.
whether the entitys obligation to provide free or discounted goods or services (awards) in the future
should be recognised and measured by
allocating some of the consideration received or receivable from the sales transaction to the award
credits and deferring the recognition of revenue (applying the Standard of GRAP on Revenue from
Exchange Transactions (as revised in 2010) and the Standard of GRAP on Revenue from None
exchange Transactions (Taxes and Transfers); or
providing for the estimated future costs of supplying the awards; and
if consideration is allocated to the award credits:
how much should be allocated to them;
when revenue should be recognised; and
if a third party supplies the awards, how revenue should be measured.
IGRAP 7: The Limit on a defined benefit asset, minimum funding requirements and their interaction
This interpretation of the Standards of GRAP applies to all post-employment defined benefits and other
long-term employee defined benefits.
71

For the purpose of this interpretation of the Standards of GRAP, minimum funding requirements are any
requirements to fund a post-employment or other long-term defined benefit plan.
when refunds or reductions in future contributions should be regarded as available in accordance with
paragraph .68 of the Standard of GRAP on employee benefits; and
how a minimum funding requirement might affect the availability of reductions in future contributions.
The Interpretation of the Standards of GRAP addresses accounting by the entity that grants award credits
to its customers.
IGRAP 8: Agreements for the construction of assets from exchange transactions
This interpretation applies to the accounting for revenue and associated expenses by entities that undertake the construction of assets in exchange transactions directly or through subcontractors. The construction of assets entered into by entities, where funding to support the construction activity will be provided
by an appropriation or similar allocation of general government revenue or by aid or grant funds, are excluded from the scope of this Interpretation of the Standards of GRAP.
72
Agreements in the scope of this interpretation of the Standards of GRAP are agreements for the construction of assets in exchange transactions. In addition to the construction of assets in exchange transactions,
such agreements may include the delivery of other goods or services.
The interpretation of the Standards of GRAP addresses two issues:
Is the agreement within the scope of the Standard of GRAP on Construction Contracts (as revised in
2010) or the Standard of GRAP on revenue from exchange transactions (as revised in 2010)?
When should revenue from the construction of assets in exchange transactions be recognised?
IGRAP 9: Distributions of non-cash assets to owners
This interpretation of the Standards of GRAP applies to the following types of non-reciprocal distributions
of assets by an entity to its owners acting in their capacity as owners:
distributions of non-cash assets (e.g. items of property, plant and equipment, entity combinations as
defined in the Standard of GRAP on Entity Combinations, ownership interests in another entity or disposal groups as defined in the Standard of GRAP on non-current assets held for sale and discontinued
operations (as revised in 2010)); and
distributions that give owners a choice of receiving either non-cash assets or a cash alternative.
This interpretation of the Standards of GRAP applies only to distributions in which all owners of the same
class of residual interests are treated equally.
This interpretation of the Standards of GRAP does not apply to a distribution of a non-cash asset that is
ultimately controlled by the same party or parties before and after the distribution. This exclusion applies
to the separate, individual and consolidated financial statements of an entity that makes the distribution.
This interpretation of the Standards of GRAP does not apply when the non-cash asset is ultimately controlled by the same parties both before and after the distribution. The Standard of GRAP on entity combinations states that A group of individuals shall be regarded as controlling an entity when, as a result of
binding arrangements, they collectively have the power to govern its financial and operating policies so as
to obtain benefits from its activities. Therefore, for a distribution to be outside the scope of this interpretation of the Standards of GRAP on the basis that the same parties control the asset both before and after
the distribution, a group of individual owners receiving the distribution must have, as a result of binding
arrangements, such ultimate collective power over the entity making the distribution.
This interpretation of the Standards of GRAP does not apply when an entity distributes some of its ownership interests in a controlled entity but retains control of the controlled entity. The entity making a distribution that results in the entity recognising a minority interest in its controlled entity accounts for the distribution in accordance with the Standard of GRAP on consolidated and separate financial statements.
This interpretation of the Standards of GRAP addresses only the accounting by an entity that makes a noncash asset distribution. It does not address the accounting by owners who receive such a distribution.
When an entity declares a dividend or similar distribution and has an obligation to distribute the assets concerned to its owners, it must recognise a liability for the dividend or similar distribution payable.
Consequently, this interpretation of the Standards of GRAP addresses the following issues:
When should the entity recognise the dividend or similar distribution payable?
How should an entity measure the dividend or similar distribution payable?
When an entity settles the dividend or similar distribution payable, how should it account for any difference between the carrying amount of the assets distributed and the carrying amount of the dividend or similar distribution payable?
IGRAP 10: Assets received from customers
This interpretation of the Standards of GRAP applies to the accounting for the receipt of items of property, plant and equipment by entities that receive such assets from their customers.
Agreements within the scope of this interpretation of the Standards of GRAP are those in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either
to connect the customer to a network or to provide the customer with ongoing access to a supply of
goods or services, or to do both.
73

This interpretation of the Standards of GRAP also applies to agreements in which an entity receives cash
from a customer when that amount of cash must be used only to construct or acquire an item of property, plant and equipment and the entity must then use the item of property, plant and equipment either to
connect the customer to a network or to provide the customer with ongoing access to a supply of goods
or services, or to do both.
This interpretation of the Standards of GRAP does not apply to agreements in which the receipt occurs as
part of a non-exchange transaction as defined in the Standard of GRAP on revenue from non-exchange
transactions (taxes and transfers), or infrastructure used in a public-private partnership agreement (see the
Guideline on Accounting for Public-private Partnerships), or assets received in a transfer of functions.
The interpretation of the Standards of GRAP addresses the following issues:
Is the definition of an asset met?
If the definition of an asset is met, how should the received item of property, plant and equipment be
measured on initial recognition?
If the item of property, plant and equipment is measured at fair value on initial recognition, how should
the resulting credit be accounted for?
How should the entity account for a receipt of cash from its customer?
74
IGRAP 13: Operating leases incentives

In negotiating a new or renewed operating lease, the lessor may provide incentives for the lessee to enter
into the agreement. Examples of such incentives are an up-front cash payment to the lessee or the reimbursement or assumption by the lessor of costs of the lessee (such as relocation costs, leasehold improvements and costs associated with a pre-existing lease commitment of the lessee). Alternatively, initial periods
of the lease term may be agreed to be rent free or at a reduced rent.
The issue is how incentives in an operating lease should be recognised in the financial statements of both
the lessee and the lessor.
IGRAP 14: Evaluating the substance of transactions involving the legal form of a lease
An entity may enter into a transaction or a series of structured transactions (an arrangement) with an unrelated party or parties (an investor) that involves the legal form of a lease. For example, an entity may lease
assets to an investor and lease the same assets back, or alternatively, legally sell assets and lease the same
assets back. The form of each arrangement and its terms and conditions can vary significantly. In the lease
and leaseback example, it may be that the arrangement is designed to achieve a tax advantage for the
investor that is shared with the entity in the form of a fee, and not to convey the right to use an asset.
When an arrangement with an investor involves the legal form of a lease, the issues are:
how to determine whether a series of transactions is linked and should be accounted for as one transaction;
whether the arrangement meets the definition of a lease under the Standard of GRAP on Leases (as
revised in 2010); and, if not,
whether a separate investment account and lease payment obligations that might exist represent
assets and liabilities of the entity;
how the entity should account for other obligations resulting from the arrangement; and
how the entity should account for a fee it might receive from an investor.
IGRAP 15: Revenue barter transactions involving advertising services
An entity (seller) may enter into a barter transaction to provide advertising services in exchange for receiving other services from its customer (customer). Advertisements may be displayed on the internet or
poster sites, broadcast on the television or radio, published in magazines or journals, or presented in another medium. An example could be where a municipality offers advertising services to local businesses in
its community newsletters in exchange for repairs and maintenance services provided by those businesses.
These repair and maintenance services may, for example, take the form of repairing and maintaining office
buildings or motor vehicles owned by the municipality.
In some cases, no cash or other consideration is exchanged between the entities. In some other cases, equal
or approximately equal amounts of cash or other consideration are also exchanged.
A seller that provides advertising services in the course of its ordinary activities recognises revenue under
the Standard of GRAP on revenue from exchange transactions (as revised in 2010) from a barter transaction involving advertising when, amongst other criteria, the services exchanged are dissimilar in terms of
paragraph .18 in the Standard of GRAP on revenue from exchange transactions (as revised in 2010) and
the amount of revenue can be measured reliably in terms of paragraph .20(a) in the Standard of GRAP on
revenue from exchange transactions (as revised in 2010). This interpretation of the Standards of GRAP only
applies to an exchange of dissimilar services. An exchange of similar advertising services is not a transaction
that generates revenue under the Standard of GRAP on revenue from exchange transactions (as revised
in 2010).
The issue is under what circumstances a seller can reliably measure revenue at the fair value of advertising
services received or provided in a barter transaction.
The effective date of the interpretation is for years beginning on or after 1 April 2011. The entity expects
to adopt the interpretation for the first time in the 2012 annual financial statements. It is unlikely that the
amendment will have a material impact on the entitys annual financial statements.
75

GRAP 1 (as revised 2010): Presentation of financial statements

The revision resulted in various terminology and definition changes.
Additional commentary has been added, describing the purpose of financial statements in the public sector.
Commentary has been added to explain that, where legislation requires a departure from a particular
Standard of GRAP and that departure is material, entities cannot claim compliance with the Standards of
GRAP.
Additional disclosure requirements have been added regarding the following areas: assets and liabilities
included in disposal groups classified as held for sale, biological assets, deferred tax assets (liabilities), tax
expense, post-tax surplus or deficit and the use of transitions provision in the accounting policy.
All amendments are to be applied retrospectively.
The effective date of the amendment is for years beginning on or after 1 April 2011.
The entity expects to adopt the amendment for the first time in the 2012 annual financial statements.
76
GRAP 2 (as revised 2010): Cash flow statements

Operating cash flows:
Where an entity is in the business of renting and subsequently selling the same assets, these cash flows
should be regarded as operating rather than investing cash flows.
Investing cash flows:
Only expenditures incurred on a recognised asset qualify to be classified as investing activities in the
cash flow statement.
Acquisitions and disposals of controlled entities and other operating units:
Guidance relating to acquisitions and disposals of entities, particularly those on another basis of
accounting, has been deleted.
Disclosure of undrawn borrowing facilities, restricted cash balances and the operating, investing and financing cash flows of jointly controlled entities accounted for using the proportionate consolidation method,
are now encouraged rather than required.
The effective date of the amendment is for years beginning on or after 1 April 2011. The entity expects to
adopt the amendment for the first time in the 2012 annual financial statements. It is unlikely that the
amendment will have a material impact on the entitys annual financial statements.
GRAP 3 (as revised 2010): Accounting policies, changes in accounting estimates and errors
Figures in Rand
2011
2010
Paragraphs added to Changes in Accounting Policies:

A change from one basis of accounting to another basis of accounting is a change in accounting policy.
A change in the accounting treatment, recognition or measurement of a transaction, event or condition
within a basis of accounting is regarded as a change in accounting policy.
Selection of accounting policies
The reference to the Accounting Practices Committee (APC) of SAICA has been deleted from paragraph .11 on the basis that it is not a standard setter and that entities would consider information from
a wide range of sources in formulating an accounting policy and not just the pronouncements of the
APC.
Commentary on the selection of benchmark and alternative accounting policies has been deleted.
adopt the amendment for the first time in the 2012 annual financial statements. It is unlikely that the amendment will have a material impact on the entitys annual financial statements.
GRAP 4 (as revised 2010): The effects of changes in foreign exchange rates
Terminology changes:
Where reference has been made to the net realisable values of inventories, current replacement cost has
also been included to allow for the appropriate valuation of inventories where they are distributed as part
of a non-exchange transaction. Reference to trade receivables has been amended to receivables.
Monetary items:
Paragraph .15 clarifies that child support grants are payables, and not just obligations in terms of the current requirements of the Standard of GRAP on provisions, contingent liabilities and contingent assets
(GRAP 19).
GRAP 9 (as revised 2010): Revenue from exchange transactions
Dividends or similar distributions declared from pre-acquisition surpluses:
Paragraph .36 has been amended to encompass not only securities, but any contributed capital.
Various amendments, deletions and additions to examples are included in the appendix.
All amendments are to be applied retrospectively
77

GRAP 10 (as revised 2010): Financial reporting in hyperinflationary economies

Certain terminology changes have been made:
The reference to current cost in paragraph .30 have been deleted.
Where reference has been made to net realisable value, current replacement cost has been added.
Net monetary position:
References to surplus or deficit have been changed, throughout the document, to gain or loss.
Interpretations:
Text included in this Standard of GRAP from IFRIC Interpretation 7 on applying the restatement approach
under IAS 29 financial reporting in hyperinflationary economies has been deleted.
adopt the amendment for the first time in the 2012 annual financial statements. It is unlikely that the amendment will have a material impact on the entitys annual financial statements.
GRAP 11 (as revised 2010): Construction contracts
The revision resulted in certain terminology changes.
78
Other amendments:
An example has been added to clarify when an entity acts as a contractor in a construction contract
arrangement.
The example in paragraph .11 has been deleted, as it is inappropriate for the South African public sector.
The explanatory text relating to contractors has been amended to clarify that an entity can be a contractor if it performs construction related activities itself or through subcontractors.
The entity expects to adopt the amendment for the first time in the 2012 annual financial statements. It is
unlikely that the amendment will have a material impact on the entitys annual financial statements.
GRAP 12 (as revised 2010): Inventories
Cost formulas:
Paragraph .34 was amended and .35 was added to separate the principle from the exception when applying the cost formula for inventories with a similar nature and use to the entity.
Recognition as an expense:
Where reference has been made to net realisable value, current replacement cost has been added.
Fair value measurement:
The appendix on how to determine fair value has been deleted.
GRAP 13 (as revised 2010): Leases
Scope:
Paragraph .04 has been included to clarify that this Standard does not apply to lease agreements to explore
for or use natural resources such as oil, gas, timber, metals and other mineral rights and licensing agreements
for such items as motion picture films, video recordings, plays, manuscripts, patents and copyrights.
Non-current assets held for sale and discontinued operations:
Paragraph .51 has been added to clarify that finance lease assets classified as held for sale in accordance
with the Standard of GRAP on non-current assets held for sale and discontinued operations shall be
accounted for in accordance with that Standard.
Guidance on accounting for finance leases by lessors:
The paragraph (previously paragraph .53) that provided guidance on the recognition of assets where entities enter into arrangements with private sector entities has been deleted as the Guideline on Accounting
for Public Private Partnerships supersedes this guidance.
Guidance on operating lease incentives and substance over legal form:
The guidance included in the original text on substance over legal form has been deleted.
Classification of leases on land and buildings elements:
The guidance on the classification of land and buildings has been amended to ensure that the element of
the lease relating to the land is classified as a finance lease where significant risks and rewards have been
transferred, despite there being no transfer of title, consistent with the general classification guidance.
All amendments are to be applied retrospectively
GRAP 14 (as revised 2010): Events after the reporting date
Existence of a liability for dividends or similar distributions:
Paragraph .13 of GRAP 14 was amended to clarify that no liability exists at the reporting date for dividends
or similar distributions declared after the reporting date.
79
GRAP 16 (as revised 2010): Investment property

Recognition of investment property:
Additional commentary has been included in paragraph .19 and .20 to explain paragraph .18 that outlines the recognition criteria for investment property.
This Standard includes investment property under construction as it was inconsistent with the
requirement that investment property being redeveloped was still within the scope of this Standard,
but not the initial development. As a result paragraphs .10 and .11 were amended, paragraphs .60 and
.61 inserted, and paragraphs .25 and .65(e) of the original text deleted.
The measurement principles were also amended accordingly to allow investment property under construction to be measured at cost if fair value cannot be measured reliably, until such time as the fair
value can be measured reliably.
Additional guidance has been included in the examples of investment property to clarify that the
rentals earned do not have to be on a commercial basis or market related for the property to be classified as investment property.
Disclosure:
Entities are encouraged, rather than required, to disclose the fair value of investment property, when this is
materially different from the carrying amount.
80
Amendments are to be applied as follows:

Paragraphs .10(e), .54, .59, .62 and .65 were amended, paragraphs .60 and .61 were added and paragraphs .25 and .11(d) of the original text (2004) has been deleted by the Improvements to GRAP
issued in 1 April 2011. An entity shall apply those amendments prospectively for annual periods beginning on or after 1 April 2011. If an entity elects to apply these amendments earlier, it shall disclose this
fact. The related amendment to paragraph .05 in the Standard of GRAP on property, plant and equipment is also applied earlier.
Any other amendments to the Standards of GRAP shall be applied retrospectively.
GRAP 17 (as revised 2010): Property, plant and equipment
Scope:
The recognition and measurement of exploration and evaluation assets have been added to the scope
exclusions.
Investment properties under construction have been removed from the scope.
Measurement at initial recognition:
Paragraph .23 and .24 have been amended to clarify that the guidance applicable to determine fair value
for revalued assets applies equally to the initial measurement of items of property, plant and equipment at
fair value.
Depreciable amount and depreciation period:
An additional paragraph has been added to clarify that reviewing the useful life of an asset on an annual
basis does not require the entity to amend the previous estimate unless expectations differ from the previous estimate.
Derecognition:
The requirement to not classify gains from the disposal of property, plant and equipment as revenue,
has been removed.
Paragraph .79 has been added in line with the IASB Improvements Project to clarify that where assets
are held for rental to others in the ordinary course of operations and the entity subsequently sells the
assets, the Standard of GRAP on non-current assets held for sale and discontinued operations does not
apply. Rather, these assets are to be transferred and treated in accordance with the Standard of GRAP
on Inventories.
Disclosures:
The required disclosures in paragraph .90 have been amended to encouraged disclosures. Added to
the list of encouraged disclosures, is the fair value disclosure of assets where the cost model is used.
The requirement to disclose the cost basis for revaluated assets, was removed.
Amendments to be applied as follow:
Paragraphs .05, .23 and .24 were amended and paragraph .79 was added by the Improvements to
GRAP issued in 1 April 2011. An entity shall apply those amendments prospectively for annual periods
beginning on or after 1 April 2011. If an entity elects to apply these amendments earlier, it shall disclose
this fact.
GRAP 19 (as revised 2010): Provisions, contingent liabilities and contingent assets
The revision resulted in certain terminology changes.
Social benefits:
Paragraphs .08 and .16(a) clarify that social benefits due at year end are payables, as the amounts due are
certain in terms of legislation.
Binding agreements for restructurings:
Paragraph .87 has been amended to clarify that restructurings may take place in the public sector in terms
of directives, legislation or other means. These alternative means are enforceable and may give rise to an
obligation.
81

Interpretations:
In developing the Standard initially, the Board included relevant text from any interpretation that had been
issued by the International Financial Reporting Interpretations Committee (IFRIC) relating to provisions,
contingent liabilities and contingent assets. The Board included selected text from IFRIC 1 on Changes in
Decommissioning, Restoration and Similar Liabilities and IFRIC 5 Rights to Interests Arising from
Decommissioning, Restoration and Environmental Rehabilitation Funds in line with the Boards decisions.
The Board concluded at its May 2008 meeting that it would issue any Interpretations as separate documents rather than dispersing the text of the Interpretations across various Standards. As a result, paragraphs
.37 to .43, .74 to .80, and Appendix F of the previous version of GRAP 19, have been deleted.
GRAP 100 (as revised 2010): Non-current assets held for sale and discontinued operations
Scope:
Paragraph .07 has been added to clarify the application of other Standards of GRAP to assets classified as
non-current assets (or disposal groups) held for sale.
82
Plan to sell the controlling interest in a controlled entity:

The Standard has been amended to clarify that an entity that is committed to a sales plan involving loss
of control in a controlled entity shall classify all the assets and liabilities of that controlled entity as held
for sale when the required criteria are met.
The Standard has been amended to clarify that an entity that is committed to a sales plan involving loss
of control of a controlled entity shall disclose the information required when the controlled entity is a
disposal group that meets the definition of a discontinued operation.
Examples included in Appendix:
An additional example has been included regarding sale expected to be completed within one year.
Amendments to be applied as follow:
Paragraphs .13 and .42 were added by the Improvements to GRAP issued in 1 April 2011. An entity shall
apply those amendments prospectively for annual periods beginning on or after 1 April 2011. If an entity
elects to apply the amendments earlier, it shall disclose this fact.
GRAP 105: Transfers of functions between entities under common control

The objective of this Standard is to establish accounting principles for the acquirer and transferor in a transfer of functions between entities under common control. It requires an acquirer and a transferor that prepares and presents financial statements under the accrual basis of accounting to apply this Standard to a
transaction or event that meets the definition of a transfer of functions. It includes a diagram and requires
that entities consider the diagram in determining whether this Standard should be applied in accounting for
a transaction or event that involves a transfer of functions or merger.
It furthermore covers definitions, identifying the acquirer and transferor, determining the transfer date,
Assets acquired or transferred and liabilities assumed or relinquished, accounting by the acquirer and transferor, disclosure and transitional provisions as well as the effective date of the standard.
GRAP 106: Transfers of functions between entities not under common control
The objective of this Standard is to establish accounting principles for the acquirer in a transfer of functions
between entities not under common control. It requires an entity that prepares and presents financial statements under the accrual basis of accounting to apply this Standard to a transaction or other event that
meets the definition of a transfer of functions. It includes a diagram and requires that entities consider the
diagram in determining whether this Standard should be applied in accounting for a transaction or event
that involves a transfer of functions or merger.
It furthermore covers definitions, identifying a transfer of functions between entities not under common
control, The acquisition method, recognising and measuring the difference between the assets acquired and
liabilities assumed and the consideration transferred, measurement period, determining what is part of a
transfer of functions, subsequent measurement and accounting, disclosure and transitional provisions, as well
as the effective date of the standard.
GRAP 107: Mergers
The objective of this Standard is to establish accounting principles for the acquirer in a transfer of functions
between entities not under common control. It requires an entity that prepares and presents financial statements under the accrual basis of accounting to apply this Standard to a transaction or other event that
meets the definition of a transfer of functions. It includes a diagram and requires that entities consider the
diagram in determining whether this Standard should be applied in accounting for a transaction or event
that involves a transfer of functions or merger.
It furthermore covers definitions, Identifying a transfer of functions between entities not under common
control, the acquisition method, recognising and measuring the difference between the assets acquired and
83

liabilities assumed and the consideration transferred, measurement period, determining what is part of a
transfer of functions, subsequent measurement and accounting, disclosure and transitional provisions, as well
as the effective date of the standard.
3 PROPERTY, PLANT AND E" UIPMENT

2011
Accumulated
depreciation/
impairment
Figures in Rand
Cost
84
Buildings
Plant and
machinery
Furniture and
fixtures
Motor vehicles
Capital work in
progress
Minor plant
Leased assets
Total
310 325 286
Carrying
value
Cost
(33 246 595) 277 078 691
2010
Accumulated
depreciation/
impairment
Carrying
value
310685606
(29454206)
281231400
33 031 751
(21 848 140)
11 183 611
31805890
(19732115)
12073775
7 947 898
11 401 236
(6 015 788)
(6 311 935)
1 932 110
5 089 301
7648459
10934651
(5310863)
(5753931)
2337596
5180720
59 491 143
535713979 (158841626)
10604194 (10604194)
966883922 (229696935)
59491143
376872353
737186987
75
538
10
987
947
402
604
660
465
75 947465
587 (177 752 236) 360 650 351
194 (10 604 194)
417 (255 778 888) 731 881 529
Reconciliation of property, plant and equipment - 2011

Figures in Rand
Buildings
Plant and
machinery
Furniture and
fixtures
Motor vehicles
Capital work
in progress
Minor plant
Opening
balance
Additions
Disposals
Other changes,
movements
Depreciation
281 231 400
(239 709)
(3 887 629)
12 073 775
2 664 951
(14 397)
(427)
(3 346 839)
2 337 596
5 180 720
650 650
1 199 339
(89 177)
(325 781)
(1 000 311)
(964 643)
59 491 143
376 872 353
737 186 987
39 453 177
3 428 493
47 396 610
(84 272)
(753 336)
(427)
(19 539 881)

(28 739 303)
Reconciliation of property, plant and equipment - 2010

Figures in Rand
Opening
balance
Additions
Disposals
Depreciation
Impairment
loss
Total
Buildings
Plant and
machinery
Furniture and
fixtures
Motor vehicles
Capital work in
progress
Minor plant
282293451
2726571
(3788622)
281231400
12637060
2908963
(139726)
(3314641)
(17881)
12073775
2584250
6074899
792927
(5108)
(1033585)
(893804)
(888)
(375)
2337596
5180720
203677938 (144186795)
227647013
169015620
734914611
31257286
(144834)
(19782520)
(28813172)
(7760)
(26904)
59491143
376872353
737186987
Other information
Property, plant and equipment fully depreciated and still in use (Gross carrying amount)
Figures in Rand
2011
6 587 527
2010
4 842 820
Assets amounting to the cost of R6 587 527 had a nil useful life. In 2010 the cost of assets with a nil useful life was R4 842 820.
A register containing the information required by section 63 of the Municipal Finance Management Act is
available for inspection at the registered office of the entity.
Impairment
loss
Impairment
reversal
Total
(25 371)
277 078 691
(379 453)
186 001
11 183 611
(592)
(334)
33 944
1 932 110
5 089 301
(22 996 855)

(26 342)
(23 428 947)
219 945
75 947 465
360 650 351
731 881 529
Grootvlei Biosure plant (Cost 2011: R22 996 855; 2010:

R22 996 855) is not currently operational as the
Grootvlei Mine was liquidated. The contract between
ERWAT and the new owners of the Aurora mine could
not be renewed due to the financial difficulties the new
owners are experiencing.. The Grootvlei Biosure plant is
impaired in this financial year as the plant is no longer
providing economic benefits.
85
4 INTANGIBLE ASSETS
Cost
Computer
software, other
2011
Accumulated
amortisation &
accumulated
impairment
3 090 333 (1 375 127)
2010
Accumulated
amortisation &
accumulated
impairment
Carrying
value
Cost
1 715 206
3065509
(1320950)
Carrying
value
1744559
Reconciliation of intangible assets - 2011
Computer
software, other
Opening
balance
Additions
Disposals
Amortisation
1 744 559
241 650
(116 100)
(262 077)
Impairment
reversal
Total
107 174
1 715 206
Reconciliation of intangible assets - 2010
Computer software, other
86
Opening balance
Additions
Amortisation
Total
612842
1505789
(374072)
1744559
AVAILABLE-FOR-SALE INVESTMENTS
Name of entity
Sanlam demutualisation shares

Old Mutual demutualisation
shares
Old Mutual Unit Trust
Carrying amount
2011
Carrying amount
2010
Fair value
2011
Fair value
2010
430 212
641 245
356845
529 995
430 212
641 245
356 845
529 995
3 039 405
4 110 862
2 437 935
3324775
3 039 405
4 110 862
2 437 935
3324775
The Board of Directors decided to sell the shares, therefore the shares are classified in the current
financial year as current assets.
Fair value
The fair values, determined annually at end of the reporting period, were determined as follows:
The fair values of listed or quoted investments are based on the quoted market price.
The fair values on investments not listed or quoted are estimated using the discounted cash flow
analysis.
Figures in Rand
2011
2010
6 TRADE AND OTHER RECEIVABLES FROM EXCHANGE TRANSACTIONS

Trade receivables
Deposits
Prepayments
Related parties receivables
Provision for bad debts
Salaries
VAT receivable
6 707 482
511 918
50 470
26 581 512
(764 961)
1 183
33 087 604
10690836
511918
78079
18533273
(2195239)
2395398
30014265
The directors consider the carrying amount of trade and other receivables to approximate their fair value.
Credit quality of trade and other receivables from exchange transactions that are neither past due nor
impaired can be assessed by reference to external credit ratings(if available) or to historical information
about counterparty default rate.
7 CASH AND CASH E" UIVALENTS

Cash and cash equivalents consist of:
Cash on hand
Bank balances
Short-term deposits
16
53 937
16 600
70 554
300
784
000
084
16000
17228891
17244891
87
Credit quality of cash at bank and short term deposits, excluding cash on hand
The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past
due nor impaired can be assessed by reference to external credit ratings (if available) or historical information about counterparty default rates.
The entity had the following bank accounts
Account number /
Bank statement balances
Cash book balances
description
30 June 2011
30 June 2010
30 June 2009
30 June 2011 30 June 2010 30 June 2009
ABSA bank current account 260 170 120
51 849 070 15 878 449
6 202 443 51 832 594 15 878 449 6 179 919
ABSA bankSalary account 260 170 139
2 110 471 1 346 619
198 059 2 110 471 1 346 619
198 059
Petty cash and floats
16 300
16 000
15 000
Clearing account
(5 281)
3 823
(127 759)
INCA bankLong term loan
16 600 000
50610027704
16 600 000
Total
70 559 541 17 225 068
6 400 502 70 554 084 17 244 891 6 265 219

Figures in Rand
2011
2010
8 MAR TO MAR ET RESERVE

Opening balance
Movement for the year
1 905 133
755 661
2 660 794
1380097
525036
1905133
31 504 502
37764869
82 155 642
84509601
32 297 860
35443232
145 958 004
157717702
133 315 837
146073831
12 642 167
145 958 004
11643871
157717702
145 958 004
157717702
9 LONG TERM BORROWINGS

At amortised cost
ABSA Bank loan
Account number 3020478989 @ 7,25%
redeemable 31/05/2015
Account number 3020478442 @ 8,25%
Account number 3020478581 @ 8,25%
INCA Bank loan
Account number 50610027704 @ 7,00% redeemable 28/06/2024
DBSA Bank loan
88
At amortised cost
Current liabilities
At amortised cost
Fair value of the financial liabilities carried at amortised cost

Bank loans
Figures in Rand
10 PROVISIONS
Reconciliation of provisions - 2011
Opening
balance
Post retirement
medical provision
Bonus provision
Incentive bonus
Leave pay provision
Other provisions
Additions
Utilised during
the year
Under
provision/
(over provision)
Total
2 419 768
1 474 245
(255 294)
3 638 719
2 711 355
3 386 143
7 042 399
5 083 583
6 052 800
3 483 333
2 863 138
9 105 586
(5 903 232)
(3 322 291)
( 1 711 839)
(3 810 202)
157 993
(577 612)
3 018 916
3 547 1785
7 616 086
10 378 967
20 643 248
22 979 102
(15 002 858)
(419 619)
28 199 873
Opening balance
Additions
1727721
1700870
3081516
6531116
2155890
15197113
876315
5734473
2866667
2967685
3783725
16228865
Reconciliation of provisions - 2010

Bonus provision
Leave pay provision
Other provisions
Utilised during
the year
(184268)
(4723988)
(2562040)
(2456402)
(856032)
(10782730)
2011
Current liabilities
3 638 719
24 561 154
28 199 873
Total
2419768
2711355
3386143
7042399
5083583
20643248
2010
2 419 768
18 223 480
20 643 248

ERWAT provides post retirement medical benefits to some of its already retired employees and a provision
is thus raised for the obligation.
Bonus provision
A provision for 13th cheques to be paid in November is raised.
A provision for incentive bonuses is raised. The bonuses will only be approved by the board of directors if
they are satisfied with ERWAT's performance at the end of the financial year.
Leave pay provision
The liability is based on the total accrued leave days at year end.
Other provisions
Includes a provision for water and electricity accounts not received yet, based on an estimate of previous
months usage and workmen's compensation commission based on estimates.
89

Figures in Rand
2011
2010
11 TRADE AND OTHER PAYABLES FROM EXCHANGE TRANSACTIONS

Trade payables
Payments received in advanced - contract in process
Deposits
Payroll creditors
Related party payables
Credit balances in debtors
Other payables
VAT payable
21 348
282
27
908
2 545
129
68
5 944
31 255
867
186
806
269
903
204
189
891
315
15699854
282186
28673
742570
8708383
121696
133045
25716407
The directors consider the carrying amount of trade and

other payables to approximate fair value.
1 REVENUE
90
Service charges
Levies
Interest received external investments
Interest earned bank
Interest earned fair value adjustment
Interest received trading
Other income
The amount included in revenue arising from exchanges
of goods or services are as follows:
Service charges
Interest earned outstanding debtors
Interest received external investments
Interest earned bank
Interest earned fair value adjustment
Interest received trading
Other income
The amount included in revenue arising from non-exchange
transactions is as follows:
Transfer revenue
339 058 193

1 611 299
308 099
492 654
3 256 788
65 577
9 934 166
54 685 944
409 412 720
264 943
156
22
628
2 636
27
23 197
50 112
341 724
032
613
478
140
665
321
539
246
034
339 058 193

1 611 299
308 099
492 654
3 256 788
65 577
54 685 944
399 478 554
264 943 032

156 613
22 478
628 140
2 636 665
27 321
50 112 246
318 526 495
9 934 166
23 197 539
339 058 193
264 943 032
13 SERVICE CHARGES
Sewerage and sanitation charges
Figures in Rand
2011
2010
14 OTHER INCOME
Income directorate
Reversal of bad debt provision
Tender income
Devon sundry income
Housing and leases
Insurance claims received
Learnership income
Income: Administration
Income: Technical
Income: Laboratory
Income: Operations
Discount received
Bad debts recovered
2 195 239
71 520
489 269
220 885
29 852
693 614
108 508
18 043 670
23 920 651
8 178 365
460 869
273 502
54 685 944
700
4 745 562
40780
489269
199690
124483
513979
259754
16951594
19875182
6 296 169
615 084
50 112 246
464 886
722 329
706 621
170 250
625 496
848 562
2 082 466
328 785
1 442 145
682 655
664 220
59 622
704 100
301 935
398 128
6 747 564
1 293 673
12 514
365 649
225 479
4 661 088
83 225
1 916 076
3 201 352
1 468 005
751 967
1 658 309
2 087 110
34 674 211
420886
998429
750922
168555
737931
699886
2789611
368984
248873
516510
39983
647248
277832
252382
7444143
1501192
10647
407960
236223
5136494
115623
1960788
3081420
1038161
446644
2388778
1866351
34 552 456
1 GENERAL EXPENSES
Advertising
Assessment rates & municipal charges
Auditors remuneration
Bank charges
Cleaning
Computer expenses
Consulting and professional fees
Consumables
Discount allowed
Donations
Entertainment
Flowers
Lease rentals
Conferences and seminars
Rental of equipment
Hiring of fleet
Marketing
Postage and courier
Printing and stationery
Research and development costs
Security (guarding of municipal property)
Subscriptions and membership fees
Telephone and fax
Transport and freight
Training
Travel - local
Health and safety expense
Laboratory charges
91

Figures in Rand
2011
2010
16 EMPLOYEE RELATED COSTS

Basic
Bonus
Medical expenses
Workmens compensation
Skills development levy
Other payroll levies
Leave pay provision charge
Other short term costs
Post-employment benefits medical aid
Overtime payments
Long-service awards
Car allowance
Housing benefits and allowances
Bursary schemes
Company contributions
Protective clothing
Learnerships
Long-term benefits incentive scheme
Remuneration of non-executive directors
92
Remuneration of the Chief Executive Officer

Annual remuneration
Car allowance
Performance bonuses
Contributions to UIF, medical and pension funds
Travel and other
67 181 029
5 498 465
64 221
768 842
130 753
2 916 974
129 583
1 232 269
6 159 998
44 126
4 034 511
745 849
333 840
26 784 758
378 226
3 139
3 543 977
570 043
120 520 603
61574320
5731021
79167
1188976
677417
23816
2972446
135030
668124
6274701
101044
3454688
794394
266785
23479373
355634
2866667
572820
111216423
948
120
179
233
33
1514
718
000
279
497
442
936
760721
120000
135710
197218
1213649
729
102
152
207
11
1 204
813
000
641
957
899
310
611449
102000
110971
199264
1023684
The remuneration of the Chief Executive Officer

is included in the employee related costs.
Remuneration of Chief Financial Officer
Annual remuneration
Car allowance
Performance bonuses
Expense allowance
The remuneration of the Chief Financial Officer is included in the employee related costs.
Figures in Rand
Remuneration of executive managers

Annual remuneration
Car allowance
Performance bonuses
Other
2011
4 440
537
819
1 191
21
7 011
2010
866
860
652
730
871
979
3712284
537860
629749
1007895
5887788
764 960
40 422
805 382
2195239
9840155
12 035 394
65 577
27321
The remuneration of the executive managers is

included in the employee related costs.
17 DEBT IMPAIRMENT
Contributions to debt impairment provision
Bad debts written off
18 INVESTMENT REVENUE
Dividend revenue
Unit trusts local
Interest revenue
Fair value adjustment receivables
Bank
Interest received on investments
Interest earned on outstanding debtors
3 256
492
308
1 611
5 668
5 734
788
654
099
299
840
417
2636665
628140
22478
156613
3443896
3471217
28 739 302
262 077
29 001 379
28813172
374072
29187244
12 441 380
1 283 926
34
241 977
13 967 317
14709999
92782
1265763
208190
16276734
19 DEPRECIATION AND AMORTISATION

Intangible assets
0 FINANCE COSTS
Interest on long term borrowings
Bank
Fair value adjustments on payables
Other interest paid
Unwinding of discount
93

Figures in Rand
2011
2010
1 AUDITORS REMUNERATION
Fees
706 621
750922
69 617 550
1 243 171
40 828 285
50206436
876170
39669962
111 689 006
90752568
49 742 316
18243163
29 001 379
481 533
(1)
23 101 826
805 382
7 556 624
29187244
144834
26904
7289832
(69456)
5446134
(5 482 417)
(805 382)
(392 304)
8 340 288
(30 426)
(345072)
(7289832)
5217774
(3132347)
(26804)
112 318 818
54692374
5 900 258
4463627
BUL PURCHASES
Electricity
Water
Sewer purification
3 CASH GENERATED FROM OPERATIONS
94
Surplus
Adjustments for:
Depreciation and amortisation
Loss on disposal of assets
Dividends received
Impairment loss/reversal of impairments
Debt impairment
Movements in operating lease assets and accruals
Movements in provisions
Changes in working capital:
Trade and other receivables from exchange transactions
Consumer debtors
Trade and other payables from exchange transactions
VAT
Inrerest receivable on available-for-sale asset
4 COMMITMENTS
Authorised capital expenditure
Already contracted for but not provided for
This committed expenditure relates to plant and equipment and will be financed by available bank facilities.
Figures in Rand
2011
2010
CONTINGENCIES AND GUARANTEES

ERWAT is currently in dispute with Black Child Productions CC and Trinity Entertainment CC. ERWAT was
to act as DWA's (Department of Water Affairs) implementing agent as per the memorandum of understanding for the War on Leaks Programme in the Ekurhuleni area. The service provider was to be recommended by ERWAT. Instead the above close corporation was contracted without any knowledge of
ERWAT and they are claiming R10 000 000 for work performed from ERWAT. According to ERWAT the
R10 000 000 should be paid by the Department of Water Affairs.
At 30 June 2011 the company had contingent liabilities in respect of bank and other guarantees and other
matters arising in the ordinary course of business from which it is anticipated that no material liabilities will
arise. In the ordinary course of business, the company has given guarantees amounting to R2 999 270 in
2011 (R2 999 270 in 2010) to third parties.
6 RELATED PARTIES
Relationships
Controlling entity
Ekurhuleni Metropolitan Municipality
Other members of the group:
Brakpan Bus Company & Ekurhuleni Development Company
Related party balances
Amounts included in trade payable
regarding related parties
95
2 545 903
8 708 383
26 581 512
18 533 273
9 934 166
23 197 539
Purchases from related parties

34 688 802
32 684 458
Sales to related parties

354 012 147
305 368 928
Amounts included in trade receivables

Grants received
Related party transactions

Figures in Rand
2011
2010
7 COMPARATIVE FIGURES
Certain comparative figures have been reclassified.
Government grant received
During 2011 EMM decided that the income ERWAT has received the prior year amounting to R7 219 613
for two water and electricity accounts, should be classified as a grant received. The prior year the
R7 219 613 was classified as sundry income. Note 26 (related parties) changed from R15 977 926 to
R23 197 539 and the other income (note 14): income operations from R13 515 782 to R6 296 168.
Grants received are disclosed seperately on the income statement.
Provision for post retirement medical aid
Provision for post retirement medical aid has been classified as a non-current provision. This provision was
previously classified as a current provision. Refer to note 10.
The reversal of bad debt provision is classified separately under other income as R4 745 562 (note 14).
Previously it was stated under debt impairment. Debt impairment (note 17) is now R12 035 394.
The effects of the reclassification are as follows:
96
Statement of financial position

Non-current liabilities - provisions
Current liabilities - provisions
Statement of financial performance
Sundry income
Debt impairment
(2 419 768)
2 419 768
(7 219 613)
7 219 613
4 745 562
(4 745 562)
8 RIS MANAGEMENT
Capital risk management
The entitys objectives when managing capital are to safeguard the entitys ability to continue as a going concern in order to provide returns for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
The capital structure of the entity consists of debt, which includes the borrowings (excluding derivative
financial liabilities) disclosed in note 9, cash and cash equivalents disclosed in note 7, and equity as disclosed
in the statement of financial position.
Figures in Rand
2011
2010
Consistent with others in the industry, the entity monitors capital on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings
(including current and non-current borrowings as shown in the statement of financial position) less cash
and cash equivalents. Total capital is calculated as equity as shown in the statement of financial position plus
net debt.
There are no externally imposed capital requirements.
There have been no changes to what the entity manages as capital, the strategy for capital maintenance or
externally imposed capital requirements from the previous year.
Total borrowings
Other financial liabilities
Less: cash and cash equivalents
Net debt
Total equity
Total capital
9
7
(145 958 004)

70 554 084
(75 403 920)
635 936 093
560 532 173
(157 717 702)

17244891
(140472 811)
585532 987
445060176
Financial risk management

Liquidity risk
The entitys risk to liquidity is a result of the funds available to cover future commitments. The entity manages liquidity risk through an ongoing review of future commitments and credit facilities.
97
Cash flow forecasts are prepared and adequate utilised borrowing facilities are monitored.
Less than 1
year
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
At 30 June 2011
Borrowings
12 642 168
31 255 315
13 806 910
103 495 617
16 013 309
At 30 June 2010
Borrowings
11 643 871
25 716 407
12,906,422
45 029 314
88 138 093
Interest rate risk

The entitys interest rate risk arises from long-term borrowings. ERWAT manages interest rate risk so that
fluctuations in variable rates do not have a material impact on surplus/deficit, through negotiations with the
banks for fixed interest rates, as well as the lowest rates by request for tenders for the lowest rates.
At year end, financial instruments exposed to interest rate risk is indicated in note 9. ERWATs income and
operating cash are substantially independent of changes in market rates.

Figures in Rand
2011
2010
Credit risk
Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The entity only deposits
cash with major banks with high quality credit standing and limits exposure to any one counter-party.
Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to
customers on an ongoing basis.
Price risk
The entity is exposed to equity securities price risks because of investments held by the entity and classified on the statement of financial position as available-for-sale.
9 GOING CONCERN
We draw attention to the fact that at 30 June 2011, the entity had accumulated surpluses of
R633 275 299 and that the entitys total assets exceed its liabilities by R635 936 093.
The annual financial statements have been prepared on the basis of accounting policies applicable to a going
concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.
98
The ability of the entity to continue as a going concern is dependent on the continued support of
Ekurhuleni Metropolitan Municipality (parent municipality) by way of service charges for treatment of
wastewater and the provision of related engineering services paid each year in terms of the service delivery agreement entered into between ERWAT and Ekurhuleni Metropolitan Municipality.
30 IRREGULAR EXPENDITURE
Add: irregular expenditure current year
Less: amounts condoned
2 029 778
(2 029 778)
340325
(340325)
Details of irregular expenditure not recoverable (not condoned)

The Supply Chain Manangement policy section 36(2) stipulates that the Accounting Officer may deviate
from the procurement process in certain instances, provided that he records the reasons for any deviations
and reports them in the next Board meeting. He must include a note to the financial statements with details
of such deviations.
Contrary to this requirement the R2 029 778 was not reported to the Board. Therefore they are
irregular.
Figures in Rand
2011
2010
31 DEVIATION FROM SUPPLY CHAIN MANAGEMENT REGULATIONS

Paragraph 12(1)(d)(i) of Government Gazette No. 27636 issued on 30 May 2005 states that a supply chain
management policy must provide for the procurement of goods and services by way of a competitive bidding process.
Paragraph 36 of the same gazette states that the accounting officer may dispense with the official procurement process in certain circumstances, provided that he records the reasons for any deviations and reports
them to the next meeting of the Board of Directors and includes a note to the annual financial statements.
Goods and services were procured during the financial year under review and the process followed in
procuring those goods deviated from the provisions of paragraph 12(1)(d)(i) as stated above. The reasons
for these deviations were documented and will be reported to the Board of Directors.
The expenses incurred, as listed hereunder, have been
approved/condoned
Emergencies
Sole suppliers
Other
1 351 750
479 491
198 537
2 029 778
3 FINANCIAL ASSETS BY CATEGORY

99
The accounting policies for financial instruments have been applied to the line items below:
2011
transactions
Unit trust and demutualisation shares
2010
transactions
Unit trust and demutualisation shares
Loans and
receivables
Available-for-sale
Total
33 087 604
33 087 604
70 554 084
4 110 862
74 664 946
33
70
4
107
087
554
110
752
604
084
862
550
30 014 265
30 014 265
17 224 891
3 324 775
20 549 666
30
17
3
50
014
224
324
563
265
891
775
931

Figures in Rand
2011
2010
33 FINANCIAL LIABILITIES BY CATEGORY

The accounting policies for financial instruments have been applied to the line items below:
2011
Financial
liabilities at
amortised cost
Trade and other payables from
exchange transactions
Long term liabilities
(current and non-current)
2010
Financial
liabilities at
amortised cost
Total
Total
31 255 315
31 255 315
25 716 407
25 716 407
145 958 004
145 958 004
157 717 702
157 717 702
177 213 319
177 213 319
183 434 109
183 434 109
34 EVENTS AFTER THE REPORTING DATE

Management decided to impair the Grootvlei Biosure plant, after reporting date, as it is providing no economic benefit. The impairment is R22 996 855, reducing the surplus for the year to R49 742 316.
3 ADDITIONAL DISCLOSURE IN TERMS OF MUNICIPAL FINANCE MANAGEMENT ACT

100
Audit fees
Current fees
Amount paid current year
PAYE and UIF

Current year fee
Pension and medical aid deductions

Current year fee
706 621
(706 621)
750 922
(750 922)
15 867 835
(15 689 781)
178 054
14 085 461
(14 085 461)
25 496 042
(25 496 042)
22 727 314
(22 727 314)
5 944 891
5 944 891
2 395 398
2 395 398
VAT
VAT receivable
VAT payable
All VAT returns have been submitted by the due date throughout the year.
Figures in Rand
2011
2010
36 UTILISATION OF LONG-TERM LIABILITIES RECONCILIATION

Outstanding long-term liabilities
Redemption of loans
Used to finance property, plant and equipment
Unspent long term laibilities
157 717 702

(11 759 698)
145 958 004
(145 958 004)
168 667 329

(10, 949 627)
157 717 702
(157 717 702)
Long-term liabilities have been utilized in accordance with the Municipal Finance Management Act. Sufficient
cash has been set aside to ensure that long-term liabilities can be repaid on redemption date.
101
37 STATEMENT OF COMPARATIVE AND ACTUAL INFORMATION

2011
Original
budget
Budget
adjustments
(i.t.o. s28 and
s31 of the MFMA)
Financial Performance
Service charges
Investment revenue
Transfers recognised operational
Other own revenue
341 595 002

1 613 000
56 058 797
Total revenue (excluding capital transfers and contributions)
399 266 799
Employee costs
Debt impairment
Depreciation and asset impairment
Finance charges
Materials and bulk purchases
Repairs and maintenance
Other expenditure
(127
(1
(29
(29
(118
(45
(47
089)
000)
734)
633)
018)
729)
596)
Total expenditure
(399 266 799)
259 558 439
(142 404 763)
259 558 439
(231 407 709)

89 002 946
259 558 439
(142 404 763)
33 283 338
(259 558 439)
247 690 044
Net increase/(decrease) in cash and cash equivalents
21 414 943
Cash and cash equivalents at the beginning of the year
29 038 234
Cash and cash equivalents at year end
50 453 177
Surplus/(Deficit) for the year
480
106
725
741
498
227
487
102
Capital expenditure and funds sources
Total capital expenditure
Sources of capital funds
Transfers recognised - capital
Borrowing
Internally generated funds
Total sources of capital funds
Cash flows
Net cash from (used) operating
Net cash from (used) investing
Net cash from (used) financing
Final
budget
Actual
outcome
341 595 002

1 613 000
56 058 797
339 058 193

5 734 417
9 934 166
54 685 944
399 266 799
Actual
outcome
as % of final
budget
Actual
outcome as
% of original
budget
2 536 809
(4 121 417)
(9 934 166)
1 372 853
99%
356%
100%
98%
99%
356%
100%
98%
409 412 720
(10 145 921)
103%
103%
089)
000)
734)
633)
018)
729)
596)
(120 520603)
(805 382)
(52 103 205)
(13 967 317)
(111 689 006)
(25 429 147)
(35 155 744)
(6 959 486)
(300 618)
22 377 471
(15 774 316)
(6 809 012)
(19 798 582)
(12 331 852)
95%
73%
175%
47%
94%
56%
74%
95%
73%
175%
47%
94%
56%
74%
(399 266 799)
(359 670 404)
(39 596 395)
90%
90%
49 742 316
(49 742 316)
100%
100%
(127
(1
(29
(29
(118
(45
(47
480
106
725
741
498
227
487
Variance
103
117 153 676
47 638 261
69 515 415
41%
18%
28 150 730
89 ,002 946
9 934 166
37 704 095
(9 934 166)
28 150 730
51 298 851
DIV/0 %
-%
42%
100%
-%
100%
117 153 676
47 638 261
69 515 415
41%
18%
33 283 338
(259 558 439)
247 690 044
112 318 818

(47 249 934)
(11 759 691)
(79 035 480)

(212 308 505)
259 449 735
337%
18%
(5)%
337%
18%
(5)%
21 414 943
53 309 193
(31 894 250)
249%
249%
29 038 234
17 244 891
11 793 343
59%
59%
50 453 177
70 554 084
(20 100 907)
140%
140%
PREDETERMINED OB ECTIVES 010/ 011

There are two critical performance areas for the company, namely affordability (measured in cents/kilolitre of water purified) and quality of effluent.
The measurement used for the effluent standards is the standards determined by the Department of Water Affairs. ERWAT has identified three
measurements as being the most critical. These are COD (Chemical
Oxygen Demand), PO4 (Phosphates) and SS (Suspended Solids).
The 2010/11 performance in terms of these four objectives is as follows:
Description of target
Target
Actual achieved
Comment
To improve water quality in terms of COD
56 645 kg/day
20 543 kg/day
Target
Achieved
Improve water quality with respect to

PO4 (Phosphates)
755 kg/day
462 kg/day
Target
Achieved
Improve water quality with respect to

SS (Suspended Solids)
18 882 kg/day
10 809 kg/day
Target
Achieved
Actual cost of purification
152.61 c/kl
116.68 c/kl
Target
Achieved
Explanatory notes on targets achieved
104
COD (Chemical Oxygen Demand): measured in kg/day. This target is calculated by multiplying the national standard with the actual volumes and the
actual figure is calculated by multiplying actual analysis by national standards.
Actuals should always be less than target.
PO4 (Phosphates): measured in kg/day. This target is calculated by multiplying the national standard with the actual volumes, the actual figure is calculated by multiplying actual analysis by national standards. Actuals should
always be less than target
SS (Suspended Solids): measured in kg/day. This target is calculated by multiplying the national standard with the actual volumes, the actual figure is calculated by multiplying actual analysis by national standards. Actuals should
always be less than target.
ERWAT is satisfied that the targets on all four objectives were achieved and
we are confident that we can continue this success in the future.
Note: ERWAT decided to exclude from the annual report all the departments strategic focus areas inclu-ded previously and only report on the four
main objectives as they are reported to the parent municipality.
For further information

contact ERWAT at
Hartebeestfontein Office Park,
R25 (Bapsfontein / Bronkhorstspruit)
Kempton Park
GPS co-ordinates:
S 26 01 25.8 and E 28 17 10.0
PO Box 13106, Norkem Park 1631
Republic of South Africa
Tel: +27(11) 929-7000
Fax: +27(11) 929-7031
E-mail: mail@erwat.co.za
Web: www.erwat.co.za

Erwat Annual 2012

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report erwat 2011 woensdag11_erwat report 2012/11/19 8:16 AM Page 1

report erwat 2011 woensdag11_erwat report 2012/11/19 8:16 AM Page 2

About ERWAT .................................................................................

Chairpersons review ......................................................................

Executive management structure ................................................

Managing Directors review...........................................................

Corporate governance ...................................................................

Annual financial statements .........................................................

Directors responsibilities and approval......................................................

Report of the Auditor-General .....................................................................

Directors report ..............................................................................................

Statement of financial position ......................................................................

Statement of financial performance..............................................................

Statement of changes in net assets ..............................................................

Statement of cash flows ..................................................................................

Accounting policies ..........................................................................................

Notes to the annual financial statements ...................................................

Predetermined objectives .............................................................

report erwat 2011 woensdag11_erwat report 2012/11/19 8:16 AM Page 1

report erwat 2011 woensdag11_erwat report 2012/11/19 8:16 AM Page 2

ERWAT currently manages and

Tel no: +27 11 929 7000

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 3

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 4

report erwat 2011 woensdag11_erwat report 2012/11/19 9:11 AM Page 5

MANAGING DIRECTORS REVIEW

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 6

The water business

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 7

ERWAT currently operates the following WWTWs:

Like many other sectors in the country, the water industry is

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 8

Green Drop certification

DWA launched the Green Drop certification programme

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 9

Retrofitting: Waterval WWTW

Wastewater quality compliance

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 10

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 11

The compliance of the determinants in Tables A, B and C are

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 12

Northern catchment area:

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 13

Resear-h an. De?e5896 ent (R D)

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 14

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 15

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 16

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:17 AM Page 17

INNOVATIVE WASTEWATER SOLUTIONS

report erwat 2011 woensdag11_erwat report 2012/11/19 8:18 AM Page 18