City Power Johannesburg (SOC) Ltd Business Plan 2017 - 2018 Final

 
City Power Johannesburg (SOC) Ltd Business Plan 2017 - 2018 Final
City Power Johannesburg (SOC) Ltd
          Business Plan
          2017 – 2018

              Final
City Power Johannesburg (SOC) Ltd Business Plan 2017 - 2018 Final
City Power Draft Business Plan 2017-21

Official sign-off
It is hereby certified that this Strategic Plan:
•   Was developed by the management of City Power SOC Ltd under the guidance of the
    Managing Director.
•   Takes into account all the relevant policies, legislation and other mandates for which
    the City Power SOC Ltd is responsible.
•   Accurately reflects the strategic outcome oriented goals and objectives which City
    Power SOC Ltd will endeavor to achieve over the period 2017-2018.

Sign Off:

MD Name: ………………………                       Signature: …………………… Date: ………………

Sector ED Name: ………..…………. Signature: …………………… Date: ……….………

Sector MMC Name: ………………… Signature: …………………… Date: ……………….

Company Details
Company Name:                                      City Power Johannesburg (SOC) Ltd
Company Registration Number:                       Reg 2000/030051/30
Physical Address:                                  40 Heronmere Road, Reuven
Postal Address:                                    PO Box 38766, Booysens, 2016
Phone Number:                                      (+27) 011 490 7000
Fax Number:                                        (+27) 011 490 7590
E-mail:                                            electricity@citypower.co.za
Website:                                           www.citypower.co.za
Customer Contact Centre:                           (+27) 011 375 5555

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Contents
1.      EXECUTIVE SUMMARY............................................................................................................................. 6
1.1.       CITY POWER STRATEGIC DIRECTION .................................................................................................... 6
1.2.       PROBLEM STATEMENT ........................................................................................................................ 6
1.3.       CORE MANDATE/PURPOSE/OBJECTIVE ............................................................................................... 7
2.      INTRODUCTION ....................................................................................................................................... 8
2.1.       BACKGROUND ..................................................................................................................................... 8
2.2.       OVERVIEW .......................................................................................................................................... 9
3.      STRATEGIC ENVIRONMENTAL ANALYSES ............................................................................................... 11
3.1.       BACKGROUND ................................................................................................................................... 11
3.2.       HIGH LEVEL SWOT ANALYSIS ............................................................................................................. 11
3.3.       HIGH LEVEL PESTLE ANALYSIS ............................................................................................................ 12
3.4.       INDUSTRY CHANGE DRIVERS ............................................................................................................. 13
3.5.       THE TOP 10 CHANGE OPPORTUNITIES: .............................................................................................. 14
4.      SHAREHOLDER ALIGNMENT TO GDS AND IDP ....................................................................................... 15
4.1.       BACKGROUND ................................................................................................................................... 15
4.2.       THE STRATEGIC THRUST FOR 2017/18 IDP REVIEW OF THE SHAREHOLDER ....................................... 15
4.2.1.         COJ VISION .................................................................................................................................... 15
4.2.2.         COJ MISSION ................................................................................................................................. 15
4.2.3.         COJ OUTCOMES AND PRIORITIES .................................................................................................. 15
4.2.4.         CITY POWER ALIGNMENT .............................................................................................................. 16
5.      BUSINESS PERFORMANCE OBJECTIVES ................................................................................... 17
5.1.       FINANCIAL PERFORMANCE ....................................................................................................... 18
5.2.       STAKEHOLDER/CUSTOMER PERFORMANCE ....................................................................... 19
5.3.       INTERNAL PROCESSES .............................................................................................................. 20
5.4.       HIGH PERFORMANCE TEAMS ............................................................................................................ 22
6.      DAY TO DAY OPERATIONS ..................................................................................................................... 24
6.1.       COMMUNICATION AND STAKEHOLDER MANAGEMENT .................................................................... 24
6.1.1.         INTEGRATED COMMUNICATIONS STRATEGIC APPROACH ............................................................. 24
6.1.2.         STAKEHOLDER MANAGEMENT APPROACH ................................................................................... 27
6.2.       REVENUE MANAGEMENT .................................................................................................................. 29
6.2.1.         TECHNICAL LOSSES ........................................................................................................................ 29
6.2.2.         NON-TECHNICAL LOSSES ............................................................................................................... 29
6.2.3.         IN LIGHT OF BUDGET LEKGOTLA: IMPLEMENTATION PLAN ........................................................... 31
6.3.       SERVICE DELIVERY MAINTENANCE PLAN ........................................................................................... 32

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6.3.1.         BACKGROUND ............................................................................................................................... 32
6.3.2.         CRITICAL CHALLENGES .................................................................................................................. 32
6.3.3.         RESPONSE TO THE SERVICE DELIVERY CRITICAL CHALLENGES ....................................................... 34
6.3.4.         FUNDING REQUIREMENTS AND ALLOCATION ............................................................................... 34
6.3.5.         SERVICE DELIVERY KEY PERFORMANCE INDICATORS .................................................................... 35
6.4.       SECURITY OF SUPPLY ......................................................................................................................... 36
6.4.1.         LOAD SHEDDING ........................................................................................................................... 36
6.4.2.         ENERGY MANAGEMENT (INCLUDING DSM AND SSM)................................................................... 36
6.4.3.         ASSET MANAGEMENT ................................................................................................................... 37
6.4.4.         ELECTRIFICATION OF INFORMAL SETTLEMENTS ............................................................................ 37
6.5.       ANTI-FRAUD AND CORRUPTION PLAN – 2017/2018 .......................................................................... 40
6.5.1.         OBJECTIVES ................................................................................................................................... 40
6.5.2.         APPROACH .................................................................................................................................... 40
6.5.3.         TARGET AUDIENCE ........................................................................................................................ 41
6.5.4.         DEFINING SUCCESS ........................................................................................................................ 41
6.5.5.         POTENTIAL RISKS .......................................................................................................................... 41
6.5.6.         ANTI-FRAUD AND CORRUPTION CAMPAIGNS ROLL OUT............................................................... 41
7.      COMMUNITY BASED PROGRAMME ....................................................................................................... 44
7.1.       REGION A .......................................................................................................................................... 44
7.2.       REGION B .......................................................................................................................................... 45
7.3.       REGION C .......................................................................................................................................... 46
7.4.       REGION D .......................................................................................................................................... 46
7.5.       REGION E........................................................................................................................................... 47
7.6.       REGION F ........................................................................................................................................... 48
7.7.       REGION G .......................................................................................................................................... 50
8.      FINANCIAL PLAN AND IMPACT .............................................................................................................. 51
8.1.       TARIFF PLAN ...................................................................................................................................... 51
8.1.1.         BACKGROUND ............................................................................................................................... 51
8.1.2.         BULK PURCHASES .......................................................................................................................... 52
8.1.3.         DESIGN PRINCIPLES FOR 2017/18 AND BEYOND ........................................................................... 58
8.1.4.         KEY ASSUMPTIONS AND PROPOSED INCREASE ............................................................................. 58
8.2.       OPERATIONAL BUDGET ..................................................................................................................... 61
8.2.1.         INCOME STATEMENT AND EXPLANATION OF VARIANCES ............................................................. 61
8.2.2.         RATIOS .......................................................................................................................................... 65
8.3.       CAPITAL PLAN ................................................................................................................................... 66

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8.3.1.        LONG TERM CAPITAL BUDGET INDICATIVES .................................................................................. 66
8.3.2.        CAPEX REQUIREMENTS ................................................................................................................. 66
8.3.3.        CAPEX FUND ALLOCATION AND IMPACT ....................................................................................... 68
9.      MANAGEMENT AND ORGANISATIONAL STRUCTURES ........................................................................... 74
9.1.       ORGANISATION STRUCTURE ............................................................................................................. 74
9.2.       MANAGEMENT TEAM ....................................................................................................................... 74
9.2.1.        BOARD OF DIRECTORS .................................................................................................................. 75
9.2.2.        EXECUTIVE COMMITTEE MEMBER ................................................................................................ 75
9.2.3.        BOARD COMMITTEES .................................................................................................................... 76
9.2.4.        COMPANY SECRETARIAL FUNCTION .............................................................................................. 78
9.3.       HUMAN RESOURCES (HR) PLAN ........................................................................................................ 79
9.3.1.        WHY IS HR CRITICAL TO BUSINESS PERFORMANCE AT CITY POWER? ............................................ 79
9.3.2.        HR STRATEGIC FRAMEWORK......................................................................................................... 79
9.3.3.        PRIORITIZING PEOPLE TO ENABLE STRATEGY EXECUTION ............................................................. 82
10.        RISK MANAGEMENT .......................................................................................................................... 92
10.1.      RISK MANAGEMENT PROCESS ........................................................................................................... 92
10.2.      RISK IDENTIFICATION ........................................................................................................................ 93
10.3.      MONITORING AND REPORTING......................................................................................................... 94
10.4.      AUDITING .......................................................................................................................................... 94
10.5.      COMPLIANCE RISK MANAGEMENT .................................................................................................... 94
10.6.      TOP STRATEGIC RISKS........................................................................................................................ 94
11.        REPORT CONCLUSION ....................................................................................................................... 97
12.        BUSINESS ACRONYMS AND APPENDICES .......................................................................................... 98

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    1. Executive Summary

   1.1. City Power Strategic Direction

   1.2. Problem Statement

The aim of City Power is to assist the City of Johannesburg to address the South African challenge
of security and quality of electricity supply i.e. enabling consumers who reside in the City of
Johannesburg jurisdiction to obtain electricity at a defined quality and reliability at affordable rates
and transparent prices.
In parallel to this objective City Power will also be required to ensure the sustainability of the
business through the achievement of certain agreed to financial, social and environmental goals.
Human capital is a dynamic, shifting asset because the organisation, its managers and individuals
make choices daily that help create or potentially destroy value. The sum of knowledge, skills,
experience and other relevant work attributes that reside in our workforce drives productivity,
performance, culture and achievement of other goals.

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   1.3. Core Mandate/Purpose/Objective

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2. Introduction

   2.1. Background
Following the first democratic elections that took place in 1994, and the local government election
that followed in 1995, eleven local authorities were amalgamated to form the Greater
Johannesburg Metropolitan Council. By mid-1997 it became apparent that the new structures
were not optimally effective and the Councils of Greater Johannesburg were facing a severe
financial crisis. It was then agreed that a unified, metropolitan-wide initiative was necessary to
focus specifically on the critical problems facing the City. This led to the inception of the i-Goli
2002 plan. i-Goli 2002 was essentially a three-year strategic plan. It involved the structural
transformation of Metro functions with the view to ensuring enhanced and more cost effective
service delivery. It achieved this by reducing fragmentation, eliminating duplication, improving
accountability, focusing on human resource development and improving performance incentives.
From an organisational perspective, the i-Goli 2002 Plan put in place “sensible” structures that
delivered at greater levels of efficiency.

The i-Goli 2002 Plan envisaged that the City would work through a combination of new political
governance structures, agencies and corporatised entities. A key element of the i-Goli 2002
strategy for service delivery was the establishment of utilities, agencies and corporatised entities
now called the municipal owned entities (MOEs). One of the entities established was City Power
Johannesburg (SOC) Ltd, 100% owned by the City of Johannesburg, and established in terms of
the Companies Act, on 30 November 2000.

The National Energy Regulator of South Africa (NERSA) granted City Power a license to trade on
19 December 2001. City Power is not
the sole provider of electricity services
for the City.

City Power is accountable for public
lights in all of Johannesburg but the rest
of the electricity services are split with
Eskom. This Map of Johannesburg
show
     in yellow areas that are provided
         electricity by Eskom and
     in blue the areas that are
         provided electricity by City
         Power.

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In line with the establishment of City Power Johannesburg (SOC) Ltd, the Council utilises an
Environment and Infrastructure Services Department (EISD) to oversee the performance and
Group Governance to oversee the governance of the company, as well as to regulate it. In this
regard various agreements in principle were concluded during the establishment of the
companies. These included the Sale of Business Agreement (SBA) and the Service Delivery
Agreement (SDA).

The relationship maintained with the Greater Johannesburg Metropolitan Council is one of Service
Authority and Service Provider. City Power Johannesburg (SOC) Ltd is the preferred Service
Provider for the Service Authority, the Council. City Power Johannesburg (SOC) Ltd is the Energy
Distribution Service Provider to the Service Authority, Johannesburg Council. The core
competency of the business is to purchase, distribute and sell electricity within its geographical
footprint of business. The City of Johannesburg is the sole Shareowner. The Council, by means
of a Service Delivery Agreement, regulates the service in respect of the following: financial issues
(such as tariffs and capital expenditure), human resource issues (such as skills development),
delivery targets (maintenance of assets and addressing assets), and standards of customer care.

   2.2. Overview

City Power strategy has evolved over the year in alignment with its sole shareholder, the City of
Johannesburg. The table below shows the journey of the company since its inception:

        2002-2006                    2006-2011                      2011- 2016
     Egoli 2002                      GDS 2030                        GDS 2040
 Bringing the different          Improving network              Improving condition monitoring
 municipalities together         performance                    maintenance
 Moving from fire -fighting to   Perfecting time based          Making sure we get paid for our
 planned maintenance             maintenance                    services & improve revenue
                                                                management
 Developing and initiating       Introducing condition          Introduction of a zero tolerance to
 Capex program to reduce         monitoring maintenance         fraud and corruption programme
 backlog
 Introduction of customer        Implementation and improving   Improve stakeholder communication,
 segmentation                    Capex program to reduce        engagement and management
                                 backlog                        including R&CRM
 Introduction of prepaid         Consolidation and              Review Company business model to
 meters                          centralisation of customers    move to an energy company
                                 services
                                 Improving prepaid & smart      Shift to low carbon infrastructure and
                                 meter technologies             introduction of SSM & DSM
                                 Piloting of DSM projects       Introduction on TOU and green tariffs

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The table below provides some high level statistics about City Power as at June 2016:

                                         •Over 390,000
            Customers                     •Large Power Users (LPU) are 1%, Prepaid are 62%
                                           and Conventional Business/Domestic are 37%

                                         •Over R14billion
             Revenue                      •64% is from business and 36% from domestic
                                           &prepaid

                                         •Over R11,8billion invested in infrastrucutre in the past
        Capital Investment                10years

                                         •Over 17 500km of cable, over 18 000 substations, and
            Infrastructure
                                          over 270 000 public lights,

            Asset Value                  •Estimated asset value of R52billion

             Employees                   •Over 1700 employees

                                         •Over 2800MW peak demand which is 8-10% of South
           Peak Demand
                                          African National Load

                                         •Only utility in Africa with four ISO accreditations (9001,
                ISO                       14001, 18001 & 31000) and ISO 26000 compliant and
                                          currently implementing 16000

         National Key Point              •Head office is National Key Point

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3. Strategic Environmental Analyses
    3.1. Background
The City of Johannesburg has embarked upon journey to become a sustainable and smart City
of the future in line with the principals of the Growth and Development Strategy 2040 and in line
with the Vision, Mission, Pillars and priorities of the shareholder. Energy will be a critical
component in realising these aspirations. Whilst energy is key to unlocking the economic and
socio-economic development objectives, unchecked consumption of coal-based power will
increase carbon and energy intensity, threaten economic and environmental sustainability and
the quality of living within the City.
An environmental scan is a process which results in the identification and monitoring of factors
from both inside and outside the organization that may impact the long-term viability of the
organisation. For City Power, the Environmental Scan provides the Board and Management Team
with information that assists them in decision making.
This section of the business plan will provide a high level SWOT and PESTEL analysis, to identify
City Power’s Strengths, Weaknesses, Opportunities and Threats; and analyse the Political,
Economic, Social, Technological, Environmental and Legal environment in which it operates.
These are then addressed in the strategy that is contained in the rest of this document.

  3.2. High Level SWOT Analysis
The following Strengths, Weaknesses, Opportunities and Threats have been identified by City
Power:
                STRENGTHS                                                    WEAKNESSES

       ISO accreditation (4 accreditations)       Communication (Internal and External)
       Unqualified Audit                          Revenue protection
       Good         knowledge           and       Contracts management
        understanding of the current               Perceived low employee morale,
        business                                   Ineffective performance management and High vacancy rates
       Documented value chains                    Inability to execute projects and follow through on benefit realisation
       Supportive stakeholder and Board           Reducing the average age of our transmission and distribution network
       Strategic     Risks       identified,       where it is in excess of 40 years through refurbishment and
        documented and monitored                    replacement
       Updated risk management process            Addressing and improving safety on the network i.e. replacement of
        in place                                    high risk equipment
       Pockets of strong subject matter           A network that, due to densification, has in many areas exceeded its
        expertise                                   firm capacity and in some instances reached its installed capacity
                                                   Outages and slow restoration times to restore power following outages

              OPPORTUNITIES                                                     THREATS
       Expansion and Security of supply           Security of supply
       Alternative energy sources, Off grid       Theft/vandalism, illegal connections leading to loss of revenue and
        solutions and disruptive forces             damage to infrastructure
       Community              involvement/        High debt levels in South Africa leading to inability to pay or reduced
        engagement                                  consumption
       Smart Grid realisation                     Dramatic increase in the cost of key resources i.e. labour and materials
       Company image/reputation                   Comply with the Cluster programs while trying to refurbish and extend
       Public-private partnerships                 our network
       Investment in energy management            Service delivery protests
        systems                                    High levels of coal usage leading to increased GHG despite pressures
       Recovery of non-technical losses            to reduce
                                                   People setting up their own off grid solutions and becoming
                                                    independent of the power grid

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   3.3. High Level PESTLE Analysis
City Power continuously monitors the operation environment to assess impact on the programmes
and projects
 EXTERNAL FACTORS                                           EFFECT
 Political       Change in Political leadership             High Level strategic focus/alignment
                 GDS 2040.                                  Changing priorities/funding
                 COJ IDP                                    Changing targets: knock on effect
                 SOCA/SONA                                  Promises made: refocus mandate
                                                            Refocus of mandate; implications for service delivery and
                                                            business model
 Economic        Funding challenges                         Limited funding
                 Consumer spending pressures                Reduced revenue if people cannot pay
                 Increased cost of supply Kelvin            Reduced margins; or pass on costs which make
                 pricing/PPA                                electricity expensive
                 Security of supply                         Locked into agreement – negative impact on pricing
                                                            Investor and economic impact
 Social          Service delivery                           Pressures to deliver
                 Social media                               Interconnectedness: challenge of maintaining a positive
                 Company image/reputation                   company image and responding immediately to issues
                 Theft and vandalism, Illegal               Increased outages and service delivery pressures
                 connections                                Inability to pay; increased crime (theft and vandalism)
                 Unemployment levels                        Increased demand on current network (old) or challenges
                 Social and economic inequality             to replace new network, workforce health
                 Spatial challenges
 Technological   Disruptive and New technologies            New skills required
                 Changing ICT landscape- cyber              Cyber security becomes a greater challenge
                 security                                   CP must act quickly to be a ‘world class’ utility
                 Globalisation/interconnectedness
 Legal           Constitutional requirements                Mandate to supply electricity
                 Legislation and regulation requirements    Limitation on procuring from IPP’s
                 (e.g, ISMO, Energy legislation and ISO)    Accreditation requirements to maintain license
                 Legislation and regulatory limiting (wrt   Legislation hinders carbon reduction and use of new
                 energy and low carbon)                     energy
 Environmental   Drive to reduce consumption and            Less consumption, less revenue
                 emissions                                  Pricing of renewables may be +ve or –ve
                 IPPs/renewable energy                      Security of supply through alternative means
                 Security of supply, Reliance on coal       Coal usage = more emissions
                 and other fossil fuels for energy supply   Limited resources = challenge to the business operating
                 for the foreseeable future                 model
                 Climate change and Natural resource
                 scarcity

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   3.4. Industry Change Drivers
City Power as part of the Energy Industry is affected and impacted by changes in the industry
as highlighted below:

Utilities need to innovate across the value chain to derive competitive advantage and turn
disruptive threats into opportunities

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   3.5. The Top 10 Change Opportunities:
The above changes present the following opportunities to entities and companies in the
industry:
1. Rising emerging markets’ energy demands (including poverty reduction and access to power)
2. Acquisitions or alliances to gain new capabilities (including growing skills base)
3. Growth in energy and ancillary services markets (including sustainable jobs)
4. Enhancing relationships with external regulatory and compliance bodies
5. Improving public perceptions (including customer control)
6. Increased focus on investor relations programs and communications (including security of
    supply to drive investor appetite)
7. Integration of distributed energy resources (including necessity to innovate)
8. Increased investment in generation capacity and delivery infrastructure in emerging markets
    (including security of supply and network investment)
9. Rising energy innovation in emerging markets
10. Improving onshore and offshore wind supply chain efficiency

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4. Shareholder Alignment to GDS and IDP
    4.1. Background
It is vital for any company to align their Business Plan to the vision of its shareholder. In the
case of City Power this is done within the legislative and regulatory framework of municipalities
entities.

The business plan is developed and executed by the Board and Management in cooperation
with COJ to ensure alignment, sustainability and meeting the needs of all current and future
prosumers, consumers and customers of the energy.

  4.2. The Strategic Thrust for 2017/18 IDP Review of the Shareholder
       4.2.1. COJ Vision
The vision of the City of Johannesburg is “A Johannesburg that works, is a South Africa that
works”

       4.2.2. COJ Mission
The mission of Johannesburg is “To create an enabling economic environment by making
Joburg more responsive in the delivery of quality service.”

      4.2.3. COJ Outcomes and Priorities
The above will be attained utilising the following pillars and priorities:
 Outcomes                             Priorities
 Outcome 1: A growing, diverse and    Priority 1: Promote economic development and attract investment towards
 competitive economy that creates     achieving 5% economic growth that reduces unemployment by 2021
 jobs
                                      Priority 2: Ensure pro‐poor development that addresses inequality and
 Outcome 2: Enhanced, quality         poverty and provides meaningful redress.
 services and sustainable
 environmental practices              Priority 3: Create a culture of enhanced service delivery with pride.

 Outcome 3: An inclusive society      Priority 4: Create a sense of security through improved public safety.
 with enhances quality of life that
 provides meaningful redress          Priority 5: Create an honest and transparent City that fights corruption.
 through pro-poor development.
                                      Priority 6: Create a City that responds to the needs of citizens, customers,
 Outcome 4: Caring, safe and          stakeholder and businesses.
 secure communities
                                      Priority 7: Enhance our financial sustainability.
 Outcome 5: An honest, transparent
 and responsive local government      Priority 8: Encourage innovation and efficiency through the Smart City
 that prides itself on service        programme.
 excellence
                                      Priority 9: Preserve our resources for future generations.

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        4.2.4. City Power Alignment

 Proposed 2016/2021 Priorities                        CP Response

 Promote economic development and attract             Reliable network
 investment that creates jobs towards achieving       Network expansion to support new development
 5% economic growth
 Ensure pro-poor development that addresses           Job creation programmes (permanent & temporary)
 inequality and provides meaningful redress           SMME and BBBEE support programme
                                                      Skills development programme
                                                      Electrification of informal settlement programme
 Create a culture of enhanced service delivery with   Skills development programme
 pride                                                Inculcate a culture of performance
                                                      Stakeholder engagement (internal & external)
 Create an honest and transparent City that fights    Fraud and corruption reduction strategy and plan,
 corruption                                           Embed an ethical culture in the organisation,
                                                      Assurance provided by AG and SABS
 Create a City that responds to the needs of          Infrastructure provision, refurbishment, upgrade and
 residents                                            maintenance
                                                      Review operating model
                                                      Job creation programmes
                                                      Electrification of informal settlement programme
 Enhance our financial sustainability                 Effective revenue management,
                                                      Streamlining business processes
 Use technology that encourages innovation and        Roll out of Smart grid
 efficiency
 Preserve our resources for future generations        Greenhouse gas reduction and improving energy mix

In light of the budget Lekgotla feedback City Power would be prioritising two value propositions:

       Reducing losses
       Improving quality of supply and service

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5. Business Performance Objectives

City Power uses the Balanced Score Card Methodology to measure performance as outlined
below:

 Priority Areas in light of Budget Lekgotla

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5.1. Financial Performance
Joburg Priority: Enhance our financial sustainability
 Value       Weight Key          Baseline Target      Target          2017/18 Quarterly Targets                         Target    Target         2017/18  Means of
 Propositio           Performa             2017-21    2017/18                                                           2018/19   2019/20      Budget per verification
 n                    nce                                                                                                                      programme
                      indicator                                       Q1            Q2          Q3          Q4                                Capex Opex

Sustainable 20%       % of        31%        34%          31%         Annual        Annual      Annual      Annual      32% Gross 33% Gross                 SAP &
Value                 Gross       gross      gross        gross       target        target      target      target      Margin    margin                    Spreadsheet
Creation              margin      margin     margin       margin
            30%        % of       100%       95%          95%         95%           95%         95%         95%         95%         95%         R94,59        SAP
                      Controlla   Controllab Controllab   Controlla   Controllabl   Controlla   Controlla   Controlla   Controllabl Controllabl 6m
                      ble Capex   le Capex le Capex       ble Capex   e Capex       ble         ble         ble         e Capex e Capex                R12611
                      spend       spend      spend        spend       spend         Capex       Capex       Capex       spend       spend               ,10 m
                                                                                    spend       spend       spend
             50%      % of Total 23,23%     15% total 17% total Annual              Annual      Annual      Annual      16% total 15% total R134.2          Excel sheet from
                      losses     Total      losses    losses    target              target      target      target      losses    losses    m               Revenue
                                 losses                                                                                                                     Management and
                                                                                                                                                            COJ

   There are three Key Performance Indicators for this perspective which are % of Gross margin, % of Controllable Capex spend and %
   of Total losses.
        Percentage gross margin is sales minus bulk purchases divided sales multiplied by 100.
        Percentage of Controllable Capital spend where Controllable Capital Spend is Capex projects that the organisation has
           control over (excludes projects funded by public contributions and insurance claims). This KPI is aligned to the risk that deals
           with Inadequate capital funding
        Total Losses are Billed units (KWh) as a percentage of purchased units (KWh). This KPI is aligned to the risk that deals with
           Reduction of non-technical losses
City Power Draft Business Plan 2017-21

      5.2. Stakeholder/Customer Performance
Joburg Priority: Create a City that responds to the needs of residents
 Value Weigh Key                 Baseline Target 2017- Target        2017/18 Quarterly Targets                           Target       Target          2017/18    Means
 Propo t        Performance               21            2017/18                                                          2018/19      2019/20       Budget per   of
 sition         indicator                                                                                                                           programme    verificat
                                                                     Q1        Q2          Q3              Q4                                      Capex Opex    ion

Impro 40%      % Reputational   66%        70%            70%          70%          70%          70%        70%          70%          70%                        See
ved            management       reputation Customer       reputation   reputation   reputation   reputation reputation   reputation   reputation                 below
Custo          index            index      Satisfaction   index        index        index        index      index        index        index                      for
mer    60%     %                 New       86%            80%          80%          80%          80%        80%          82%          84%                        details
                                                                                                                                                        R50,5m
and            Achievement of              Achievement    Achieveme    Achieveme    Achieveme    Achievem Achieveme      Achieveme    Achievem
Stake          Services Level              of SLS         nt of SLS    nt of SLS    nt of SLS    ent of SLS nt of SLS    nt of SLS    ent of SLS
holder         Standard (SLS)
Experi
ence

   There are two Key Performance Indicators for this perspective which are Customer Satisfaction Survey, Percentage Achievement of
   SLA and Sentiment Analysis. These KPI are aligned to the risk that deals with escalation of theft and vandalism
       % Reputation management Index has two measures which are weighted at 50% each.
              o City Power customer satisfaction survey is measured by City Power and the information is from a survey report.
              o The Sentimental analysis is conducted across Traditional media (Print, Online, Broadcast) and Social Media (Weighted
                 75% & 25%) respectively. The information for the sentimental analysis obtained monthly from data analytics reports and
                 includes print, online and broadcast.

          % Achievement of SLS is the number of measures achieved/Total Number of KPIs in SLS x 100. The KPIs included in the
           City Power SLS are:
               o Outages resolution rate for traffic lights, public lights, high voltage network and all network. This information is from the
                  Outage management system
               o Query resolution rate for meters, the source for information on the account queries and dispute is spreadsheet.
               o Meter reading rate the source of information is a spreadsheet.
               o Service connections within 21days for LPUs after payment the source of information is a spreadsheet.
               o Baseline development for semi-smart meter vending rate as per plan

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City Power Draft Business Plan 2017-21

      5.3. Internal Processes
Joburg Priority:
Create a City that responds to the needs of residents, Promote economic development and attract investment that creates jobs towards achieving 5% economic
growth, Preserve our resources for future generations
 Value    Wei Key             Baselin Target       Target     2017/18 Quarterly Targets                        Target      Target       2017/18 Means of
 Proposi ght Performanc e             2017-21      2017/18                                                     2018/19     2019/20     Budget per verificati
 tion            e indicator                                                                                                          programme on
                                                              Q1            Q2          Q3          Q4                                Capex Opex

Optimis 10% Tons       CO₂      6 818,5 96822,8         24205,7        5 454,8 Tons  5 795,7        6 136,7 Tons 6 818,5          24205,7         24205,7                   Database
e and       offset         in   Tons    Tons CO₂        Tons CO₂       CO₂ offset in Tons CO₂ CO₂ offset in Tons CO₂ Tons CO₂ Tons CO₂
Ensure      greenhouse          CO₂     offset    in    offset    in   greenhouse    offset in      greenhouse offset in          offset       in offset      in
Complia     gas                         greenhouse      greenhouse     gas emissions greenhouse gas                greenhouse greenhouse greenhouse
nce to      emissions                   gas             gas                          gas            emissions      gas            gas             gas
Value                                   emissions       emissions                    emissions                     emissions emissions emissions
Chains 20% %                    99,44% 95%              95%            95%           95%            95%            95%            95%             95%                       Quality of
            compliance                 compliance       compliance compliance to compliance compliance to compliance compliance compliance                                  Supply
            to NRS048                  to NRS048        to NRS048 NRS048             to NRS048 NRS048              to NRS048 to NRS048 to NRS048                            System
                                                                                                                                                                 R      R
        10% Number        of    6796   3580 units       810     units 100 units      200 units 300 units           210 units 1280 units 745              units 1099,5 2250, SAP, work
            units                      (structures)     (structures) (structures) in (structures) (structures) in (structures) (structures) (structures)         m      m completio
            (structures) in            in informal      in informal informal         in informal informal          in informal in informal in informal                      n
            informal                   settlements      settlements settlements      settlements settlements settlements settlements settlements                            certificate
            settlements                with access      with access with access to with access with access with access with access with access
            with access                to electricity   to electricity electricity   to electricity to electricity to electricity to electricity to electricity
            to electricity
        10% Number of      270000 2260 public           1000 public    100 public       250 public   300 public      350 public     420 public 420 public
            public lights            lights             lights         lights installed lights       lights          lights         lights       lights
            installed by             installed by       installed by   by City Power installed by    installed by    installed by   installed by installed by
            City Power               City Power         City Power                      City Power   City Power      City Power     City Power City Power
        15% Attainment of  Unqualif Clean audit         Clean audit    Annual target Annual          Annual target   Annual         Clean audit Clean audit        R193, Report
            a clean audit  ied audit Report             Report                          target                       target         Report       Report            7m    from AG
            report         report
        15% Maintain ISO   Unqualif Clean audit         Clean audit Annual target      Annual        Annual target Annual           Clean audit Clean audit                Report
            accreditation  ied audit report             report                         target                      target           report      report                     from
                           report                                                                                                                                          SABS
           20% Decrease in New       % decrease         % decrease     Define, Set                                                  % decrease % decrease
               corruption            in                 in             baseline and                                                 in corruption in corruption
               index                 corruption         corruption     targets to                                                   index         index
                                     index              index          decrease
                                                                       corruption
                                                                       index

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City Power Draft Business Plan 2017-21

There are seven Key Performance Indicators for this perspective which are Tons CO₂ offset in greenhouse gas emissions, %
compliance to NRS048, Number of units (structures) in informal settlements with access to electricity, Attainment of a clean audit
report, Maintain ISO accreditation and Decrease in corruption index. These KPI are aligned to the risks that deal with Unethical
business practices resulting in fraud and corruption activities and Inability of the business model to respond to disruptive forces.
    NRS048 is a comparative analysis between QOS System output and National Standard.
    Number of units (structures) in informal settlements with access to electricity is Total number of units (structures) in informal
        settlements with access to electricity per annum.
    Number of public lights installed by City Power is Total Number of public lights installed by City Power per annum.
    Attainment of the clean audit as per results of the Auditor General auditing process.
    Maintain ISO accreditation as per results of the SABS ISO accreditation process.
    Tons CO₂ offset in greenhouse gas emissions from energy programmes
    Decrease in corruption index

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City Power Draft Business Plan 2017-21

       5.4. High Performance Teams
Joburg Priority:
Create a culture of enhanced service delivery with pride
 Value    Wei Key            Baselin Target        Target          2017/18 Quarterly Targets                             Target       Target             2017/18 Means of
 Proposi ght Performanc e             2017-21      2017/18                                                               2018/19      2019/20           Budget per verificati
 tion            e indicator                                                                                                                           programme on
                                                                   Q1             Q2           Q3           Q4                                         Capex Opex

High    10% %    of   AA     91,24   85% of AA      85% of AA      85% of AA 85% of AA 85% of AA 85% of AA 85% of AA 85% of AA                                      SAP
Perform     employees                employees      employees      employees employees employees employees employees employees
ance    10% % of GE          26,73 30% of GE        27% of GE      26% of GE 26% of GE 27% of GE 27% of GE 28% of GE 29% of GE
Team        employees                employees      employees      employees employees employees employees employees employees
        10% % of PWD         2,35    2% of PWD      2% of PWD      2% of PWD 2% of PWD 2% of PWD 2% of PWD 2% of PWD 2% of PWD
            employees                employees      employees      employees employees employees employees employees employees
        25% %        Job     Revised %       Job    %       Job    Set baseline                                           %         Job %        Job
            vacancy rate             vacancy        vacancy        and targets                                            vacancy       vacancy
                                     rate           rate           for       Job                                          rate          rate
                                                                   vacancy rate
           15% % Work place New      90% work       80% work       Finalise work 20% work 50% work 80% work 84% work 88% work                                      Compere
               skills  plan          place skills   place skills   place    skills place skills place skills place skills place skills place skills          R1168 d to plan
               achievement           plan           plan           plan            plan         plan         plan         plan          plan                   m
                                     achievemen     achieveme                      achievemen achievemen achievemen achievemen achievemen
                                     t              nt                             t            t            t            t             t
           15% % Leadership New      90%            80%            Finalise        20%          50%          80%          84%           88%
               development           Leadership     Leadership     Leadership Leadership Leadership Leadership Leadership Leadership
               plan                  developme      developme      development developme developme developme developme developme
               achievement           nt      plan   nt      plan   plan            nt     plan nt      plan nt      plan nt       plan nt      plan
                                     achievemen     achieveme                      achievemen achievemen achievemen achievemen achievemen
                                     t              nt                             t            t            t            t             t
           15% % Employees 56,1%     58%            55%            Annual Target Annual         Annual       Annual       56%           57%                         Survey
               satisfaction          Employees      Employees                      Target       Target       Target       Employees Employees                       report
               survey                satisfaction   satisfaction                                                          satisfaction satisfaction
                                     survey         survey                                                                survey        survey

   The High Performance Team value proposition talks to productivity, performance, culture and achievement of other goals which is
   the sum of knowledge, skills, experience and other relevant work attributes that reside in our workforce. These KPI are aligned to the
   risks that deal with Insufficient capability, capacity and commitment to deliver.

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City Power Draft Business Plan 2017-21

There are seven Key Performance Indicators for this perspective which are % of AA employees, % of GE employees, % of PWD
employees, % Job vacancy rate, % Work place skills plan achievement, % Leadership development plan achievement and %
Employees satisfaction survey.

       The Employment Equity compliance KPIs are % of AA employees, % of GE employees % of PWD employees.
       The Job vacancy rate is about the % vacant positions,
       % Work place skills plan achievement and % Leadership development plan achievement are about ensuring staff development
       Employees satisfaction survey measures amongst other things the moral and commitment of staff.

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6. Day to day operations
This section has five main areas that will assist the company to meet stakeholder expectations:

      Communication and Stakeholder management
      Revenue Management
      Infrastructure Plan and Maintenance
      Security of Supply
      Anti-fraud and Corruption Plan

  6.1. Communication and Stakeholder management
       6.1.1. Integrated Communications Strategic Approach

City Power is embarking on a journey to change the way in which the organisation
communicates and integrates its communications efforts to achieve optimum results. Whilst City
Power has made great strides in positioning its leadership, in order to effectively communicate
on projects and other initiatives, there needs to be one voice to integrate marketing
communications efforts. There needs to be a focused approach in communicating City Power
and the broader City of Joburg’s overall vision and mandate, business, strategic and political
aspirations for communication to yield the desired results.
City Power has developed an Integrated Marketing Communications Strategy that integrates
public relations, marketing and advertising, internal communications, stakeholder engagements
and corporate social investment efforts.
City Power Draft Business Plan 2017-21

Internal Communications Approach

In order to drive a high-performance culture, engagement of internal employees must be
prioritised for City Power to achieve its strategic business objectives.

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City Power Draft Business Plan 2017-21

External Communications Approach

External relations will focus on the following:

       Proactive media engagement
        o The media engagement programme is aimed at building relationships with key media
           influencers to position City Power, its vision and positioning and ensure an
           understanding of these in the media to ensure their effective reporting on it.
       Brand championship
        o Use champions e.g. happy customers, third party endorsements to spread the good
           word about City Power and its initiatives
       Story telling
        o Leverage different initiatives for story telling opportunities such as sharing good news
           stories
        o Tell success stories of City Power’s achievements as a long term strategy Stories will
           be packaged in various forms audio and video.
       Social Media
        o Use social media platforms relevant to the business including Twitter, Facebook and
           Instagram as a platform to engage with customers and other stakeholders
       Speaking engagements
        o Identify relevant industry conferences or workshops where spokespeople can give
           presentations as keynote speakers / speakers at events in order to establish City
           Power and City of Joburg’s leadership and spokespeople with key stakeholders; and
           show visibility and involvement of City Power at relevant industry events (key for
           stakeholder engagement)
       Targeted leadership profiling
        o Identify relevant media profiling opportunities for identified spokespeople
       Thought leader positioning
        o Make industry contributions on relevant topics, develop content that speaks to industry
           changes, innovations, topical issues, and research and byline articles for targeted
           media distribution
Corporate Social Investment (CSI) Approach
       Corporate social investments will be focused on enabling the business to succeed while
        empowering communities, because the success of society and our communities is linked
        with the future success and performance of the business.
       The approach will be focused on yielding long-term positive results for clients and building
        sustainable relationship with the communities in which they operate.
       Key considerations will be made in aligning solutions with the organisation’s business
        objectives, values and vision of becoming a world class electricity distributor.
       Employee’s participation will form a key part of the CSI programme and will be used to
        boost morale internally by involving them to participate in identifying worthy causes in
        communities.

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City Power Draft Business Plan 2017-21

CSI Considerations

      6.1.2. Stakeholder Management Approach
Stakeholder management for City Power is aimed at:

     Creating awareness of City Power activities, services, projects and programmes
     Forging and strengthening positive relations with all internal and external stakeholders
     Encouraging public participation and engaged active citizenry
     Ensuring effective communication to all stakeholders by providing relevant and credible
      information
    Promoting and enhancing the City Power brand
Key Stakeholders

             • Keep informed                                           • Keep informed,
                                                                         monitor, and
                                                                         manage very
                                                                         closely

                                    Internal       Media

                                    Political   Customers

                                                                       • Keep informed
             • Keep satisfied
                                                                         and monitor

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City Power Draft Business Plan 2017-21

Engagement with Political Stakeholders:

       Engage with councillors to determine the method of communication and interaction with
        customers in their area.
       Enable and empower councillors to engage with communities on the challenges, benefits,
        workings and implementation plans of City Power
       Equip the City Power technical teams to successfully interact with residents aided by the
        area councillor’s support.
       Enable smart communication (two way) between City Power, the councillors and their
        constituents.

Approach

Engagement Strategy
City Power will engage with the councillors in all regions as well as the dedicated councillors for
City Power projects.

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City Power Draft Business Plan 2017-21

   6.2. Revenue Management
As part of City Power business of buying and selling electricity, the calculation of losses is always
based on the difference between the electricity that is bought and electricity that can be accounted
for (e.g. Electricity Sales, Streetlights, and free basic electricity). During analysis the losses are
then separated between technical and non-technical.

        6.2.1. Technical losses
Technical losses describe energy losses in the network encountered through the transmission
cables and transformer, due to network design and materials of construction. In essence,
technical losses result from differences in voltages and longer feeder lines from substation or
transformer, to the consumption end-point at the customer’s premises.

         6.2.2. Non-technical Losses
Non-Technical losses define lost or uncollected revenues relating to the incomplete and
inaccurate customer billing and poor management of metering operations in the distribution
network. As a result, non-technical losses may be considered to be revenue losses due to the
theft of electricity and inability to measure customer energy consumption accurately for billing.

The following are common factors that contribute to non-technical losses:

       Illegal Connections: Energy theft such as in non-proclaimed/ informal settlement, own-
        connections before the meter or tampering with the meter to bypass readings dials. Illegal
        connections are compounded by the inherited challenge from Eskom of poor customer
        addresses and meter locations managed. This challenge also created a scenario where
        “ghost” prepaid vending became possible.
       Bypassed Meters: Emergency calls out after hours, often result in power restorations
        where a customer’s meter is bypassed and the necessary meter change-out does not
        happen. This is caused by lack of job card data which electricians do not close, in order
        to enable metering operation to replace the bypassed meter.
       Meter Tampering: Meter tampering is often a problem with prepaid customers that do not
        have split meters. Customers on AMR meters are also known to tamper with the
        communications modules by stealing sim cards, or removing fuses on meters. The result
        is an online meter that can be detected, but does not transmit customers’ consumption
        data, due to communication failure.
       Poor management of meter installations and maintenance: Meter installations and
        trouble-shooting conducted by poorly skilled technicians often results in situations where
        a meter detected as online, but the necessary configurations, especially for AMR and
        Prepaid are not which leads to failure in communication to transmit meter data, or failure
        in vending.
       Poor maintenance of customer data (Addresses, account Number, etc.): Lack of
        customer data quality management and associated system updates leads to various
        challenges as follows:
            o Un-located addresses for manual read meters: Inability to respond swiftly to
                detected energy theft, and inability to fast-track maintenance of meter change out
                for customers who logged queries

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City Power Draft Business Plan 2017-21

           o   Poor data capturing of meter readings: Meter readers often capture data that
               throws exception during the validation phase. Some of these errors are not resolve
               within the meter reading window and therefore impact on accurate billing of
               customers. Meter readers must face penalties for poor data capturing.
           o   Inaccurate and incomplete billing of customers: Inaccurate and incomplete
               billing tends to promote the culture of non-payment with disgruntled customers.
               Inefficient management of meters or not fulfilling work orders often leads to
               customers been billed on estimates rather than actual consumption. There are
               cases where customers on prepaid are still billed and invoiced for some time after
               they have been converted to prepay. Inaccurate billing is a major contributor for
               customers having negative sentiments about the organisation.

   Corruption and fraud on the side of utility or distributor’s employees: A number of City
    Power employees and electricians have been in the past found to be guilty of illegally
    connecting customers, where employees have wilfully swopped registered meters for
    unregistered ones. Proper processes and controls must be introduced that dictate meter
    handling and issues at stores.

In 2012 City Power did a business case for reducing losses and improving revenue. Below is
the summary of proposed solutions which include smart metes.

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City Power Draft Business Plan 2017-21

        6.2.3. In light of budget Lekgotla: Implementation plan

Metering - proposed expenditure plan eliminating non-technical losses
 Programmes                                              Budget
 Prepaid                                                 R 39mil
 Smart meters                                            R 55mil
 System Enhancement                                      R 25mil
 Winter Strategy                                         R 14,8mil
 Total                                                   R134,8mil
Targets per area
 Suburb/        Total          Monthly      Start Date               End Date               Budget     Recover
 Township       Customers      Target                                                                  y costs
                per Suburb/                                                                            /annum
                Township
 Kew            577            577          1st July 2017            31 July 2017           2.6M       1.3M
 Lawley         10536          3000         1st August 2017          30 November 2017       29M        12M
 Lenasia        13064          3000         1st August 2017          15th December          32M        24M
                                                                     2017
 Rabie Ridge    3539           1769         1st September 2017       30 October 2017        7.2M       7.7M
 Tshepisong     12276          2500         1st August 2017          15 December 2017       23M        5.6M
 Klipfontein    2196           1000         1st September 2017       30 October 2017        6.5M       6.7M
 Total          42188          11846

Breakdown Analysis

                           TOTAL SURBURB/TOWNSHIPS BREAKDOWN ANALYSIS
                   Total
Suburb/        Customers Per                    Total Not                   Total Revenue       Total Average
                               Total vending                  Different
Township          Suburb/                       Vending                         Per Yr             Per Yr
                 Township
KEW                 577             452            125           327             4 759 225.60        10529.26
LAWLEY             10536           2814           7722          -4908            4 334 981.30         1540.51
LENASIA            13064           9425           3639          5786            61 657 211.70         6541.88
RABIE RIDGE        3539               959         2580          -1621            2 887 758.40        3011.22
TSHEPISONG         12276          10268           2008           8260           28 652 133.40        2790.43
KLIPFONTEIN        2196               868         1328           -460            4 381 695.00        5048.04
Total                  42188

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City Power Draft Business Plan 2017-21

   6.3. Service Delivery Maintenance Plan

         6.3.1. Background
City Power owns and operates an extensive transmission and distribution network as well as
public lighting infrastructure. The Engineering Operations Group is tasked with undertaking
planned and unplanned maintenance with the aim to achieve maximum continuity of supply.
The Group is mandated to operate and maintain the electricity network in a manner that is safe,
reliable and cost-effective to maximize continuity of electrical supply.
There are 10 depots distributed across the City Power footprint. Each depot takes full
accountability for service delivery within the designated geographical area.
Below is the overview of various network components within the entire City Power footprint;

  10
Depots
                  268              18,577            270,000          17,500km            823km
               Substations          Load           Streetlights      Underground         Overhead
                                   Centres                             Cables              Lines

        6.3.2. Critical challenges
City Power’s infrastructure continues to age, it is critical to take active steps to counter network
failures. As a result, the Group has identified the following challenges that affect the optimal
functioning of the network;
 Age of existing infrastructure presents challenges in terms of sourcing of spare parts,
     maintenance, operation and Original Equipment Manufacturers (“OEMs”) support.
 Cable theft, illegal connections and vandalism of infrastructure, particularly underground
     cables.
 Illegal connections causing unsafe working conditions, premature equipment failure and
     potential fatalities.

   a) Frequent equipment failure due to overloading
The electrification networks to service townships were designed for 1x RDP house per stand.
The electrical infrastructure was well within the design limits until the advent of backyard
dwellers.

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