PSU (Public Services and Utilities) International specializes in Revenue Management with a specific focus on Debtor Management based on data integrity. The services incorporate:
PSU evolved out of a company formed in 1978, which focused on supplying financial systems to Local Governments and Utilities in Africa and Europe. It became apparent that the requirements in developing countries were vastly different to those in developed countries. African countries require the provision of financial and administrative expertise, not merely complex financial software. PSU International has hence developed into a specialist company focusing on establishing sustainable, self-sufficient Public Services and Utilities within Africa.
The company has been involved in successful "Utility Revenue Service" projects in Africa for the past 15 years and in several other countries around the world. These countries include the UK, USA and Australia, but more importantly Kenya, Uganda, Malawi, Tanzania, Namibia, Zambia, Botswana, Zimbabwe and South Africa. One of the main reasons for our success in the African continent is our holistic approach in understanding the unique social, economic and political environment that exists on our continent.
The nature of business has grown from (a) the provision of billing software in 1991 to (b) revenue management based on field/meter and customer audits in 1996 to (c) PPP’s for the provision of basic services such as water and electricity in 1998 to (d) revenue management based on electronic cleaning of municipal revenue data in 2004. Currently PSU is able to provide a qualitative revenue management analysis for revenue protection and enhancement initiatives that address the underlying systemic causes of financial distress in municipalities and utilities, and implementation that produces real (measurable) results to justify the cost of projects.
The company's Head Office is in Johannesburg, South Africa. There are regional offices in East London and Gaborone (Botswana). PSU currently employs approximately 60 people and is committed to being the employer of choice in the Utility Service Industry.
The company's shareholders are as follows:
Kagiso Enterprises (36%) is 100% owned by Kagiso Trust Investments (Pty) Ltd. Kagiso is a name rooted in our community and closely associated with the transformation of our country. It is a name that is synonymous with empowerment and is unrivalled in its reputation for business success and integrity. It is a name with a reputation for nurturing enterprises and for its belief in better business for a better society.
Rand Merchant Bank (RMB – 20%) is one of the largest Merchant Banks in South Africa. In the Utility Industry it has been indispensable with regard to promoting and financing infrastructural improvements that have, and are required to extend the basic services of water and electricity to more of the country's previously disadvantaged communities.
The Management (44%) shareholding ensures that the dedication and commitment required to elevate any company to the top levels of service delivery is in place.
In South Africa, PSU specializes in Revenue Management Services with a specific focus on Debtor Management based on data integrity. These services are based on combining IT and financial management skills and experience by establishing a team of people from both the private and public sectors with a specific focus on debtor management aspects of municipal finance. PSU’s Revenue Management Services incorporates the full function from invoice generation to actual revenue collection; Special Audits such as data collection and cleansing, meter audits and service audits; Information Technology in the form of the Municipal Data Analysis Model (MADAM) which is a diagnostic tool to enable the effective analysis of debtor data; and Capacity Building and Training within communities and client organisations to ensure the sustainability of the services provided by PSU.
Our understanding is that the need for municipal support in the area of debtor management has shifted in line with the local government establishment process from data collection (actual field work) and billing management services to a more advanced financial analysis and revenue protection and enhancement focus. What is increasingly required is qualitative analysis, the formulation of strategies to address the underlying systemic causes of financial distress in municipalities and implementation that produces real (measurable) results to justify the cost of projects. This is a more result-orientated focus that requires a “hands on” approach that ultimately leads to added value. Recent PSU experience indicates that matters that require specific attention are indigent management, identifying and verifying debt that should be written off, addressing government debt, improving integrity of debtor data and establishing a sound base for the implementation of the MPRA. This focus further requires interactive participation and involvement between the client and service provider, and if properly managed could result in effective skills transfer to the client to enable sustained benefit to the client.
PSU Project Managers have training, skills and experience in municipal and/or public financial management, or have IT training, skills and experience in the municipal and public sectors. PSU has been involved with more than eighty Local Authorities and Utilities over the last 8 years. The PSU Project Profile for current projects and projects completed in the past 5 years is included in the section below.
The success of our projects is due to the proven methodology of initially focusing on the correctness and completeness of the revenue base in respect of debtor data whilst also providing specific focus on all other aspects of Debtor Management as it relates to various facets of municipal financial management.
A typical PSU designed revenue protection and enhancement strategy includes all components of the revenue environment as depicted in the diagram below and focuses on the real customer – the consumer of services. At a very simplistic level it is based on the relationship between the municipality as the service provider providing a range of services and a customer who is then obliged to pay the municipality for these services. Financial sustainability is the delivery of agreed service levels to customers within financial parameters agreed to by the community, the local authority and the government. It has been the experience of PSU that financial sustainability in Local Government and Utilities is based on accurate and valuable data – if this is incorrect or incomplete then any analysis, development of strategy and resulting implementation would not be sustainable and interventions would be addressing the symptoms rather than the causes.
The definition of revenue protection and enhancement, or revenue management, is not restricted to increasing payments received, but correction/completing and updating of data that may lead to write-off of incorrect and/or irrecoverable debt; increasing or completion of customer database and therefore an increase in billings and resultant payments; and indigent management that will lead to effective draw-down by the municipality of equitable share.
A revenue protection and enhancement strategy begins with the establishment of a complete and correct customer base. Having established a sound basis for billing, service delivery needs to be monitored to ensure that all consumers are billed for the services delivered to their properties. The analysis of tariffs is an associated activity to ensure that services are correctly billed according to the debtor status of consumers.
Billing coverage is a further aspect of revenue enhancement: ensuring that all properties without exception are billed for services unless exemption has been granted in accordance with approved policies. The use of GIS applications is useful in this regard: it provides a visual perspective on the extent to which properties are serviced and easily identifies properties that need to be added to the billing system or that require further investigation.
More qualitative revenue management inputs include the analysis of monthly consumptions, monitoring of the expansion of services to new developments, tracking of arrears for top consumers and top debtors and the monitoring of indigent accounts for consumption, billing and payment patterns.
A fundamental principle underlying this revenue enhancement strategy is that services are delivered to all consumers. The delivery of sustainable services is the most critical consideration for the expansion of revenue opportunities. The implementation of billing for services should follow progress made in the development of services infrastructure and where services are delivered to only a select number of communities, service infrastructure ought to be expanded so that all communities have equitable access to municipal services. Until all consumers have access to a basic level of service, and unless the necessary service provider arrangements have been clarified and fully established at the local level, service charges will remain an unlikely source of revenue for the municipality.
The methodology for the revenue management service offered by PSU is to use the Municipal Data Analysis Model to highlight and recommend data to be cleaned, initially focusing on “the property” as the foundation layer, and then moving onto the “customer”, services, tariffs, valuations, consumptions and various other aspects. The Municipal Data Analysis Model provides a consolidated overview of a municipality’s debt at the highest level of detail. By adding a range of optional classifications, the data and debt can be viewed in more detail, which in turn facilitates the analysis and interrogation of the data. This overview not only provides a unique perspective on consumer information, debt, and services but also has the ability to reveal underlying systemic causes for the growing debt.
Based on these analyses, debt collection and data cleaning plans can be developed that will assist a municipality in improving their financial management systems (especially billing) and in collecting recoverable debt. It will also illustrate revenue losses due to inefficient billing and consumption management. The strength of the Model lies in its ability to provide the necessary detail to carry out an efficient and targeted plan.
The importance of accurate customer information, billing accuracy, debt management and revenue management must be viewed against the reality that as much as 60 percent of a municipality’s income is derived from service charges. Escalating debt, that is non-payment for municipal services, has become the primary challenge facing most municipalities. Non-payment has not only begun to severely affect cash flows but also the ability to deliver services. As the financial position of municipalities deteriorates so the ability of municipalities to deliver services deteriorates. Consequently, on the back of poor service delivery, consumers are increasingly withholding payment for any services provided.
In turn, municipalities often respond by simply clamping down on defaulting customers through a range of debt collection initiatives without fully understanding the underlying problems. The result is growing frustration and anger at a community level, increased legal costs on the part of the municipality with limited net results. In this context, the chances of expanding service to under-serviced areas are increasingly becoming compromised.
Once a detailed understanding of the Municipality’s base data is established, a series of additional detailed programmes is proposed with the aim to assist municipalities in reviewing their budgets for the current and following years and improving their cash flow projections based on revenue improvement targets.
Lessons learnt from our involvement with the dplg Debt Project and Project Consolidate 12 pilots are that the revenue analysis in all instances displayed to some or other degree the lack of data (completeness of data) as well as quality of data or “data integrity” (correctness of data). The above has been confirmed more recently by other non-dplg/Project Consolidate projects done by PSU, most notably in the pilot projects done for KZNLGTA, Revenue Analysis and Strategy Development for 6 municipalities done for Limpopo DLG&H, and the Gauteng Revenue Enhancement Protection Program.
Where PSU has been working with individual municipalities the benefit has been in terms of providing a revenue analysis based on data from the financial system of that municipality, identifying data discrepancies due to completeness and/or correctness that has resulted in a write-off of arrears and/or increase in revenue; formulation of a revenue enhancement and protection strategy to sustain the benefits post the PSU intervention. The spin-off benefits, if the revenue enhancement is sustained could translate into improved financial viability, thus improved credit ratings that enable more effective borrowing from the banks to improve service delivery.
PSU has been involved with more than eighty Local Authorities and Utilities. This involvement, with both Public and Private sector organizations, has enabled PSU to develop a base of expertise that takes both sectors' differing requirements into account. This section on the PSU Project Profile is sub-divided into Current Projects; Projects completed in the Recent Past, and Historical Projects.
3.1. CURRENT PROJECTS
Provision of billing software and accompanying application support.
uMkhanyakude District Municipality and all Local Municipalities within the District Municipality - Provision of credit control and Debt Management services in partnership with ZMS.
Umzimkhulu Local Municipality - Provision of credit control and Debt Management services in partnership with ZMS.
EDI (April 2008 - ongoing) - PSU is part of a consortium contracted by EDI Holdings to perform ringfencing and due diligence for the electricity restructuring process and formation of RED’s. Current sites are KwaDukuza and Mamusa.
Emfumeni (MPRA) - 160 000 properties matched against Deeds Register, Valuation Roll and Updated onto Billing system for implementation on 01 July 2009. Calculation of new tariff structure in line with current economic conditions and obtained approval by Council and provincial departments of local government and treasury.
Midvaal (NDPG) – PSU is part of a consortium led by Kagiso Urban Management (KUM) that on phase one of a larger project in respect of the municipality’s application for the Neighbourhood Development Program Grant. PSU’s service is focused on the revenue analysis part of the financial component of the project.
ESKOM - Revenue Protection & Data Field Audits (Southern Region, Eastern Cape) - This project is in the Eastern Cape, and is being implemented by the PSU office based in East London. The initial 6-month contract has been extended with a further 12-month contract ending December 2008. Total number of meters audited 6 500. We are using subcontractors to go out and check meter integrity, replace faulty meters, verify consumer data and detect meter tampering in Eskom’s Southern region.
DWAF WSBP– Contract Management, performance management and financial analysis and strategies – Contract ends December 2009
Chris Hani District Municipality – Revenue Enhancement – Project Ends May 2009
Matatiele Municipality – Revenue Enhancement – Project ends September 2009. Launched discounted payment scheme option – first pilot project for PSU. Credit control assistance programme launched to start 01 July 2009 as an extension of current project.
Sundays River Valley Municipality – Revenue Enhancement Project – Review of institutional arrangements and Human Resource Capacity with regard to improved revenue enhancement.
Gauteng Revenue Protection & Enhancement Program (Nov 2006 – October 2007) - The Gauteng Program was jointly implemented by Gauteng Treasury and the Gauteng Department of Local Government under the guidance of the Municipal Support Directorate as a Project Consolidate initiative with municipal wide support. It was Gauteng DLG’s intention to coordinate this Program with the various other GLD projects such as SAICA and SAICE initiatives to ensure that the support provided to the various participating municipalities has the desired holistic and long-term impact. Municipalities that were part of the Program are all the metropolitan and local municipalities in Gauteng:-
The objective of this Program for Gauteng was to improve the revenue environment in the participating municipalities.
BCX (City of Joburg) Data Cleaning Project - Initial work was done as part of the Gauteng Revenue Protection & Enhancement Program (Nov 2006 – March 2008). This contract focused particularly on providing correct ID numbers/business registration numbers, contact details and postal addresses for consumer accounts as part of the larger data migration project of the City.
DWAF Water Services Business Plans (WSBP) - The Eastern Cape regional office of DWAF found value in our support services in relation to their previous WSA capacity building programme. The WSBP project was aimed at assisting WSPs with the implementation of their BPs. We were appointed to facilitate the implementation (a planning and monitoring function) of the different BPs in Amathola District Municipality Chris Hani District Municipality OR Tambo District Municipality.
ADM Billing Support - This project was a 6-month appointment to assist the district municipality with cleaning government debtors on the billing system and with the collection of the arrears (credit control function).
Nokeng Tsa Taemane Local Municipality Revenue Enhancement Project - Initial work was done as part of the Gauteng Revenue Protection & Enhancement Program (Nov 2006 – March 2008). This contract focused particularly on tariffs and improving the cash flow.
Nokeng Tsa Taemane Local Municipality MPRA – Provision of electronic matching services of properties on valuation roll to properties on the financial system.
Emfuleni Local Municipality Data Cleaning & Water Billing Projects - Emfuleni Local Municipality found value in the work done as part of the Gauteng Revenue Protection & Enhancement Program (Nov 2006 – March 2008) and as a result appointed PSU for additional cleaning of revenue data focusing on the reduction of consumer debt and particularly government debt, as well as assisting with the water billing crisis.
City of Tshwane Metropolitan Municipality (2007) - PSU was part of a consortium lead by PWC to produce a Revenue Enhancement Strategy and Funding Options to Generate R2bn over a Three Year Period.
PSU provided general Revenue Management Services in the following municipalities (2007):-
Limpopo Department of Local Government & Housing: Revenue Enhancement Strategy Development Project in 6 Local Municipalities (Jan –June 2007) - The Objective of the project was to initiate the improvement of the revenue environment in the six local municipalities by developing Revenue Enhancement Strategies for each municipality. This was achieved by:
dplg Project Consolidate 12 pilot sites
dplg MIMS - PSU provided an assessment of the Municipal Information Management System, and the population of data of parts of the system.
The PSU office in East London managed a range of Revenue Management Projects in the following municipalities:-
Nkomazi Municipality (Mpumalanga) - The Malelane Local Council and PSU entered into a Public Private Partnership, which has benefited the community. The contract included the reconstruction and development of the Kamhlushwa water network with the intention of raising the revenue base of the Local Authority. This was achieved by investigating the current water service, rehabilitating the water network and providing efficient Revenue Management.
Madibeng - This was a data cleaning project to prepare the municipality to change financial systems.
The KZNLGTA appointed PSU to do pilot revenue management projects at the following two municipalities:
Pikitup - PSU assisted with data management.
Johannesburg Metropolitan Municipality
The Data Switching Project involved the establishment of a technology infrastructure that woulf allow for the splitting of the provision of services within the GJMC into individual Utilities, but allowing for centralised payment and data access. There were 11 Customer Care Centres in the GJMC and they utilised the Data Switching Centre for cash splitting and information accessing. There were more than 1 million customer accounts involved in this exercise.
The Data Cleaning Project was split into two sections. The first phase was for the top 20 000 consumers and the second phase the remainder. The top 20 000 consumers constituted 70% of the revenue, and PSU was contracted to clean this data. This project involved site audits, data comparisons and data cleansing.
A separate New Water Utility Company (Johannesburg Water) was formed on 1st January 2001. PSU was responsible for establishing and implementing the Revenue Management, Customer Service and Information Technology strategies. The new water utility had 600,000 customers.
The Johannesburg Water Call Centre was initiated and run by PSU for the first four months of operation.
Department of Water Affairs (South Africa)
Amaze Bantu, a consortium that consisted of Group 5, Uvula Trust, PSU and Water and Sanitation Services was awarded a Tender by the Department of Water Affairs to carry out delivery of Water supply under the RDP BOTT (Build, Operate, Train, Transfer) to various villages in the Eastern Cape and Northern Province. The initial project in the Eastern Cape entailed the provision of water to 115 villages under 44 projects. PSU’s role was to provide the Revenue Management and Cost Recovery systems for these projects. It is important to note that each scheme presented a unique set of circumstances and as a result, different approaches had to be applied each time. The emphasis of these projects was to implement a successful cost recovery process in collaboration with the communities involved, to employ and train staff from the local community and once running successfully, and to transfer the sustainable schemes to the community.
Tshwane Metro (Pretoria) - Olievenhoudbosch:
Tshwane Metro experienced poor revenue collections from their informal and low cost housing areas. PSU made presentations to the Council and recommended a process that would include the community in the decision making process. The process included the following phases:
The focus of the project was to improve water service delivery and to improve revenue collections for all services delivered in Olievehoudtbosch. Water was distributed using pre-paid meters. The other levies collected from the community were waste collection, rates collections and sewerage. The focus of the project was to improve service delivery and to increase the financial viability of the area by using local capacity. PSU's remuneration was based on a flat management fee. This was an interim measure with the intention of moving to performance-based remuneration in the future. The project success is summarized as follows. In its first month of running this project, payments were not high. This amount increased steadily and in the seventh month of running this project, PSU recorded an increase of 1485%. Subsequently monthly revenue collections exceed those of the first month by in excess of 1450%. A fully functional Customer Care Centre has been established to provide customer support and customer management. Two permanent and two temporary people from Olievenhoudbosch community performed all the functions of the local office. They were employed by PSU under the guidance of a PSU manager. The services became sustainable and financially viable.
Amatola Water Board / WSSA Bott Project
These projects involved assisting the Department of Water Affairs and Forestry and the Amatola District Municipality in the Project Management of Community Water Supply in the Eastern Cape. PSU International (Pty) Ltd was responsible for meter reading, billing, revenue collection, and Project Management.
Umtata (Eastern Cape)
The KDS Municipality (Umtata TLC) outsourced the electricity Revenue Management function of all domestic customers to the Umthiza JV (PSU International, Siemens and PAS). The success of the initial project resulted in its extension to include commercial customers. This was a five-year contract, which commenced in March 2000.The contract included the management of all pre-paid customers and vending stations, all the billing, meter reading and collections from all commercial customers. The Aquilium Customer Information System and Great Plains Accounting Software were used. Revenue collection improved from R250 000 to R5,3 million in December 2001. The KDS Municipality debt to Eskom of R38 million was repaid in full. Meter tamper rates declined from 80% to less than 5% in December 2001.
Abase Monti
Abase Monti was a Joint Venture (PSU and Siemens) which was awarded a turn-key project for the normalization and rehabilitation of the electricity supply of Mdantsane. The project required the establishment of a sustainable revenue collection system. PSU assisted with the revenue management of pre-paid electricity within Mdantsane as well as the establishment of Vendors Network and a Customer Care Centre. R2 million was collected through Electricity vending per month, of which 40% was allocated towards arrears. The vending software was Suprima supplied by EML, which is a subsidiary of Siemens.
Egoli Gas (South Africa)
The Egoli Gas Company was the first privatised utility in Southern Africa, and came about in 2000 when the Johannesburg City Council sold its gas supply business to a private company. Cinergy from the USA, had contracted PSU to be responsible for all issues to do with Customer Service, Revenue Management and Information Technology. PSU installed the IT infrastructure, in conjunction with Dimension Data. Aquilium and Great Plains software was installed and implemented. PSU also provided key personnel to the operation. PSU was able to get Egoli Gas to a position where they could go live on their new systems with the data that they were receiving from the Johannesburg City Council within six weeks.
Botswana Government
In 1998 PSU was awarded the contract to assist the Central Government to make each Local Authority (41 Local Authorities) financially self-sustainable. The first step entailed installation of Great Plains and Aquilium Financial and Customer Information Service Software. PSU was also responsible for documenting the business procedures that were required to achieve this autonomy. The size of this project (in terms of sites is 41 and users 670) has resulted in PSU's on going relationship with Botswana government. This Project is now in its 10th year.
Presidential Projects
This project involved the supply of computerised financial systems, administrative expertise, training and support to 28 Municipalities and 2 District Councils in the former Transkei. This was a 5 year project initially, and involved setting up of new administrative infrastructures in collaboration with appointed Accounting Firms and installing Income and Expenditure Computer systems at the Local Authorities. The major emphasis on this project was to ensure successful sustainability through an effective transfer of skills to the staff at the various TLC's.
National Water Schemes Transfer Model
SALGA and DWAF participated in a workshop in August 2000 to develop a support program for local government. One of the critical issues identified at the work session was the financial viability of Municipalities post water schemes transfer. PSU were appointed by the Department of Water Affairs and Forestry (DWAF) to investigate the financial viability of Municipalities where water schemes are to be transferred from DWAF to Local Government. The project objective was to identify both once-off cost items and capital cost items relating to water schemes transfer and establish the effect these cost items would have on the long-term financial viability of water schemes post transfer. The project was managed by WSSU. PSU was required to interview senior national officials with in DWAF, DPLG and SALGA and to embark on numerous site visits. The main focus of the project was on long-term sustainability of municipalities and ensuring all aspects of sustainability were included in the final viability model. The function of the model was to facilitate the transfer process by ensuring that all aspects of service delivery and sufficiently addressed including Water Services, Revenue Management and Customer Care. The model was also to have ensured that grant funds received would be correctly utilised to develop sustainable self-sufficiency with in the water services sector. The model was tested on a number of sites in Mpumalanga and Northern Province and was presented to the National Transfer Task Team (NTTT). The model was to be used as an important tool in the roll out of the water transfer process that would include all 352 water schemes to be transferred from DWAF to Local Government.
Victoria Falls Municipality ( Zimbabwe )
PSU were awarded a three-phase project to assist the Victoria Falls Municipality (VFM) in improving their revenue generation and service delivery. PSU compiled strategies dealing with organizational support, performance management, human resources and capacity building.