Presentation by City of Cape Town to the South African National Department of Provincial and Local Government (DPLG) in May 2006. Presented by Mehboob Foflonker and Andre Stelzner, the 2 city Directors responsible for this project.

1. CITY OF CAPE TOWN
Creating Sustainable Value in a
multi service municipality
André Stelzner / Mehboob Foflonker
Dir: ERP Business Transformation
Dir: ERP Implementation

2. Agenda
Background.
SAP Implementation - the City’s ERP system.
SAP-ISU – the City’s Utility solution.
Creating Value
Conclusion.

3. Background:
Significant Political Events in South Africa during
the past decade have changed the face of Local
Government in Cape Town.
Pre- 1994: South Africa internationally isolated and
communities segregated on racial grounds.
April 1994: first democratic election and government
of national unity established.
3-Tier government structure: National, Provincial and
Local Government
Legislation passed restructuring Local Government:
Mergers of 7 previous autonomous
Municipalities into a single Metropolitan Uni-City
Powers and Duties of Local Authorities changed
Next Wave of Restructuring – Establishment of
Regional Electricity Distributors.

4. Background:
The City of Cape Town had to merge 7 previously
autonomous local government administrations and
become a single integrated metropolitan City, but it found
that creating a Unicity to be complex due to:
• “Lack of standardised financial
policies and procedures”
• “Each administration ran its own
IT systems, many of which did not
meet business requirements”
• “Back-office systems were
deemed (by large) to be outdated,
functionally inadequate and not
properly integrated”
• “Difficulty in merging these
systems was in fact hindering the
merger of the administrations and
undermining the objectives which
motivated the creation of the
Unicity”

5. Background:
Demographics of Cape Town
Population: 3.2 million
Share of National GDP: 10.5 %
Share of Provincial GDP: 75 %
Area: 215 900 ha
Rateable Properties: 800 000
Employees: 24 579
Annual budget 2004/05:
Operating: R 11,3 billion
Capital: R 1,5 billion
Annual Income 2004/05:
From Utility Services: R 4,36 billion (38,6 %)
From Tax and Levies: R 3,14 billiion (27,8 %)

6. Background:
Local Government – the delivery arm of Government
Governance closest to the people – providing the following
services:
Electricity / distribution and peak load generating
Water and Sanitation / storage, treatment and distribution
Solid Waste / landfill, removal and area cleaning
Roads, Stormwater and transport
Public Housing
Local Economic Development
Social - and primary health services
Emergency Services
Municipal Policing
Urban Planning and Environment
Sport and Recreation
City Administration

7. Agenda
Background.
Implementation SAP - the City’s ERP system.
SAP-ISU – the City’s Utility solution.
Creating Value
Conclusion.

8. Project Implementation: Selection Process
2004 & beyond
2002 & 2003
2000 2001
The years of
The years of
The year of The year of
Benefits
Implementation
Strategy Selection
Projects undertaken during 2001: Resulted in the
SAP system and Accenture being selected.
Project # 4
Project # 3 Project # 5
Project # 2
• The consultant • The enterprise
• The software • The ERP systems
selection system integrator
selection implementation
(March – April 2001) selection (July -
(April - June 2001) blueprint planning
November 2001)
• Gartner was chosen phase
• SAP was selected
to assist with software (November 2001 -
• Accenture was
as software
and systems January 2002)
chosen as the
providers
integrator selection
preferred ERP • Accenture confirms
processes
system integration their cost & scope
partner of implementation

9. Project Objectives:
CA PE
METROPOLITA N
Blaauwberg AREA
City of
Tygerberg
City of
Oostenberg
Cape
Cape Town
Cape Town
Town
Helderberg
South
Penins ula
“To Implement a functionally rich ERP
system, in a manner that will ensure
integration, facilitate the merger and bring
about organisational transformation.”
Thereby, enabling the City to deliver on its
Strategic Objectives”

10. What is an ERP
MAINTENANCE Processes
An ERPsystem offers organizations a
ASSET MANAGEMENT Processes
PROCUREMENT Processes
REVENUE Processes
comprehensive and integrated solution for managing
services such as financial, revenue, human resources,
maintenance, procurement, leasing, customer care on a
single integrated IT system.
PROJECT Processes
HR processes
CUSTOMER Processes
It is not so much about the technology as it is
PLANNING processes
about the integration of business processes.
ACCOUNTING processes
Workflow provides the means of automating
business processes and system integration
ensures that only a single record of master data is
held – but shared across the application.
Debate is whether to implement an ERP system
vrs. so called ‘best of breed’ systems.
SAP is a specific ERP vendors.

11. Successful Organizations are able to align:
STRATEGY:
Strategy
Organisation
What must we do ?
TECHNOLOGY
PROCESS:
How are we going to do it?
Process People
People:
Who is going to do it ?

12. Project Scope:
The City of Cape Town: Scope of implementation
- Billing to sundry
- Financial Accounting
debtors
SD FI
Sales & Financial
Distribution Accounting
- Management
MM CO
- Procurement & Accounting
Materials Controlling
Inventory SCADA* Mgmt.
R/3 (4.6c) and AM
PP
Management
Fixed Assets
Production
IS-U/CCS (4.63) Mgmt
Planning
EDI Number of Users
- Plant Maintenance QM PS - Asset
6 500
Quality Project
Management
Management System
PM WF
Plant
Field Workflow
Maintenance
- Project
Service
IS
HR
Support
Accounting
IS-RE
Industry
Work Human
Solutions
Resources
Clearance*
IS-U /
- Real Estate
FERC
SM
- Human Resources & GIS
CAD Management
Payroll Service AM/FM
Mgmt
IS-U/
CCS
- Customer Care &
Revenue Management
Systems to be Replaced
Original – Replaced = Final
240 – 138 = 102 systems
198 – 128 = 70 interfaces

13. ERP Program –
Past and Future Release dates.
Release 1 & 2
GAMAP /GRAP
SAP_BW
2005 2006
Program 2003 2004
F A J AA M
O D F A J OA NO D
F A J A O D F A J A O D F M J S D
J A
System Support Support to 6300 system users
Release 1 Original Project Scope:
Release 1 – Expenditure (Go-live Dec 2002)
Release 2 – Revenue (Go-live Sept 2003)
Release 2 Revenue Release
Implement GAMAP
GAMAP
GAMAP GAMAP compliance as of
1 July 2003
System Enhancements Monthly Releases of new Reports and Functionality
Upgrade of
Upgrade
R3 and ISU
Business
SAP-BW
Warehouse
Go-live dates

14. Agenda
Background.
Implementation SAP - the City’s ERP system.
SAP-ISU – the City’s Utility solution.
Creating Value
Conclusion.

15. Challenges faced by the Cape Town Municipal Utilities
Social responsibilities of Government in conflict with
Commercial Objectives of Utility Business units.
Aging Infrastructure with a lack of investment in proactive
maintenance.
Need to rapidly expand access to basic services in order to –
keep track with high rate of urbanisation and
eliminate the historical backlog.
Many Citizen can not afford basic Utilities.
Unbundling of Utility Services from Local Authorities.
Managing limited Natural Resources.
Initial steps to overcome many of these challenges have been enabled
through the implementation of the City SAP-ERP system

16. Social responsibilities of Local Government vrs.
Commercial objectives
Unlocking scarce financial resources for social up-liftment
and improved service delivery :
R extracted, used to improve …
Create
financial
value Preferential procurement
Employment equity
R extracted, used for … Socially
Supports …
conscious
policies
Advance social
R extracted, used to
upliftment Improve
educate staff and provide lower cost, more pervasive
service delivery
better working service delivery supports …
environment …
improved decision making
allowing matching of supply and demand …
Information
transparency
motivated, better educated
Enhance
and more productive Enabled by SAP
human
employees…
performance

17. Infrastructure Maintenance: Plant Maintenance
Maintenance Management has been enabled through the
implementation of SAP-PM (Plant Maintenance)
All infrastructural assets have been created on SAP within a functional
location hierarchy.
2 million pieces of equipment (fixed installations, distributed Infrastructure,
equipment and plant)
100’s proactive maintenance schedules created.
2 163 PM users across 500 Maintenance Depots and Workshops
Centralised call centre for Defect Notification via ISU-CIC and PM
Accurate job costing - Integration with Ledger and Asset Register

18. Infrastructure Provision: Project Systems (PS)
Provision of Services to previously disadvantaged communities
necessitates an aggressive infrastructure expansion programme.
Financial management of projects via PS and Investment
Management structures to administer various funding sources.
Integration of Project Systems with the Asset Register.
Asset Depreciation and Interest Simulation.

19. Utility Billing: Consolidated billing for various services.
Number of Contracts and Devices managed through SAP ISU:
Division: Number of Meter Reading
Number of Billing
interval
Contracts Interval Devices
Prop. value assessed
671 388 n/a
Property Taxes: Annual
every 5 yrs.
633 183 577 148
Water Services: Monthly Monthly
616 923 569 821
Sewerage Services: Monthly Monthly
658 306 529 611
Refuse Removal: Monthly Fixed Charge
364 779 Monthly
451 894
Electricity: Monthly
Pre-paid
423 527
Total 3 031 694 2 464 886
Number of ISU users = 2 243 Number of PM users = 2 163

20. Revenue Solution: Progressive Tariff Structures
Large disparity in the socio-economic status of citizens
Identifying citizens which can – but don’t pay versus
Citizens which do not have the means to pay.
Implementation of social and resource responsible tariff
structures:
Property Tax: first R50 000 of property value exempt from tax - then
property tax based on % of remainder of property value.
Water: first 6 kl free and then step tariff based on property zoning.
Sewerage: Availability charge based on property value and consumptive
charges as a % of water consumption
Refuse: Availability charge based on property value and consumptive
charge based on bins removed by week.
Electricity: first 50 KwH free and then step tariff per category of user.
Rebate system for citizens which are proven to be indigent.
Debt payment via arrangement with the raising of interest being suspended for
period whilst arrangement is being adhered to.
Various other progressive messages to help address arrears.
Invoicing in all 3 Official Languages of the Western Cape Province.

21. Revenue Solution: Consolidated and Itemised Billing
Extract of Municipal Account – front page (Balances)

22. Revenue Solution: Consolidated and Itemised Billing
Extract of Utility Bill - City of Cape Town (in Afrikaans):
- Property Tax: instalment Plan
- Electricity and Water : Step Tariffs with actual Consumption for billing
period and availability charges shown in detail.
- Sewerage and Waste Removal plus Sundry Charges not shown………

23. Single view of the citizen Consumption History
Click for Graphic View and
details of Meter Readings
Account Balance.
and Period Consumption.
Click for current and future
amounts raised and details
of payments received.
Monthly Consolidated
Account. History of Customer
Click for copy of Invoice Contacts
No further action required
Click for details
Details of Each Service
Tab for details of each Utility
and Rates Service.
Service Orders
Raised
Instruction to Operational
Units to perform work.
Click for Progress and
Costing Information

24. Turning the Tide against Non-payment:
Payment Ratio
How was the benefit realised?
• Improved visibility and transparency of information on the new invoice, the
ability for citizens to pay their accounts at any municipal pay point and the
implementation of a call center to address billing queries.
• Revenue Services performed significant data alignment duties in converting
data to SAP.
• Revenue enhancement interventions have received priority attention.
Payment Ratio : 12 month moving average Calculation:
• 1% increase in the payment ration =
100.0% R6,05 mil per month.
95.0% • Increasing the payment ration since
go-live of ISU has increased revenue
90.0%
by R698 mil.
85.0% • Only 10% of this payment benefit has
been accredited as a direct ERP
80.0%
benefit – a very conservative approach
75.0% has been adopted in the ROI model.
03
4
4
04
4
3
4
l- 0
-0
-0
0
0
v-
n-
p-
p-
ar
ay
Ju
No
Ja
Se
Se
M
M
% Payments vs Billings (12 month moving average)

25. Cash flow.
It’s all about Cash in the Bank:
Net increase of R667mil between Sept ’03 (SAP go-live)
and Sept ’04.
Cash Balance
SAP
1,600
go-
1,400 live
1,200
R '000 000
1,000
800
Planned loan of
600 R300 mil not
400 taken up
200
0
Au 4
Au 3
Au 2
Ap 4
Ap 3
O3
04
03
Fe 2
O2
Ju 4
Ju 3
De 3
De 2
0
0
0
0
r- 0
0
0
r- 0
0
0
-0
-0
n-
n-
n-
b-
b-
c-
g-
c-
g-
g-
ct
ct
Ju
Fe Budgeted Cash Balance Actual Cash Balance

26. Creating Confidence in utility-billing:
Starts with accurate meter readings.
Number of Repeated
Reason for no meter reading– (SAP / GIS Reporting)
Estimates
Number
OF Number
estimates OF meters
2 2612
3 1591
4 755
5 519
6 416
7 303
8 243
9 1433
10 224

27. Managing scarce Natural Resources
Water Consumption Monitoring
Cape Town is in the mits of a
sever draught.
SAP – Spacial reporting

28. Agenda
Background.
Implementation SAP - the City’s ERP system.
SAP-ISU – the City’s Utility solution.
Creating Value
Conclusion.

29. Value Creating Opportunities Identified
A compelling business case was built by only
quantifying “ the tip of the iceberg ”
Quantified, financial VCOs that are directly attributable to SAP (4)
Those financial VCOs that we have managed to quantify (10)
Those financial VCOs that can be quantified (managers willing AND data is available)
Those VCOs that have a direct financial benefit (45)
Those VCOs that we have documented (74 unique of the127 identified)
Those VCOs that are known to the City of Cape Town due to a vision and strategy having been defined
All value creating opportunities (VCOs) that can be enabled by an ERP

30. Project Benefits: Financial (CoCT ROI Study)
Value of Benefit: 2002 - 2004
R 300,000,000
• Reduction in costs of support staff = R87,5mil
R 250,000,000
• Increased Revenue through improved collection
R 200,000,000 Staff Costs
and daily billing = R192,6 mil
Revenue
R 150,000,000
• Reduction in Inventory Holdings and increase in
Inventory Benefits
stock turns = R1,02 mil
R 100,000,000 IT Value Opportunity
R 50,000,000 • IT value. The cost of supporting SAP with more
functionality = cost of supporting legacy
R0
systems
2001/2 2002/3 2003/4 2004/5
Project break-even will be achieved before the end of the current financial year
R 300,000,000
Project Implementation Costs = R 350 mil ($ 58,3 mil)
R 200,000,000 Cos ts
R 100,000,000
Benefits
Realis ed
R0
Net ROI
-R 100,000,000
/8
/9
/3
/6
/7
/2
/4
/5
07
08
02
06
01
03
04
05
20
20
20
20
20
20
20
20
-R 200,000,000
Expected
Future value of Realised Benefits
Cas e
Actuals
Feb2002
-R 300,000,000

31. Project Benefits: E-Government – the next wave
Bridging the digital divide:
ERP project critical enabler to the “smart city”
strategy
SAP will provide the
solid foundation on
which the
eGovernment strategy
of the City will be
deployed.
eGovernment flip
flops relationships:
Citizen Citizen
Official IT
IT Official

32. Agenda
Background.
Implementation SAP - the City’s ERP system.
SAP-ISU – the City’s Utility solution.
Creating Value
Conclusion.

33. Support Organisation – Driving out Business Value
Accredited SAP Competence Center Established.
Support Team = 150 (Coct = 90, Accenture = 20, Empowerment = 40)
With a 3 year strategy to become self sufficient.
Business appointed Process Owners and User Groups established.
Monthly release strategy implemented

34. Conclusion:
In conclusion, implementing ‘SAP in the City’ has …
Helped to align the operational activities of the organisation to its strategic
imperatives - basic free services for the ‘poorest of the poor’
Provided a robust technical platform to integrate and standardise business
processes across the organisation
Significantly impacted the city’s operating model, organisational structure and
human performance considerations - Services closer to the People.
Provides effective management reporting capabilities, encouraging fairness,
accountability, responsibility and transparency
Enables financial, as well as non-financial benefits
Enabled performance management

35. Questions ?
City of Cape Town: ERP project room (August 2002)