Standard charges cuts could drown WUC
The abolition of water usage standard charges in Botswana could severely drop Water Utilities Corporation (WUC) revenues and further erode its financial integrity, an inside source warned.
This is after cabinet recently stopped the P20 standard charge for domestic, business and industrial use as well as the Value-Added Tax (VAT) on the first 0 -5000 liters for domestic use. This is after rife public complaints that the charges are made even when the taps are dry or closed.
The source who spoke to Gazette Business revealed that before the decision was reached, there were disagreements on whether the charges should be abolished or reduced, with some arguing for a 50% decrease while some, including the Minister of Land Management, Water and Sanitation Prince Maele described them as irrational.
According to the source, the decision which is expected to effect on 1st of April 2017 will greatly affect WUC revenues and worsen its financial situation. This publication has established that WUC was generating around P120 million on annual basis from around 500 000 customers who paid P20 monthly standard charges.
According to the WUC 2016 annual report tabled at parliament recently, WUC last year incurred financial losses amounting to P266 million. Revenues generated in 2016 amounted to around P1.3 billion, lower than P1.6 billion operation expenses recorded during the year. Last year unpaid water bills amounted to P530.4 million and this was an over 70 % increase from P300 million recorded in 2015. Government departments and district councils were the major debtors.
The corporation is exposed to financial risks such as foreign exchange and according to the report there were South African Rand borrowings of around R55 million in 2016. It has emerged that if Botswana Pula had moved by 1 % against foreign currencies in 2016, the effect could have resulted with loss or gain of P420 thousand.
The corporation which cannot operate without government subsidy, has received tariff subsidy grant amounting to P388 million from government to improve its compromised liquidity position.
WUC Board Chairman Matome Malema blames debtors for the corporation’s deteriorating liquidity position. “One area that requires more focus and stakeholders support is accounts receivable (debtors). By the end of the financial year, aged debtors had grown significantly and this compromised our ability to run the affairs of the corporation prudently and undermined our profitability, liquidity and effectiveness,” he said.
Malema noted that due to land servicing constraints the corporation continues to experience major setbacks in the timely provision of water to various areas in the country. “Lack of synchronization in the provision of the related services by the responsible players in water service provision is a constraint to timely and effective provision of services by the corporation to its customers. The most prohibitive and constraining of these is the lack of reconciliation between plot allocations and land servicing which often result in plots being occupied in areas without any water delivery infrastructure. It is our aspiration that the relevant acts be reviewed and amended to reflect this reality and empower WUC to effectively deliver its mandate in the provision of water and waste water services. While we have relentlessly pursued this issue during the year under review, the results have been less than satisfactory,” he said.
Meanwhile, WUC CEO Mmetla Masire says loss of water due to dilapidated infrastructure is also a serious challenge. He noted that in 2016 water loss and unaccounted water was high. 102,554,634 KL of treated water was pumped into the distribution networks for use and of this, only 68,957,604 KL was accounted for, leaving 33,957,030 KL as Non-Revenue Water (NRW), according to the corporation.
With a property, plant and equipment valued over P5.7 billion, WUC infrastructure includes 9 dams among them Gaborone Dam. It also owns North South Carrier Scheme 1 which is comprises a 360-km long pipeline, water treatment plants and associated pump stations.