Thursday, May 6, 2021

BPC and WUC: The notorious loss making parastatals

Water-shedding here to stay

As it stands, WUC is living on borrowed time. The corporation’s financial woes could soon render it incapable of delivering on its key mandate of providing the country with clean, fresh water. WUC Communications Manager, Matida Mmipi admitted to Sunday Standard previously that the corporation’s cash reserves have dried up over the past few years as it was forced to divert its cash resources towards financing the country’s Water Sector Reforms project.
Records show that WUC recorded a net loss of P191.1million in 2013 which was a great improvement from P541.6 million in 2012.

Subsequent losses have been attributed to challenges relating to implementation of the Water Sector Reforms Project, which include increased costs on waste water treatment and distribution, rehabilitation of infrastructure inherited from District Councils, increased staff and training costs, amongst others. WUC also had to battle with clients who simply refused to pay their water bills. By 2012 the corporation was owed as much as P243 million in unpaid water bills by customers who included government departments, parastatals and individual households. At some point in 2014, the corporation announced that it was harmonising and reviewing its tariffs.

Parallel to that, the WUC executive announced plans to intensify debt collection in a bid to improve the corporation’s cash flow. The corporation writes in its 2013/14 annual report that vandalism of its infrastructure was another challenge that had an adverse impact on its operations.

These myriad of problems combined with a marked decline in rainfall, particularly in the south of Botswana where the water supply situation is deplorable, conspired to sound a death knell for the bed ridden WUC. Panic stricken, the corporation then implemented what is popularly known as water-shedding and issue warnings to its clients that they “may experience low pressure to no water supply even outside their water rationing schedule.”

New Broom, No water

In early 2013, WUC made headlines for the wrong reasons as the corporation’s top management was accused of incompetence, poor governance, dubious appointments and abuse of funds by middle managers who were disillusioned because their opinions were always ignored. Fast forward to May 2014, former CEO Godfrey Mudanga was given the boot and replaced with Leornard Nxumalo in EARLY December last year. Prior to his appointment Nxumalo was WUC’s transformation advisor after having previously worked for Swaziland Water Services Corporations as Strategic Services Director. It is not clear whether he played any part in the dismissal of Mudanga and his top executives.

He has been given two and half years to deliver, and it is still too early to determine his performance. He brings with him a wealth of experience, as he has provided transformation services to countries such Nigeria, Zambia and Lesotho. What is certain though is that he takes over at a time when the corporation is tottering on the brink of collapse and financial ruin. Minister of Finance and Development Planning, Kenneth Matambo confirmed that WUC is broke during the budget speech on Monday.

BPC is a black-out specialist

Botswana Power Corporation (BPC) did not fare any better as it incurred a net loss of P1.3 billion in 2013. BPC is also notorious for its frequent load shedding in southern Africa. The Auditor General’s report for 2013 clearly indicates that the situation at BPC is more critical than initially reported. Available figures also show that BPC’s working capital position is bad, as by close of books on 31 March 2013, its current assets were valued at P1.19 billion while its current liabilities stood at P3, 73 billion, giving BPC a net current liabilities position of P2.54 billion.

And so it was that last week Matambo once again doled out a portion of the national budget to the fledging power utility, pumping in P1.5 billion to cover tariff subsidies and some operational expenses. It was clearly not the first time that BPC was bailed out and it will not be the last.

Irish transformation

In April 2014, BPC joined another government parastatal, Air Botswana, in becoming the second corporation owned by government to be run through a consultancy. BPC board chairman, Sebetlela Sebetlela, confirmed that global energy company ESB International (ESBI) from Ireland had been given a tender to take over as new managers at BPC.

The energy consultancy firm based in Ireland was given three years to achieve performance turnaround and organisational transformation at BPC. The change process is believed to be largely brought about by BPC’s transformation from a retailer of power to an electricity generator with a higher asset base due to increased generation and transmission infrastructure. It is yet to be seen on whether the external expertise brought by ESB will assist BPC to ready itself for competition in the electricity industry in line with Government’s decision to open up the market to independent power producers soon.

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