Cash strapped Water Utilities Corporation (WUC) has frozen with immediate effect staff recruitment and movements pending the adoption of a new strategy that is expected to be finalised by the board of directors by the end of January 2015.
The moratorium was communicated via a memo dated 9th January, 2015, from the newly appointed Chief executive officer, Leonard Nxumalo, who replaced Godfrey Mudanga towards the end of last year. The memo is addressed to corporate management team, general managers and sectional heads.
In the memo titled “moratorium on freezing recruitment and staff movements”, the new chief executive officer stated that: “Members will recall that towards the end of last year, management initiated the development of a new WUC Strategy which is yet to be finalised with the Board of Directors by the end of the month. You will further note that the development of the Strategy will be followed by the Organisational Structure which by implication shall affect staffing levels within the Corporation. In order to allow the impending restructuring process to be a seamless exercise, I have resolved that recruitment of employees (new or promotion) as well as staff movements such as transfers and redeployments should be suspended with immediate effect until further notice”.
Nxumalo further stated that any critical requests which have a bearing on the service delivery of the corporation will be assessed by his office on a case by case basis requiring motivation to his office for approval.
The wholly government owned parastatal’s employees who got wind of the memo are apprehensive that the impending organisational restructuring will result in massive job losses as the corporation’s losses mount with a third consecutive net loss recorded at the close of the 2013/14 financial year.
According to the corporation’s 44th annual report for the year ended March 31, 2014, the parastatal’s net loss increased to P346 million from P191.1 million in the 2012/13 financial year. Although still high, it is however lower than the P541.5 million deficit recorded in the 2010/11 financial year.
In the report, board chairman Matome Malema reported that the corporation recorded operating expenses of P1.3 billion in the year under review compared to P1.1 billion in the previous financial year which marked an increase of P0.2 billion or 18.2 percent with water and waste water treatment costs accounting for 5.7 percent of the corporation’ total operating costs while administration and other costs constituted 25.6 percent of the total operating costs.
“For the review period the corporation recorded a net loss of P346.6 million, compared to net loss of P191.1 million in 2012/13. The P155 million increase was mainly attributable to the fact that unlike in the previous financial year where the government provided a revenue grant of P200 million during the financial year under review, no government grant was received. The net loss resulted in the retained earnings being reduced to P448.1 million in 2013/14 compared to P796.2 million in the previous financial year.
“The cash flow situation declined from P428.4 million in 2012/13 to P173.6 million in the financial year under review. Debt service ratio stood at (487):1 in 2014 compared to (177):1 in the previous year”, reported Malema adding that by the close of the period, title to some of the land and buildings acquired by the corporation through the Water Sector Reforms Programme (WSRP) had not yet been transferred to the corporation.
While independent auditors Deloitte and Touche Assurance & Advisory Services Chartered Accountants did not qualify the corporation’s accounts, they however raised a red flag on the net loss of P348.5 million which in their professional view cast doubt on the corporation’s ability to continue as a going concern although government had committed to provide ongoing financial support in the future.
Malema argued that in spite of the unsatisfactory situation of the corporation’s water resources for both surface and ground water during the reporting period, the parastatal was able to deliver on its mandate.
Through relevant water demand initiatives including water restrictions and water rationing the corporation was able to provide sustainable water delivery service especially in the water stressed areas in the south of the country.
“It was through this ability to manage its operations, carry out regular maintenance and optimise its water treatment plants and other relevant systems that the corporation was able to continue supplying the country with water despite all the conditions that were plaguing it as a water supplier”, said Malema.
For his part, former CEO Godfrey Mudanga said history was made during the review period as the corporation completed the takeover phase of villages under the Water Sector Reforms Programme ahead of the set project schedule.
The reforms had dominated the corporation’s operations in the previous three reporting periods while all resources (financial and otherwise) were channelled towards the success of the reforms that reached its peak with the takeover of the last batch of villages in the Nhabe area.
Mudanga observed that the year under review was the most challenging as the corporation’s financial resources got depleted after years of financing the Water Sector Reforms Programme. “Staff morale hit an all-time low as staff got burnt out from the long hours, increased workloads and extended areas of jurisdiction that came with the reforms. High customer expectations in the newly taken over also increased the pressure under which the corporation operated”, observed Mudanga.
The challenges notwithstanding, connections increased from 80 000 in 2009 to 330 000 in 2014 while the corporation’s assets stood at P5 billion at the close of the reporting period.