Umgeni Water’s ability to raise funds ‘at risk’

Futuregrowth Asset Management, SA’s largest specialist fixed-income money manager, warned that governance lapses at Umgeni Water including a decision to fire its board, could jeopardise the state-owned utility’s ability to raise financing.

Futuregrowth, which is owned by Old Mutual, has raised this concern with Umgeni Water and the Department of Water Affairs and Sanitation and its lawyers have written to Water and Sanitation Minister Nomvula Mokonyane, Andrew Canter, Futuregrowth’s chief investment officer, said.

“We called for corrective actions and we highlighted that their credit ratings might be at risk, their bonds could be suspended from the Johannesburg exchange and that access to capital markets in the future might be impaired.”

Based in KwaZulu-Natal, Umgeni Water provides water to about 6-million consumers.

Futuregrowth accused Mokonyane of flouting the Public Finance Management Act by illegally appointing Msizi Cele as the utility’s acting CEO and accounting officer, City Press newspaper said, citing a letter that ENS Africa, the Cape Townbased fund manager’s lawyers, had written to the minister.

“We did not call for the dismissal of the acting CEO,” Canter said. “Rather, we called for the legal appointment of a CEO.”

Mlimandlela Ndamase, a spokesman for the Department of Water Affairs and Sanitation, said Mokonyane was taking steps to allay investors’ fears and had done nothing that falls outside the prescripts of the Public Finance Management Act. The minister was expediting the appointment of a new board, he said by phone on Sunday.

Umgeni Water is satisfied its interim independent structures are sufficient to ensure continued strict adherence to clean corporate governance, Shami Harichunder, a spokesman for the utility, said.