NOMVULA’S money woes
Letters from Treasury show that a unit within the department has an overdraft of R3.5 billion and that R654 million cannot be accounted for in its financials
Water and Sanitation Minister Nomvula Mokonyane and Treasury are at each other’s throats over the department’s deteriorating finances. Confidential letters from Treasury to Mokonyane’s most senior executives, obtained by City Press, reveal that: The Water Trading Entity (WTE), a unit within the department tasked with managing water sales and rights, has racked up a R3.5 billion overdraft. In February, City Press reported that the department was broke and couldn’t pay contractors;
The department appears to have cooked its books to try to explain an amount of R654 million that it can’t account for in its financials;
The WTE’s negative balance could jeopardise the ability of the Trans-Caledon Tunnel Authority (TCTA) to service its Lesotho Highlands Water Project debt;
Treasury will no longer pay the WTE’s invoices until the department settles its R3.5 billion overdraft; and
Mokonyane and her officials have plans to remove the WTE from the department and set it up as a standalone state-owned enterprise.
In a letter to Mokonyane’s director-general, Dan Mashitisho, two weeks ago, Treasury’s outgoing director-general Lungisa Fuzile said: “I wish to reiterate to you, as the WTE’s accounting officer, that in terms of Treasury regulations, trading entities are not allowed to borrow for bridging purposes and are also not allowed to run into overdraft. To protect the TCTA’s government guaranteed debt, the TCTA payments will be ring-fenced and only those payments will be processed until such time that the National Treasury and the WTE agree on repayment terms to bring the account back to a positive balance.”
In a separate letter on December 2, Treasury’s asset and liability management deputy director-general Anthony Julies asked Mokonyane’s chief financial officer Sifiso Mkhize to explain the R654 million TCTA “facility management” fee: “A major operating expenditure in the financial statements relates to a TCTA ‘facility and management fee’ of R654 million. National Treasury is not aware of any such fees that are charged by the TCTA as the TCTA’s cost recovery is reflected in TCTA’s tariff, which is payable by the WTE. “National Treasury further enquired with TCTA regarding these fees and TCTA was itself unable to reconcile the costs reflected in the operating expenditure.” Julies also encouraged Mkhize to make a business argument to Treasury to justify the establishment of the WTE as a parastatal. However, the department’s spokesperson, Sputnik Ratau, denied the books were cooked. “Aspersions of ‘cooking the books’ are incorrect. The TCTA is an entity of the department, with the minister of water and sanitation responsible as the executive authority. Management fees would include administration and operating costs for building leases, salaries of staff, telephone, travelling costs, stationery, arranging and monitoring maintenance, managing borrowed funds and more. “TCTA, as an independent entity, can provide proof and a breakdown of how facilities and management fees are calculated,” Ratau said. After denying in February that the WTE had an overdraft at all, Ratau said: “It is also confirmed that the WTE is in a very strong financial position with assets exceeding liabilities by R72 billion. It should be noted that the overdraft for WTE is the result of nonpayment of debt by municipalities and water boards ... Various debt recovery strategies are being implemented, which include obtaining default judgments, as well as working with National Treasury on managing the overdue debt.” He also denied the department had plans to merge the TCTA and the WTE to create a parastatal. “A due diligence exercise is currently being conducted on the possibilities of establishing an independent infrastructure agency. [It] has not yet been completed.” However, a senior Treasury executive said: “They wanted to make a state-owned enterprise. In a state-owned enterprise, a minister appoints a board and can ask it to do whatever she wants it to do. They can divert tenders to wherever she wants them to go.” A senior bureaucrat in Mokonyane’s office confirmed the plans to merge the TCTA and WTE into a state-owned enterprise.