Umgeni Water successes
Umgeni Water is the second-largest water board in South Africa, with an annual turnover of more than R2.5-billion and a five-year capital expenditure budget of more than R7-billion. Despite recent concerns around governance and risk management, over the past five years Umgeni Water has consistently achieved clean audit reports from the office of the auditor general.
Established in 1974, Umgeni Water is a public entity that provides water supply and sanitation services to other water services institutions in its service area (KwaZulu-Natal). The organisation operates in accordance with the Water Services Act 108 of 1997 and the Public Finance Management Act 1 of 1999, among others. Umgeni Water reports directly to the department of water and sanitation through the chairman of the board and the chief executive. The executive authority of the water board is Minister of Water and Sanitation Nomvula Mokonyane. through the exchange of letters.”
Responding to the allegations of illegal board appointments, Hlongwa stresses: “There is no illegal person appointed to the board. Section 49 explains the process and this is simply subject to interpretation.”
When questioned about the legality of Mokonyane appointing Hlongwa as both acting chief executive and the accounting authority, Hlongwa says that this is another misconception, as the minister did not appoint him but “merely confirmed my appointment as an acting chief executive”.
“I was appointed by the board to act as chief executive and this is something ENS Africa has agreed is above board, and a board resolution taken before their term expired.
“We have an independent audit committee, which is highly capable and duly qualified to oversee all pertinent issues — to the satisfaction of the auditor general. Governance issues in our operation do not get compromised and we follow the letter of the law all the time. We pride ourselves on doing this.”
Asked what Umgeni Water’s stance is on its level of governance and risk management, Hlongwa responded by saying: “Where I am sitting we are very much on a good straight and narrow as far as both are concerned. We will continue to assess and evaluate.
Investor confidence
“There is no question of treasury stepping in or bonds being withdrawn. We are financially sound and have met all our financial obligations. It terms of governance and risk management, we have exhibited and continue to exhibit the highest level of performance.
“We are very comfortable that we have restored investor confidence. We do not actually believe confidence was impaired in the the first place. We have been engaging with ratings agencies and do not anticipate any credit ratings downgrade. One key criterion for ratings is that you still have paper that is tradeable and have an ability to raise funding — which we have, even before legal interpretation. Even what was written to the minister we don’t see as being malicious.
“We have many investors, and have always explained any issues to them and been absolutely transparent, including issuing SENS statements through the JSE whenever there have been any changes.”
There has been some contention around Mokonyane’s decision to merge Umgeni with Mhlathuze Water. Hlongwa says that the minister mooting the merger is because she is looking at all the water boards and investigating ways to create regional utilities that are big and capable in the area they are operating in”.
“This was the departure point, but we have to ensure that any merger happens responsibly and with the right levels of due diligence to ensure that it is viable for all the parties concerned and look at all the possibilities towards a seamless transition.
“We have to include all aspects of the local sector, including local government and the Ethekwini metro as our customers and consider the way the customers operate; and this is a review we are presently undergoing to see how this merger could take shape, if it will happen at all.
“We also need to consider how the public feels and engage such parties as the labour unions to address their concerns as representatives of our workers. We must endeavour to accommodate the wishes of everyone in addressing the key issue of potentially a bigger and more abled entity able to provide sufficient water and the development of water resources and water services without strain and without service interruptions occurring.”