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BWB expects K10.2 billion loss

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Blantyre Water Board (BWB) is expected to post a loss of K10.2 billion during the financial year that ends on June 30, the Ministry of Finance has said.

This will be the third year running for the water utility to post a loss after recording a negative profit of minus K9.2 billion last year and K4.5 billion in 2019.

In the 2021 Annual Economic Report by the Malawi Government released on Friday, the Treasury says, as at December 31, which is mid-year of the current financial year, BWB registered a net loss of K4.2 million.

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The Treasury says the performance of BWB has worsened largely due to non-implementation of cost-reflective tariffs which had not been adjusted in the last three years, high non-revenue water (NRW) levels due to dilapidated pipeline systems and high electricity costs.

The report says these challenges have significantly compromised operations of the board and that, based on the mid-year performance, BWB revised downwards budgeted revenues and expenditure resulting in a projected loss of K10.2 billion by the end of the 2020/21 financial year.

“The board continues to face serious challenges to finance its operations as [the] board’s monthly operating expenses continue to increase, with 65 percent committed to settling of electricity bill (averaging K1 billion per month). NRW was still very high at an average of 53 percent in December 2020.

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“However, the board planned to slightly reduce the NRW to 50 percent by June 2020 through conducting water balancing, timely reparation of all leaks in the transmission and distribution network and uprooting all illegal connections, among others. To reduce electricity bills, the board has begun the process of developing an alternative technology to pump water to maximise the pumping from Nguludi plant, which uses gravitational force,” the report says.

According to the Treasury, as at December 2020, BWB had an operating profit margin of negative 33.04 percent, meaning that, for every Kwacha sale, BWB loses K33.04 after tax.

As a result, BWB’s working capital position worsened and continued to be in the negative, putting it at a disadvantage, including lower creditability, in banks as well as creating poor supplier relationships.

“The liquidity position of BWB continued to be weak as demonstrated by a current ratio of below desirable levels (more than 1). This is also demonstrated by the insolvent state of the board as it continued reporting worsening negative working capital over the years. As at 31st December 2020, the board reported a liquidity ratio of 0.27:1, meaning that it was still unable to cover its current liabilities as they fall due. As at mid-year, trade payables had worsened to K33.2 billion from K27.0 billion in 2019/20 [fiscal year], of which electricity payment arrears constituted 49 percent.

“On the other hand, trade debtors had worsened to K10.1 billion comprising K5.9 billion as public institutions arrears while K4.1 billion [arrears] were for private customers. This shows that the board was still struggling with its receivables management with debt receivable days at 292 days as at December 31 2020, hence the worsening in the liquidity position,” the report says.

Looking ahead, BWB says it has intensified debt collection by conducting periodic mass disconnection campaigns on all overdue accounts over 30 days and cleaning up the customer database through customer verification exercises.

In a July 11 2019 audit report, acting Auditor General Thomas Makiwa categorised BWB alongside the Agricultural Development and Marketing Corporation as high-risk organisations.

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