The Budget and Finance Committee of Parliament yesterday summoned Blantyre Water Board (BWB) to explain persistent financial losses and strategies it is putting in place to bring the loss making trajectory to a halt.
The summoning followed revelations that BWB posted a loss of K23 billion in the year ended March 2023.
Budget and Finance Committee of Parliament Vice Chairman Ishmael Nkumba told BWB management, led by Chief Executive Officer Robert Hanjahanja, that by design, State Owned Enterprises (SOEs) like BWB are supposed to be vehicles of efficient and effective service delivery in addition to being a source of revenue for the government.
He observed that Malawi has been talking about reforming SOEs for a while now but that the performance of BWB and many other SOEs remains unsatisfactory.
- Advertisement -
According to Nkumba, over the years, BWB and other SOEs have been registering losses, which suffocates revenue mobilisation as evidenced by lack of SOE dividends in the budget framework.
- Advertisement -
In his presentation, Hanjahanja said the water utility firm’s financial performance has been declining over the past years mainly because of high non-revenue water (NRW), high energy costs and non-implementation of cost reflective tariffs.
“NRW has moved from 37 percent to around 52 percent over the past five years. This has mainly been due to aged distribution infrastructure and inefficiencies in the prepaid watering system.
“On energy, the board incurs high energy costs due to a pumping head of about 1 km from the main water source at Walkers Ferry to its farthest customers. This results in high electricity bills,” Hanjahanja said.
He said the board has been selling water below the actual cost of service with a gap between water tariffs and the actual cost of service increased from 6 percent in 2015 to 147 percent in 2024.
- Advertisement -
As at March 31, 2024, BWBs total current liabilities were seen at K42.8 billion against current assets of K19.7 billion.
According to Hanjahanja, devaluation of the Kwacha has led to huge increases in service costs.
“This has created liquidity challenges, hence reliance on overdrafts and loans to finance operations,” he said.
The BWB boss said a large proportion of water is lost through NRW due to prepaid meter inefficiencies, aged infrastructure (aged meters and pipes), pressure variations, vandalism, theft, illegal connections and reservoir overflows.
He added that the current electricity bills average K2 billion per month, which is about 60 percent of sales.
“The water tariffs have remained below cost of service since 2015. Water tariff adjustment has always been below the main input of production i.e. electricity tariff.
“Further, the delays in approvals and implementation of tariff adjustments create funding gaps in operations. The tariff adjustments made in 2022 and 2023 were not enough to cover the foregone revenue,” he said.
He was quick to note that BWB has developed a strategy to turn around its performance with emphasis on improving its operational efficiency, financial position, staff productivity, corporate governance, and customer satisfaction.
The BWB boss observed that the main strategic objectives in the turnaround strategy include reducing NRW to 43 percent by March 2027, cutting energy bills by 40 percent by March 2027 and attaining cost reflective tariffs from April 2025.
“The board’s turnaround strategy covers a period of 2024 to 2027 with a turnaround occurring in 2026. By 2026 the board will start registering profit and have net cash inflows for operations and statutory obligation.
“In order to improve its efficiencies, the Board secured a grant of $145m to help reduce NRW in Kabula and Soche Zones and improve in operational efficiency. “This project will improve water supply and sanitation services in Blantyre City and surrounding areas. The board is expected to take over sewerage facilities from Blantyre City Council at the end of the project in March 2029,” he said.
