Umgeni Water nets unqualified audit despite fraud allegations

Cape Town - Umgeni Water has ended its financial year with an unqualified audit and its corporate governance intact in spite of allegations of tender fraud through the period, and the untimely resignation of its board and chief executive officer.

Acting chairperson Ziphozethu Mathenjwa said on Tuesday at an event in Durban the utility had ended the year to June 30, 2017 in “stable and financially sound position”, even though “during the turbulence, our good [corporate] governance was tested” and the utility had to deal with drought.

She said the allegations of corruption that were levelled at some of the senior employees at the group were withdrawn. 

Regarding the board changes, Mathenjwa said all board members had a four-year tenure, which had come to an end this year, and which had also co-incided with the end of the five-year tenure of the former chief executive, Cyril Gamede.

The instability from these changes, and appointment of an interim board and chief executive, had contributed to the “tumultuous” period that Umgeni Water found itself in this year.

Drought remains problem

However, at no point in the year were they without suitably qualified executives and leadership, she said.

Although the financial results were good, with pre-tax profits at R746m compared with R781m the previous year, the drought remained a problem.

Mathenjwa said the water system feeding Durban and Msunduzi in particular, was still under stress, and the 15% water restrictions would have to remain in place. Nevertheless, “we don’t anticipate the situation will get worse”, she said.

Acting CEO Thami Hlongwa said that the R746m surplus will be used to sustain the five-year R837m rural development programme and for infrastructure projects.

He said that the surplus would also be used to ensure that bulk water tariffs were maintained at an affordable level. Last year the utility charged a 15% tariff on its customers, but Hlongwa said they had not yet decided what the tariff would be for the new financial year, as negotiations were due to start with customers in a week.

'Golden handshake'

When questioned about speculation that Gamede had received a “golden handshake” at the end of his tenure, Mathenjwa said Gamede had only received the funds that were due to him by the end of his contract.

Hlongwa also provided some detail on what is likely to be their biggest project in the years ahead, the uMkhomazi - Water Project and the uMkhomazi Bulk Water Supply System (BWSS), for which environmental impact assessment studies were under way, and which could cost in the region of R3.5bn and R18bn to R22bn respectively.

The uMkhomazi Water Project will serve the eThekwini Municipality, while the uMkhomazi BWSS will also serve the Ugu Municipality on the South Coast. The appointment of a permanent board was expected to take about six months.

The proposed “re-alignment” of the KwaZulu-Natal water sector would be rolled out after a due diligence study was commissioned, which in turn would likely take between six to 12 months to complete by an external group of specialists.

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