National water

By Haggai Matsiko

Fight over Muhairwe’s job rages on as corporation declares profits

National Water and Sewerage Corporation (NWSC) has just announced a Shs 10 billion profit. So why is the management at the corporation punching holes in the numbers instead of celebrating?

Failure to name a new managing director five months after former MD, William Muhairwe’s contract expired on November 7, 2011 and was not renewed as had been the practice, partly explains it.

Accounts signed by the Auditor General show that in the financial year ended June 30, 2011, NWSC posted a Shs10 billion profit which is a 30% jump from Shs 7.6billion made in the previous financial year.

The financial statement shows that the corporation’s income grew 16% to Shs.131billion from Shs.112 in the previous financial mainly on revenue from expanded water and sewerage services.

But insiders point out that this growth in income and profits could have been wiped out by the more than proportionate growth in the corporation’s operating expenses which went up over 16% from Shs 86 billion in 2010 to Shs100 billion last year.

Without items like Shs 5 billion “other income’ which comprises provisions for bad debt, income from external sources, and foreign exchange gains, and grant income of Shs 5 billion, NWSC’s Shs 10 billion declared profit could have been easily wiped out by the growth in expenses.

The Acting MD, Alex Gisagara, remains uncommunicative but it’s clear he is under pressure. To clinch the job, Gisagara must maintain the blue-chip image of the corporation created by Muhairwe who was appointed in 1999 when NWSC was loss-making but turned it around to post profits since 2005.

Gisagara’s first months in the job have been tough with the corporation running ads on local radios to apologise for water cuts in several areas.  Insiders say Gisagara, an engineer who before his elevation headed the corporations engineering department, is treading softly. He is dealing with a board chaired by Christine Nandyose who even under Muhairwe’s reign showed that she is keen to stamp her authority on NWSC.  Critics say, as a result, there is a lot of laxity at Plot 39 Jinja Road and throughout the corporation’s operations.

“We do not have an MD yet so those issues are likely to be there like in all transitions but as for water supply, it has been improving and we now supply a lot of water and have been making several infrastructural investments to make the situation better,” an official at the corporation told The Independent.

The strategy

As part of the strategy to deflect criticism, it appears the new managers want to show that Muhairwe left a company worse off than was reported.

At the time when the audited financial statements were presented showing the Shs10 billion profit, The Independent has accessed papers presented to the board and reportedly shared with President Yoweri Museveni showing how the new managers have allegedly cut costs drastically since Muhairwe left. The documents show that the MD’s telephone calls, hotel bills, travel expenses are down by over 90%.

The paper shows that between November when Muhairwe left and December, the corporation was able to cut average monthly foreign travel costs from Shs 246 million to less than Shs 15 million.

Hotel bills for the Head Office reduced from Shs 45 million to Shs 12 million and that that the Managing Director’s telephone bills reduced from Shs 11.3 million to less than Shs 500,000.

One of the concerns raised against Muhairwe was his constant travels abroad where he gave lectures about managing public corporations.

“How much time do you spend at office doing company work when you are always travelling abroad marketing your book and giving lectures at the expense of the corporation,” a board member told The Independent at the time of Muhairwe’s exit.

Local travel in Uganda also reduced from Shs 137.1 million to Shs 24 million. In the same way security expenses for Head Offices also reduced from Shs 11 million to Shs 9 million.  In another case, a mysterious non-staff only identified as Ms. Joanita N was during Muhairwe’s tenure on payroll receiving Shs 7 million although she was an external consultant.

Misleading information

One of Muhairwe’s major achievements was the switch to the e-water billing system that resulted in an overhaul of the company. But NWSC board member told The Independent that the corporation was recently shocked to learn that the system was costing them a lot of money yet Muhairwe had told the board that e-water was free of charge.

“The former MD had told us that he had worked out an arrangement with the banks that would not cost the corporation money as the banks would benefit from deposits,” the official said, “but Stanbic alone recently charged us over 300million.”

Sources at the corporation told The Independent that the 2011 financial report reflects Muhairwe’s keenness to present good financials to the board by employing decision that hurt the company in the long-run.

PriceWaterHouseCoopers, the corporation’s auditing firm, and the Auditor General, raise concerns about an item called “Non-Revenue Water” (NRW); that is water the corporation produces but is lost through leakages and other ways without bringing in revenue.

Sources at the corporation attribute the high volumes of NRW to inadequate capital investment in infrastructure over the years by Muhairwe. Critics say he shunned investing in order to have good financial reports.

There is disagreement about the true extent of NRW. The financial accounts show that it reduced from 33.3% to 32.8% in 2010/11, although in Kampala it stagnated at 39.2 percent. The Auditor General’s report says the decline in NRW is a “remarkable achievement” due to the implementation of the NRW Action Plan through strategic programmes like “Every Drop Counts” and operation “Wet Storm”.

Muhairwe’s critics claim as of December 2011, NRW in Kampala had dropped to 41% from 43%. They say between 2008 and 2011, NRW generally had only slightly reduced from 33.5 to 33%.

The fight over NRW water is critical in NWSC because it is used as a measure of how well a water utility is managed. The World Bank recommends optimal NRW losses below 25%. To benchmark NWSC performance, NRW in Germany is 7% while it is 90% in Lagos, Nigeria.

But as they punch holes in his accounts, June 2012, when the financials for the first year after Muhairwe are presented, is approaching. The current management has no choice but to challenge Muhairwe’s record with figures and service provision.