Senators give Lenku 60 days to reform debt-ridden water firm

A Senate watchdog committee has issued a 60-day ultimatum to Kajiado Governor Joseph Ole Lenku to turnaround operations of debt-ridden Oloolaiser Water and Sewerage Company.

This is after senators declared the firm as technically insolvent and is edging towards bankruptcy.

The revelations emerged during the grilling of Lenku by the Senate County Public Investments and Special Funds committee chaired by Vihiga Senator Godfrey Osotsi yesterday.

The county chief was responding to a damning report by Auditor General Nancy Gathungu on the financial operations of the company.

It emerged that the company is operating on a negative working capital of Sh120.5 million as it struggles with liabilities of Sh196.6 million.

The firm is also grappling with an operating loss of over Sh120 million having been on a loss-making trend since 2018.

This is due to huge unpaid water bills by consumers in the satellite towns.

The firm supplies water in Ngong, Rongai, Kiserian and the environs.

According to the report for year ended June 2021, the company registered a loss of Sh97.7 million in the financial year ended June 2019, Sh22.8 million in the following fiscal year and Sh25.6 million in the financial year ended June 2021.

“It is clear the company is experiencing financial difficulties impacting on its sustainability and is edging towards bankruptcy,” Gathungu said in the report.

“The negative trend casts significant doubt on the future existence of the company,” the report adds.

The firm is also struggling with high non-revenue water of 38 per cent against the allowable threshold of 25 per cent allowed by the Water Services Regulatory Board regulations.

According to the audit report, four out of every 10 litres of water produced by the company was not paid for during the year under review.

The panel heard that the non-revenue water had risen from 33 per cent in the fiscal year ended June 2019 to the current 38 per cent.

During the fiscal year ended June 2021, the company lost Sh76.9 million in water produced but not billed known as non-revenue water, where 2.4 cubic meters of water was produced but only 1.5 million cubic meters was billed.

“The company produced 2.4 million cubic metres of water out of which 936,940 cubic metres, representing 38 per cent, was not paid for,” read  the report in part.

Osotsi said the audit queries mean the company is technically insolvent as it grapples with Sh144 million debt while also owes customers Sh686 million for use of their deposits.

Consequently, he tasked the firm’s management to put in place measures to stop the loss-making trend as well as establish a debt-recovery plan within 60 days.

“The company should also deal with the high non-revenue water, come up with a debtors’ schedule and an ageing analysis as well as an updated assets register,” Osotsi said.

Migori Senator Eddy Oketch also raised concern over unpaid bills amounting to Sh85 million and called for recovery of the debts from consumers.

The company was also fingered for irregular payment of acting allowances, failing to have fixed assets register and irregular withdrawal from customer deposit account.

“The management also has seven days to put in place policies to access, utilise and refund money from customers’ deposit account,” he added.

The firm’s acting managing director Juma Aliero said they have been spending most of their funds on electricity and purchase of chemicals for water treatment.

“We also have an old water tariff (2014) that has denied the company revenue. We have, however, applied for a new water tariff to enhance our revenue,” Aliero said.

Governor Lenku admitted the challenges facing the water company, saying the audit queries raised have to do with governance issues as the firm has been operating without a board of directors.

He said he has moved to install a new management at the utility firm to turn it around with the new board mandated to fix water loss.

“We now have a functional board and we shall substantially address this water shortage when the ongoing implementation of the Nairobi satellite towns water and sanitation programme is completed,” Lenku said.

The governor said the project by the national government targets to construct 205 kilometres of pipeline and 8,240 new meter connections.

Earlier, the committee postponed consideration of audit queries for Nolturesh Water and Sewerage Company after it emerged it was owned by the three counties of Kajiado, Machakos and Makueni.

Senator Osotsi directed the queries be handled in the presence of governors Wavinya Ndeti (Machakos), Mutula Kilonzo Jr (Makueni),  Lenku and Wasreb.