Senators want the “skewed” agreement between Coast Water Works Development Agency and Kwale Water and Sanitation Company (Kwawasco) that has left the utility on the brink of insolvency reviewed.
The Senate’s County Public Investments and Special Funds Committee yesterday heard that the water company is grappling with a negative working capital of Sh75 million, resulting from inherited liability of Sh346.3 million against assets of Sh271.1 million. The firm is also struggling with accumulated losses of Sh129 million over three successive financial years starting in 2019.
Kwawasco also owes Coast Water Works Sh217.8 million although the latter puts the figure at Sh661.5 million.
Consequently, Auditor-General Nancy Gathungu cast doubts on the ability of the company to meet its obligations due to the mounting debts. She said the company has had to largely depend on support from the Kwale County government, shareholders and creditors to continue operating.
“This is an indication that the company may not be able to settle its obligation as and when they fall due,” said Ms Gathungu.
Appearing before the committee chaired by Vihiga Senator Godfrey Osotsi, Kwawasco Managing Director Eric Parmet said the uncertainty at the utility firm is due to the skewed bulk water supply service provision agreement with Coast Water Works. In the agreement, Kwawasco only gets 40 per cent of the revenue generated despite having to foot 100 per cent of bills for the operation of the inherited water sources.
He explained the water sources relied upon by the firm were initially managed by Coast Water Works before being transferred to Mombasa and Kwale counties after devolution.
Mr Parmet added that Coast Water Works has passed the management of 13 boreholes to them yet the same was to be operated by Coast Water Service Board as part of the bulk water supply as per the service provision agreement.
He pointed out that in the financial year ended June 2021, for instance, they are expected to foot a Sh83 million bill as invoiced by Coast Water Works being Sh43.3 million bulk electricity bills and Sh37.2 million as cost of bulk water.
“This has been a long-standing issue. Coast Water operates the water sources and they sell us the bulk water, which we then sell to our customers. However, we get only 40 per cent of the water but are billed at 100 per cent,” said Mr Parmet.
During the financial year under review, the water firm made Sh141.6 million from water sales against a target of Sh220 million. According to audit reports, in the financial year ended June 2019, the firm reported a loss of Sh135 million, which was then reduced to Sh27.3 million in the following financial year before dipping further to Sh15 million in the financial year ended June 2021.
Kwale Governor Fatuma Achani said they have raised the matter with Coast Water in writing but no goodwill to engage has been forthcoming. She asked the senators to intervene in the matter by writing to Coast Water for a solution to be arrived at, adding that they are grappling with huge debts and aged infrastructure inherited from the agency.
“We have been calling for engagements to reconcile the bills but no meeting has ever happened,” said Ms Achani.
Mr Osotsi said they will look into the issue with a view of having Coast Water harmonise the billing process.
“This is a serious issue as it touches on revenue and cost of your services. We will take the matter seriously,” said Mr Osotsi. “We are noticing there are so many transitional issues from defunct local governments over the issue of transfer of assets and liabilities.”
“They should be billing you in the right manner as per the agreement and not the 100 per cent,” added Elgeyo-Marakwet Senator William Kisang.