Umgeni Water needs to make R1 billion profit to fund projects and meet its service demands

Umgeni Water, KwaZulu-Natal’s largest supplier of bulk potable water, would need to post profits of more than R1 billion over the next year to be able to fund its infrastructure projects to meet its service demands and create an economic development impact in the province, according to the entity’s chief financial officer, Nomalungelo Mkhize.

“In the next financial year the forecast we are looking at as we go into our tariff discussions is above R1.5 billion. Post that period, we are also looking at generating surpluses at around the same number,” said Mkhize. Umgeni Water reported yesterday that in the 2018/2019 financial year the entity made a profit of R1.4 billion.

Thami Hlongwa, Umgeni Water’s chief executive, said the profits would be used to implement key infrastructure projects to ensure water resource security. At this point, R1.36 billion had been committed for the 2019/2020 financial year. Of this amount, more than R405 million would be spent on rural development projects.

For the year under review, the entity reported that its revenue totalled R3.524 billion, which showed an increase of 22 percent (R636 million) from the prior year. Bulk water sales volumes grew by 8.6 percent as the drought subsided. The approved bulk water tariff increase for the year was at 13.7 percent.

Mkhize said a majority of the surpluses came from the volume growth recorded at 8.6 percent in the previous financial year as well as having a tariff that was cost reflective. “We start off with a tariff making sure that all our direct costs are accounted for and able to provide for our infrastructure, operating and maintenance.

"So the tariff that we charge multiplied by the volumes should give a good basis for our revenue. It will cover all the cost so that in the end it can generate a surplus,” she said. Umgeni Water board chairperson, Ziphozethu Mathenjwa, said that the entity recently signed a 20-year partnership that opened way for the entity to operate and manage secondary potable water schemes on behalf of uThukela District Municipality.

Currently, Umgeni Water was operating and managing three schemes and would take up 11 others. In the next five years, investments would be made in rehabilitation, upgrades and refurbishment of the infrastructure. The entity also said that if all went according to schedule, 2020 would see the beginning of construction the Lower uMkhomazi Bulk Water Supply Scheme which would provide about half a million people from the South of Durban(Amanzimtoti) to the South Coast.

The budgeted project cost was R4 billion aimed at securing future water supply, reducing backlogs and in regeneration industrial and economic development. Completed projects included the uMshwathi Regional Bulk Potable Water Supply Scheme, which cost R972 million.