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Statement from the board of Umgeni Water: Apprisal of stakeholders on various developments
UMGENI WATER
Registration number: 1997/007707/07
JSE Alpha code: BIUMWA
STATEMENT FROM THE BOARD OF UMGENI WATER: APPRISAL OF STAKEHOLDERS ON VARIOUS
DEVELOPMENTS AS A FOLLOW UP FROM THE PRESENTATION OF ANNUAL PERFORMANCE RESULTS 2019/2020
1. Context
In line with Umgeni Water’s commitment to share information with its stakeholders on significant
organisational developments, a series of engagements is held every year where the audited outcomes of
Umgeni Water’s annual performance are presented. This occurs in an interactive manner that is often
characterised by a robust question and response segment.
The audited performance results for the most recent financial year, namely 2019/20 (“FY 19/20”), were
shared with a wide range of stakeholders, initially with the media, the Executive Authority and customers
and later, in separate sessions over two days, with investors and financial institutions, following publication
of the FY19/20 results on SENS . At the latter sessions and following presentations, various questions were
raised on governance-related matters and two investigations, one commissioned internally into three
awarded tenders and accompanying supply chain processes and the other by the Special Investigative Unit.
The Board of Umgeni Water provided an undertaking that feedback would be provided once more
information became available. This communique is fulfilment of that undertaking and also serves to apprise
interested parties who were unable to participate in the engagements with financial institutions.
2. Engagements with financial institutions and other stakeholders on FY 19/20 results
Financial institutions were well represented at the briefing sessions, which were held digitally on 5 th and 6th
May 2021. On the first day, a wide spectrum of financial services providers, investment managers, capital
managers, debt funders, asset managers and portfolio managers participated.
As an illustration of the seriousness with which Umgeni Water regards stakeholder engagements, all
presentations were done by the Acting Chief Executive, Mrs Nomalungelo Mkhize, and the Acting Chief
Financial Officer, Mrs Kajal Singh. The Chairperson of the Board, Mr Magasela Mzobe, was present to
respond to questions, particularly ones pertaining to governance.
The presentations were well received, which illustrate again the high level of confidence the investment
community, bondholders and financial services businesses have in Umgeni Water’s position as a financially
sound entity that remains a going concern, is able to service its debt and, at the same time, continue to
implement vitally needed water infrastructure projects. There was also recognition by participants of
Umgeni Water’s strategic role as a catalyst for economic reconstruction, after the devastation of the COVID-
19, and in transformation of our economy through various Black economic empowerment initiatives.
3. The Board of Umgeni Water: Subscription to accountability
The Board of Umgeni Water is delighted at the constructive engagement and the positive response that was
received and wishes to reiterate that it will continue to interact with Umgeni Water’s stakeholders in a frank
and transparent manner so that the cordial relationships that exist are further strengthened.
In keeping with the ethos of accountability that has been firmly instilled across the organisation, all
questions that were raised received adequate responses. The following were some of matters/issues that
were raised at the 5th and 6th May 2021 sessions and the Chairperson’s responses to them. This statement
also contains progress that has been made and measures implemented where loopholes or weakness were
identified in internal processes.
4. Key issues/matters raised by financial institutions in follow up to presentations
4.1. Investigations: Request for additional information
4.1.1. Independent forensic investigation
The Chairperson of the Board confirmed that following receipt of a report concerning ligation
matters that impact on infrastructure implementation, the Board had proactively requested an
independent forensic investigation into three tenders that were awarded and the associated
supply chain processes. These tenders were the subject of protracted and costly court cases.
Committees of the Board and the Board have since received and considered the forensic report,
which also contains recommendations for tightening of controls and corrective measures. One
of the reasons for commissioning a forensic investigation was to identify areas of improvement
in supply chain processes – where or if required – and institute remedial action. Since submission
of the report, effective measures have been implemented that will now assist in pre-empting and
preventing the possibility of litigation over tender awards (See 5). Litigation results in projects
being delayed and consequently delays in provision of water to municipalities or in operation and
management of wastewater treatment works that are vitally needed to prevent environmental
degradation.
4.1.2. The Special Investigative Unit
In January 2019 a Presidential proclamation was issued, approving a SIU investigation into various
matters, including allegations of unauthorised, irregular or fruitless and wasteful expenditure,
and whether any loss had been incurred by the Board or the State. The investigation pertained
to certain emergency projects and another project pertaining to refurbishment of aqueducts. The
investigation was commissioned in terms of a proclamation that was issued by the President of
the Republic of South Africa, therefore, on completion of the investigation, the SIU will hand its
report to the Office of the President. The President will make a decision on whether to release
the report or not. For its part, Umgeni Water provided full co-operation to the SIU during
investigations and will implement the recommendations and remedial action that may be
required.
4.2. Governance: Request for additional information
4.2.1. Appointment of a permanent Board
In terms of the Water Services Act 108 of 1997, appointments to Boards of water sector
institutions are made by the Minister of Human Settlements, Water and Sanitation, who is the
Shareholder and Executive Authority of these institutions. The process for the appointment of a
permanent Board for Umgeni Water has begun through publication of an advert calling for
nominations. Shortlisting and interviews are, therefore, done by the department. Once the
appointment process has been completed, an announcement will be made by the Ministry. In
the meantime, the current Board continues its fiduciary duties and governance responsibilities
as a fully-fledged Accounting Authority.
4.2.2. Appointment of a permanent Chief Executive
A permanent Chief Executive will be appointed by the new Board after due processes have been
followed. The current Chief Executive (Acting) continues to execute her role and responsibilities
to the fullest and in line with the organisation’s legislative mandate, strategies of the organisation
and expectations of the Board. In FY 19/20, under the stewardship of the current Chief Executive
(Acting), Umgeni Water accomplished strong financial and non-financial results despite the
adverse environment that was created by COVID-19 and an economic downturn.
4.2.3. Resignation of the former Chief Executive with immediate effect
It is indeed correct that the former Chief Executive, Mr Thami Hlongwa, resigned with immediate
effect. The decision to resign was his own and the Board accepted it when it was tendered. The
transition from the previous Chief Executive to the current Chief Executive (Acting) has been
seamless. The Acting Chief Executive continues to steer Umgeni Water on the right path and the
organisation is on track to perform strongly again at the end of FY 19/20. Testimony to the
smooth changeover is contained in the views of our Executive Authority and other stakeholders
who complimented the Board for managing the process in a way that did not cause disruptions.
5. Progress to date on findings, recommendations and remedial action identified in the forensic
investigation report
1. The process of review and updating of organisational policies and processes, including those pertaining
to supply chain management (SCM), is currently underway and good progress is being made. This is in
direct response to recommendations made in the forensic investigation report.
2. Certain SCM procedures have been identified in the report as ambiguous and an area of weakness.
These procedures are being updated to ensure they are relevant and able to adequately support the
organisation’s work in tender compilation and awarding. In this crucial area of our business, there is no
room for confusion and wherever it exists, it will be rectified.
3. Other issues identified in the forensic report is the need for training of members of the Cross Functional
Sourcing Team (CFST) (Technical Evaluation Team) and drawing up of Terms of Reference for this team
to clarify their appointment and mandate and demystify the tasks, responsibilities and reporting lines.
4. This disquiet expressed in the findings, together with the absence of a procedure manual for the CFST,
will be addressed as a matter of urgency in order to ensure that future implementation of such roles
and responsibilities is unambiguous and beyond question.
5. Equally importantly, a legal expert will be appointed to guide and assist in the implementation of the
report’s findings and recommendations particularly in the areas of consequence management and
institution of any charges for misconduct.
6. Where appropriate and required, disciplinary steps will be taken to deal with suspected negligence,
dereliction of duty or poor performance.
7. The appointment of the Chief Audit Executive, fully accountable to the Board of Umgeni Water, will
assist in the monitoring of controls within the SCM unit amongst other key business processes and will
liaise with the Auditor General in so far as resolving some of the issues identified in the reports and
recommendations issued.
8. With regards to possible illegal conduct through alleged mismanagement of funds or other serious
contraventions of the Public Finance Management Act, this will become the subject of investigations
by law enforcement agencies.
9. National Treasury’s Government Technical Advisory Centre (GTAC) unit as well as the National
Treasury’s Office of the Chief Procurement Officer (OCPO) and Municipal Infrastructure Support Agent
(MISA) will be called upon to assist in the bid committee process enhancement as well as monitoring
of the SCM unit’s business process against legislative requirements.
6. The Board of Umgeni Water: Its commitment
The Board of Umgeni Water subscribes fully to fair, transparent and ethical conduct and ensures that this
remains an entity-wide ethos. The Board, as the Accounting Authority, is committed to a cordial, healthy
and constructive relationship with all who transact and interact with Umgeni Water or have an interest in
it. This pledge will continue to be fulfilled through constructive engagement and dialogue, including regular
provision of information in an unambiguous manner. At the same time, the Board will not hesitate to act
decisively when the potential for compromises in governance arises or are recorded.
16 July 2021
Debt Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Date: 16-07-2021 12:07:00
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