Economy
State-owned water firms owe Treasury Sh123bn
Tuesday October 31 2023
The National Treasury building in Nairobi. FILE PHOTO | NMG
State-controlled water service providers are struggling to repay loans that the National Treasury borrowed on their behalf, deepening the financial woes for an industry battling high levels of water theft and wastage.
Latest data shows 13 out of 17 firms had not serviced their outstanding debts, which stood at Sh123.13 billion in the last financial year ended June.
Only Sh2.07 billion had been repaid in the review period by firms in the sector, pointing to a default rate of more than 98 percent.
Read: Treasury bonds duration falls on interest heat
The Treasury usually borrows cash from foreign and domestic lenders for on-lending to State-Owned Enterprises (SOE), which play a strategic role in the economy but cannot get funding on their own because of their weak financial positions.
As a prerequisite, the Treasury should ensure the projects funded through on-lent credit “hold a top-level priority on the development agenda of the government.”
The data puts the loan disbursed to the Eldoret Water & Sanitation Company Ltd as the best performing having repaid 75.73 percent, or Sh802 million, of Sh1.06 billion borrowed. It is followed by Nyeri Water & Sewerage Company which had by last June serviced 60.86 percent of 1.16 billion total debt.
Athi Water Services Board had only repaid 1.12 percent of the Sh47.67 billion, while Lake Victoria North Water Services Board had cleared a lowly 0.21 percent of Sh11.62 billion loans.
Rising default rates amongst Water Services Providers (WSPs) have injured the creditworthiness of the utilities to contract new loans, the World Bank Group warned in a report.
Some of the debt is historical, with some dating back to the pre-devolution period when the utilities operated under defunct municipal and county councils.
“This [investment] financing model, developed pre-devolution, is no longer sustainable because counties have contested the loan repayments, and most WSPs are not in a financial position to honour their loan obligations,” World Bank analysts wrote in a recent report on the sector.
Large debtors struggling to service loans loans are Coast Water Service Board with Sh20 billion outstanding, Lake Victoria South Services Board (Sh11.90 billion), Tanathi Water Services Board (Sh8.01 billion) and Tana Water Services Board (Sh7.07 billion).
“Most waterworks development agencies face financial difficulties thus, are unable to meet their on-lent loans obligations,” the Treasury wrote in a past report.
“An Inter-Ministerial Committee has been constituted to review water sector loans and recommend the mitigation measures to be adopted.”
Read: Treasury gets five years to trim debt to 55pc of GDP
The water utilities have been struggling to reintame non-revenue water which has been eating nearly half of their potential sales.
