RIGHT OF REPLY: On August 27, the Daily News published a report titled “Debt taps tightened at water boards”.
This report contains innuendo
or inferences that are worrisome
as they may create a grossly negative perception about borrowings
by water boards, including
Umgeni Water.
It is important and relevant to note that water boards operate in a highly regulated environment prescribed by the Public Finance Management Act, the Municipal Finance Management Act, the Water Services Act and the National Water Act, among others.
It is important Umgeni Water sets the record straight so that the negative slant of the report and innuendo are not interpreted to mean that discipline or due consideration is, or had been, absent in decisions on borrowing, specifically the amount required and for what purpose.
In a three-year cycle Umgeni Water applies for borrowing limits as per the Public Finance Management Act. The notice issued by the Finance Minister in the Government Gazette is the norm and initiated through, in this instance, Umgeni Water’s submission of Funding Strategies.
The three aspects of the report mentioned are:
1. The headline: “Debt taps tightened at water boards”. This infers lack of discipline in borrowing and could also be construed to suggest that Umgeni Water had in the past gone on a shopping expedition to finance markets without due regard for risk and other factors relating to repayment.
This is not the case. Discipline has always been prevalent and remains present, as is evidenced in borrowing limits approved by National Treasury and Umgeni Water’s adherence to them.
These limits cannot ordinarily be exceeded and if there is intention to exceed them, prior application, supported by sound reasoning, has to be made to National Treasury.
A decision on whether they should be exceeded is made by National Treasury after various factors are considered.
Inclusion of this information
in the report would have given
it balance.
2. The introduction uses
the words “stringent rules”.
This infers “stringent rules”
had been set to manage or
control excessive borrowing.
“Stringent” is clearly the reporter’s interpretation of the nature of the rules and use of the word “set” would suggest they are new.
The past and prevailing situation is that rules and conditions of borrowing are determined by National Treasury after submission of the Funding Strategies.
Umgeni Water does not borrow more than it requires.
Some key factors considered by National Treasury are affordability and risk.
3. The report says that “as part
of conditions for authorisation, Umgeni Water is required to submit quarterly progress reports to National Treasury asset and liability management division as well as highlight progress with major capital expenditure projects”.
The manner in which this information is presented could incorrectly suggest that this is
new and may have been introduced to make borrowing by Umgeni
Water difficult through regular monitoring of how borrowed funds are being spent.
The prevailing situation is that ordinarily and as part of regular and mandatory reporting to its statutory stakeholders, Umgeni Water submits such reports and has been consistently compliant in this regard. Umgeni Water also ensures that funds raised are spent for reasons they are borrowed, and it accounts for this expenditure.
Shami Harichunder Corporate stakeholder manager, Umgeni Water