NAMWATER must make drastic increases in its bulk water tariffs in order to maintain and install new infrastructure to replace ageing pipelines and pumping stations.
NamWater has not been able to recover its cost of providing water because of Cabinet's reluctance in the past to approve tariff hikes for water. In the process, NamWater has lost around N$400 million over the years. The water utility is finalising a document on higher tariffs for Cabinet approval.
NamWater has not been as lucky as NamPower, which has been able to get approval from Cabinet for regular tariff hikes.
"Tariffs assist with the payment for operational expenditure and the accumulation of reserves to be utilised for the replacement of assets. There is still a huge backlog on the replacement of fixed assets which we have to address through a combination of shareholder injection, loan finance, and internal reserves," NamWater told The Namibian on inquiry.
One of the projects planned for this financial year includes updating the pipeline and pump stations between Windhoek and the Von Bach Dam, which is currently underway and will cost the corporation more than N$150 million.
Other projects include the Ondangwa reservoir, the Kuiseb River pipeline strengthening project, Rundu treatment plant upgrade, the Calueque pump station upgrade, Otjimbingwe rural scheme and the Kalkfeld rural scheme.
"There is no adequate funding. Some of the money will have to be borrowed from financiers, whilst the balance will be financed from central government and savings from previous financial years. The bigger projects are still to be executed, the total of which is around N$2 billion for the next five years, which must be financed by NamWater," said the corporation's corporate communication department.
According to the corporation, the bulk of the infrastructure is older than 30 years and replacements have to be done now.
"We have developed master plans to schedule and cost these replacements, and these indicate that substantial adjustments for tariffs will be required if NamWater is to be able to pay for the replacements, from its own resources and external debt," the corporation said.
NamWater made a loss of N$9,4 million after tax during the 2010/11 financial year and said the performance for 2011/12 is expected to be "slightly better" due to the approved tariff increases in that financial year.
"An increase in the tariffs will however enable NamWater to adequately recover is operating costs and improve its ability to replace the existing infrastructure," NamWater said in a document seen by The Namibian.
Some of the tariff increases proposed include a 25 per cent increase for each of the next three financial years for the City of Windhoek. The City of Windhoek is NamWater's biggest customer, consuming 30 per cent of all water supplied by the utility.