21 November 2012

Namibia: Namwater Must Change Strategy to Serve Its Growing Client Base

NAMWATER has to reposition itself to be able to competently serve a growing market segment consisting of individuals and small businesses.

This is contained in NamWater chief executive officer Vaino Shivute's 2011 annual report that was tabled in the National Assembly last week.

He said the business landscape within which NamWater operated during the financial year ending March 31 2011 was characterised by uncertainties initially caused by the slow recovery of the global economy, and a number of natural disasters which further affected the viability of key industries in the country.

The corporation's core business is to supply water in bulk to local authorities and industries, but in addition to that NamWater finds itself increasingly supplying individual customers and small businesses in quantities which cannot be classified as bulk supply.

"If one looks into the future, it becomes increasingly clear that NamWater will be expected to play a bigger role in the supply of water to small customers, i.e. retailing. The operational and cost structures of our corporation are not set up for this type of activity and we will, therefore, have to reposition the corporation to be able to competently service this new but growing market segment."

Shivute said there were no significant differences in the sources of revenue to the corporation from the previous year, with the majority of treated water sales going to the local authorities, regional councils, ministries and mines.

In terms of quantities, 40% was sold as untreated irrigation water and its contribution to revenue was only 0,8% due to the lower tariffs charged for untreated water. "This is, however, a vital low-cost input to a very strategic sector of the economy i.e. agriculture," according to Shivute.

The percentage contribution of sales by customer category showed no significant difference compared to the previous year. However, he said future projections indicated that if rural domestic consumers were to be cushioned from tariff increases, the percentage contribution to total sales of rural domestic consumers would further dwindle.

For the year under review the corporation recorded a net profit before interest and taxation of N$9 411633 (2010: N$15 264 794 loss).

Total expenditure during the year under review decreased by N$4 million compared to the previous year, which constituted a decrease of 0,85%. When the impact of bad debts provisions and write-offs was excluded, expenditure increased by N$40,9 million (9,9%).

Shivute said this was mainly driven by an increase in personnel costs, mainly due to vacancies filled and salary adjustments of N$18,6 million, as well as electricity tariff adjustments, plus increased pumping of water to the Von Bach Dam at a cost N$16 million.

Other factors that played a role regarding the expenditure were post-retirement benefits mainly relating to severance pay provisions of N$6,2 million and a depreciation increase mainly relating to capitalisation of new infrastructure of N$6 million.

Shivute pointed out that the bulk of the corporation's expenditure was electricity costs and salaries. The two expenditure items constituted 58% (2010: 55%) of the total costs excluding impact of bad debts of the corporation.

"It remains of grave concern to the corporation that there is a disproportionate increase between electricity tariffs and water tariffs, considering the fact that due to the country's topology, the corporation spends significant amounts of its resources in pumping water to where it is needed," he said.

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