Johannesburg - Finance Minister Tito Mboweni has set stringent rules for the Rand Water and Umgeni Water boards. This comes as Mboweni has authorised Umgeni to borrow up to R4.8 billion and Rand Water almost R45 million as bank guarantees for a period of over three years for their respective projects.
“If there are any delays in the projects, the entity should provide reasons for such delays,” he said, adding that the bank guarantee should not in any of the three years exceed R15 million.
In a Government Gazette published last Friday, Mboweni said Umgeni Water could be granted up to R2bn for the financial year ending June 2020, R1.4bn in June 2021 and R1.4bn for June 2022. The amounts, Mboweni said, reflected the maximum balance of interest-bearing debt the entity could have as at the end of the financial years.
“This means that for as long as Umgeni Water has an interest-bearing debt on its statement of financial position (or balance sheet), it is not allowed to exceed these limits.
“The authorisation expires on June 30, 2022, and a new authorisation will be considered on expiry, provided Umgeni Water has borrowings recorded in its statement of financial position,” he said.
As part of the conditions for authorisation, Umgeni Water is required to submit quarterly progress reports to the National Treasury asset and liability management division as well as highlight the progress of major capital expenditure projects.
Mboweni also authorised that the Rand Water board be given R26.215m and issued bank guarantees of up to R15m limit a year between June 2019 and June 2021. Rand Water can borrow R6.345m by June 2019; R8.265m by June 2020; R11.605m by June 2021.
Mboweni said the proposed limits on borrowings reflected the maximum balance of interest-bearing debt at any point in time for the relevant period. He said the bank guarantee reflected the maximum bank guarantee Rand Water could source in favour of Eskom for its electricity supply agreement.
“Rand Water is required to have a non-cash secured bank guarantee and should at any point in time have liquid investments to the equivalent of R15m in relation to the financial years highlighted above.
“The bank guarantee is granted only in favour of Eskom and is limited to Eskom providing electricity to Rand Water’s three key accounts. These are Zuikerbosch, Zwartkopjes and Palmiet pumping stations,” he said.
Mboweni also highlighted that the set conditions for the approval of the bank guarantee for Rand Water also included the entity submitting quarterly progress reports to the National Treasury’s asset and liability management division and indicated the progress of major capital expenditure projects and project plans for the next six months.