Data Hub

Nairobi loses Sh4.8bn in unbilled water use


Nairobi’s water problems have become so prevalent that the majority of residents now take it for granted that their taps will be dry and that they will be buying the precious commodity from predatory bowser operators.

The over four million residents of the capital have had to put up with water rationing since April 2017, with some estates going without water for weeks at a time, if not months.

Nairobi City Water and Sewerage Company Limited (Nairobi Water) can supply 525,000 cubic metres daily to the residents against a demand of 850,000 cubic metres, leaving a deficit of 325,000 cubic metres.

But even as the firm grapples with the growing supply deficit, it faces crippling revenue loss with half of the water flowing through its pipeline going unbilled.

A report by Auditor-General Nancy Gathungu for the financial year ended June 30, 2020, shows the company produced 176.04 million cubic metres of water out of which only 86.35 million cubic metres were billed to customers.

The balance of 89.69 million cubic metres or 51 percent of the total volume produced represents non-revenue water. This was double the allowable loss of 25 percent, under Water Service Regulatory Board guidelines for non-renewable water.

“The significant level of non-renewable water is an indication of inefficiency and a lack of effectiveness in the use of public resources and, may negatively impact the company’s profitability and its long-term sustainability,” said Ms Gathungu.

Despite efforts to cut water losses, the city has always struggled to meet the threshold set by the regulator, pointing to longstanding and deep-rooted malpractices, as well as inefficiencies at the utility.

Before the big jump in 2020, the non-revenue water had fluctuated between 34 and 42 percent from 2014 to 2019. The losses rose in 2020 despite a decrease in the production of 3.06 million cubic metres — from the 180.1 million cubic metres produced in the year to June 2019.

“This is attributed to the closure of the Ngethu treatment plant in May 2020 for some days due to high turbidity, and the washing away of the Sasumua transmission line in the Aberdare Forest during the April 2020 long rains,” said Nairobi Water managing director Nahashon Muguna.

In monetary terms, the urban utility firm lost a staggering Sh4.75 billion in revenue from unbilled water — due to water theft, faulty metres and illegal connections.

Under the current Nairobi Water tariff structure, domestic, industrial consumers, and government institutions pay a fixed flat rate of Sh204 for units up to six cubic metres consumed.

Units of water used between seven and 60 cubic metres for domestic consumers attract a levy of Sh53 per cubic metre.

Mr Muguna explained that the utility had a revenue collection target of Sh10.4 billion in the financial year, but collected Sh8.3 billion, translating to a performance of 81 percent.

But even revenue from the legally consumed water was not realised in full, with the Sh8.3 billion, representing 97 percent of the actual Sh8.6 billion billed in the period under review.

The firm has recorded mixed success over the years in collecting all its billed revenue.

Illegal connections

In the year ending June 2015, it beat its billed revenue by Sh10 million to collect Sh 6.72 billion but then fell into a deficit of Sh237 million in the year to June 2016, when the firm billed Sh8.274 billion.

In the year to June 2017, collection hit Sh8.54 billion against a target of Sh8.4 billion, followed by an intake of Sh8.16 billion against a target of Sh8.27 in 2018.

In the financial year ended June 2019, the firm brought in Sh8.74 billion against a target of 8.745 billion.

Mr Muguna admitted to the incidents of unaccounted for water but says the firm is working to put in place measures to reduce the losses.

The main mitigation measure the firm is pursuing is the disconnection and/or regularisation of all illegal connections across the city.

Further, he argued that the unaccounted-for-water is also a result of leakages in connection pipes, overflows at storage facilities, metering inaccuracies and an inefficient billing system.

As a remedy, Mr Muguna said, the firm would install accurate flow meters to replace all mechanical meters for high consumers, replace faulty meters, disconnect or regularise illegal connections and ensure timely repair of leakages and pipe bursts.

In addition, the firm is carrying out a census, tagging and geo-referencing of all meters to improve reading and billing.

In 2019, City Hall netted more than Sh16 million in penalties and court fines for illegal water connections in the capital after the county government launched a major crackdown on cartels perpetuating the vice.

Penalties for individuals arrested over illegal water connections amounted to Sh12.9 million while Sh3.19 million was in court fines.

City Hall said the operation saw 1,834 illegal water connections unearthed, leading to the arrest and prosecution of 232 people, with a further 893 illegal connections regularised.

Most of the illegal connections are found in lower-income areas such as Githurai, Zimmerman, Kasarani, Mwiki, Kiamaiko, Huruma, Kariobangi, Mathare North, and Kayole as well as Tassia, Baba Dogo, Embakasi, Kware ward and Imara Daima.

The crackdown followed a call by Nairobi County Assembly in 2018 for the utility firm to strengthen reinforcement units to help deal with the cartels operating water supply business illegally besides formulating policies that would encourage punitive measures to be taken on any person vandalising the company’s property.

Further, the assembly told the utility to expedite installing metres that are easily monitored and tamper-proof to curb revenue loss.

The firm was also told to install bulk metres in informal settlements and look for innovative measures like having private people man and operate water supply to the residents.

The assembly also urged the firm to acquire a water billing software programme that cannot be manipulated and would help in detecting overpayments and underpayments immediately after the readings are posted to the system.

In early 2019, Nairobi Water awarded Giza Systems Integration (K) Limited a Sh122.7 million contract for the supply, delivery, installation, testing and commissioning of customer management and billing system.

The new billing system was to enhance the growth of the firm’s billing and collections and also enhance controls in revenue management.

The system was planned to go live in April 2020 but that did not happen until four months later in August 2020.

To boost revenue, Mr Muguna said the firm hopes to implement a new billing tariff to replace the old one, which has been in place since November 2015.

He said the company had applied for a tariff review like the one in use has remained constant despite the prices of goods rising.

“We are already implementing the non-revenue water reduction strategies, which are being fast-tracked to improve our revenue growth,” he said.

The firm has put in place mechanisms to enhance billing and revenue collection through the use of technology and surveillance.

“Revenue performance is continually monitored and discussed monthly with the heads of departments.”

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