Billions down the drain: How Sakaja's City Hall let Nairobi Water sink into Sh5b debt

Nairobi Governor Johnson Sakaja faced tough questions from the Senate over the mismanagement of Nairobi City Water and Sewerage Company Limited, which is now choking in Sh5 billion debt.

Sakaja, who appeared before the Senate County Public Investments and Special Funds Committee, had a rough time explaining to senators why the water company is losing at least Sh8.57 billion in water that is consumed but customers are not billed.

The Committee, chaired by Vihiga Senator Godfrey Osotsi, was surprised to learn that metre readings for 15,000 water metres out of the 250,000 managed by the county could not be accounted for, which might be an avenue for revenue loss. Sakaja explained that the metres could not be reached.

“Following the inability to access water metres in some premises due to residents not being at home, the city water company is sensitising customers on self-metre reading through SMS reminders. The company is working towards relocating the metres to outside the gates for easier access,” said Sakaja.

According to the Auditor-General’s report, the water company spends more than Sh3.26 billion on unnecessary staff expenses. The report for the financial year ending 30 June 2024 showed that the company had a negative working capital of over Sh3.4 billion, with liabilities outstripping assets.

The Auditor-General declared the water company technically insolvent and cited collusion and laxity among senior staff as the main causes of the mismanagement, which produced 185.8 million cubic metres of water but only billed 90.3 million cubic metres.

The 95.4 million cubic metres accounted for non-revenue water – water produced but not billed – with the firm losing a staggering Sh8.57 billion during the period under review. This translates to a loss of 78 per cent of the company’s operating revenue during the year under review, which was Sh10.94 billion.

Osotsi said that it was concerning that the water company staff had estimated water bills due for some 15,320 customers, instead of getting actual readings, for six months, while some 23,384 accounts were billed Sh344.4 million but did not pay the amounts and still continued receiving water.

“The Auditor-General’s report has shown that some 10,192 active accounts did not receive any water bill during the entire year but still remained active. The report has raised eyebrows. We would like the Nairobi City Water and Sewerage Company to explain this,” said Osotsi.

Sakaja told senators that the firm allowed customers to read their metres and send the bills by text message to Nairobi Water because they could not access the residences of the customers, while in some areas, they were even attacked, posing a danger to their lives.

Nairobi Water Company Managing Director Nahashon Muguna defended the decision to encourage self-reading of metres, saying some consumers lock their gates, denying their staff access to the metres or, in some instances, they are attacked or dogs unleashed on them.

Muguna cited instances where estimation is normally done using three months’ actual readings taken before, which are averaged, after which the consumer is required to pay in instances where the water firm staff cannot access the metres in some compounds that are fenced with gates closed.

“We have allowed some customers who have unpaid bills to continue getting water because you cannot disconnect water to public hospitals, schools, and other institutions without getting an outcry, with politicians leading delegations to our offices to complain,” said Muguna.

Nairobi Senator Edwin Sifuna wondered how they can stay for six months without reading water metres in some areas, while the county enforcement officers have been seen breaking into properties within the city whenever they are carrying out evictions, but are now saying they cannot get water metre readings.

Elgeyo Marakwet Senator William Kisang wondered why the water company has failed to install smart metres to ease their work, including remote disconnection to non-compliant customers, saying that was the only way they would avoid incurring further losses.

Muguna explained that installing smart water metres was too expensive, as a single one costs between Sh15,000 and Sh20,000, while the mechanical metres that they use cost around Sh3,000, arguing that it would take them 20 years to recover the cost if they are installed.

Sifuna was irked by Muguna's claims, stating that he had never seen any progressive institution running away from technology unless there was something to hide, and that the company needs to urgently look for a solution to end the millions of shillings in losses incurred.

Sakaja supported Muguna, saying they cannot adopt technology just for the sake of it and that the cost-benefit analysis must make sense, stating that even cities like London and Amsterdam were still using mechanical metres and that they are out to sensitise customers to pay their bills on time.

“You cannot run away from technology unless you have an ulterior motive. It will be costly at first but beneficial in the long run. What Muguna is telling senators is ridiculous. The city needs smart water metres as soon as possible to seal the loopholes leading to losses,” said Sifuna.

Sakaja said that Nairobi County needs Sh40 billion in the next five years in order to ensure that the seven million city residents are able to get a sufficient water supply in their homes, saying that it will be expensive to do piping, but it is worth modernising.

According to the Auditor-General, Nairobi Water Company spends Sh7.1 billion of the revenue (65 per cent) on staff costs for its 2,930 employees – a number that is more than or rivals the entire staff for most counties in the country.

The report showed that despite the company having huge debts, the management is not bothered to pursue debtors, with Sh10.93 billion outstanding, of which Sh7.3 billion has been overdue for more than 16 months, against the requirement of not more than six months to recover such debts.