Refiloe Tlali recently retired as the CEO for the Lesotho Highlands Development Authority (LHDA). She began her tenure with LHDA in 2012, which included overseeing the Lesotho Highlands Water Project (LHWP) – considered the world’s largest water project when including all phases. In her role she oversaw operation and maintenance of existing LHWP Phase I structures and implementation of the ~$1.3B Phase II expansion. Between 2003 and 2012 she was the Chief Executive of the Water and Sewerage Company (WASCO) for Lesotho – having a staff of about 500. Between 1999 and 2003 she was the General Manager for Finance and Commercial Services for LHDA. We are honoured to have her as one of ROCKBlue’s Specialists and to have the chance to ask her questions about managing a utility’s cash flow. We hope you enjoy her interview below.
For a utility struggling with cash flow, what are your top suggestions to assist them in managing better financially?
- One of the first things for the utility to do would be to ensure that they plan their (financial) outflows such that they are in line with their inflows, including when they usually receive customer revenue. It is important in order to avoid making payments but not having sufficient funds; which may be bad for the organisation’s reputation when it comes to its credit rating.
- Next is the issue of collections. You’ll find that a lot of their cash is tied up in debtors. Utilities should have the appropriate staff for credit management and collections, especially if they don’t have prepaid metering. Of course, if cash is a struggle installing prepaid meters may not be feasible. And, from my experience, prepaid meters are not as advanced as electricity meters, making them less reliable. Customers can be the utility’s primary debtors, which is not easy to address. That said, the utility can find innovative ways of metering, so that they’re able to give their debtor customers their bills on time. For example, they can arrange that customers who are able to read their own meters SMS their reading to the utility, or hand deliver their meter reading to the utility and receive their corresponding bill. Some customers would even be able to calculate the cost of their consumption. To me, if they know how to do this, they can determine how much they have to pay, even without receiving their bill.
- Thirdly, it is vital to be in touch with your customers, to know them and to be aware of those that are dependable and able to pay vs. those that are not.
- Lastly, with larger consumers such as industrial customers who purchase a lot of water, it is imperative to ensure that meters are always operative, regularly checked and repaired timeously if there is something wrong. Those customers are very important, and the utility needs to develop a trusting relationship with them.
In the period when you were CEO of WASCO, did you ever experience intermittent supply, and if so, what impact did that have on your meters?
Well, intermittent supply was certainly not deliberate. This would have been the case whenever there was a drought and/or levels in our supply reservoirs very low and insufficient to provide water to certain parts of the city.
In those cases, one of the difficulties experienced was that when customers opened their taps only air came out, yet the meter continued to run/register. The community complained about the reading on their meter’s and the difference between the bill they received and what they were actually supplied. This scenario made it difficult for us to dispute their claims since we could not say with any certainty how much water had been consumed.
How would you suggest transforming the mentality of a utility’s management such that it thinks of itself as a corporatized or bankable entity versus just another public entity that does not necessarily need to cover all its costs?
That’s what we attempted to do while I was at WASCO. Which is the reason why we changed from being a government authority (WASA) to a water and sewerage company (WASCO).
It’s in the mindset the staff itself carries. That would be the first place to begin. I came to realise that when you get to a utility that is not performing well, and you talk about having the staff improve and perform better, you want to get them to appreciate that it is not only for the utility, but for their own benefit as well. You must show them that the utility is “theirs”. You must motivate the staff to bring in their ideas, as they know a lot and you want to show them that they are important. Too often they believe that upper management doesn’t consider them to have anything that can be contributed. You must nurture a motivated and engaged staff.
Also, the utility should have a transformation plan on how they can grow from where they currently are (i.e., being subsidized by the government) to where they need to be – financially self-sustaining. Here is where tariffs play an important role. While staff are certainly one of the key stakeholders in the equation, you also have the government stakeholder. That’s where the utility has to convince them of its capabilities, and that it’s for the benefit of the government that the utility should be able to have a tariff that is adequate to cover their costs.
The biggest challenge with a government or with politicians, is that because they focus on winning votes and one tool they sometimes use is the promise of low/zero tariffs with often misused slogan that provision of water is a “right”. Thus, the utility must also educate customers and politicians that they’re not paying for raw water (e.g., rainwater into rivers and lakes which is free), but they are paying for storing, transferring, treating, delivering and managing that water. Therefore, particularly for the government stakeholders, it is crucial to have them understand that the utility needs to be charge sufficiently to be able to pay expenses for those services that have a cost.
Are you familiar with the National Water Supply and Sewerage Company in Kampala, Uganda, and the fact that they brought in someone from the private sector to transform that utility – applying his private-sector mentality? Do you think that’s an approach that could work with some utilities?
I do believe it would be helpful to send somebody from the private sector, because some staff at these utilities may have previously worked for government and have a governmental mentality. They may not realize that there is a lot of wastage that happens within a utility that could be limited with the right mindset. For example, employing time management principles and prohibiting the use of company vehicles and phones for personal things. Bringing in the private sector mindset will be invaluable.
If you had to list only three things to do as a utility CEO to improve performance, what would those three things be?
- Cost reduction, which is a major effort to take note of. I believe that a utility is a business like any other business and what matters is whether you can fund and run it like a business. Utility management must not think of it as government or a government ministry. They must determine if they have adequate funding to run the utility. This idea (thinking like a business) has to be conveyed to all staff. So, costs management, cost reduction and avoiding unnecessary costs is very important.
- Collections is very important and collecting adequately.
- Staffing – they must have the right staff; staff with the correct qualifications and required experience. Because, even if you have hard-working staff, if they do not understand why they are doing something, they won’t be as effective as they could be.
How do you motivate senior and mid-level staff if their salaries are relatively low, they’re often paid late, or they don’t always have the necessary resources to perform their job?
As I said before, you must recruit the right people and motivated people. They must have the right experience and qualifications. They also need to be kept informed about what is happening within the utility. Especially if we’re talking about the senior management or the executives. They need to know exactly what the position of the utility is (e.g., financially stressed), and it would be good to discuss with them ideas on how to turn the utility around and to get their buy-in. All these things should come from them. They must be told when they will receive the resources/materials they need and that what they are doing is for their benefit as well.
It is also important that they have sufficient funds. If you are working together with management teams and executives, and you’re taking their ideas and implementing them, once improvements start to materialize you also have to be seen to be pulling your weight – setting a good example. Continuous reporting as well as holding formal meetings and informal discussions with your management is also important.
How can you hold your staff accountable for their obligations and responsibilities in the event that they are not well paid and may feel compelled to take a 2nd job?
Well, as I mentioned, you must continually communicate with your staff, and consider signing performance-based contracts, which comes after you have had discussions on the topic. Among other things, as managers, we need to have performance agreements and to be held accountable to clear targets. When one has a target, he/she needs to meet, there should be regular reporting on the progress being made. The targets, of course, would be specific to their areas of responsibility. Finance will have financial targets and operations and maintenance will have their own targets, and so on. Thus, everyone must account for their targets and held accountable to those targets.
From my experience, if there are clear goals set to measure (in writing), then you will see improvements. I subscribe to the adage of “that which is not measured doesn’t get done”. When you start to measure everything, you’ll start to see improvements. Even if it something that some may consider trivial such as, punctuality. You will be amazed at the change if staff must log their hours. As well as with submission of reports. One of my managers used to say, “name and shame”, so that when you get to the management meetings whoever is inconsistent with submission, is mentioned in the meeting.
If you were to share with a young, new foreign consultant, about the challenges that are unique and different in Africa (vs. North America or Europe) that they should be aware of, what would those challenges be?
Development partner procurement procedures are very stringent. Yes, sometimes there’s a bit of flexibility from some partners, but others can be very strict.
For instance, in Lesotho right now, in order to improve the country’s economy, government wants to procure as many services locally as possible. Yet, somebody from the developed world will be looking at procurement procedures and insist that there shouldn’t be any geographical and/or local preferences. Their justification is that procurement is a competitive process and one cannot/should not impose geographic preferences. This is not necessarily good for the utility. Remember that the government is a very important stakeholder. For example, when sourcing loans the guarantees come from the government. I am not calling for non-competitive procurements; but I’m saying they should look for ways of assisting the economy of the country, such as buying locally where possible.
Also, we need to share with external consultants our perception that because they are with an organization or a company (i.e., having mark ups on their fees), that charges are excessive.
There is a need for their financiers to be more objective, and to understand the challenges which some of the African countries are facing.
External consultants need to be aware of the challenges with local politicians as well. They can be helpful in that regard in “managing” politicians so that they (the politicians) are not putting excessive demands on the utilities – they need to help find a balance. Sometimes it’s easier for an external entity to effectively work with a political entity than it is for a locally situated individual or entity.