The department of water & sanitation has outlined a series of measures to deal with municipalities’ mounting debt to the country’s nine water boards that has crippled their ability to improve the country’s ageing and ailing water infrastructure.
As at the end of March, municipalities owed the nine water boards R14bn, R9.7bn of which is 120 days overdue or more. Sedibeng Water Board alone, which services the Northern Cape, Free State and North West, is owed R5.6bn.
In addition, municipalities owe the department of water & sanitation’s Water Trading Entity, which manages water infrastructure and resources and also sells raw water, R8.4bn of the total R23bn it is owed.
The nonpayment limits the ability of the water boards to invest in the infrastructure needed to meet the growing demand, nor can they invest in maintenance to keep operations going.
The Sedibeng Water Board is being dismantled, mainly because of nonpayment by municipalities and problems with its governance and service delivery. Bloem Water and Magalies Water will take responsibility for the areas it previously serviced.
“At the heart of this problem is that municipal councils adopt unfunded budgets indicating that they plan to spend more than their revenue intake,” Eustathia Bofilatos, the director for institutional governance at the department of water & sanitation, said in a presentation to parliament’s water and sanitation portfolio committee on Tuesday.
“Thus the strategy is to ‘force’ municipalities to adopt funded budgets where cash surpluses pay arrear obligations. This is the first step towards sustainability. With funded budgets municipalities can pay their current accounts,” Bofilatos said.
Bofilatos said a multidisciplinary revenue committee — which includes the National Treasury, the departments of water & sanitation and co-operative governance and traditional affairs, and the SA Local Government Association — is diagnosing the water services business of the 43 municipalities that owe the most to the water boards to identify the structural and systemic issues underlying the debt.
Some of these municipalities have been placed under national government supervision in terms of section 139 of the constitution and are being assisted with the development of financial recovery plans.
Other short- to medium-term measures include restructuring the arrear debt and the Water Trading Entity so that the amounts outstanding are ring-fenced and interest payments are suspended, payment arrangements are revised, and incentives provided to write off arrear interest incrementally.
In the long term, detailed assessments of the 43 municipalities is planned to identify the structural and systemic issues underlying the debt, such as the lack of billing, dilapidated infrastructure, lack of maintenance, outdated indigent registers, inadequate skills and capacity, and poor systems.
“The assessments will give a better understanding of the state of the water services function and what must be done in the short, medium and longer term to ensure sustainability,” Bofilatos said. “Based on the assessments, a plan of action will be developed for each municipality which assigns responsibility to different stakeholders.”
A cost of supply study will determine the water tariffs are necessary to recover costs.
Besides the financial challenges the water boards have also been plagued by governance instability, with several having interim boards and acting CEOs and CFOs. The department says it is addressing the matter.
The boards have also suffered from fraud and corruption, that is being investigated by the Special Investigating Unit.
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