Municipalities that owe water boards a combined R21.3bn are seeking debt relief from the government similar to the R245bn plan offered to power utility Eskom, according to deputy minister of water & sanitation David Mahlobo.
Debt restructuring would ensure the sustainability of the country’s 15 water boards. The boards do not receive money from the National Treasury and rely on revenue collected from municipalities, their main clients.
Municipalities’ failure to pay for services rendered by water boards has resulted in them being unable to properly maintain and operate infrastructure.
Mahlobo told parliament’s portfolio committee on water and sanitation on Tuesday the debt relief programme for municipalities would be considered individually as many municipalities “are bankrupt but there is also a culture of nonpayment”.
“We don’t have money to bail out water boards as we know that the National Treasury is not funding water boards and water boards have to be self sustainable, but these water boards should not be allowed to fail because the implications are huge both for the economy and social issues [including] security issues,” Mahlobo said.
“We want municipalities to enter into formal agreements with water boards because some of these municipalities have been running away and in instances where there is a payment plan there has been defaulting.”
Department director-general Sean Phillips said two of the country’s water boards, which service six provinces, are on the verge on bankruptcy.
Vaal Central Water and Magalies provide services to municipalities in the Free State, the North West, the Northern Cape, Gauteng, and Limpopo. By paying only essential expenses (such as salaries, electricity and chemicals), Magalies Water would be able to keep going until about June 2025 while Vaal Central Water would be able to adequately function until May 2025, he said.
“A solution needs to be found urgently for those municipalities which are unable or unwilling to commit to paying their current invoices in full. This is beyond the mandate of [the department],” Phillips said.
“It is not all municipalities which are not paying. However, if a water board goes bankrupt and stops functioning it will stop providing water to all its municipal customers, not just the ones which are not paying.”
“Magalies Water and Vaal Central Water have already stopped paying for raw water — nonpayment by municipalities to water boards therefore threatens the financial viability of the whole water sector, including the viability of the National Water Resource Infrastructure Agency.”
Anthea Stevens from the National Treasury municipal support programme told MPs municipalities, and metros in particular, are facing an “Eskom-type situation where investment is lagging significantly behind growth”.
To address the water debt owed by municipalities and the lack of maintenance of water infrastructure, the National Treasury is using a performance-based financing incentive to strengthen municipal finance sustainability in metros and which also seeks to radically gear up metro investment in their infrastructure, Stevens said.
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