Water boards need to be more forceful in collecting the money owed to them by municipalities, Treasury director-general Duncan Pieterse says.
Pieterse was speaking in reply to questions from MPs on Thursday. There was concern among MPs about the nonpayment by municipalities for bulk water supplied by the water boards.
Municipalities owed the seven water boards R22.4bn as at end-June, threatening the solvency of two of them, Vaal Central and Magalies, which face bankruptcy in the next 12 months.
Pieterse, who appeared before parliament’s four finance and appropriation committees together with finance minister Enoch Godongwana and Sars commissioner Edward Kieswetter, said the Treasury had recently had engagements with director-general of water & sanitation, Sean Phillips, on the issue of nonpayment. There had also been various engagements in the cabinet.
“From a technical point of view there are two areas where we have aligned. The one area is that the director-general of water & sanitation has been working with the water boards to ensure that they forcefully implement debt collection and credit control enforcement for those municipalities that are not paying,” Pieterse said.
“In some cases that will have to include attaching the bank accounts of those municipalities. Without forceful debt collection and credit control mechanisms by the water boards themselves it will be difficult to enforce that culture of payment that is required from the municipalities.
“Second, we do have a provision which emanates from the constitution. That is, if the minister of water & sanitation writes to the minister of finance requesting that the equitable shares of specific municipalities are withheld to deal with consistent financial delinquency, then that is something that the minister of finance can consider.”
Pieterse said there were ongoing discussions about this, though he cautioned there were other unintended consequences of withholding a municipality’s equitable share.
Debt relief
Municipalities are seeking debt relief from the government similar to the R245bn plan offered to power utility Eskom. Debt restructuring would ensure the sustainability of the water boards.
The water sector is one which is targeted by the Treasury’s efforts to draw in private sector participation.
The medium-term budget policy statement (MTBPS) tabled in parliament on Wednesday by Godongwana noted that the department of water & sanitation’s water partnerships office had two priority programmes for nonrevenue water (that is revenue lost from water leaks) and recycling wastewater for different uses.
“The private sector can participate through performance-based contracts and public private partnerships. Performance-based contracts for the non-revenue water programme are being fast-tracked in eThekwini, Tshwane, Nelson Mandela Bay, Buffalo City and Mangaung metros,” the MTBPS said.
It noted that over the medium term the government would transform its approach to public sector infrastructure by creating the conditions to attract private sector participation. This would include improving project preparation, strengthening partnerships and exploring alternative financing mechanisms.
“A series of reforms under way is expected to catalyse greater private sector participation in public infrastructure projects.”
Deputy finance minister David Masondo defended the government’s reliance on the private sector for its infrastructure development programme in the face of an attack by EFF MP Omphile Maotwe, who believed there was a contradiction between the efforts of Operation Vulindlela, to get the private sector involved in transmission infrastructure development, and in Transnet and Treasury’s drive to build state capacity.
Masondo said the approach of Operation Vulindlela was necessary because the government did not have the money to do the work itself.
Liberalising the energy market had been successful and neither Eskom nor the state had the money to finance the rollout of transmission infrastructure. Transnet’s balance sheet was constrained and it was important to bring in the private sector to operate freight locomotives.
Masondo noted that China had liberalised its energy market and had privatised some of its power stations.
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