Government gets to grips with municipal water debt

Water & sanitation minister Senzo Mchunu says his department and the National Treasury have agreed on various measures to deal with municipalities’ outstanding debt that is threatening the provision of services nationally.

Addressing a mini-plenary of the National Assembly in his budget vote speech Tuesday, Mchunu said that in February municipalities owed water boards R16.7bn, while municipalities and the water boards owed the department (which has its own water trading entity) R17.4bn.

“What is most worrying is that these debts are escalating rapidly, and this poses a grave risk to the financial sustainability of the water sector,” he said.

“Many municipalities are in a downward spiral of poor and declining water services, reduced payment rate, increasing debt, and low investment," he said. “To address this downward spiral, we need to ensure that water services are provided by professionally managed, capable, efficient, and financially viable institutions.

“The key cause of the decline is poor governance and ineffective management in municipalities. Weak billing and revenue collection at municipal level is resulting in escalating debts across the water value chain.”

Deputy minister David Mahlobo said the department’s 2022 Green Drop report rated one-third of the country's 1,186 water supply systems as being at a high to critical risk of failure. Regarding water quality, just 40% of systems achieved microbiological compliance and only 23% chemical compliance. Slightly less than 41% of treated water is lost to leaks and illegal connections. 

Spending on repair, maintenance and rehabilitation of water supply systems remains inadequate.

Mchunu said his department, National Treasury and the water boards had agreed on several measures, including Treasury withholding equitable share allocations from municipalities; the department and the water boards standardising and strengthening their credit control measures and debt recovery processes; the consistent enforcement of water restrictions on non-paying municipalities, including legal processes to attach municipal bank accounts where necessary; and the installation of bulk prepaid meters in municipalities with a poor payment record.

Several measures are also planned to improve the pricing of water. In the financial year to the end of March 2024 revised norms and standards will be issued for the setting of retail water tariffs by municipalities as well as a revised raw water pricing strategy. The department will also work on the introduction of a multiyear tariff regime for bulk and raw water charges.

The minister said much greater levels of private sector investment in municipal water services was needed. His department had established a Water Partnerships Office in partnership with the Development Bank of Southern Africa and the SA Local Government Association to assist municipalities to package bankable projects. The focus of these projects would be on the reduction of water leakages and water reuse.

Mchunu said about 65% of the funding for R130bn major water resource infrastructure projects that are in the implementation phase would come from private sector finance.

Mchunu said the department’s licensing system had been improved and it was now processing about 70% of applications within 90 days countrywide. About 100 additional staff would be employed in provincial offices, which would assist in achieving 100% turnaround in 90 days.

ensorl@businesslive.co.za