Water Boards are facing a huge cash flow challenge as municipalities continue to ignore paying for services rendered. As a result, the Portfolio Committee on Water and Sanitation has called for less talk and more action to resolve a longstanding challenge that threatens the viability of water boards.
The committee received a briefing from the Minister of the Department of Water and Sanitation, Ms Pemmy Majodina, and departmental management who presented a bleak picture of the country’s water boards. Water Boards play a key role in the South African water sector, operating dams, bulk water supply infrastructure, some retail infrastructure and some wastewater systems. Some also provide technical assistance to municipalities. Through their role in the operation of dams, they also play an important role in water resource management.
“The magnitude of this problem is devastating to the cash flow of water boards and negatively affects the entire water value chain. Finding solutions to this unsustainable challenge is urgent and cannot be deferred any further,” said Mr Leon Basson, the Chairperson of the committee.
The committee was informed that as of June 2024, municipal debt to water boards stood at R22.36 billion, with an average increase of 151% between 2019 to 2024. The direct impact to water boards is that some boards, such as Vaal Central Water and Magalies Water, face bankruptcy in the next six to 12 months, as they do not have sufficient cash resources to pay their operating activities and have stopped paying for their raw water. If the situation is not urgently resolved, the impact on communities served by these boards will be dire, as the boards may be unable to provide water.
For Vaal Central, five of the municipalities with the most debt are Matjhabeng Local Municipality, Kopanong Local Municipality, Mangaung Metropolitan Municipality, Nala Local Municipality and Nama-Khoi Local Municipality. Matjhabeng and Kopanong have openly indicated to the Minister that they cannot commit to paying their current invoices and the department informed the committee that the continued non-payment of current invoices by these two municipalities alone will result in Vaal Central Water Board going bankrupt, even if all the other municipalities start paying their current invoices in full.
The Matjhabeng Local Municipality’s debt to the Vaal Water Board has grown by R2.041 billion from R4.897 billion on 30 June 2022 to R6.938 billion on 30 June 2024, which is a 41% growth over two years.
Maquassi Hills and Thabazimbi local municipalities are the two with the most debt to Magalies Water Board. Both have been willing to conclude repayment agreements but have to date not been able to adhere to these agreements. Maquassi Hills Local Municipality has failed to make regular payments over the past two years and the debt has grown from R266 million in 2022 to R352 million in June 2024, a 32% increase in the outstanding debt over two years. Thabazimbi Local Municipality has failed to make regular payments over the past two years and the debt has grown from R123 million in 2022 to R198 million in June 2024, a 61% increase in the outstanding debt over two years.
The Minister informed the committee that since August engagements have been ongoing with municipalities and provincial governments to resolve the matter, but the committee emphasised that this juncture calls for more action and less talk. “The socio-economic impact of the debt is far-reaching and has the potential of crippling the water value chain, as it will affect the ability to perform necessary maintenance, businesses will be greatly affected and access to water will be made difficult,” Mr Basson emphasised.
Malatswa Molepo
28 August 2024
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