South Africa’s R100 billion middle finger to government
South Africans have adopted a culture of non-payment, owing around R100 billion to critical utilities for water and electricity services – most of which will never be recovered.
Water and Sanitation minister Pemmy Majondina has revealed that South African municipalities owe the country’s 15 water boards R21.3 billion in debt—exacerbating the same crisis in the electricity sector where Eskom is owed R78 billion by municipalities.
Combined, these essential services are owed R99.3 billion, with no pathway to recovering it.
Speaking to the media on 5 August regarding her department’s plans and priorities for 2024/25, Majondina said that despite progress in increased access, “the quality and reliability of municipal water and sanitation services across South Africa has deteriorated markedly over the last ten years.”
Majondina noted that:
- The percentage of water supply systems with poor or bad microbiological water quality compliance went from 5% in 2014 to 46% in 2023;
- The percentage of waste water treatment systems in a critical state of performance went from 30% in 2013 to over 40% in 2022;
- Municipal non-revenue water increased from 37% in 2014 to 47% in 2023.
The minister said that among other woes, the inability of water boards to properly maintain and operate infrastructure sits at the root of the issue.
She said that a contributor to this is because the municipal debt to these boards has now risen to R21.3 billion.
“The water boards do not receive money from the fiscus and this debt is threatening their ongoing financial viability, as well as the financial viability of the whole sector,” which needs to be self-financing through revenues from the sale of water, said Majondina.
This has not gone unnoticed, with South Africa’s water security remaining one of the most pressing issues for households and businesses, and continues to remain top of mind for investors.
In Coronation’s July 2024 Correspondent, economist Marie Antelme and ESG analyst Leila Joseph outlined that “water security is arguably one of the most critical risks to South Africa’s social, economic, and political long-term future.”
The fund manager’s study showed that water security emerged as the most concerning environmental issue for their clients, with 78% of respondents indicating that this should be prioritised by investors in 2024.
Majodina said “to ensure that the availability of water does not become a constraint to investment and economic growth, and to ensure that there is sufficient water to meet the needs of our population, as mandated by the Constitution, we will be focusing on three key priorities over the term of this government.”
She said that there are to:
- Invest in national water resource infrastructure promptly;
- Diversify water sources by utilising groundwater, recycling, and desalination;
- Enhance water conservation and demand management to meet or exceed international consumption standards.
Our hands are tied
Dysfunctional water provision and municipal wastewater systems are resulting in lack of adequate access and the “pollution of communities, rivers, and the environment, resulting in intolerable living conditions and increased risk of life-threatening diseases such as cholera [and] damage to tourism and services industries,” said the minister.
Majodina said that she has been “inundated with calls and messages from the public and local and provincial political leaders regarding challenges with water and sanitation service delivery at local level.”
However, the minister stressed that the provision of local water and sanitation services lay with municipalities.
“Callers do not seem to appreciate that the provision of water services is the responsibility of municipalities, not the national Department of Water and Sanitation,” said the minister.
“The national Department cannot do maintenance or repairs to municipal infrastructure on behalf of a municipality,” adding that a priority of her department is to “correct this misunderstanding and to encourage communities and community leaders to hold their municipalities accountable.”
She said her department would continue to support struggling local councils to get their infrastructure projects and maintenance work on track.
“We support municipalities, we don’t take over the responsibilities of municipalities” said Majodina.
Majodina said that she wants to boost accountability , saying that she would soon table an amendment to the Water Services Act, to introduce an operating license system for water service providers to ensure a minimum level of competency.
It “will also introduce measures to enable the national department to take regulatory action against municipalities which do not comply with national minimum norms and standards for water,” said the minster.
Electricity crisis
The municipal issues relating to water and debt echo what is happening with electricity in local government, which is threatening to collapse power supply in South Africa.
In July, Energy minister Kgosientsho Ramokgopa warned that the rising levels of municipal debt and “perennial under-investment” in distribution infrastructure by municipalities is the next big threat and risk Eskom faces in South Africa.
If left unaddressed, the continued refusal of municipalities to settle their bills could lead to a total debt bill of R3.1 trillion by 2050 – which would collapse Eskom, the minister said.
Making matters worse, these debts are unlikely to ever be fully recovered—because municipalities lack the capacity to collect, and South Africans living in these municipalities lack the ability to pay.
“I can tell you, a lot of this cannot be recovered. There is no possibility under the sun that we will collect that R78 billion. A lot of it is over three months, six months being owed. People are not sitting on this money,” Ramokgopa said.
“But this is a problem for Eskom. Eskom needs this money so it can reinvest it back into its own infrastructure. Municipalities have to pay that money – but on objective grounds, they simply do not have the means to.”
Non-payment of services is a compounding issue for South Africa. For electricity, the huge losses incurred by Eskom from non-payment result in the utility shifting the burden onto customers (usually direct) who do pay, through massive price hikes.
Experts have warned that this will ultimately push the utility into a death spiral, as those who have the means to pay for electricity look elsewhere—like private generation—leaving the burden to fall on a decreasing base.
Read: New state-owned company for water in South Africa coming in 2025
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