The plan to stop cities in South Africa from crumbling
The ANC has thrown its support behind the continued use of Operation Vulindlela, a joint initiative between the National Treasury and the Presidency, to revitalise South Africa’s crumbling municipalities.
The ANC’s head of the local government subcommittee and Minister of Trade and Industry Parks Tau said that the architecture of local government, including its financial structures and funding mechanisms, needs to be revised.
In addition to reviewing existing legislation and the white paper on local government, Tau said that intergovernmental debt and infrastructure challenges need to be addressed.
Phase two of Operation Vulindlela is to focus on the reforms in local government, with a particular focus on major metros.
Operation Vulindlela was created in 2020 and has already hit most of its policy reform targets.
It aims to accelerate economic growth via structural reforms, with a specific focus on energy, digital infrastructure, transport, and water. This should boost investment in the country, improve service delivery, and enhance competitiveness.
It also aims to streamline regulatory processes, eliminate bureaucratic obstacles, and promote public-private partnerships to drive economic development.
So far, it has increased the role of independent power producers, restructured Eskom into three branches, and implemented e-visas and visa waivers.
As part of its first phase, the project still needs to create a national water resources agency and improve the performance of the nation’s ports.
The initiative has been well received by markets, with many stating that it has laid the groundwork for achieving effective economic growth in the country.
Tau said that tackling the intergovernmental debt crisis is a massive priority, where local governments owe billions to national state entities. The Minister said that the problem is a spiral that has not reached finality.
Water and Sanitation Minister Pemmy Majondina said that South Africa’s municipalities owe the country’s 15 water boards R21.3 billion in debt.
Majondina said that the quality and reliability of municipal water and sanitation services across the country had deteriorated substantially over the last decade, with water boards unable to properly maintain and operate infrastructure due, in part, to the extreme debt.
The electricity situation is far worse, with municipalities owing Eskom around R80 billion in debt.
Energy and Electricity Minister Kgosientsho Ramokgopa said that the rising levels of municipal debt and “perennial under-investment” in distribution infrastructure by municipalities are the next big danger facing Eskom.
Ramokgopa added that municipalities’ continued refusal to settle their bills could lead to a total debt bill of R3.1 trillion by 2050, resulting in Eskom’s collapse.
In addition, these debts are unlikely to ever be fully recovered, as municipalities lack the capacity to collect them, and many households can’t 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.
Public-private partnerships
Tau added that South Africa needs far more investment in critical infrastructure, such as wastewater treatment plants, reservoirs, and transformers on the electricity side.
Although Eskom has not load shedding in South Africa, Tau noted that the local infrastructure is still failing, resulting in prolonged power outages.
He added that South Africa needs to adopt a blended finance model to fund this critical infrastructure and mobilise resources across the board, including from the private sector, development finance institutions, and local and foreign government institutions.
South Africa’s government has recently committed to greater private sector participation, with Transnet allowing third parties to access its rail network and the aforementioned introduction of independent power producers.
Tau also added grants to local municipalities that will be repurposed to ensure that basic service delivery needs are met. Large amounts of funding given to local government get returned due to under expenditure.
In an immediate concern, Tau also noted that South Africa’s municipalities would soon struggle to collect for electricity services, as many prepaid meters have not been updated and will stop dispensing electricity on 24 November 2024.
All prepayment meters using Standard Transfer Specifications-compliant (STS) technology will cease dispensing electricity at the TID, which is based on a reference date of 1993 and will reach its limit in 2024.
When this happens, prepayment meters will no longer be able to accept new tokens, causing massive risks to service levels, sales and revenue collection of municipalities.
Read: Market panic and weaker rand – what it means for interest rates in South Africa
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