According to its latest statement, Rand Water is deeply concerned over the escalating debts caused by municipalities’ failure to honour their bulk water purchase agreements and debt settlement arrangements with the water utility.
This situation highly destabilises Rand Water’s financial position and poses a direct threat to its medium and long-term sustainability. Rand Water operates without any form of allocation from the national fiscus thus relies solely on funds collected from its customers, primarily municipalities. To date, Municipalities owe Rand Water a cumulative amount of R4,1 billion, with
R2, 9 billion by Gauteng municipalities, R1,2 billion from Mpumalanga municipalities and at least R58 million by Free State municipalities. The following non-performing municipalities are contributing to this long overdue debt:
The Lesedi Local Municipality in Gauteng shows R48 476 180.41 in arrears, while the RandWest City Local Municipality, also in Gauteng, is
R483 336 982.72 in the red. Another Gauteng non-payer is the Merafong City Local Municipality which owes R763 737 343.74.
In Mpumalanga, the Victor Khanye Local Municipality owes R356 668 518.06, while the Ngwathe Local Municipality in the Free State shows R61 407 584.18 in arrears.
In the statement Rand Water said to be able to carry out its public function, all customers are required to comply with payment terms as per the bulk water supply contracts. There have been multiple engagements with all defaulting customers and the issues of non-payments as well as the amounts owed, were discussed with the above customers and this is documented in line with the provisions of POPIA. By disclosing the above information, Rand Water has complied with the provisions of the Protection of Personal Information Act.
Deteriorating Municipal Payment Patterns
Rand Water says the payment patterns of municipalities have deteriorated to concerning levels, threatening the liquidity, financial performance and sustainability of the water utility. Despite ongoing efforts to accommodate this ongoing pattern of non-payment through bilateral engagements and participation in Intergovernmental Relations Forums, a stalemate has now been reached.
Rand Water’s statements also mentions that several agreements and engagements were held with the aforementioned non-paying municipalities and “it is evident that these municipalities, including the metros, have taken advantage of these avenues and use them to cause endless and fruitless negotiations when it is clear that they have no intention to pay or enter into amicable arrangements that will afford them an opportunity to pay their account with ease.” The water utility has also found that some of these municipal customers take an inordinately long period of time to sign the agreements.
Drastic Measures Taken
The magnitude of the outstanding debt from municipalities has reached a critical level, leaving Rand Water no other option but to invoke Section 41(1) of
Intergovernmental Framework Act (IRFA) and declare an intergovernmental financial dispute and seek intervention of National Treasury and Co-operative Governance and Traditional Affairs. Section 41 (1) of the Constitution alludes to cooperation, mutual trust and good faith between the three (3) spheres. The constitution further binds the three spheres of government and organs of state to the basic principles of co-operative government and intergovernmental relations.
Rand Water has also requested the Minister of Finance and National Treasury’s assistance in curbing this escalating debt by withholding the aforementioned defaulting municipalities’ December 2023 equitable shares pay out until an agreement is reached with a down payment to maintain cash inflow to enable Rand Water to meet its short- and medium-term obligations.
The Threat to Rand Water
It is important to note that should Rand Water be placed under further on-going financial risk, the entity will be plunged into a debt crisis which will impact all municipalities currently serviced by Rand Water and curtail the ability of Rand Water to finance the construction of bulk water infrastructure and to undertake adequate maintenance of its extensive network. This would have dire consequences on the entire network, particularly Gauteng Province.
However, Rand Water, in the statement, reiterates that it remains committed to serving its customers and ensuring long-term security of supply of potable bulk water while imploring the owing municipal customers to treat this matter with the utmost urgency.
