Municipal debt to water boards; DWS Quarter 4 2023/24 Performance & Quarter 1 2024/25 Performance; with Ministry

Video The Portfolio Committee on Water and Sanitation convened to address the pressing issue of escalating municipal debt to water boards and to review expenditure reports for the fourth quarter of the 2023/24 financial year and the first quarter of the 2024/25 financial year. The meeting primarily focused on the concerning rise in municipal debt, which had reached R22.36 billion as of June 2024. This figure represents a dramatic 151% increase from 2019 to 2024, highlighting a severe financial crisis within the sector. The substantial debt poses a significant threat to the stability of water boards, with some, such as Vaal Central Water and Magalies Water, facing the possibility of bankruptcy within the next six to twelve months. Such financial instability threatens to disrupt water services and impact the entire water value chain, particularly affecting regions such as the Northern Cape, Free State, and North West provinces. Data presented during the meeting revealed troubling trends in the financial health of major water boards. One major board reported a rise in debt from R2.2 billion to R4.12 billion, marking an 87% increase, while another saw its debt grow from R910 million to R1.78 billion, a 95% increase. These figures reflect a broader issue affecting both larger and smaller municipalities and key districts, with significant increases in debt observed over the past two years. The potential bankruptcy of these water boards could have far-reaching consequences, including severe impacts on water services and financial viability. This instability might force water boards to reduce essential expenditures such as infrastructure maintenance, further deteriorating service quality. In response to these challenges, standardised processes for debt collection and credit control have been developed in collaboration with National Treasury. A debt relief mechanism, similar to that implemented for Eskom, is being finalised. However, this mechanism is conditional on municipalities fulfilling their current payment obligations, with those unable to meet these obligations excluded from relief. Efforts are also underway to reprioritise budget allocations and explore alternative funding solutions, although available funds remain constrained. The Minister acknowledged the gravity of the situation and outlined a coordinated approach involving multiple departments to address the municipal debt crisis. The development of this approach is being managed by an inter-ministerial Committee, and the Committee will be informed of Cabinet's decisions once they are finalised. The need for improved municipal billing, revenue collection, and addressing high unemployment levels affecting water payments was emphasised. During the discussion, Members raised questions about regulatory measures, municipal support strategies, and the reasons behind under-expenditure. Inquiries were also made regarding water licensing, raw water pricing, and the impact of failing water boards on new agencies. Responses indicated ongoing efforts to strengthen municipal support and regulatory roles, including revising norms and standards and addressing issues of under-expenditure. The meeting concluded with the Minister assuring continued engagement with municipalities and relevant departments to resolve the issues. Further updates on the Cabinet's strategic plan and financial measures are anticipated once they are finalised.