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Rand Water concerned by escalating municipal water debt, reaches stalemate

A Rand Water treatment plant

Photo by Creamer Media

8th December 2023

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

     

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Rand Water on Friday called on municipalities to urgently pay their water debt as the amount owing to the water utility escalates and threatens its financial position.

The water utility said it is deeply concerned over the escalating debts, currently standing at a cumulative R4.1-billion, caused by municipalities' failure to honour their bulk water purchase agreements and debt settlement arrangements with it.

“The payment patterns of municipalities have deteriorated to concerning levels that threaten the liquidity, financial performance and sustainability of Rand Water,” Rand Water said in a statement on Friday, noting that the utility operates without any form of allocation from the national fiscus and relies solely on funds collected from its customers, primarily municipalities.

“Despite our relentless efforts to accommodate this ongoing pattern of nonpayment through bilateral engagements and participation in Intergovernmental Relations forums, we have regrettably reached a stalemate.”

Gauteng municipalities owe a collective R2.9-billion, Mpumalanga municipalities collectively owe R1.2-billion and at least R58-million is due from Free State municipalities.

The water utility outlined the debts owed by the Lesedi, RandWest City and Merafong City local municipalities in Gauteng, the Victor Khanye local municipality, in Mpumalanga, and the Ngwathe local municipality, in the Free State.

The Lesedi local municipality owes a total of R48.48-million, with R38.88-million overdue; while the RandWest City local municipality owes a total of R483.34-million, R443.62-million of which is overdue. The Merafong City local municipality owes a total of R763.74-million, of which R721.09-million is overdue.

The Victor Khanye local municipality owes R356.67-million, of which R346.03-million is overdue and Ngwathe local municipality owes R61.41-million, R57.65-million of which is overdue.

“Several agreements and engagements were held with the aforementioned nonpaying municipalities, and its evidence that these municipalities, including the metropolitans, 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,” Rand Water said, adding that some of these municipal customers take an inordinately long time to sign the agreements.

With the magnitude of the outstanding debt from municipalities having reached a critical level, requiring urgent attention, Rand Water has invoked the provisions of Section 41(1) of the Intergovernmental Framework Act (IRFA) and declared an intergovernmental financial dispute and is seeking intervention from the National Treasury and Department of Cooperative Governance and Traditional Affairs.

Rand Water has also requested the assistance of National Treasury and the Finance Minister to curb this escalating debt by withholding the aforementioned defaulting municipalities’ December 2023 equitable shares payout until amicable agreement with a down payment to maintain cash inflow that will enable Rand Water to meet its short- and medium-term obligations is concluded.

“It is important to note that should Rand Water be placed under further ongoing 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 and other parts of the country that are serviced by Rand Water.

Edited by Creamer Media Reporter

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