By Levy Masiteng
The Portfolio Committee on Cooperative Governance and Traditional Affairs (COGTA) on Wednesday urged for swift solutions to address the mounting debt crisis faced by municipalities in South Africa.
The committee’s call on Tuesday comes after revelations that the debt owed to Rand Water, a major water utility, has ballooned to over R8 billion as of the third quarter of 2024/25.
The committee said that this staggering figure represents a significant increase from the R1.5 billion owed in the 2014/15 financial year.
Last year, Rand Water revealed that the municipalities that owe them have a cumulative overdue amount of R3 billion, with R2 billion relating to Gauteng municipalities, R1 billion from Mpumalanga municipalities, and at least R63 million from Free State municipalities.
The committee added that the entity’s financial health is under strain due to municipalities’ failure to honor their bulk water purchase and debt settlement agreements.
“The committee heard that Rand Water’s total water reservoir storage by 14 March was 42.3%, against a target of 60%, and that the entity is hamstrung by municipalities failing to honour their bulk water purchase and debt settlement agreements.”
The committee identified several factors, including illegal connections, vandalism, and tampering with water infrastructure.
Additionally, encroachment on water infrastructure servitude by informal settlements has disrupted water supply, causing serious injuries and deaths.
“The committee also noted that many municipalities fail to honour their debts to utilities because of the state of dysfunctionality, poor governance, and financial mismanagement, which compromises service delivery,” the committee said.
The committee emphasised that a culture of payment for services must be encouraged, while also ensuring that municipalities remain financially viable.
The committee also requested that Rand Water reassess its pricing system to ensure it doesn’t exacerbate the financial strain on communities, while also allowing municipalities to operate effectively.
It further urged the Ministers of COGTA, Water and Sanitation, and National Treasury to take a more active role in addressing the debt crisis by utilising inter-governmental frameworks to ensure municipalities comply with their debt obligations, thereby preventing disruptions to essential services.
“The culture of payment for services must be encouraged in communities by using flat rates in poor communities, while free basic services remain protected through a sound municipal indigent policy,” the committee added.
Rand Water proposed a Special Purpose Vehicle (SPV) model to alleviate debt pressures, but committee members sought clarification on the SPV’s structure and funding.
However, the committee cautioned that the SPV must not perpetuate a cycle of debt that exacerbates existing municipal challenges, instead advocating for a more sustainable and equitable financing solution.
“The committee urged further engagement to refine solutions and interventions to address current and long-term challenges,” the committee said.
INSIDE METROS