The financial trap municipalities face when residents are told to save water

Julia Fish

Most South Africans remember the electricity crisis pop-ups on television urging households to cut demand: switch off geysers, delay running pool pumps, and use less power during peak hours.

Remarkably, many of us listened. Peak demand dropped, and over time millions of households and businesses invested in solar panels, inverters and backup systems.

The long-term result has been a structural shift – growing share of electricity consumption is now self-supplied rather than purchased from municipal grids.
In response, municipalities have introduced registration requirements for embedded generation and have adjusted tariffs to protect grid stability and recover costs as sales volumes decline.

In other words, the grid still has to be maintained even when fewer units are sold.
A similar dynamic is now unfolding in water, and it carries a warning that municipal leaders, residents and policymakers should not ignore.

South Africa is a water scarce country. We need to change our relationship with water and use it more efficiently, lowering the demand we place on dams, treatment works and ageing distribution systems.

Potable water is essential for drinking, cooking, hygiene and cleaning. It is also essential for livelihoods: small scale food production, spaza shops, salons and other micro enterprises rely on reliable water to sustain families.

But not every use requires potable water. Toilets are a simple example. We flush roughly six to nine litres per flush, often with drinking quality water.

In a constrained system, it is rational for households and businesses to consider alternatives such as rainwater harvesting, greywater reuse and, where feasible and legal, boreholes or on-site treatment. Those choices are not anti-social; in many cases they are a practical response to scarcity and unreliable service.

In Johannesburg’s current crisis, some households have gone weeks without supply. Almost every communication from Johannesburg Water has included calls to conserve and reduce consumption. Civil society has echoed the same message: we need some water for all, not all water for some.

Yet there is an uncomfortable financial reality behind these appeals. In most municipalities, water and electricity are not only basic services, they are also major sources of revenue.

Service charges fund operations and maintenance, and, in many cases, cross subsidise other functions of local government. While municipalities receive national transfers and may borrow for capital projects, trading services are meant to be financially sustainable. When they are not, the entire municipal budget becomes fragile.

This is where the trap starts.

When water supply is erratic or billing is disputed, the consumers most able to respond are those with capital: middle- and higher-income households, large commercial users and industry.

Households install tanks and pumps. Businesses invest in storage, recycling and treatment. Industrial users redesign processes to reuse water or source it independently.

These are often the most consistent payers, the customers who pay in full and on time.
As they reduce their reliance on municipal supply, municipalities lose precisely the revenue base they need to maintain infrastructure. Collection rates, already under pressure from unaffordable tariffs and years of billing irregularities, decline further.

With less cash coming in, maintenance is deferred, repairs are slowed, capital upgrades are postponed, and system performance deteriorates. That in turn pushes more users to exit, accelerating a vicious cycle: declining reliability leads to declining payment, which leads to declining reliability.

The consequences are not evenly shared. Those who can afford to insulate themselves do so. Those who cannot remain dependent on a deteriorating network, often in areas where service backlogs are already severe and where households rely heavily on the equitable share grant to sustain basic services.

In effect, the system begins to sort residents by income: resilience for those with alternatives, vulnerability for those without.

This is why it is misleading to frame the problem as a simple choice between use less and use more. Conservation is essential during a crisis and necessary in the long term. The real question is whether municipalities are structured to survive when people conserve.

At present, many are not. Municipalities are financially punished when they deliver efficiency. They are rewarded, perversely, when they sell more volume, even if that volume is lost to leaks, inaccurate metering or unlawful connections.

Non-revenue water — water produced but not paid for — is therefore the central battlefield. A municipality that loses a third, or more, of its water through leaks, theft and meter errors cannot realistically solve its fiscal problems by asking paying customers to consume more. Nor can it preserve its revenue base by appealing for solidarity from residents who are already living with outages.

cross-subsidiseWhat would a more sustainable approach look like?

First, municipalities must treat non-revenue water reduction as a financial recovery strategy. Leak repairs, pressure management, accurate metering and credible billing are revenue protection measures. They are also pro poor measures, because fixing the system benefits everyone, not only those who can buy alternatives.

Second, the tariff model needs reform. If the cost of keeping a water system ready and reliable is largely fixed, then municipalities cannot depend primarily on volumetric sales to recover those costs.

There is a strong case for separating a fixed availability charge, to fund readiness, maintenance and refurbishment, and a volumetric charge that encourages efficient use, while protecting lifeline consumption through free basic water and steeper blocks for luxury use.
Third, municipalities should ring fence water revenues for water operations and maintenance, with transparent reporting. When residents believe their payments disappear into a general fund while pipes continue to burst, compliance collapses.

None of this is an argument against conservation. It is an argument against a municipal model that cannot survive it. South Africans must use water differently, and municipalities must be redesigned to succeed when we do.

Otherwise, the call to save water will inadvertently speed up the very collapse we are trying to avoid.


Julia Fish is Managing Director of the Johannesburg Community Action Network (JoburgCAN)

INSIDE METROS