Africa’s largest bulk-water supplier, Rand Water Services Pty Ltd., is grappling with serious financial difficulties as unpaid bills from municipalities continue to accumulate, posing significant risks to water service sustainability. The Johannesburg-based company reported financial impairments totaling 382.3 million rand (approximately $20 million) for the year ending June, attributing this loss to the rising net debt owed by the South African municipalities it serves, which has surged by 12% to 4.4 billion rand.
The municipality of Emfuleni, noted for housing the country’s largest steelmaking operations, is particularly affected, having accrued debts amounting to about 25% of the total outstanding amount, demonstrating the perilous state of local finance management.
This rising tide of non-payment is alarming for officials, with Water Minister Pemmy Majodina confirming, “Non-payment by local municipalities poses a threat to the sustainability of water boards.” She emphasized the urgent nature of the situation, indicating she is collaborating with other government ministers including those of finance and cooperative governance to devise solutions.
Highlighting the severity of the financial strife among municipalities, the National Treasury recently announced plans to withhold funding from five councils this December due to their delinquency with water bills. Among those municipalities, Merafong and Victor Khanye are supplied by Rand Water, underlining the direct link between municipal debt issues and the operations of the water supplier.
South Africa finds itself amid a deepening water crisis, largely attributed to years of neglect, underinvestment, and poor maintenance by local authorities. Rand Water issued warnings earlier this October, stating Gauteng province—the nation’s economic heart, which includes major cities like Johannesburg and Pretoria—could face severe supply shortages if consumption was not curbed immediately.
This decline is not only detrimental to public utility but also identified as a serious risk to the country's financial stability, according to the South African Reserve Bank. They warned of the significant threat posed to the financial system by the deteriorated state of municipal energy, transportation, and water infrastructure.
Currently, Rand Water caters to around 18 million people, distributing water through 17 municipalities and servicing hundreds of industrial clients across four provinces. The situation reflects broader systemic issues, as outstanding debts to other state-owned enterprises are equally staggering. Power utility Eskom SOC Ltd., for example, reported outstanding debts totaling 95.4 billion rand by November—a staggering 28% increase since March.
Energy Minister Kgosientsho Ramokgopa has deemed this debt situation to be “an existential problem” for both energy and water supply sectors, establishing the urgent need for comprehensive solutions to stabilize utility services.
To mitigate rising operational costs and the crippling effect of municipal debts, Rand Water is also exploring avenues to reduce reliance on Eskom's electricity supply, particularly after experiencing a 19% rise in power costs. The utility company is actively investigating alternative energy solutions, placing emphasis on renewable sources, including solar and hydropower.
The confluence of unpaid debts, deteriorated infrastructure, and pressing government reforms reflects the precarious state of affairs for South Africa's public services. The financial struggles of Rand Water are not only indicative of its operational challenges but also highlight the larger narrative of public service management and fiscal responsibility among municipalities.
With local governments facing increasing pressure to fulfill their financial obligations for basic services, the future of water provision hangs precariously if these debts are not addressed. The urgency to reform financial practices within South African municipalities cannot be overstated, as the country's water resources become increasingly strained.
