Mayor says Govan Mbeki Municipality is paying its debts
Zuma said the municipality was advised to continue servicing the Eskom account.
The Govan Mbeki Municipality (GMM) executive mayor told the council that the municipality paid Eskom R10.9m and R8.3m to Rand Water in January.
Nhlakanipho Zuma said for the municipality to qualify for the Municipal Debt Relief circular for the 2023/24 Medium Term Revenue and Expenditure Framework (MTREF), designed to resolve Eskom’s financial and debt crisis, the municipality had to sit down with the National Treasury.
They committed to pay the Eskom account and reach all the requirements. Zuma said the municipality was advised to continue servicing the Eskom account.
The circular aims to present a solution to non-payment for electricity consumption by defaulting municipalities and, in parallel, address the consumer culture of not paying for services. Without universally restoring debt collection, the debt will immediately accumulate anew.
This circular spells out the conditions and processes municipalities must follow to qualify for debt relief, which aims to restore financial best practices and improve revenue collection.
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These conditions include measures to install prepaid meters, update the indigent registers, adopt funded budgets, ring-fencing revenue from water and electricity, and exercise credit control mechanisms.
If successfully implemented, these measures could also free up revenue for municipalities that owe Eskom to maintain their current bulk accounts, pay other creditors’ current accounts, and provide a reliable basic level of services.
Rand Water is deeply concerned over the escalating debts caused by municipalities’ failure to honour their bulk water purchase agreements and debt settlement arrangements with Rand Water.
This situation highly destabilises Rand Water’s financial position and directly threatens its medium and long-term sustainability.
Rand Water operates without any form of allocation from the national fiscus, thus relying solely on funds collected from its customers, primarily municipalities, to fulfil its obligations.
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Municipalities owe Rand Water a cumulative overdue amount of R3b, with R2b relating to Gauteng municipalities, R1b from Mpumalanga municipalities, and at least R63m from Free State municipalities.
The GMM is one of these municipalities.
In a statement, the water utility said municipalities‘ payment patterns have deteriorated to concerning levels, threatening Rand Water’s liquidity, financial performance, and sustainability.
“Despite our relentless efforts to accommodate this ongoing pattern of non-payment through bilateral engagements and participation in intergovernmental relations forums, we have regrettably reached a stalemate.
“Several agreements and engagements were held with the aforementioned non-paying municipalities, and it’s evident these municipalities have taken advantage of these avenues and use them to cause endless and fruitless negotiations when it is clear they have no intention to pay or enter into amicable arrangements that will allow them to pay their account with ease.
“Some of these municipal customers take an inordinately long time to sign the agreements. The magnitude of the outstanding debt from municipalities has reached a critical level and requires urgent attention.”
Rand Water has invoked the provisions of Section 41(1) of IRFA, declared an intergovernmental financial dispute, and seeks the intervention of National Treasury and Co-operative Governance and Traditional Affairs.
In terms of the Promotion of Administrative Justice Act 3 of 2000, Rand Water also wants to sensitise the residents and communities of the aforementioned municipalities of its intention to exercise its right, invoke the provisions of Section 4 of the Water Services Act, and initiate the curtailment of water flow due to non-payment of water services.
Rand Water advised the Ngwathe Local Municipality and Merafong City Local Municipality communities on February 26 that it had reduced the water flow by 20%. Should these municipalities fail to pay the overdue amount or enter into amicable payment arrangements, Rand Water will implement another 20% on March 25.
The utility is also threatening GMM with water throttling.
The statement also said 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 serviced by Rand Water and curtail its ability to finance the construction and augmentation of bulk water infrastructure and undertake adequate maintenance of its extensive network.
This action would have dire consequences for the entire network, particularly for Gauteng and other parts of the country serviced by Rand Water.
