GMM struggles with Eskom and Rand Water debt
Mayor says a revised agreement is expected to stabilise cashflow, demonstrate commitment to settling debts, and prevent further escalation of interest and enforcement action.
The Executive Mayor of Govan Mbeki Municipality, Nhlakanipho Zuma, has revealed that the municipality continues to face serious financial challenges, affecting its ability to fully settle bulk service accounts.
Reporting to council during an ordinary meeting on March 25, Zuma said the municipality paid R30m to Eskom in February, which falls short of the total monthly billing due to severe cashflow constraints. He attributed the shortfall to limited revenue collection and competing operational obligations, noting that interest of R26.2m was added to the Eskom debt during February. “Management continues to prioritise
Eskom payments within available funds while engaging Eskom to address both historical debt and current account management,” Zuma said. He also accused Eskom of communicating directly with consumers regarding intended actions instead of engaging the municipality first.
Zuma reported that the municipality paid R31m to Rand Water in February against a billed amount of R35.22m. As a result of outstanding balances, interest amounting to R6.5m was incurred, bringing the total debt owed to Rand Water to almost R895m as of February. Council was informed about progress on a revised Debt Settlement Agreement (DSA) with Rand Water following earlier deliberations.
After engagements on March 9, Rand Water agreed to introduce more flexible repayment terms under a Debt Relief Programme (DRP), which include:
- Paying 60% of the monthly invoice within 30 days
- Paying the remaining 40% within 15 days of the following month, interest-free
- Paying 100% of the invoice within 30 days during interim and year-end reporting periods
- Repaying the historic debt over five years, extending the agreement by two additional years
- Zuma said the revised agreement aims to align repayments with the municipality’s revenue patterns, improving cashflow management while ensuring continued payment of bulk services. He acknowledged that the municipality’s financial position remains strained but said the revised agreement is expected to stabilise cashflow, demonstrate commitment to settling debts, and prevent further escalation of interest and enforcement action. The agreement complies with provisions of the Municipal Finance Management Act (MFMA), including Sections 33, 60, and 61.
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Council resolved to:
- Note the R30m payment to Eskom, with an outstanding balance of R6.68b.
- Note the R31m payment to Rand Water, with an outstanding balance of R894.9m
- Acknowledge receipt of the revised DSA addendum.
- Authorise the municipal manager to sign the agreement.
- Notify National Treasury, Provincial Treasury, and the Auditor-General upon finalisation.
- Make the agreement public in line with MFMA requirements.
Zuma also addressed the current water crisis affecting certain regions within the municipality, stating that the issue lies with Rand Water.
“Rand Water wanted us to reduce the amount of water it needed to supply the municipality as per our licence. Another challenge is that Rand Water is not informing us on time when they are not pumping water to GMM.
“Sometimes it takes them six hours to notify the municipality, affecting areas without water storage like Secunda, Bethal, and eMzinoni,” he explained.
Zuma added that the municipality plans to implement a bulk water pipeline to Bethal and eMzinoni once funding is available.
