Rand Water ‘20% cuts’ to force payment
Merafong on the West Rand owes R801m and Ngwathe in the Free State owes almost R63m
● Rand Water this week reduced the water supply to two defaulting municipalities by 20%, and says it will cut a further 20% each month the debt is not paid, or until a payment plan is agreed on.
It cut supply on Monday to Merafong municipality on the West Rand, which owes R801m, and Ngwathe municipality in the Free State, which includes the towns of Parys, Vredefort and Heilbron and owes almost R63m.
“Rand Water is in the process of employing the same credit control measure with other owing municipalities,” it said.
The utility said outstanding debt from municipalities had reached a “critical level”, with municipalities owing a combined R3bn.
Those in Gauteng lead the pack with arrears of a staggering R2bn, followed by Mpumalanga with R1bn. Ngwathe is the only municipality in the Free State listed as being in arrears.
Rand Water says it is seeking interventions from the National Treasury and the cooperative governance & traditional affairs department.
It said the escalating debt “highly destabilises” its financial position and poses a direct threat to its medium- and long-term sustainability.
“Rand Water operates without any form of allocation from the national fiscus [and] thus relies solely on funds collected from its customers, primarily municipalities, to fulfil its obligations,” it said.
It said that municipalities’ erratic payment patterns had “deteriorated to concerning levels” and that despite engaging with the defaulting municipalities on numerous occasions, “they took advantage of these [contacts] and use them [as a pretext for] endless and fruitless negotiations”, which they never intend to honour.
Rand Water spokesperson Makenosi Maroo told the Sunday Times that though Emfuleni had the biggest arrears, “they did make payments in the past ... even though they were not full payments”.
“But [Merafong and Ngwathe] renege on their agreements. We’ve had bilateral agreements and meetings with them. We meet so often and have had so many discussions ... hence we’re resorting to this now.”
She said she didn’t want to “pre-empt” how the discussions would go with the Treasury and Cogta but Rand Water would see how the process unfolded and take it from there.
While Emfuleni is not in the direct firing line for now, it did express surprise over the announcement, especially as the water & sanitation department had taken over water and sanitation services in the municipality.
“Rand Water was appointed the implementing agent of this intervention and this means that money allocated for water and sanitation in the municipality will be administered by the entity,” Emfuleni’s Makhosonke Sangweni said.
Sangweni also spoke of the collaboration the municipality had with Rand Water to establish a “special vehicle entity” to help improve water supply, revenue collection and deal with leaks, which he said accounted for more than 50% of water use.
“It means we’ll be working jointly but obviously because Rand Water has specific and necessary skills ... they will be leading the process,” he said.
The project is expected to run for three years and will be a private-public partnership, he said.
“And that is done because it’s a sign of commitment on our side that we want to resolve the matter. We appreciate that we have challenges and that we don’t have money to pay what we owe them.”
Water specialist Anthony Turton said Rand Water’s statement highlighted its challenges.
“It supplies a large number of end-users or municipalities. Three of those are [Gauteng] metros ... each of those is a big undertaking and each, in its own way, is in financial difficulty.
“Rand Water has a growing cash flow crisis and has no control over the end-user. It’s got no ability to force the end-user to pay. If the end-user defaults on payments, what does it do? It’s not as though the courts are likely to force the municipalities to pay because the problem is that the regulator failed ... many years ago by allowing municipalities to get into debt in the first place,” he said.
The water & sanitation department, as the regulator, was both a “referee and player” in the sector, he said.
Referring to the measures Rand Water is implementing to penalise its debtors, Turton said curtailing supply was a “double-edged sword” because water was a basic right and supply could not be cut off. And municipalities would receive less revenue if they provided ratepayers less water.
“Water is a human right, it’s not an enforceable issue. You can’t go and collect on it ... so we’re fast getting into a situation where we’re seeing these contradictions between our law and the economy.
“The law has lots of rights for people ... but it doesn’t give obligations to the people who enjoy these rights. And that’s the problem now because service providers like Rand Water have obligations but no rights. Unless we can sort this out, Rand Water is going to start defaulting,” he said.