Municipal debt is rising in South Africa

The debt owed by municipalities to water boards continues to grow. It has emerged that, as of 30 June 2011, municipalities owed water boards R1.89bn.
The Democratic Alliance (DA) has been tracking this debt for more than two years now, and the trajectory is heading one way: upwards.

The Churchill Dam overflowing

Over the same period the DA has been calling for action to be taken by National Treasury to ensure municipalities pay their debt in arrears. These debts are compromising the financial sustainability of many of the water boards, and this could potentially affect the future provision of clean water to the public as well as the ability of water boards to expand water infrastructure to areas where there is currently no access to running water.
From 2009 to 2011 the debt has grown by over R 700m. It must be said that the problem of debt in arrears does not affect all water boards. Overberg Water, for example, is owed no debt that is in arrears. Amatola and Pelladrift Water Boards have relatively small amounts owing to them.
However, several of South Africa’s 12 water boards are burdened by massive amounts of debt in arrears owing to them. For instance, Bushbuckridge Water is owed R 230m of debt in arrears, Sedibeng R 384m and Lepelle Northern R 320m.

The Minister of Water and Environmental Affairs must ensure that the National Treasury, which has a mandate to mediate between water boards and municipalities in terms of section 44 of the Municipal Finance Management Act, continues to pressurise municipalities to pay their outstanding debts.
The Department of Water has expressed frustration that the unconditional grant that municipalities receive as part of the equitable share for the provision of water to poor communities, is often being used for purposes other than settling debt with water boards.
The considerable amounts outstanding to some water boards increase the financial risk of these water boards, compromise their ability to engage in capital expansion projects and could compromise the provision of water to the public. Unless there is a significant intervention now, the amounts owing to water boards will continue to grow.

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