R320bn departmental debt to municipalities cause of R130bn municipal debt to water boards

South Africa’s water boards are grappling with a worsening debt crisis, driven by the combined effects of municipal financial instability and substantial departmental arrears.

According to detailed presentations at a recent parliamentary portfolio committee meeting on water and sanitation, the water boards are also confronting mounting challenges in infrastructure maintenance.

Municipal and departmental debt

Minister of Water and Sanitation Pemmy Majodina said water boards currently face outstanding municipal debt of approximately R130 billion, while municipalities themselves are owed R320 billion by various government departments and entities.

Majodina said that when the department questioned the municipalities regarding their debt, they responded, “We don’t pay water boards because we are also not being paid by departments.”

She added that the municipalities wrote to the national treasury for intervention regarding departmental debt.

Majodina said the water and sanitation department could not implement the debt recovery from departments as that was Cogta and the national treasury’s responsibility.

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Treasury’s aggressive debt recovery strategy

The parliamentary committee revealed a decisive approach to addressing municipal debt through strategic financial interventions.

The Department of Water and Sanitation reported success in recovering municipal debt through National Treasury interventions.

The department plans further withholdings for March 12 payments after initial positive results.

However, legal challenges have emerged, particularly with Mbombela municipality, which secured a court order mandating arbitration and monthly payments of R12 million against their R69 million debt.

Committee members highlighted the systemic nature of municipal financial distress, with one member noting, “If you minus the debt of Matjhabeng to Vaal Central, it owes many other entities.”

The implications are particularly concerning for large municipalities like Matjhabeng, which serves 462,000 people and carries a R7 billion debt burden.

Financial recovery initiatives

Committee members proposed several financial recovery strategies, including structured repayment agreements and compliance incentives.

Majodina confirmed previous attempts at such approaches, stating; “We made commitments to wave the interest; we made commitments to cancel old debts if municipalities are committed and paying”.

However, repeated non-compliance has forced more stringent measures.

Proposed mechanisms now include direct deductions from Equitable Share instead of full allocation withholding, and a potential performance-based grant system linking fund disbursement to debt repayment milestones.

ALSO READ: Plan to clear historic municipal debt to water boards

Amatola Water Board’s performance

Amatola Water Board Chair Dr Gaster Sharpley admitted their financial struggles but committed to break even within the next year.

The chair revealed that Amatola still grapples with the recovery of historical municipal debt, recurring financial deficits, stagnant revenue growth, and ageing infrastructure plagued by increasing water losses and service interruptions.

“We want to try and get to break even within the next year,” Sharpley stated, emphasising their focus on reducing water losses to control expenditure.

Despite financial challenges, Amatola also had a few achievements. Sharpley revealed Amatola Water completed the Lower Level Scheme Phase 3 and improved audit outcomes.

He reported filling three executive positions and establishing a full board complement, leading to improved organizational stability.

According to Sharpley, the board also approved an infrastructure master plan and crisis readiness strategy.

Amatola’s priorities include:

• Implementing financial recovery over 24 months
• Exploring renewable energy alternatives
• Implementing drone protection for water purification plants
• Reviewing organizational policies
• Finalizing organizational structure review
• Expanding Eastern Cape footprint

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Magalies Water Board’s Challenges

Despite maintaining over 90% performance ratings in recent years, Magalies Water Board representatives Ofentse Nthutang, Acting CEO, expressed serious concerns.

He revealed that their audit status shifted from clean to unqualified in recent years.

“We are experiencing critical risks related to sustainability due to debt,” Nthutang stated.

Regarding its recruitment overview, Nthutang reported a staff complement of 679 with a 70-30 gender ratio, working toward 50-50 representation.

Magalies financial position

The board’s revenue showed significant growth, particularly after incorporating City Bank.

However, they face R115 million in irregular expenditure from a single capital project and nearly R1.5 billion in secondary activities debt.

He specifically cited issues with late municipal payments.

According to Nthutang, Magalies Water experienced significant challenges during the 2019-2024 period, primarily centred on financial sustainability and operational risks.

Meanwhile, persistent cashflow deficits are undermining the organisation’s performance, and the added complexity of not charging interest on outstanding debt could potentially exacerbate their financial strain.

Lastly, Nthutang said, “Legal and administrative debt collection costs further compound these challenges, creating a complex financial landscape that threatens the entity’s long-term service delivery capabilities and overall sustainability.”

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Magalies treasury intervention

Magalies Water further faced scrutiny over R115.6 million in irregular expenditure and questions about mechanisms to recover a R78 million overpayment on a capital project.

However, the board, previously identified as at risk of running out of cash by mid-2024, reported that treasury interventions are helping to improve their position.

“The intervention by the National Treasury and the ministry, which we highly appreciate – the minister has gone out of her way to intervene with respect to this escalating debt issue – the intervention is working,” stated Nthutang.

Infrastructure projects

A key focus remains the Brits Water Treatment Plant upgrade, scheduled for completion by June 2025.

Nthutang also highlighted concerns about “deteriorating raw water quality,” explaining that poor municipal return flows were necessitating increased chemical treatment.

He said the escalation of their debtors’ book represents their most critical strategic challenge, directly impacting their ability to fund operational costs and maintain financial stability.

Rand Water performance

Rand Water reported significant achievements, including recognition as one of the top four global utilities in 2024.

Their CEO, Sipho Mosai, proudly announced that their water supply was “totally compliant with South African drinking water quality standards” and tested against international benchmarks.

The utility completed significant infrastructure projects, including the world’s largest post-tension press concrete reservoir with a storage capacity of 2,110 megalitres.

“We supplied record volumes of water, way beyond what we had budgeted,” he said, adding that it had resulted in a “net profit increase of 29% to 4.6 billion rand.”

However, debt collection remains challenging, with Mosai noting, “Despite collecting about 91% of outstanding amounts, our expected credit loss continues to increase.”

Rand Water finacial performance

• Revenue increased 11.42% to nearly R22 billion
• Corporate social investment of R84 million
• Net profit increase of 29% to R4.6 billion
• Total liquidity of R13 billion
• Overdue debt of R5.7 billion
• Collection period of 110 days against 70-day target

ALSO READ: Vaal Dam and Grootdraai Dam levels show mixed trends

Future investment

Rand Water announced a R27 billion infrastructure investment plan, including:

• A new 450 megaliter per day scheme
• Pipeline upgrades
• New reservoirs
• Purification works improvements

Mosai revealed that the utility is establishing a technical academy and pursuing innovation partnerships through professional chairs at institutions.

Lepelle Northern Water’s progress

Municipal debt continues to plague Lepelle Northern Water’s financial stability.

Lepelle reported an outstanding municipal debt of R812 million, with three major debtors: Mopani, Vhembe, and Sekhukhune District Municipalities.

However, the utility has also made progress with Mopani District Municipality, which is now servicing its debt regularly following a new service level agreement.

Dr. Cornelius Ruiters, Lepelle Northern Water’s CEO, said the overall water board has presented positive financial growth since the 2021/22 financial year, with revenue increasing from R640 million to R1.8 billion over three years and cash equivalents reaching approximately R1.3 billion.

“We have been on a positive progression rise in terms of revenue,” the board chair confirmed.

Lepelle Northern Water’s infrastructure and operational challenges

Ruiters emphasised their focus on infrastructure replacement and rehabilitation programs aligned with approved budgets.

The utility is implementing an R2.1 billion capital expenditure Programme.

A significant challenge faces Polokwane, where water demand of 174 megalitres per day far exceeds the current supply of 85.6 megalitres.

“There is a substantial deficit of nearly 86 megalitres per day,” Ruiters explained, noting that long-term solutions requiring approximately R18 billion investment are being developed.

According to Lepelle Northern Water’s presentation, the national average for water losses is 44.7%, with some municipalities exceeding 60%.

Water boards oversight concerns

Committee members expressed concerns about the disconnect between presentations and ground realities.

“The greatest litmus test for us as public representatives is not fancy presentations by boards but the actual lived experiences of our citizens on the ground,” stated MKP MP Visvin Gopal Reddy.

Reddy called for increased physical oversight of water board operations.

Meanwhile, Majodina assured the committee of the department’s commitment to accuracy: “When we come to the portfolio committee with the entities, be it water boards or any other water entity, we come knowing very well that we are not supposed to mislead the committee.”

The Deputy Minister concluded with a call for transparency and non-political approaches to water management: “Let’s tell no lies, let’s not mask our difficulties, let’s not claim easy victories, and let’s not politicize water—it knows no ideology but it also knows no boundaries.”

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