(Archive photo: pixabay)
According to the national treasury, South African municipalities lose R25 billion annually in water and electricity that they buy, but never sell. In some cities, up to 40% of all bulk water purchases produce no revenue and average power losses stand at 25%.
This is the result of water leaks, transmission losses, electricity theft and old meters that had to be replaced and are bypassed by large consumers, says the treasury. The costs are recovered through tariffs paid by consumers.
The treasury disclosed this massive inefficiency during a virtual media conversation with members of the National Press Club which focused on the institution’s role in intergovernmental relations, especially with municipalities.
The government has allocated R54 billion over six years for its new Metro Trading Services Reform Programme, which aims to break the vicious cycle of underinvestment in infrastructure. It is a cycle that leads to poor service delivery and deteriorating collections, which in turn leads to no money being available to invest in the repair and improvement of infrastructure.
Awards under the programme
| Metro | Water and sanitation | Electricity | Waste management | Total |
| Johannesburg | 6 062 | 3 031 | 1 010 | 10 104 |
| Cape Town | 5 173 | 2 587 | 862 | 8 622 |
| Durban | 5 137 | 2 596 | 856 | 8 562 |
| In drag | 4 738 | 2 369 | 790 | 7 896 |
| Tshwane | 4 291 | 2 146 | 715 | 7 152 |
| Nelson Mandela Bay | 2 536 | 1 282 | 427 | 4 272 |
| Buffalo city | 2 293 | 1 147 | 382 | 3 822 |
| Mangaung | 2 142 | 1 071 | 357 | 3 570 |
| Total | 32 400 | 16 200 | 5 400 | 54 000 |
Source: National Treasury
Sydney Maesela, chief city adviser at the treasury, explained that the money will be allocated over the period in 24 separate awards in the form of incentive-driven grants, together with capacity support to turn around the electricity, water, sanitation and waste management services.
Three metros already felt the impact of underperformance in the first year.
Nelson Mandela Bay received nothing because he failed to provide the information required by the Treasury. Ekurhuleni received a third of what was available to him, and Mangaung 66%.
Metros can also increase their allocation by outperforming their peers on targets.
The National Treasury’s offices in Pretoria. (Photo: PSAM)
The program focuses on the country’s eight metro councils where 40% of the population lives and up to 60% of the economic activities take place, although they cover only 2% of the land area in South Africa.
The government believes that the intervention will have the greatest impact in metros, as some metros have budgets larger than those of some provinces and even certain neighboring countries. If performance in the metros improves, it will have economic benefits for the entire country, Maesela said.
An independent officer will visit the metros and verify their performance. Without such verification, the money will not be paid out. The Treasury has also developed and published several documents to provide guidance to the metros.
This is not a quick fix, the treasury stressed, but rather a new approach to the use of conditional grants for reform.
The hope is to improve infrastructure so that inefficiencies, such as the R25 billion worth of losses, can be eliminated and the money can be used efficiently.
Tariffs must be structured so that they generate a surplus to plow back into infrastructure, Maesela said.
He said the country has been very successful in expanding access to services, but it is still dependent on historical bulk capacity that has never been expanded. This needs to be fixed.
Debt Relief Program
During the same event, the deputy director-general of the treasury, Ogalaletseng Gaarekwe, disclosed that the treasury is currently considering the responses of 13 municipalities that are at risk of being removed from the treasury’s debt relief programme.
These municipalities all have large amounts of arrears with Eskom and fail to pay their current accounts, which is the main condition of the program.
She said the municipalities were advised to enter into distribution agency agreements (DAAs) with Eskom, otherwise Eskom would be able to continue with credit control measures. This may include the seizure of the municipal bank account.
The local authorities had until the end of March to respond and these responses are currently being assessed.
Gaarekwe was confident that the task force of the national treasury, the South African Local Authorities Association (Salga), Eskom and the department of cooperative government and traditional affairs and energy and electricity respectively will reach consensus on standard conditions for the agreements.
This follows after the treasury indicated earlier that the agreement which has so far been implemented in three municipalities benefits Eskom. Eskom’s acting group head for power distribution, Agnes Mlambo, subsequently revealed to Maroela Media that the utility company has no intention of changing the content of the current DAA.
Jan Hattingh, chief director for municipal budget analysis at the national treasury, said that 24 of the 71 municipalities that participated in the debt relief program were able to have a third of their Eskom debt written off by meeting the conditions. This includes the timely and full payment of their current accounts for 12 consecutive months.
This contradicts the picture that Eskom often paints that the program has largely failed.
“If one municipality succeeds, we consider it a success,” said Hattingh.
