Eskom in crisis, are the Water Boards next?

A person drinking water from a tap
Reading Time: 2 minutes

The financial difficulties experienced by the power utility Eskom are due, in part, to the failure of several municipalities to pay the energy provider for bulk energy supplies. Currently, municipalities owe the power utility over R17 billion.

A similar amount is owed by Soweto residents who receive their electricity directly from Eskom rather than via the local government. The resulting arrears of over R34 billion has contributed to Eskom’s financial woes and thus to the recent bout of load-shedding.

Now research by the UWC’s Applied Constitutional Studies Laboratory (ACSL) suggests that Water Boards face a similar situation. Water Boards provide bulk water to municipalities just as Eskom provides bulk electricity.

According to their latest Public Finance Watch, municipalities currently owe Water Boards more than R9 billion. This amounts to almost half (47%) the Board’s current annual revenue. ACSL indicates that should the current trend continue, the arrears will exceed annual revenue within three years.

In 2017, the Department of Water Affairs took initial steps to stop further escalations in municipal arrears. These steps included throttling water supply to municipalities for several hours a day. In late 2017, 30 municipalities faced throttling of their bulk water supplies.

According to the Department of Water Affairs, 25 of the municipalities quickly entered arrangements to make good on their arrears and the threat of throttling their supply was withdrawn.

Despite this, as the ACSL graphic below shows, the arrears have continued to grow apace. The current trend indicates that arrears will reach R17 billion in 2021. At that stage, municipal arrears for bulk water start to exceed current arrears to Eskom. The rates at which the arrears are increasing suggest that the municipalities in question are in financial crisis.

Although Section 139 of the constitution obliges provincial and national government to intervene when municipalities are in crisis, they have been reluctant to intervene. So far there have been no mandatory interventions as a result of the financial difficulties experienced by local municipalities. This suggests that the situation is likely to grow worse, perhaps to the extent that the financial viability of Water Boards is brought into question.

BREAKING NEWS: Govender brothers sentenced to 7 years imprisonment for attempted murder, 3 years for grievous bodily harm and 12 months for assault common. For more visit http://sabcnews.com