National Treasury has set out a far-reaching reform agenda to address the governance and capacity failures undermining water and other basic services in cities such as Joburg
In its recent engagement with city’s leadership, Treasury emphasised that aging pipes, leaking reservoirs and mounting water losses are symptoms of a deeper structural problem.
National Treasury director-general Duncan Arendsem said a six-year R54-billion performance-linked incentive grant for larger metros, coupled with technical assistance, to drive the turnaround has been introduced.
“The most important reform I think is being what we are bringing forward for metro municipalities this year, which is where we have introduced new incentive to get these municipalities to reinvest the revenue that they collect from basic trading services like electricity and water back into those businesses so that those water utilities and water infrastructure is properly maintained.
“We have allocated R54-billion for that, so within our sphere of control on financial management side, we have made this a big priority.”
Metros with adverse or disclaimer audit opinions are excluded, and performance under the reform is independently verified on an annual basis. Funding is tied to governance and operational improvements monitored close by Treasury.
Under the reform, metro councils must adopt comprehensive trading services reform strategies covering water, electricity and solid waste, integrate these into statutory planning and budgeting frameworks, and commit to a set of minimum accountability measures.
Years of underinvestment, estimated at more than R25-billion, have been compounded by inefficiencies, declining cash revenues and weak accountability within municipal trading services.
The result has been a steady erosion of maintenance and capital budgets, driving deteriorating service delivery across the country’s largest cities.
Joburg has experienced water cuts that have frustrated residents across the metro who have taken to the streets in protest.
The success of the reform will depend not only on the scale of the incentive grant, but on whether councils can meet the stringent governance and capacity requirements now tied to funding.
In the case of Joburg’s water crisis, mirrored in many municipalities across the country, National Treasury is planning to send a team to the municipality to urgently find a solution.
The aim is to restore accountable management, ring-fence finances and rebuild technically competent utilities capable of sustaining infrastructure over long term.
According to the Budget Review, weak revenue collection and poor financial management have left 88 municipalities with unfunded budgets, harming service delivery and infrastructure maintenance.
