Is this the future of small town South Africa?

Written by Ciaran Ryan. Posted in Journalism

When the taps run dry and the lights go out.

This article first appeared in Moneyweb

Increasing municipal debt is being identified as a key strategic risk. Picture: Naashon Zalk, Bloomberg

The residents of Bethal, a small farming town in Mpumalanga, know what it is like to live without water. Rand Water reduced the water pressure by 40% in December when the Govan Mbeki Municipality missed payment on its arrears bill of R88 million.

When the taps run dry, schools and businesses close down. Parts of the town still have access to water, but most do not. On Saturday the municipality turned the water back on, but no one knows how long this will last. Local businesses and farmers have come together to solve the problem, trucking in water from surrounding boreholes to supply the town. Local residents have resorted to hauling buckets of water to their homes for washing and cooking. The town’s abattoir was shut down because it could not get water.

A week ago residents marched on the municipal headquarters demanding to know why the water bill has not been paid and when the taps would be turned on again. “We are expecting the lights to go out soon,” says Michelle Rademeyer, a local resident planning to campaign in the upcoming elections for Freedom Front Plus (FF+). There’s a good chance she will clean up in the election, given the level of disaffection with the current municipal leadership. Many residents suspect corruption as the cause of their dry taps. “We may be able to do without lights, but we cannot do without water,” says Rademeyer.

Local government an ‘irrelevance’

The local government has ceased to function, adds local town councillor Aranda Nel-Buitdendag. When that happens, residents take it upon themselves to provide basic services such as water supply and emergency services. The local government has become an irrelevance, or worse, an obstruction to daily life.

Residents know who to blame, and the ruling ANC can expect a thrashing in Bethal come election time. Smaller parties such as FF+ and the Economic Freedom fighters (EFF) are expected to gorge themselves on this mess.

Rand Water supplies bulk portable water to 17 municipalities in Gauteng, Mpumalanga, North West and the Free State. As of January 23, it was owed R708 million in arrears. Bushbuckridge Municipality, also in Mpumalanga, has had its water flow reduced by 20%. Worst affected is Victor Khanye Municipality, also in Mpumalanga, where water flow has been reduced 60%, impacting the surrounding areas of Delmas, Botleng, Eloff and Sundra. It owes Rand Water about R86 million in arrears.

Asked whether the delinquent municipalities were managing to catch up on the arrears, Rand Water cryptically replied: “Some municipalities have been improving and adhering to the repayment arrangements [more] than others.”

Other towns in Mpumalanga dependent on coal mining have been devastated, but for different reasons. Blinkpan, which abuts the Koornfontein Coal Mine, has been in virtual shutdown since workers stopped getting paid in October last year. Koornfontein, like its sister mine Optimum, forms part of the Tegeta group, once owned by the Guptas. Both mines were placed in business rescue in February 2018.

Several thousand families have been affected since the pay cheques stopped coming last October, and have resorted to raising donations from local businesses and good Samaritans to feed themselves. There is hope that the imminent sale of these mines by Tegeta’s business rescue practitioners will allow miners to return to work and receive back-pay. Mine workers are having to borrow to pay water and lights, and 20 workers have died – some from stress – in the last year, according to a spokesman from Feed the Miner, a non-profit set up to provide food to hungry mining families.

Municipality on life support

Louisville, also in Mpumalanga, is on life support after the suspension of mining operations at the nearly Lily and Barbrook gold mines three years ago, following the collapse of a support pillar that killed three mine workers.

In Emfuleni, south of Johannesburg, sewage is seeping into the Vaal River, creating an environmental and economic crisis. Unemployment at Sebokeng, the largest township in Emfuleni, is 54%, according to a North-West University study. Non-payment of utility charges has weakened the municipality’s capacity to repair broken infrastructure. This week, Reverend Gift Moerane, Gauteng provincial secretary of the South African Council of Churches, was appointed the new mayor of Emfuleni and tasked with restoring basic services and financial stability.

According to the auditor-general, just 49 of the country’s 263 municipalities achieved clean audits in the 2015/16 financial year, adding that irregular expenditure had increased by more than 50% to R16.8 billion. The figure is likely much more than this as the full extent of mis-spending was unknown. Irregular spending at municipal level was reported at R50 billion (though possibly as high as R80 billion) in the last financial year, prompting amendments to the Public Audit Act giving the auditor-general more powers to enforce recommendations and recover missing money.

The Municipal Demarcation Board says 70-80% of the population in municipalities, especially those located in the former homelands, are dependent on social grants. The suggested solution for some of these struggling municipalities is amalgamation.

Read: Amalgamation no silver bullet for struggling municipalities 

Eskom’s 2018 annual report puts municipal arrears debt at R13.6 billion, though this is likely an understatement. The figure for the previous year was R9.4 billion. “Municipal arrear debt has increased at an alarming rate over the last three years. It is assumed that municipal arrear debt will continue to increase due to poor cash flow positions of municipalities. Eskom will engage relevant parties to have appropriate policies and legislation revised in order to recover amounts due,” the power utility says.

Increasing municipal debt was identified as a key strategic risk, and one solution proposed is to curtail supply to defaulting municipalities. But even here, Eskom faced opposition. Supply interruptions planned for Maluti-a-Phofung in the Free State were halted through a court interdict won by a group of customers. In terms of an interim court ruling, Eskom agreed not to interrupt supply to the customers who brought the application, provided they pay Eskom directly until such time as the final application is heard in court.

The top three defaulting Free State municipalities – Maluti-a-Phofung, Matjhabeng and Ngwathe – account for almost R5.4 billion of the total outstanding debt to Eskom of R13.6 billion.

Arrears debt as a percentage of revenue worsened to 2.73% in 2018 from 1.14% two years previously. Some 82% of these arrears came from just 20 municipalities, with nearly half of this being owed by Free State municipalities.

Joburg, with its towering skyscrapers, may as well be a million miles from small town South Africa, where local governance has sprung a fatal leak.

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.