Councils squabble and spend billions, while controls and transparency fail

In Johannesburg, the budgets show hundreds of millions spent to fix sewerage plants which still leak. Nationally, the AG again points to widespread municipal failure to manage finances.

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01/06/2023 11:29:49

.Image:  OUTA

Councils squabble and spend billions of rand, while controls and transparency fail 

Over the last five years, Johannesburg Water has spent at least R200 million on repairs and upgrades for the Bushkoppies and Goudkoppies wastewater treatment works (WWTW) but there are still sewage spills from both into the rivers.

During April, WaterCAN, an initiative of OUTA, opened a criminal case against the City of Johannesburg and its water utility Johannesburg Water at the Parkview police station over the pollution of Gauteng rivers by sewage spills from Bushkoppies and Goudkoppies, arising from the City’s failure to adhere to a directive from the Department of Water and Sanitation to clean up. See more on this here.

The pollution problem is linked to the breakdown of the generator at Goudkoppies in April 2022 and subsequent theft of power cables, resulting in the diversion of sewage inflow to nearby Bushkoppies, which does not have the capacity to cope.

The City of Johannesburg budgets from 2018/19 to 2022/23 show that Joburg Water spent R95 million on the Goudkoppies infrastructure renewal plan. The utility spent R106 million on Bushkoppies: R47.5 million on "upgrade main blowers and pipework", R17 million on the infrastructure renewal plan, R10 million on "new PSTs number 2" and R31.5 million on the balancing tank.

The City's budget for 2023/24 – currently under discussion by the council – indicates that over the next three years the City will spend another R95 million on Goudkoppies for the same infrastructure renewal project and another R225 million on the Bushkoppies main blowers and pipework.

There is a significant gap in the City’s budget documents: while the capital expenditure budgets each year show what the City’s and its entities plan to spend on the different projects, there is no record of actual spending for the previous years. The ongoing pollution problem from Bushkoppies/Goudkoppies hints that perhaps these funds were not all spent on those projects, but there is no record of what happened to them.

The capital spending plans in recent budgets for Joburg Water show a further problem: projects appear in the budgets, with spending listed over up to three years, but then disappear from subsequent budgets, leaving no record of whether those projects started, failed or were postponed. This is a loophole which would enable hundreds of millions of rand to disappear from the system.

Project budgets change hugely from year to year, raising concern that some are just made up to fill a space in the budget.

For example, the 80ML Midrand President Park water tower reservoir, project number 109, is listed in budget 2022/23 with a total expected cost of R55 million, with R5 million planned for 2023/24 and R50 million in 2024/25, but this project is absent from budget 2023/24. Where is the 22ML Kensington B reservoir, listed in budget 2022/23 as a R15 million project due to start in 2024/25, but omitted from budget 2023/24? The promised Yeoville water upgrade? The Bryanston water upgrade? The 1.8ML Blue Hills water tower in Midrand is listed with a total project cost of R4 million in the 2022/23 budget, with the full R4m for that year, but in 2023/24 it appears again with a different project number and a smaller capacity tower (1.5ML), a total project cost of R57.5 million with just R2.5 million to be spent in 2023/24. The 2.26ML Brixton reservoir total project cost jumped from R54.35 million in the 2022/23 budget to R200 million in 2023/24.

The budget shows that Joburg Water expects R3.145 billion in debt impairment (effectively debt write-off) during 2023/24, following R2.717 billion debt impairment in 2022/23. Despite this, Joburg Water expects to make a surplus in the current year of R1.9 billion and expects a surplus of R2.689 billion in 2023/24. The Joburg Water annual report for 2021/22 records an accumulated surplus by March 2022 of R12.155 billion. This seems incomprehensible for an entity with a history of broken water pipes (non-revenue water is running at 45% of total water distributed), uncollected debt, and leaking and overloaded wastewater treatment works.

A failure of transparency in the budget is the absence of figures for the amount of water and electricity bought and sold on (in kilolitres and kilowatt hours) for the money spent. The budget table which lists the salaries of mayor, councillors and senior managers omits the City Power and Joburg Water CEOs.

There is no indication that Joburg Water plans to buy generators for any of the major wastewater or water treatment plants,  which is a huge concern.

Elsewhere in the budget, there is about R50 million for more generators and power back up for clinics and fire stations – these have been in each budget for the last few years – but it is unfortunate that it will take the City three more years to deliver these.

The rest of the City of Johannesburg budget does not inspire confidence in the City’s management.

Spending on repairs and maintenance is inadequate, while infrastructure crumbles. Overall, the City spends only 6.4% of the budget on this while the national benchmark is 8%. Joburg Water manages 7.9%.

This year again, tariffs are due to go up unaffordable amounts: 5.3% for rates, on top of the increases in property valuations (the City expects a 15.8% increase in revenue); 15% for electricity tariffs (this is the National Energy Regulator’s national standard for municipalities this year); 9.3% for water and sanitation tariffs against an expected increase in revenue of only 7.4% for water and 5.6% for sanitation (this hints at more water losses and an increase in those who don’t pay).

At the same time, the municipal salary bill increases by 7.3%.

These increases indicate a municipal council and management who are disconnected from the reality of the residents’ lives, and focus instead on their own enrichment. This impression is underlined by the political squabbling among the councillors – whose salaries will cost residents R193 million in 2023/24 – as they battle over access to power and to the City’s funds.

The Auditor-General of South Africa’s annual report on the municipal finances, released this week, shows that alarming trends in financial mismanagement continue.

The AG said that the root cause of poor municipal performance was inadequate skills and capacity, governance failure and a lack of accountability and consequences. The decrease in good governance across the country has a direct effect on the deterioration of the municipalities.

The AG also noted that the salary bill in many municipalities is so significant that it crowds out the spending on municipal functions (service delivery). The report raised concerns over inadequate debt management, with R39 billion in debt being written off nationally. Across the country, 77 municipalities don't have municipal managers and 52 don't have CFOs.

More information

A soundclip with comment by Dr Ferrial Adam, Manager for OUTA's WaterCAN initiative, is here.