South Africa’s Ministry of Finance to suspend municipal funds due to water debts – BNN Bloomberg

(Bloomberg) — South Africa’s finance ministry plans to withhold money from five municipalities next month over their unpaid water bills, as part of an effort to force local governments to pay for basic services.

The Ministry of Finance will invoke a law that allows authorities to block the payment of a so-called fair share of money allocated to municipalities to pay for services including water and electricity, according to a presentation by the ministry in parliament on Tuesday. The municipalities of Matjhabeng, Kopanong, Thabazimbi, Merafong City and Victor Khanye are affected by the decision, the report said.

“The aim of interventions should be to restore financial stability, improve service delivery and ensure good governance in distressed municipalities,” the Ministry of Finance said.

South Africa’s water boards owe 23.4 billion rand ($1.3 billion), more than 70% of which is four months late. The debt is hampering their ability to maintain and upgrade aging infrastructure at a time when commercial centers including Johannesburg are facing shortages.

Municipalities in South Africa have struggled with a culture of non-payment for services since the apartheid era, when residents of townships and rural areas boycotted rent and other utilities in protest against the country’s white minority government. Municipalities remained poor payers after the end of apartheid in 1994.

According to the National Treasury, the five municipalities would receive R483 million on December 4 and a further R362 million on March 12. The funding will not be released until local authorities have made arrangements to pay their relevant water boards, the report said.

Matjhabeng and Kopanong together owe the Vaal Central water board R7.8 billion, while Thabazimbi owes the Magalies board R216.5 million and Merafong City and Victory Khanye owe the Rand water board R1.54 billion. According to the Water & Sanitation department, both the Vaal and Magalies boards are at risk of bankruptcy.

In addition to the suspension of financing, the Ministry of Finance and the Ministry of Water are also helping to renegotiate repayment agreements between water boards and municipalities.

They are also finalizing a debt write-off mechanism so that water boards can “write off a municipality’s historical debt if the municipality has established a track record of paying its current bills in full,” says Sean Phillips, director general of the water department. , told parliament.

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