Africa’s largest provider of bulk water services has had to write off millions owed by municipalities that have yet to pay their outstanding bills.

Rand Water Services Pty Limited announced an impairment of R382.3 million for the fiscal year ending in June, as the net debt owed by the South African municipalities it serves rose by 12% to R4.4 billion, based on the company’s annual results released on Friday.

Listen/read: Rand Water shutdown: ‘Vehemently clear’ planning wasn’t done properly

Emfuleni, which hosts the country’s largest steel production plants, has recorded the highest outstanding debt, representing about a quarter of the total due.

The inability of local municipalities to fulfill their payment obligations “jeopardizes the sustainability of water boards,” said Water Minister Pemmy Majodina, who is working alongside the finance and cooperative governance ministers to explore potential solutions.

Last month, the National Treasury revealed plans to withhold funds from five councils in December due to unpaid water bills, aiming to urge local governments to compensate for essential services. Rand Water serves two of these councils—Merafong and Victor Khanye.

The South African government is confronting a deepening water crisis, primarily attributed to years of insufficient investments and inadequate maintenance from local councils.

In October, Rand Water cautioned that the Gauteng province—home to Johannesburg and the capital, Pretoria—could face supply shortages if cities do not swiftly reduce their water usage.

The decline of energy, transport, and water infrastructure under municipal management is seen as a significant threat to the financial system, as highlighted by the central bank.

Read:
JHB has a water leaks problem … Here’s what’s being done about it
Johannesburg considers tighter water restrictions as supply dwindles
Major companies to assist in resolving South Africa’s water crisis

Rand Water caters to approximately 18 million residents across 17 municipalities and various industrial clients in four provinces.

By November, municipalities nationwide had incurred debts totaling R95.4 billion to the state-owned power company Eskom, marking a 28% increase since the end of March, while Eskom has successfully avoided power outages for nine months.

Energy Minister Kgosientsho Ramokgopa recently deemed the increasing debt a “pressing issue.”

Rand Water seeks to reduce its reliance on Eskom for electricity after experiencing a 19% surge in power costs, as it looks to manage “soaring” expenses. The company is exploring alternative energy options, particularly focusing on renewables such as solar and hydropower.

© 2024 Bloomberg

Stay informed with Moneyweb’s comprehensive finance and business news on WhatsApp here.