The United Nations has recognised access to clean and safe drinking water as a basic human right, and ensuring all South Africans have access to affordable and reliable water services is a fundamental obligation of any government.
Despite significant efforts to expand access to water services in South Africa, many households and businesses are still unable to pay for these services.
The non-payment and inability to pay for water services are two of the most significant challenges facing the water sector in the country. These challenges have a direct impact on the financial viability of water utilities, making it difficult for them to maintain and expand their infrastructure. In turn, these water utilities would be unable to provide reliable and affordable water services to their customers.
For this paper, I want to focus my attention on Rand Water as a significant institution in the water sector and the country’s economy. It is a strategic institution that is investing and building formidable infrastructure for water provision to Africa’s largest regional economy, Gauteng, and Johannesburg in particular. Since its establishment, it was fit for purpose in supplying the Witwaterand gold rush with water and sound infrastructure that has made the country a formidable economic hub on the continent.
Currently, it is evident that the entity has grown and adjusted from one decade to another. This is because of strong leadership, and capable management supported by highly qualified technical professionals. It is also important to note that the domestic and commercial water users have always been able to help sustain the running of this great South African entity. Hence, in recent years, Rand Water has been contributing to funding and sharing water and infrastructure solutions in the African continent as an equal partner and strategic contributor to the knowledge economy.
Undoubtedly, there are challenges in its business environment, including, but not limited to, non-payment or slow payment by municipalities. These challenges contribute immensely towards non-payment of water supplied to municipalities due to job losses, and general negative economic impact caused by the Covid-19 pandemic.
Despite these issues, the entity has shown resilience in its performance in that it has been posting excellent results to date. The critical operational ratios demonstrate that the organisation has been performing well, with its revenue growing year-on-year.
In terms of project implementation, Rand Water has also performed par excellence. The organisation had set a target to achieve 95% of project implementation by the end of the fiscal year but ended up surpassing it by achieving 115.8% – way above its expectation. This upward trend in achievement is also seen on other targets such as employment creation and its black economic empowerment programme. The repair and maintenance of assets have also been addressed; the target was 95% and the entity achieved 115%. This is a critical achievement and an assurance to the investors of the organisation’s financial stability. It is also an indication to the Gauteng residents and South Africa at large that Rand Water is serious about asset maintenance to ensure longevity and guaranteed supply.
It is important to remind the nation that the policy of this government is to keep this economy at 99% assurance of water supply. Rand Water is one of the strong water sector entities that is giving the nation and Africa’s biggest economic hub that benefit and strategic guarantee. It is commendable that the entity continuously assures the residents that there will be no day-zero in its areas of supply. Furthermore, it can continuously invest in infrastructure build programmes. In its last Annual Report, Rand water had committed to invest R25-billion on infrastructure development – a confidence booster to investors.
Over time, non-payment of water services may have a direct impact on Rand Water’s revenue stream resulting in reduced ability to effectively continue providing the service, repay its funders and manage liabilities. When the debt book grows exponentially, the organisation will experience major financial difficulties, which may result in a mismatch of assets and liabilities ratios. This will result in difficulties when approaching the market for funding.
The global pandemic which affected all countries in the world last year, created a serious negative economic impact. During that period, it was reported that some companies had to retrench their employees to manage costs, whereas others reduced production levels with the mines and factories cutting operations. It meant shrinkage in the labour pool and earning capacity of most families. The situation had a major impact on Rand Water as municipalities experienced difficulties in debt collection.
In the next five years the organisation has committed to spend almost R28-billion on infrastructure investment to meet future demands. This is commendable in a province where there is a growth of housing development and other major economic activities.
The current evidence from the business activities of the entity, demonstrate that Rand Water is an excellent business, professionally managed and adheres to the code of good governance. It is fit for purpose and mandate through its strategy and game plan to match the demand of its market.
It is too big to fail. Gauteng and the country need this entity to keep working, as it brilliantly does, and improve into the new century. It is worth mentioning that the organisation must strengthen its working relations with municipalities to launch joint ventures aimed at shifting the residents’ mind-set to develop a culture of payment for water services rendered to them.
James Ndlovu is a Water Infrastructure Specialist.