Water problems get real in Newcastle, as bills go unpaid

Estimated reading time: 3 minutes

Northern KwaZulu-Natal’s bulk water and sanitation services provider uThukela Water, says that local municipalities defaulting on payments are exasperating challenges. 

During the company’s recent Annual General Meeting, the Acting Managing Director, Luiz Cunha pointed out that working with restricted and underfunded budgets, and with no capital funding, has been a real challenge for uThukela Water. “This has been further exasperated by slow payment of the bulk water service accounts by defaulting municipalities. This has forced the entity to, at times, put a hold on spending and budgets, purely to ensure an uninterrupted water supply.”

The Statement of Financial Performance in the 2021 Annual Financial Statements reflects a small surplus, (excluding non-cash items) a cash and investment holding of R29 million, (2 months operational costs) and a serious increase in short term Water Service Authority debtors to R142 million.

The debt seriously challenged the entity’s ability to render services post 30 June 2021. Therefore, the Board had to take drastic action to recover some of the debt, in order for operations to continue.

According to Cunha, the big creditor reflected in the balance sheet of R405 million relates to the non-payment of the Department of Water Affairs and Sanitations raw water charges.

“This matter is being dealt with directly with the Department with a view to finalising the unresolved tariff issues and the structuring of a payment plan with the relevant WSA’s and the Department. The entity is debt free and has leverage off a sound balance sheet with a net asset value of approximately R550 million to raise capital for bulk water infrastructure development,” he pointed out.

According to his report, the Newcastle municipality continued to default on its payments and was 10 months in arrears at year end.

The Amajuba District municipality also continued to default on its payments and was also eight months in arrears as of year end.

The uMzinyathi District municipality was five months in arrears, as of year end.

Furthermore, Cunha said the slow payment for services rendered has a direct effect on plans and programs. This leads to delays and routine maintenance not being carried out.

“It must be stated quite categorically and without fear of contradiction, that the management and Board of this entity, has done everything correctly and possible, to ensure that it collects its revenues. The reality is that the municipalities are, due to their financial predicaments, unable to honour their commitments to the Board timorously,” Cunha explained.

With this in mind, the company highlighted that more funds were invested in short term call investments due to the deteriorating shareholder payments. This aims to provide a buffer in times of non-payment. However, it should be noted that this is barely sufficient to sustain the entity for a period of two months.

According to uThukela Water, should the municipalities update and pay their current bulk billing accounts, it would bring the entity into a favourable position enabling it to operate effectively and efficiently as it should be doing under normal circumstances.

With the threat of water issues looming, what are your thoughts on the above-mentioned? 

Share your views in the comment section below.

One thought on “Water problems get real in Newcastle, as bills go unpaid

Leave a Reply

Your email address will not be published.