By OBAKENG MAJE
Minister of Water and Sanitation, Senzo Mchunu said Sedibeng Water’s financial woes led to its demise. According to Mchunu, the water utility provider allegedly struggled to collect revenue from the municipalities for the past five years.
“Sedibeng Water experienced liquidity challenges and had to be bailed out twice in Feb 2021 and December 2021 in the total amount of R270 million. As a result, project implementation and operations were compromised.
“As at 30 September 2021, Sedibeng Water had a total debtor’s book amounting to R7 billion owed by municipalities for bulk water supply and other services. Most of the citizens in its current geographic footprint are indigent, which therefore does not allow for sustainable revenue,” he said.
Mchunu further said the biggest debtor’s book contributor is Matjhabeng Local Municipality, which owes more than R4.4 billion. He added that Sedibeng Water also owes his department more than R4.7 billion for raw water.
“Sedibeng Water is financially constrained to raise capital and based on its balance sheet, the entity is not sustainable. It has an average recovery rate of 41% in the period and its concern status is largely threatened by its financial and liquidity challenges.
“The result of these financial challenges is that, Sedibeng Water is not able to provide the required services, which affects service delivery in three provinces. The financial position of Sedibeng Water has deteriorated to a level where they are unable to continue with their daily operations as a business entity,” said Mchunu.
It is alleged that the Sedibeng Water requested the intervention and urged the department to consider providing R2bn soft loan, to provide cash injection of R395m as an immediate cash relief to settle the demanded payments and monthly operational costs.
“They also urged the department to write off its interest on the water account and the discontinuation of the interest charge. However, there is little prospect of Sedibeng Water’s financial sustainability improving in the foreseeable future and unless something is done it is likely to continue to require bailouts.
“The CEO, CFO and COO positions are vacant and Sedibeng Water is over staffed. It has a staff component of 759, which is excessive in terms of the area it services and when compared to other water boards. So, we approved the disestablishment of Sedibeng Water to be incorporated into Magalies and Bloem Water,” he said.
Mchunu said they will transfer the North West assets and liabilities to Magalies Water and transfer the Free State and Northern Cape assets and liabilities to Bloem Water. He said the disestablishment of Sedibeng Water will address the underlying problem of the poor billing and revenue collection and high water losses of the municipalities.
Meanwhile, Sedibeng Water acting Chief Executive Officer (CEO), Toto Molobye said in a letter: “This communique serves to notify you that the Minister of Water and Sanitation, Mr Senzo
Mchunu has approved the disestablishment of Sedibeng Water as an entity and have its constituent parts incorporated into Bloem Water and Magalies Water respectively.
“Staff, assets and liabilities in the Northern Cape and Free State provinces will be transferred
to Bloem Water, while staff, assets and liabilities in the North West will be transferred to Magalies Water.”
Molobye further said the ministry will in due course gazette the extension of the areas of operation of Bloem Water and Magalies Water. He added that a detailed roadmap of the disestablishment process will be provided as soon as it is available.
“Furthermore, briefing sessions where members of staff will be afforded an opportunity to raise their concerns and ask clarity-seeking questions will be arranged regionally in the next two to three weeks.
“In the meantime, all operations and/or activities will continue as usual so that services to customers both internal and external may not be impacted negatively. The board, management and department are committed to ensuring that the transition process is managed in a manner that is fair, objective, transparent and compliant to all applicable legislation,” said Molobye.
The Guardian 