The mismanagement of water and electricity infrastructure is catching up with South Africa’s major municipalities, according to credit rating agency Moody’s Investors Service.
In July, Moody’s released a report on six major metros — Cape Town, Nelson Mandela Bay, Ekurhuleni, Mangaung, Tshwane and Johannesburg — noting that: “Financial and social pressures from water and electricity delivery will intensify for lowest-rated entities.”
Although most of the financial and governance observations made in the report do not apply to the City of Cape Town, the metro does face similar social pressures and climate change-related challenges to those confronting its peers.
For the five other metros, however, the consequences of consistent and prolonged administrative ineptitude are felt in these local councils not being adequately equipped to shield communities from the ravages and complexities of climate change.
For years, the news media has diligently documented the plight of communities at the hands of incompetently run local councils, where service delivery protests in underserviced areas are a regular fixture.
Now, the state of municipal governance is receiving more intense attention from credit rating agencies because, as noted by Moody’s in its report, the funding taps and sources of finance are drying up.
Another problem facing local government is this tier’s inability to maximize revenue-generation initiatives because of deficient systems.
The symptoms of dysfunction have been around for a while now in the form of qualified audits, adverse audits, disclaimed audits and so forth.
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Other indicators of deterioration have been disputes about audits, threats about audits and refusal to cooperate during audits, all of which have confirmed that something is amiss.
More signs of decline include municipalities not charging interest on overdue accounts, councils experiencing billing crises, and flawed frameworks for determining rates.
Further clues about troubles within local government have been legal wrangling over council seats, motions of no confidence in mayors and their administrations, spats between political appointees and professional staff, and intensifying political contestation.
Over the years, the nature of the problem has evolved from municipalities not being able to deliver on basic tasks in line with their mandates to the contemporary crisis of climate change.
The climate crisis requires out-of-the-box thinking, robust governance and a proper handle on the books, none of which is present in the five metros, with the exception being the City of Cape Town, Moody’s observes.
Sections of Nelson Mandela Bay, for example, have no running water, and City Hall’s response has been inadequate. Parts of Ekurhuleni have also experienced the loss of running water because of drought, but there isn’t a plan in sight to address the problem.
In Mangaung, which is under administration, the finance minister complained during a visit there in July about the shoddy state of the metro’s roads and the lamentable condition of its overall management.
The finance minister also bemoaned the fact that the intervention in Mangaung was not yielding the desired outcomes. The situation is so desperate and dire in Mangaung that the finance minister pleaded with the metro’s new council to “put the interests of communities first”.
Meanwhile, Tshwane is running a deficit. Fraud is commonplace in the administratively challenged metros, as is financial mismanagement.
Outside of council headquarters, the mismanagement is apparent in the condition of roads and public assets. Existing infrastructure is not properly maintained. Rapid urbanization will add further strain because of the demands it places on public infrastructure.
The many years of councils’ preoccupation with politics correlate with severe underinvestment in and neglect of water and electricity infrastructure. The ripple effects of this are felt by communities and industry.
Moody’s says agriculture, manufacturing and tourism are particularly vulnerable to water and electricity disruptions.
So, “… [physical] climate events like floods and droughts can … expose infrastructure deficiencies and lead to severe water stress or blackouts,” according to Moody’s. “These events can damage already poor infrastructure even further.”
Municipalities that are not good custodians of public assets are operating against their own self-interest and placing pressure on their credit ratings.
Water and electricity account for the bulk of municipal service charges, an important revenue stream. When municipalities are unable to provide these services, however, that compromises councils’ ability to extract this much-needed revenue.
The nature of the problem is such that it has many moving parts. A big reason for this is that municipalities have been running amok — administratively speaking.
The issue is no longer confined to a few geographically dispersed bad apples. Rather, it has become widespread and systemic.
That is concerning for a country identified as one of the epicentres of the climate crisis in southern Africa and the broader continent. DM/BM