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Treated water must be paid for — or our infrastructure will deteriorate further

Sean Phillips
By Sean Phillips
14 Feb 2025
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On average, municipalities do not obtain any revenue from almost half of the treated water that they produce or buy from the water boards. One of the consequences is that water services in many municipalities are in a downward spiral.

For clean drinking water to come out of taps, water must be captured, stored, pumped, treated and distributed. All of this costs money and must be paid for from somewhere. If it is not paid for, the system starts failing and clean water stops coming out of the taps. 

Some of the bulk water infrastructure projects implemented by the Department of Water and Sanitation (DWS) and the water boards are funded from the fiscus. These are “social” projects for which it is not viable to raise money on the financial markets.

However, most national water resource infrastructure projects and most water board infrastructure projects are funded by borrowing. The loans are paid off using revenue from the sale of water. 

Neither DWS nor the water boards receive any operational subsidies from the fiscus. Their operations and maintenance costs must be funded from revenue from the sale of water to their customers. 

The national government transfers more than R60-billion per annum to municipalities for water and sanitation. This includes the portion of the equitable share which is meant to be used by municipalities to provide free basic water to the indigent, as well as various infrastructure grants which are meant to address historical infrastructure backlogs.

Municipalities are not allowed to use the infrastructure grants for operational expenditure and routine maintenance – these costs must be covered by the equitable share and revenue from the sale of water by municipalities to their customers. 

Unintended consequences


The infrastructure grants to municipalities are creating unintended consequences. In some instances, knowing that grants will be forthcoming in future, municipalities under-budget for maintenance of their water infrastructure. This leads to rapid deterioration of the infrastructure and the municipalities then use grant funding to rehabilitate the infrastructure.

In some cases, grant funding has been used multiple times to rehabilitate the same infrastructure. The grants are therefore creating a perverse incentive for municipalities to neglect maintenance. 

The 2023 DWS No Drop audit of drinking water systems throughout the country found that, on average, municipalities had non-revenue water of 47.4%. This means that, on average, municipalities do not obtain any revenue from almost half of the treated water that they produce or buy from the water boards. 

One of the consequences of this is that municipalities do not have sufficient funds to operate and maintain their water services. Water services in many municipalities are in a downward spiral – a lack of maintenance and poor operation of the infrastructure leads to declining service levels and increasing non-revenue water, which in turn leads to declining payment levels by residents and less money for maintenance.

A further consequence is that municipalities cannot pay the water boards for the treated water supplied by them. Municipal debts to water boards are increasing exponentially, resulting in some being at risk of going bankrupt.

Payments halted


The worst affected water boards have stopped paying DWS for the raw (untreated) water supplied to them, which means that the funds available to DWS to maintain and operate the national dams and related infrastructure are insufficient. 

There are debates in the local government and water sectors regarding what should be done to address the funding gap created by high non-revenue water at municipal level. 

Some argue that the problem is that municipalities are underfunded and that the equitable share allocation and grants to municipalities should be increased, so that water services can be subsidised more from the fiscus.

To provide more money to municipalities, the National Treasury would have to either cut national and provincial budgets, increase government borrowing or increase income tax and/or VAT. 

However, there is little room to further cut national and provincial budgets – the budgets for national functions such as defence have been cut to the bone and provincial health and education budgets are already under strain.

Increasing government borrowing could result in a ratings downgrade which could increase the cost of borrowing, as well as increasing debt repayments which crowd out other expenditure.

Increases in income tax or VAT could have a negative impact on economic growth as well as reduce disposable income. 

Increasing subsidies to municipalities to address the non-revenue water funding gap could have unintended consequences. It would reduce the incentive for municipalities to reduce non-revenue water. It could also result in residents who are currently paying for water stopping payment when they observe that other residents who do not pay continue to receive water. 

User-pays principle


Subsidising the non-revenue water funding gap from the fiscus also raises questions of fairness and undermines the user-pays principle. Why should everyone be taxed more to fund the provision of water to those who can afford to pay their water bills but do not pay, or to those who get free water through illegal connections? 

The counter-argument is that municipalities must address the funding gap by reducing non-revenue water. This would involve ring-fencing revenues from the sale of water for maintenance of water infrastructure and for reducing leaks in water distribution systems, closing illegal water connections and strengthening metering, billing and revenue collection.

Municipalities must also improve their indigent management systems to ensure that a portion of their equitable share allocation is used to provide a basic amount of free water to only those households that are genuinely unable to pay. Reducing non-revenue water will require decisive action by municipalities to break the downward spiral described above. 

The Bill of Rights in the Constitution states that everyone has the right to have access to sufficient water.

However, this is a right that comes with responsibilities, and those who can afford to pay for water must pay. DM

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