/ 28 June 2019

Another town bites the dust

Keep on trucking: This mobile filtration plant at Astral’s Goldi factory processes 3.5 megalitres of water a day.
Keep on trucking: This mobile filtration plant at Astral’s Goldi factory processes 3.5 megalitres of water a day. (Supplied/Astral Foods)

If you want an example of how the country’s municipalities are battling to stay afloat, look no further than Lekwa municipality in Mpumalanga, home to the town of Standerton. The delivery of service is so bad that companies have to treat their own water.

A prime example has been JSE-listed poultry producer Astral Foods — which owns brands such as Goldi Chickens and County Fair.

In early May, Astral took the municipality to court over water supply problems to its poultry processing plant in the area. The plant is the largest of its kind on the continent, processing two million chickens a week. It needs 5.5 megalitres of water a day.

But persistent problems with the water supply, which began in March after stage 4 load-shedding, meant the plant was receiving less than half of what it needed, according to Andy Crocker, the commercial managing director at Astral.

Despite a mutually agreed court order requiring the municipality to supply the plant with four megalitres a day, the municipality was not able to supply even this reduced amount, said Crocker.

The company secured an emergency arrangement to address the situation and, with the intervention of national departments, has recently been appointed as an “emergency service provider” to the municipality.

The municipality has ceded 3.5 megalitres of its raw water allocation from the Vaal River system to Astral for the next two years. Astral has had to install equipment to extract water from the river, which is then trucked to its plant where a filtration system has been installed.

At 120 truckloads a day, the system is unsustainable in the long term, said Crocker. The water supply problems have already cost the company about R85-million.

This is not the first time Astral has been forced to take the municipality on. In 2017, on the back of hundreds of millions of rands owed to Eskom, the power utility threatened to cut off the town’s electricity supply.

But Astral, one of the largest rate payers in the town, appealed to the courts to prevent this. As part of the court settlement reached with Eskom, Astral was permitted to pay its electricity bill directly to the utility instead of to the municipality — an arrangement that remains in place.

After Astral threatened to go to court again last year, said Crocker, national and provincial authorities and the Municipal Infrastructure Support Agent (which provides technical support to local governments) initiated plans to help the municipality rectify its problems.

“Unfortunately, what we are experiencing now is the outcome of all those efforts,” said Crocker. “They haven’t been remedied and that’s led to this situation.” The municipality’s infrastructure is not being maintained, it is systematically deteriorating and it does not have the means to address this, he said.

Last year Eskom told Parliament that Lekwa owed it almost R500-million. It also highlighted that a host of customers in other underpaying municipalities were in the process of applying to pay Eskom directly, by-passing their local governments entirely.

But Lekwa’s debts are worse than this. The Democratic Alliance councillor for Standerton, Louis Jansen van Rensburg, said the municipality revealed in a council meeting in May that Lekwa owes R819-million to Eskom and a further R270-million to the national department of water and sanitation.

Yet, according to Jansen van Rensburg, the municipality provided its mayor, Lindokuhle Dhlamini, with a new car, allegedly a BMW costing about R700 000. This happened despite a series of service delivery failings in the town. From complaints of raw sewage leaking into the Vaal River — heard late last year by the Human Rights Commission — to refuse being dumped illegally because the municipal site is not functioning, which resulted in the DA launching criminal charges against the mayor and the town’s municipal manager,Lekwa made headlines for all the wrong reasons.

Jansen van Rensburg said the town’s rate payers are so fed up that they have hired a private investigator to search for answers.

Lekwa is a microcosm of the wider problems reflected in the treasury’s quarterly report on local government revenue and expenditure trends.

The most recent report — which covers the third quarter of the municipal financial year, ending on March 31 — revealed that municipalities are under strain. On aggregate, they owe their creditors almost R51-billion, the bulk of which is overdue. This is up more than R10-billion from the same period last year.

The treasury said this is a sign that municipalities could be experiencing liquidity and cash problems, so they are delaying the settlement of their outstanding debts. A big part of the finance problem is the fact that municipalities are owed almost R163-billion — with R133.5-billion of that older than 90 days. Almost 74% of the outstanding money is owed by households.

Municipalities are also struggling to collect on the services they bill customers for. Their target is a collection rate of 95% but the majority of the country’s 257 municipalities are not meeting this. About 45 municipalities are collecting less than 50% of their billing, while a further 24 municipalities’ collection rates are undetermined, according to the treasury.

On Wednesday, auditor general Kimi Makwetu revealed in his latest assessment of municipal audit results that, if anything, accountability has worsened.

Only 18 of the country’s municipalities received clean audits, levels of noncompliance with legislation are at their highest since 2011-2012 and there was irregular expenditure of almost R25.2-billion. Yet there “were largely no consequences for those who flouted existing legislation”, Makwetu said.

A total of 74% of municipalities did not properly follow up on allegations of financial and supply chain management misconduct and fraud, Makwetu added.

Lekwa municipality responds

The Lekwa municipality acknowledged the financial trouble it is experiencing and stressed that the high levels of poverty and inequality in the area are contributing to its rising debt levels.

In the case of Eskom, while it is indebted, the municipality disputed the inference that it is not paying the utility. Along with customers who pay Eskom directly, the municipality’s attorneys are paying Eskom directly as well, said Noluthando Nkosi, Lekwa’s communications officer. In addition, Lekwa is paying 15% of its equitable share grant to the utility “without fail”.

Eskom was, however, charging “exorbitant interest” and other administration costs that Lekwa is unable to absorb or transfer to consumers.

The municipality “acknowledged” that it owed the water department, but said it is disputing incorrect billing from the department and it is awaiting a credit note to provide certainty on exactly what is owed.

The municipality has not failed to supply water, Nkosi said, but, like all other municipalities, Lekwa is faced with ageing infrastructure and unplanned population growth, which requires capacity upgrades. However, it has a limited budget for maintenance and repairs, Nkosi said. In its latest budget framework, the municipality is prioritising maintenance and repairs, but said it maintains “consistent supply of water to its customers, including Astral”.

Nkosi said the spending on the mayor’s vehicle was conducted in line with the mayoral handbook.

The co-operative governance and traditional affairs department said it had intervened to provide Lekwa with financial and infrastructure management support alongside the department of human settlements, water and sanitation.