The Matjhabeng Municipality is one of three municipalities who will not be receiving their equitable share grant in December.
This is a grant from the Treasury to municipalities to fund basic services and operational costs.
The Department of Water and Sanitation (DWS) has warned that two of South Africa’s seven water boards face bankruptcy due to municipal debts.
The Treasury says the blocked funds will be released once municipalities begin paying off their current accounts.
Section 38 of the Municipal Finance Management Act states that the Treasury can withhold funds from municipalities for “persistent” breaches of good accounting practices, such as not paying suppliers.
Unlike state-owned entities, the water boards do not receive funding from the Treasury and rely on payments from municipalities. If municipalities fail to pay them, they cannot turn to the Treasury for direct bailouts as a last resort.
The DWS has been giving warnings for several months that two boards risk bankruptcy within a year if payment from the municipalities they supply does not improve.
If the Magalies Water and Vaal Central Water, who supply bulk water to millions of South Africans in parts of the Free State, North West, Northern Cape, Limpopo, and Gauteng go bankrupt, it will results in a nightmare scenario.
Bankruptcy of the two water boards will force them to stop supplying bulk water to all their customers.
This will include municipalities whose payments are up to date.
Matjhabeng owes a whopping R7 billion to Vaal Central Water, while neighbouring Kopanong owes R781 million.
The DWS’ director-general, Sean Phillips, has said that continued non-payment of current invoices by these two municipalities alone will result in the Vaal Central Water Board going bankrupt, even if all the other municipalities start paying their current invoices in full.
The Treasury said the funds would only be released if the municipalities enter into a “realistic repayment agreement with the relevant water board” and start paying their current invoices.
The payment schedule for equitable share grants shows that Matjhabeng is set to receive R244 million from the Treasury on 4 December, while Kopanong is set to receive R39 million and Thabazimbi R48 million.
