Maile warns on Gauteng municipalities’ financial health

This was revealed by Gauteng Finance MEC Lebogang Maile on Tuesday during the re-tabling of his provincial budget for the 2025/2026 financial year.

Maile said the remaining municipalities risk operating outside their financial means unless urgent corrective steps are taken.

"The remaining municipalities tabled unfunded budgets, which is a serious concern. We have stated repeatedly that fiscal discipline requires that municipalities maintain fiscal positions that are consistent with macroeconomic stability and sustained economic growth.

"To reinforce fiscal discipline, the Gauteng provincial government and Gauteng municipalities must fund their requirements within the set budget ceilings. This necessitates large-scale budget reprioritisation, making trade-offs, and a drive to identify efficiency gains - all with the aim of enhancing the credibility of the provincial and municipal budgets.

"To this end, the Gauteng provincial treasury has been providing support to delegated municipalities by conducting budget assessments on the tabled/draft budget to assist municipalities with improving their budget funding positions."

Maile warned that most municipalities are running water and electricity services at a loss, as current tariffs don’t reflect the true supply cost.

Cost-reflective tariff studies show municipalities are undercharging, resulting in significant revenue shortfalls.

Maile said that municipalities, with the assistance of the Gauteng provincial treasury, have conducted cost-reflective tariff assessments to determine if current tariffs adequately cover the full cost of delivering the service.

"Findings from most municipalities on cost-reflective tariffs, including the comprehensive cost of supply studies, indicate that the calculated cost-reflective tariffs are significantly higher than the current rates, making them impractical for immediate implementation."

Maile added that a phased approach is being considered, while solutions like Special Purpose Vehicles and infrastructure repairs are on the table to curb losses and improve sustainability.

"Municipalities are having to opt for a phase-in approach. As a result, most trading services are currently operating at a loss due to tariffs that do not reflect the true cost of service provision. This challenge is magnified by the substantial distribution losses in water and electricity, which significantly impact financial sustainability.

"The Gauteng provincial government recognises that to effectively address non-revenue water challenges in municipalities, a multi-pronged approach focusing on infrastructure improvements, improved water management and governance, and community engagement is needed. This includes repairing leaks, enhancing metering and billing, engaging in community education, and implementing smart water management solutions.

"In this regard, we are engaging with municipalities to explore various options, including but not limited to Special Purpose Vehicles. The effectiveness of these SPVs will depend on municipalities prioritising the financial ring-fencing of water and sanitation revenue, as well as ensuring that they develop a coherent and sustainable revenue generation strategy.

"The total draft capital budgets of municipalities in the Gauteng province for the 2025/2026 financial year amount to R14.3 billion. Sanitation and electricity projects account for the largest share of this budget. These are some of the areas identified by Premier Lesufi as part of the 13 challenges that need to be addressed in the province."

ALSO READ