Ramaphosa proposes ring-fencing municipal water and electricity revenue

President Cyril Ramaphosa has proposed ring-fencing revenue from the sale of water and electricity to ensure municipalities prioritise infrastructure maintenance as part of a revised White Paper on Local Government.

President Cyril Ramaphosa has proposed changing which functions municipalities are responsible for, ring-fencing water and electricity revenue for infrastructure maintenance and introducing compulsory licensing for service providers as part of a major overhaul of local government.

Launching the Revised White Paper on Local Government, Ramaphosa said the existing system needed fundamental reform to address failing services, unsustainable municipal finances, corruption and weak administrative capacity.

This cannot continue.

A key proposal in the revised policy is that revenue from the sale of water and electricity must be reserved for maintaining the infrastructure needed to provide those services.

Going forward, revenues from the sale of electricity and water will be ring-fenced and used to maintain infrastructure before anything else.

He said municipalities had too often invested in new infrastructure while neglecting existing networks, including water. The financial pressure on municipalities is reflected in their debt to Eskom, which Ramaphosa said exceeded R120 billion. Many municipalities are also in arrears to water boards.

The policy also proposes separating the role of service authority from service provider in water and electricity services, alongside compulsory licensing for all providers. A time-bound Local Government Transition Management Body, involving the Department of Cooperative Governance, the Presidency and National Treasury, will coordinate the reform process.