Mayor’s newsletter for George Herald: 27 January 2022
Over the past weekend, the Municipality commenced with stringent throttling of water usage to ensure that our main water reservoirs do not run dry. Over a number of weeks we communicated that daily usage was equal and often exceeded the maximum capacity of our two water works that are collectively able to treat 40 MegaLitres (“ML”)(40 million litres). In the days leading up to the past weekend, daily water crisis meetings were being held with whatsapp communications continuing until 22h00 every night. In the days leading up to the weekend our reserves were only 2-3 hours.
The drastic action taken over the weekend should come as a sharp reminder that water is life and that we constantly need to ensure that there is water security, that we need to treat water as a scarce and valuable commodity.
The requirement to upgrade George’s water treatment capacity has been on the capital expenditure radar for at least six years. The magnitude of undertaking a project of over R400 million is daunting as it will have to funded from own cash resources, any grants available and long-term debt. Annual repayments on (for example) a R100m loan would amount to approximately R16m over 10 years. This would imply an increase in water tariffs of 10% in addition to any inflation related increase to fund the repayment.
Municipalities therefore face the difficulties of maintaining affordable tariffs while also embarking on expansions of capacity to allow for economic growth while also incurring capital expenditure on equipment that may only be utilised five years into the future. Our long-term financial model advisors regularly provide advice on maximum debt levels, requirements of future cash flows to redeem loans, timing of incurring loans, etc.
In March 2021, a decision was made that one of our solutions was to approach National Treasury with our predicament. Their advice, guidance and support led us to launching the application for a Budget Facility for Infrastructure which resulted in George being the only successful application in the entire South African public sector to receive a grant, amounting to almost R1,2bn to undertake specific water infrastructure upgrades that we had described in our application.
It is ironic that our water usage has increased dramatically by 25% over the November-December period. We are now analysing what has taken place to cause this surge in usage relative to treatment since November. Normal logic would have dictated that the gap that existed pre-November would be filled over the next four years. It has now become clear that investment in technology and data collection will be urgently required to provide greater accuracy of the volumes of water being processed, flowing into the network and used by consumers.