Joburg gripped by cash crisis despite mayor’s financial optimism

The lived reality of Johannesburg residents — overflowing dustbins, broken water pipes, electricity failures and potholes — does not reflect the political leadership’s assertion that “our financial management is okay and has not reached a crisis state”.

While the city will now be paying Eskom R1.4bn and Rand Water R960m this month, Eskom is actually owed more than R6bn, and no details have been provided on how and when this debt will be paid off.

Added to this is the fact that Johannesburg Water loses almost 42% of what it buys, while City Power loses 30% of its bulk purchases. These losses are directly related to crumbling infrastructure, theft and vandalism.

The money to pay these bulk suppliers will probably come from the National Treasury’s equitable share grant of R3.5bn, which will be paid to the city next week. The City of Johannesburg does not have the revenue on hand to pay from its own coffers.

The city has 12 days of cash on hand — about R2.8bn. City Power owes its contractors R1.5bn as of this month; Johannesburg Water owes about R1.8bn, while Pikitup owes contractors R1.3bn.

This, said JoburgCAN’s Julia Fish, is simply not enough. “Thirty percent of the city’s budget is spent on salaries. The city is playing a massive game of Russian roulette, paying whichever supplier they can. There is no wriggle room. Late payments incur penalties, which means the city pays more than it should for services,” she said.

The city constantly pays its contractors late, to the point where infrastructure projects are suspended because of nonpayment. Currently, work on the Hurst Hill 2 reservoir — which supplies multiple areas including Auckland Park, Coronationville, Emmarentia, Greenside, Parkview, Northcliff and Westbury — is suspended because of nonpayment, and the project is estimated to be eight months overdue.

The cash-flow crisis has affected infrastructure projects across the city, with City Power deferring 10 crucial projects to the next financial year, while six projects have experienced implementation delays because of late payments.

One of these infrastructure projects is the upgrading of the Eikenhof substation, where power failures have plunged Johannesburg’s water supply into crisis.

The substation powers the Rand Water Eikenhof pump station, which supplies water to 60% of the city. A power failure of any length at Eikenhof can have — and has had — long-lasting implications for the water supply. City Power was supposed to begin a R350m upgrade of the Eikenhof substation during this financial year.

But City Power spokesperson Isaac Mangena said the Eikenhof project, along with the mobile substation programme, the transformer refurbishment programme, the Orlando switching station, the Dainfern substation, the Nancefield-Nirvana tower project and the replacement of aged standby boards at the Cydna, Gresswold, Mayfair and Ridge substations, have all been deferred to the next financial year.

Pikitup’s financial troubles are equally drastic. While the entity has R2bn in cash reserves, it has been unable to access them because money is controlled centrally by the city. Mayor Dada Morero said this issue would be addressed and the money would be ring-fenced to allow Pikitup to pay its contractors.

Both the National Treasury and the auditor-general (AG) have raised concerns about the state of Johannesburg’s finances. The AG was particularly brutal in calling out the mounting financial, governance and service delivery challenges that threaten Johannesburg’s ability to fulfil its role as South Africa’s economic powerhouse.

AG Tsakani Maluleke told parliament that Johannesburg’s stand-alone audit regressed from an unqualified audit opinion to a qualified audit opinion in the 2024/25 financial year after the city failed to correct material errors identified during the audit process.

While the city’s consolidated audit outcome, which includes its municipal entities, remained unqualified with findings, the regression in the core administration raised concerns about the municipality’s financial governance.

The Treasury has threatened to withhold Johannesburg’s equitable share grant payment (R3.6bn) due this month. Morero said the city had addressed the concerns raised, and the share would now be paid over.

The core problem is that the city has not resolved the systemic failures that produced the crisis in the first place. The National Treasury’s intervention is important, but it is remedial rather than systemic
— Prof Alex van den Heever

Morero said they were working through the historical backlog of unauthorised, irregular, fruitless and wasteful expenditure rather than simply disclosing it. He said the city had recently regularised R918.4m of such expenditure.

The mayor said the largest unauthorised, irregular, fruitless and wasteful expenditure driver this year was City Power’s overspending on bulk electricity purchases, amounting to R2.1bn by the end of the third quarter in March.

Prof Alex van den Heever from the Wits School of Governance has issued a scathing rebuke to the assurances that all was fine with the city’s finances.

“The core problem is that the city has not resolved the systemic failures that produced the crisis in the first place. The National Treasury’s intervention is important, but it is remedial rather than systemic,” he said.

Van den Heever said the city’s claim that it was “regularising” irregular expenditure also could not be accepted as reassurance. “The first question is not whether irregular spending can be administratively processed after the fact. The question is why the city is unable to spend regularly in the first place.”

Van den Heever said what was required was a credible turnaround plan that confronted hard issues:

funded budgets;
enforceable payment discipline;
ring-fenced utility revenues;
procurement integrity;
real consequence management;
infrastructure maintenance;
reliable billing; and
capable professional management insulated from political interference.

Fish said there were turnaround strategies in place for Johannesburg Water and City Power which were workable, but that there was no money to fund these strategies.

“The city is not prioritising its core mandate, which is service delivery, and is undermining the exact documents it is giving to the Treasury to comply. So it’s basically empty compliance,” she said.