Municipal debts to South Africa’s water boards have more than tripled since 2018, but for all that, the financial position of the country’s major water boards remains surprisingly strong. In some cases, almost embarrassingly so, according to a new report by investment manager Futuregrowth.
The contrast is extraordinary. Municipalities now owe water boards R25.53bn, of which approximately 70% is more than 120 days overdue. Almost half the country’s treated water fails to generate revenue, and irregular expenditure at water boards increased by 41% to R3.1bn in the latest financial year. Only one of the seven water boards — Overberg Water — managed to achieve a clean audit, says the report authored by investment analyst Taariq Mohamed.
Yet Rand Water, by far the largest of the seven bulk-water suppliers, ended its 2025 financial year with R12.2bn in cash, almost double the R6.3bn it held a year earlier. Its debt-to-equity ratio was just 7%, and its earnings before interest, tax, depreciation and amortisation covered interest payments more than ten times over.
Its KwaZulu-Natal counterpart, uMngeni-uThukela Water, is similarly robust. Revenue increased by 10.9% to R7.6bn; its debt-to-equity ratio fell to a remarkably modest 5.64%, and its cash position improved. In March this year, it redeemed a R935m bond.
The contrast of SA having an increasingly serious water crisis at the same time as having two of its largest bulk-water institutions in such sound financial shape is bizarre: Futuregrowth calls it “The paradox of resilience without governance”.
The explanation is partly that South Africa’s water problems are concentrated in the municipal distribution system rather than uniformly spread across the entire water industry. Rand Water can deliver bulk water to a municipality, but that does not guarantee it will arrive at consumers’ taps. Leaking municipal pipes, malfunctioning meters, inadequate maintenance and poor collection systems are often where the trouble begins.
And the trouble eventually works its way back up the system.
Futuregrowth’s report, Troubled Waters: The paradox of resilience without governance, identifies municipal non-payment as perhaps the greatest long-term financial threat to the water sector. What began as a municipal financial problem is progressively becoming a threat to the institutions responsible for supplying and financing bulk water.
In 2018, municipalities owed the water boards just under R8bn; that ballooned three times by 2025, with nearly R18bn outstanding for more than four months.
One municipality, Matjhabeng in the Free State, owes Vaal Central Water approximately R9bn, slightly more than the water board’s entire annual revenue. This is a fairly remarkable business arrangement: the customer owes the supplier more than the supplier sells in a year.
Vaal Central is consequently in a much more precarious position than its larger counterparts. Having inherited the liabilities and infrastructure backlogs of the former Sedibeng Water Board, it has seen its liquidity deteriorate sharply. Its current ratio has fallen from 5.8 times in 2022 to barely above one, forcing it to restrict capital expenditure to essential projects.
In other words, the people and businesses who pay their water bills risk becoming victims of those who don’t.
There is an additional complication. The water boards themselves are hardly paragons of corporate governance. Irregular expenditure rose from R2.2bn to R3.1bn in 2024/25, much of the increase attributable to Rand Water. The Auditor-General identified construction contracts awarded to contractors who did not meet legislative requirements, as well as failures to take disciplinary action consistently against responsible officials.
The most serious governance story concerns uMngeni-uThukela Water. Despite its strong financial position, the organisation has faced investigations into alleged procurement irregularities, conflicts of interest and misappropriation of assets.
The concerns became sufficiently serious that Futuregrowth and fellow investment manager M&G Investments wrote directly to the Minister of Water and Sanitation in December 2025, asking what was being done about governance at the institution.
According to Futuregrowth, nine months later they had received no response.
Questionable investment
The concern of the investment managers is straightforward: an institution can have an excellent balance sheet and still be a questionable investment if its governance is sufficiently poor.
There is already evidence that water boards are becoming increasingly detached from South Africa’s domestic bond market. Rand Water is now the only water board with outstanding listed notes, following uMngeni-uThukela’s repayment of its bond in March. Rand Water itself last issued listed debt in 2021.
The thing is, Rand Water’s enormous cash position means it has little immediate reason to borrow. But uMngeni-uThukela may need additional financing in future, and Futuregrowth warns that persistent governance failures could deter investors or raise its borrowing costs.
This creates a peculiar dilemma. South Africa needs substantial investment in water infrastructure, and institutional investors have considerable funds available for properly structured projects. But the organisations best placed to borrow don’t necessarily need to, while some of those that need financing most urgently are the least attractive borrowers, the report finds.
There are some encouraging developments in the report, however.
Five of the seven water boards achieved full compliance with drinking-water quality standards and met their water supply reliability targets in 2024/25. Both indicators improved from the previous year. That is considerably better news than the dismal national picture of municipal water delivery might suggest.
Improving collections
The Trans-Caledon Tunnel Authority, which finances and implements large national water projects, is also performing relatively well. It generated an operating surplus of R1.5bn and secured R22.25bn in funding for the Mokolo Crocodile River augmentation project, which will support industrial and mining development in the Waterberg and provide additional water security for Eskom’s Medupi and Matimba power stations.
And there are signs that government is taking municipal non-payment more seriously. During the review period, 47 municipalities were submitted for possible withholding of their equitable-share allocations, an increasingly important mechanism for compelling compliance with financial obligations.
Futuregrowth cites evidence suggesting that these measures have improved collections and may even have prevented the collapse of some vulnerable water boards.
But the central contradiction remains. South Africa has financially capable bulk-water institutions, substantial infrastructure needs and investors potentially willing to provide capital. Yet municipal financial failures and weaknesses in governance threaten to undermine the whole arrangement.
The worrying possibility is that the country could end up with a shortage of investable water infrastructure institutions long before it runs out of investors willing to finance them.