Local Government, Environmental Affairs and Development Planning

(1)(a):

Kannaland is in a financial crisis as defined in terms of the measurements set out in section 140 of the Municipal Finance Management Act 56 of 2003 (“MFMA”). This financial crisis is what led to the Provincial Government deciding to intervene in the municipality in terms of section 139(5) of the Constitution.

The total outstanding debt owed by the municipality to all of its creditors as at 30 September 2025 amounted to R109.09 million. This reflects an increase of 32.0 per cent compared to the same period the previous year (September 2024) as well as an increase of 5.0 per cent compared to the previous month (August 2025).

The outstanding debt to creditors includes:

(1)(a)(i)

Eskom:

The Eskom account reflects a total outstanding balance of R72.57 million, of which R6.58 million in current charges, R10.23 million in 0 to 30 days, R125 545 in 31 to 60 days, R9.95 million in 61 to 90 days, and R45.69 million in amounts older than 90 days.

Of this amount, R29.65 million is subject to a possible debt write-off under the Municipal Debt Relief Program subject to Kannaland Municipality consistently paying its current bulk electricity accounts and meeting other conditions. However, recent non-payments to Eskom place the municipality’s qualification for this write-off at risk.

(1)(a)(ii)

The Western Cape Government:

Although the Municipality does not reflect debts owed to the Western Cape Government in its creditor age analysis, the Province is aware of unspent conditional grant transfers that the municipality is required to repay to the Province.

(1)(a)(iii)

Other creditors:

The Municipality continues to face significant pressure in meeting its obligations to major creditors, although most accounts are currently managed through active payment arrangements. The Auditor General remains one of the creditors, with a total outstanding balance of R21.10 million, which comprises R857 523 in current charges, R572 358.88 in 0 to 30 days, R790 537 in 31 to 60 days, R240 335 in 61 to 90 days and R18.64 million in amounts older than 90 days.

SALGA is owed an outstanding balance of R3.91 million, largely composed of
R3.69 million older than 90 days. SAMRAS Solvem reflects a total of R2.40 million, with arrears primarily in the over 90 day category at R2.18 million, despite smaller amounts in the current and 0 to 60 day categories. Amounts owed to other municipalities total R3.53 million, mostly overdue beyond 90 days at R3.44 million, indicating persistent delays in settling intergovernmental obligations. The Breede Gouritz Catchment Management Agency account totals R2.32 million, with R2.27 million older than 90 days, reflecting ongoing challenges in paying water resource management charges. Legal service providers reflect R97 757.07, all of which is older than 90 days. Lastly, the other creditors category shows a total balance of R3.27 million, with R1.38 million older than 90 days.

Overall, the creditor profile shows that although payment arrangements are in place, the Municipality continues to carry sizeable arrears, especially those older than 90 days, highlighting the urgent need for improved cash flow management and stricter expenditure control.

(1)(b)

As at 30 September 2025, total outstanding debtors of R172.48 million were reported, reflecting an increase of 12.48 per cent compared to the same period in 2024/25. Debtors older than 90 days account for 92.4 per cent, or R159.43 million. The Municipality has demonstrated limited progress in reducing long outstanding arrears. The Municipality reported an overall collection rate of 74 per cent, with municipal-supplied areas performing slightly better at 76 per cent, although both remain well below the National Treasury norm of a 95 per cent collection rate.

(1)(c)

Access to water, sanitation and refuse removal remains functional for Kannaland, but under increasing strain due to ageing infrastructure, limited maintenance budgets and the Municipality’s weakened financial position. Although the majority of households continue to receive basic services, the quality and reliability of delivery are affected by operational challenges and constrained resources.

(1)(c)(i)

Water services are provided across the municipal area and the majority of households receive water within the minimum service standard. However, outstanding debt for water services amounts to R37.23 million, which represents 22 per cent of total debtors, reflecting ongoing challenges in recovering costs for the service. Ageing asbestos pipes, frequent water pipe bursts and insufficient preventative maintenance capacity affect the consistency of supply. In some rural areas, tanker deliveries continue to place pressure on the operational budget because these services are often rendered without full cost recovery.

(1)(c)(ii)

Sanitation services continue to be delivered, but the system is frequently impacted by ageing sewer network infrastructure, recurring blockages and vandalism. Outstanding sanitation debt amounts to R21.31 million, or 12 per cent of total outstanding consumer debt, and indicates affordability challenges and possible billing or metering issues. The Municipality has experienced sewer spills in several areas, mainly due to inadequate network capacity and limited resources for rapid response and long term maintenance. Upgrading the sewer reticulation system remains an urgent requirement to stabilise service levels.

(1)(c)(iii)

Refuse removal continues to operate in all areas in Kannaland, although service efficiency is affected by an ageing fleet that requires repeated repairs. Waste management debt totals R31.29 million, or 18 per cent of total outstanding debt, reflecting ongoing challenges in revenue recovery for this service. The landfill site is nearing its lifespan, and the Municipality relies heavily on Expanded Public Works Programme (“EPWP”) labour to maintain daily operations. Illegal dumping remains a concern and places additional pressure on limited staff and equipment. Improved law enforcement, waste minimisation initiatives and investment in recycling facilities are needed to enhance long term sustainability.

(2)(a)

The Western Cape Cabinet took the decision to intervene in Kannaland on
14 December 2023 by imposing a mandatory Financial Recovery Plan (“FRP”) on the municipality. The FRP was developed by National Treasury’s Municipal Financial Recovery Service and approved by the Provincial Minister of Finance on 22 August 2025. Implementation began on 1 September 2025.

In addition to the support, advice and capacity building that Provincial Treasury offers to all municipalities, a Municipal Finance Improvement Programme resource (funded by National Treasury) was deployed to Kannaland on a part-time basis to assist them to improve their financial management.

Over the past three years, the Department deployed technical staff to Kannaland to act in the capacity of Technical Director.

(2)(b)

Regarding the deployment of financial experts, measurable improvements in the financial performance of the Municipality are not expected to be visible after only
2 months of implementing the Financial Recovery Plan.

Whilst the deployment of the technical staff has contributed to:

•          Improved project planning and budget prioritisation: Projects are now better aligned with sector plans, enabling the Municipality to successfully lobby for funding through various grants Water Services Infrastructure Grant (“WSIG”), Municipal Infrastructure Grant (“MIG”) and Water Resilience Grant (“WRG”).

•          Enhanced project management and implementation: Projects were delivered on time and within budget across the 2022/23–2023/24 period.

•          Establishment of an Operations and Maintenance funding regime: A strong motivation was submitted to Council to ring-fence a budget for operations and maintenance. This has since led to the Department supporting Kannaland in developing Asset Management Plans planned to kick start in the new financial year.

•          Strengthened water resilience framework: Through sustained grant support, including an additional R1.4 million allocated in the current financial year, the Department is assisting with the development of the Water Service Development Plan (“WSDP”) and Water Conservation and Demand Management Plan (“WCDM”) to systematically address infrastructure failures, and guide upgrades and new infrastructure investments as well as bring down their non-revenue water (“NRW”) and increase their water use efficiency

(3)

No investigation has been conducted in terms of section 106 of the Local Government: Municipal Systems Act, 32 of 2000, read with section 7 of the Western Cape Monitoring and Support of Municipalities Act, 4 of 2014. However, due to the seriousness of the allegations received by my office, the Western Cape Premier, Mr Alan Winde, referred the matter to the Special Investigating Unit (“SIU”) through the Office of the President on 28 December 2021. The Minister responsible for the Department of Justice and Correctional Services, as well as the Head of SIU, were copied in the referral letter. To date no investigation has commenced at the Municipality.

(3)(a) and (b)

N/A