Local Government, Environmental Affairs and Development Planning

11(1)(a)   Knysna Municipality demonstrates relatively high access to water services, with approximately 95% of households receiving basic or higher levels of service, including 89% with piped water connections and 6% accessing communal water points, while approximately 5% remain below the minimum service level. However, water provision is materially constrained by system inefficiencies, including high non-revenue water (approximately 47.8%), which significantly reduces effective supply.

Although system capacity (~19.7 ML/day) marginally exceeds demand
(~17 ML/day), this margin is insufficient to ensure stable service delivery under conditions of infrastructure failure or peak demand. Importantly, drinking water quality compliance is inadequate, as evidenced by:

• Persistent microbiological non-compliance across all treatment works; and
• Widespread chemical non-compliance on various systems for the January to

March 2026 water sample results obtained for the municipality.

These findings are consistent with the Department of Water and Sanitation 2024 Blue Drop performance assessments, which identify systemic challenges in drinking water quality management and treatment process control across the municipality’s systems.

Accordingly, while access is relatively high, the reliability, safety and regulatory compliance of water provision are significantly compromised.

 (b)   Knysna Municipality operates an extensive water infrastructure system,       comprising:

• 5 water treatment works and 2 reverse osmosis plants
• Approximately 41 reservoirs
• At least 55 Water pump stations
• Approximately 1,100 km of water distribution network
• However, the overall condition of this infrastructure is assessed as fair to poor, and the system is not fully functional.
• Based on available information, it is estimated that a significant proportion of infrastructure is only partially functional, with performance limitations affecting service delivery. Key infrastructure challenges include:
•      Ageing infrastructure and increasing mechanical failures.
•      High levels of water losses (NRW ~47.8%).
•      Telemetry and SCADA system failures impacting system control.
•      Pump station and reservoir operational instability.
•      Treatment process failures.
•      Skills shortages and lack of standard operating procedures.

On this basis, Knysna’s water infrastructure can be characterised as Operational but underperforming, partially functional and increasingly vulnerable to failure and service disruption.

(c)    All refuse is currently removed by the Municipality, and there are no backlogs.

(d)    As of the 2 June 2026, there are currently no breakdowns at the Knysna Waste Transfer Station (WTS). The conveyor belt and chain were repaired in the period 19 to 24 April 2026. Waste is still stockpiled outside the WTS, as a result of the impacts of the recent storm damage that was experienced 18 to 22 May 2026. The Municipality is hoping to clear the backlog in June 2026.

The Disaster Management funds were used to appoint a service provider to manage garden refuse in Knysna. A temporary site was used initially but the chipping is now happening at the Old Place facility. Feedback received is that the facility is not burning anymore, and that Law Enforcement’s presence is keeping unauthorized personnel off site during working hours.

200 casual workers were brought in to assist with storm cleanups, which include waste cleanups, stormwater and roads. This is in effect until 30 June 2026. In terms of Plant and Equipment, the chipper at Knysna is working, the hooklift is working and a second hook lift that was procured with internal funds should be arriving by end June 2026. Additional funds for 3 open top containers to be used at the WTS were received, and this will be procured via a deviation and expected to arrive by October 2026. Only the chipper at Sedgefield is currently not in operation.

(2)      The Provincial Treasury, in line with their mandate to monitor and support municipalities, has informed the Department that the Municipality's financial position as at the end of June 2025 indicates no immediate threat to its going-concern status, noting that total liabilities represent only 20.5 per cent of total assets. While this demonstrates that the Municipality remains solvent, the Municipality still faces significant financial challenges, including ensuring that sufficient short-term assets are available to meet short-term liabilities and also building the capacity of the Municipality to fund the investments needed to ensure both long-term financial sustainability and meet service delivery needs.

2024/25 financial performance

The latest Annual Financial Statements for 2024/25 indicate that the Municipality has experienced some challenges in meeting its short-term obligations. This is reflected in the current ratio of 1.0:1, which is below National Treasury's recommended benchmark of between 1.5:1 and 2.0:1. This result substantiates the delays experienced in settling creditors, as insufficient cash resources were available to meet obligations as they became due. The average creditor payment period of 81 days, which reflects the Municipality's reliance on extended payment terms. Although the Municipality achieved a collection rate of 93 per cent, net debtor days remained relatively high at 60 days, limiting cash inflows and placing pressure on liquidity.

However, available cash improved significantly from R23.61 million in the previous year to R106.0 million at the end of 2024/25. While this represents a substantial improvement, the cash balance remained insufficient when compared to outstanding payables of R190.56 million, highlighting the continued liquidity challenges faced by the Municipality.

With regard to maintaining and replacing assets, capital expenditure performance remained slow at 56.2 per cent of the adjusted budget, while repairs and maintenance expenditure was recorded at only 3 per cent of total operating expenditure. This level of investment in infrastructure is below accepted norms and is indicative of growing risks to service delivery and long-term financial sustainability.

In-year performance for 2025/26

The following tables summarise key financial indicators reported as at the end of

April 2026.

The Municipality reported an actual cash balance of R192.81 million, indicating a continued improvement in its cash position. Furthermore, payables were significantly lower than the year-end balance, although these amounts may increase following the completion of year-end reconciliations and accounting adjustments.

The in-year financial results indicate an improvement in the Municipality's financial position, primarily due to the increase in available cash resources. The cash coverage ratio of 1.82 months and current ratio of 1.69:1 are both within National Treasury's recommended norms, suggesting an improved capacity to meet short-term obligations. However, the liquidity ratio remains a significant concern at 0.48, well below the recommended benchmark of greater than 1. This indicates that despite improvements in cash flow, the Municipality's liquidity position remains fragile and vulnerable if unexpected financial pressures arise.

The replacement and maintenance of infrastructure assets remain critical drivers of sustainable service delivery and long-term financial sustainability. At the end of April 2026, spending of only 32 per cent was recorded against the capital budget. Assets are further not maintained as planned with an underperformance of 66.8 per cent against the repairs and maintenance budget. Continued underinvestment in asset maintenance and renewal increases the risk of infrastructure deterioration, service interruptions, and higher future replacement costs.

Overall, the Municipality remains a going concern with no immediate solvency risk. The interim financial information (April 2026) reflects an improved cash flow position and a stronger ability to fund short-term obligations than was evident at year-end. Nevertheless, the Municipality's liquidity position remains weak and requires close attention. Improving the collection rate towards the National Treasury benchmark of 95 per cent will be essential in strengthening liquidity, improving cash flow, and reducing reliance on delayed creditor payments.

The Municipality's revenue framework remains highly concentrated in property rates and service charges, with revenue growth driven predominantly by tariff increases applied to the existing customer base rather than by sustained growth in the revenue base or significant improvements in cash collection performance.

Continued focus on revenue management, debt collection, cash flow management, asset maintenance, and capital programme implementation will be critical to improving the Municipality's overall financial resilience and long-term financial sustainability.

(3)      Following the request for assistance received from the Municipality, the Western Cape Province, in line with the principles of cooperative governance, has and is currently providing structured and coordinated support to the Municipality by means of a strengthened support plan in terms of section 154 of the Constitution of the Republic of South Africa, 1996 (hereinafter referred to as the “Strengthened Section 154 Support Plan”).

This Strengthened Section 154 Support Plan prioritised Water and Sanitation, Waste Management, and Roads and Stormwater as critical focus areas, supported by transversal enablers including Legal Services, Human Resources, Supply Chain Management (“SCM”), Tools, Plants, Stores, Equipment, and Finance.

To give effect to the Strengthened Section 154 Support Plan, a Turnaround Strategy was developed to establish clear lines of accountability, structured governance arrangements, and a coordinated implementation and monitoring framework led by Western Cape Department of Local Government (“DLG”), while respecting the autonomy of the Municipality.

A dedicated multi-stakeholder team, the Steering Committee (“Steercom”), was established to drive and provide intensified support on the abovementioned critical focus areas. This Steercom comprises of the Municipality, together with appointed technical specialists, DLG, other provincial departments, including Provincial Treasury, the Department of Environmental Affairs & Development Planning, the Department of Infrastructure, as well as national partners such as the Department of Water and Sanitation, the Department of Cooperative Governance and

Traditional Affairs, South African Local Government Association, Municipal Infrastructure Support Agent, and Municipal Finance Improvement Programme.

The Steercom initially met on a bi-weekly basis to drive progress on identified projects and interventions. In recognition of the progress achieved to date and the sustained advancement across the priority focus areas, the frequency of meetings was subsequently reduced to a monthly basis. Meetings were held on the following dates:

• 23 March 2026;
• 10 April 2026;
• 20 April 2026; and
• 28 May 2026.

Within the Steercom, provincial, municipal, and transversal support enabler leads were designated to form dedicated core working groups, which support the implementation and execution of identified projects. These leads meet on a bi-weekly basis to monitor progress, identify challenges timeously, and implement appropriate interventions to address issues within their respective focus areas.

In addition to the above, the core group responsible for the Water and Sanitation Focus Area has, since June 2026, been meeting on a weekly basis to closely monitor progress, address emerging challenges, and coordinate interventions. These engagements are aimed at strengthening oversight, improving service delivery outcomes, and mitigating risks to prevent the recurrence of a water crisis in Knysna Municipality.

Since the implementation of the Strengthened Section 154 Support Plan, encouraging progress has been recorded, including the stabilisation of basic service delivery.  It is anticipated that, through the full implementation of enhanced support measures, service delivery will progressively improve and return to normal operational levels.