CITY REFORM OP-ED: As a financial fix for Joburg’s water problems, honeycombs hit the sweet spot

Instead of continuing to fund Joburg and other municipalities as they are now, elements of the solution are to be found in the incredible efficiency, strength and stress-resistance of honeycombs.

About six months ago a politician (some of my best friends are politicians) asked me what thoughts I would have on finding a financial solution to support Joburg’s devastating water problems.

First of all, I said, focus on the problem. Take water out of the mire, the sludge, the swamps that are Joburg’s more general funding problems. This is required for two principal reasons:

There are obvious problems in not doing this, such as unclear cross-subsidisation, obscured oversight and corruption (off a higher base), but more about those later.

The real purpose is to produce a clear, uncontaminated view of the water supply chain problems and opportunities. Only then can we begin to finance it optimally. Clarity, predictability and the absence of outside interference are huge factors in determining the cost of capital.

I was therefore encouraged when I read that the minister and the mayor were seeking a solution to fund Joburg’s indebtedness to Eskom (and to avoid a cut-off in supply) within the principle of ring-fenced electricity revenue contractually being applied to settle electricity debt. Obvious, really – but then most things in finance are – it’s just sums, not opinions and promises.

Of course, collection of revenue from Joburg’s diverse electricity users is another matter entirely (which sits at the kernel of the problem), but this will bring clarity to that problem/opportunity as well. I don’t know the full spectrum of users who don’t pay, but it would include those who simply can’t afford to, those who refuse to out of protest, those businesses failing because input costs (like electricity) have driven them out of business because they simply can no longer compete with international competitors (part of the reason Eskom now reports excess capacity), and, of course, there are those of us who pay, in full, on time.

Like so many other revenue sources (tax is a prime example) this latter group of payers is subsidising the non-payers and, as rates keep going up as a direct consequence (at rates way in excess of inflation) that ever-smaller group will, per force, or protest or departure, keep getting smaller. A recipe for disaster.

This general problem is pervasive throughout all mismanaged funding models. It is hard to find an exception in local, provincial and national government.

There is a limit to all of this, for the time being defined by the toler