City of Tshwane Trading Services Reforms: Enhanced water, electricity and waste management services

Effective from 1 July 2025

The City of Tshwane is introducing ring-fenced business units for the Energy and Electricity Department and the Water and Sanitation Department, in line with the National Treasury Municipal Budget and Reporting Regulations (2021) and the Local Government: Municipal Finance Management Act, 2003 (Act 56 of 2003) (MFMA). These reforms are designed to strengthen financial sustainability, service delivery and governance in essential municipal trading services.

National Treasury regulations on trading services

The Municipal Budget and Reporting Regulations (2021) mandate that municipalities establish ring-fenced business units for water, electricity and sanitation services. Key requirements include the following:

1. Financial ring-fencing (Regulation 8)
   • Trading services must operate as self-sustaining entities with separate accounting.
   • Revenue generated must be reinvested into infrastructure and service improvements.
2. Cost recovery and tariff setting (Regulation 10)
   • Tariffs must cover the full cost of service provision, including maintenance, upgrades and debt servicing.
   • Any subsidies must be transparent and properly budgeted.
3. Governance and accountability (Regulation 12)
   • Each business unit must have a clear management structure with a single point of accountability.
   • Regular performance and financial reporting to the National Treasury is compulsory.
4. Service delivery standards (MFMA Section 51(b))
   • Municipalities must ensure reliable, affordable and sustainable service provision.
   • Public participation in tariff and service quality reviews is required.

What this means for the City of Tshwane

From 1 July 2025, residents and businesses can expect the following changes:

✅ Two dedicated business units

• Energy and Electricity Business Unit: Ensures stable power supply and infrastructure upgrades
• Water and Sanitation Business Unit: Improves water quality, reduces leaks and enhances waste water management

✅ Financial transparency and sustainability

• Separate accounting ensures that revenue is reinvested into service improvements
• Compliance with cost-reflective tariff policies set by the National Treasury

✅ No job losses or service disruptions

• Employees will transition smoothly with no changes to employment terms
• Services will continue without interruption

✅ Benefits for residents and businesses

• More reliable water and electricity supply
• Faster response times for service requests
• Greater transparency in billing and service delivery

The role of the MFMA and National Treasury

The National Treasury Trading Services Reforms is primarily governed by the MFMA, particularly in metropolitan municipalities. The reform focuses on improving the financial and operational sustainability of trading services, including water, sanitation, electricity and waste management.

Key aspects include the following:

• MFMA legislative framework: Provides the foundation for financial management in municipalities, including trading services
• National Treasury oversight: Offers guidance through mechanisms like the Division of Revenue Act and Guidance Notes 2 and 4 (MFMA)
• Focus areas: Enhancing capital investment planning, operational efficiency and financial sustainability
• Specific initiatives: Programmes such as the Metro Trading Services Reforms, which tackles collapsing infrastructure in urban areas
• Performance-based incentives: The Division of Revenue Act (2024) proposes introducing performance-linked grants for trading services, starting with water and sanitation

For further information, contact the Office of the Chief Operations Officer on 012 358 4664/6740/1482/4102.