Johannesburg Water spends R1.5 billion on salaries and only R860 million on capex
Over the last seven years, Johannesburg Water has increased salaries from R840 million to R1.5 billion, while capital expenditure has risen only from R772 million to R861 million.
The City of Johannesburg’s citizens are experiencing severe water problems caused by ageing infrastructure, illegal connections, and an overloaded system.
The water crisis is so severe that experts warned that taps could run dry unless the underlying problems are addressed.
Apart from municipal mismanagement, the city has seen a big population increase without a proportionate increase in water supply.
The crisis has been looming for years, with little maintenance on water infrastructure and minimal planning to ensure adequate supply for a growing population.
Johannesburg Water had to invest in additional infrastructure through higher capital expenditure (capex) to keep up with the higher demand. This did not happen.
Capital expenditure in a water authority refers to the funds allocated for acquiring, upgrading, or replacing physical assets.
These assets include water treatment plants, pipelines, reservoirs, pumping stations, and other infrastructure needed to deliver water services.
Simply put, capex is the amount a water authority, like Johannesburg Water, invests in long-term improvements to the water system.
In 2016, Johannesburg Water spent R840 million on employee costs and R772 million on capital expenditure.
In 2023, employee costs increased by 82% to R1.53 billion, while capital expenditure only increased by 11% to R861 million.
In real terms, considering inflation, Johannesburg Water’s employee costs and salaries significantly increased while capex decreased.
Johannesburg Water’s exorbitant salary bill, which is emblematic of South Africa’s government, is out of sync with global standards.
Johannesburg Water’s employee costs to capex ratio of 1.8 is much higher than global standards.
A first-world city like Boston Water and Sewage has an employee-cost-to-capex ratio of 0.7, less than half that of Johannesburg.
Boston Water and Sewage spends 3.5 times more on its operating expenses than it does on capital expenditure.
Johannesburg Water spends 11.2 times more on operating expenses than it does on its capital expenditure.
With infrastructure entities, like water and road authorities, most of the money should go towards building and maintaining the infrastructure.
However, in South Africa, most of the money goes towards state employees, leaving little money to build and maintain infrastructure.
Even more concerning is that many state employees are not skilled in the work, which means much of it is outsourced.
The result is what is seen in Johannesburg, with collapsing infrastructure and citizens experiencing severe water problems.
Johannesburg Water employee costs versus capital expenditure
Johannesburg Water employee costs versus contractors’ maintenance service
Johannesburg Water operating expenditure versus capital expenditure
Johannesburg Water responds
Johannesburg Water would like to point out the sensationalised inaccuracies in the Daily Investor’s article, ‘Johannesburg Water spends R1.5 billion on salaries and only R860 million on capex’, published on 3 February 2025.
The direct comparison of capital expenditure and salary bill as stipulated in the article is misleading and ignores firstly, the interdependence of the two expenditure types as well as the key constraints that drive each of these expenditures.
Whilst it is true that the capital expenditure remains key to ensure long-term growth and infrastructure sustainability, operational expenditure is equally important to ensure infrastructure is maintained and used optimally to deliver services. Failure to maintain or operate infrastructure leads to frequent breakdowns and increased failure rate. This in-turn decreases the useful life of the infrastructure and consequently increases demand for more capital expenditure.
Johannesburg Water uses internal staff resources for operating activities and preventative or reactive maintenance of infrastructure. This expenditure is fixed in nature, and it is critical for the existing infrastructure as well as responding to maintenance needs of new infrastructure. Current maintenance costs stand at R1.6 billion which is significantly below the current demand for maintenance based on the current asset replacement cost, higher than the R200m claimed in the Daily Investor article.
Furthermore, there are further considerations preventing the capital expenditure to grow at the same rate as salaries. Salary costs grow annually based on the cost-of-living adjustments as well as the increased workforce over the period to align to operational needs. Despite this increase, Johannesburg Water remains with a significantly low remuneration ratio of 19% of the entire operational cost, the National Treasury norm is between 25% to 40%.
Contrary to salary expenditure, capital expenditure has varied year on year because is it largely determined by funding constraints for each year. Capital expenditure is mainly funded from three sources namely grants, debt and cash reserves all of which are determined annually in accordance with affordability.
To further illustrate this variability, capital expenditure referred to in the article is R860 million in the 2022/23 financial year, however the year prior to that the entity spent R1 billion. In the most recent results of 2023/24, capital expenditure stood at R1.1 billion. It is, therefore, mischievous and a deliberate effort to mislead the public to compare the growth over seven years without considering each year’s capital expenditure considerations.
In fact, Johannesburg Water’s challenge is not the wage bill (as alluded to by the misinformed report), but insufficient infrastructure investment. The Entity’s capital expenditure is much lower than the requirement considering the current asset replacement cost of R127 billion.
The ambition which is mapped out in the Entity’s capital investment plan (as part of the Turnaround Strategy) is targeting an investment of R32.5 billion over the next ten years which will average R3.2 billion per year. This is also not anticipated to grow steadily but to vary in accordance with affordability as well as the capital investment plan.
The Daily Investor’s article is alarmist, misleading and triggers avoidable panic while the Entity executes the Turnaround Strategy, supported by National Treasury’s reforms to address the city’s water and infrastructure challenges.
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