The city's trading services unit said capital spending was cut so severely recently in the interests of financial prudence it could render services unsustainable.

A report on risk and management, presented to the council yesterday, said underinvestment in infrastructure was profound. Capital allocations for electricity in 2003-04 was R266m (R309m previously), water and sanitation R245m (R361m) and solid waste R72m (R42m).

But all was not gloom. It said the creation of internal ring-fenced business units for electricity, water and sanitation, and solid waste and developing a long-term capital investment programme would achieve long-term sustainability.

It recommended entering partnerships. There were many opportunities in water-treatment plants, waste-water treatment and the Athlone power station in which the private sector could be encouraged invest in these facilities.

The report said delays in replacing a master electricity station would result in inability to monitor and control new substations.

Residual risk was considered "extreme" for the Koeberg Road switching station and the central business district (CBD) transformer at Roggebaai. "Of particular concern is the vulnerability of the CBD to power outages similar to that two years ago with catastrophic failure of the Hudson Street switching station, which resulted in a prolonged power loss to the CBD."

The highest risks for waste-water treatment plant upgrades and extensions related to the ability to service new developments, odour problems, environmental implications of effluent on rivers, lakes and coastal waters. The council would default on its statutory obligations. The water affairs department had expressed "distress" at the situation.

"Virtually all of the council's 17 waste water treatment plants need upgrades or extensions to comply with the statutory obligations."