Government wants the private sector to help fix its water crisis

In hopes of getting a grip on South Africa’s rapidly deteriorating water and sanitation infrastructure, the national government is looking to facilitate private sector investment in municipal water services.

They want to entice the necessary expertise and funds to be injected into ailing municipal systems and introduce operating licences for water service providers.

Across the country, taps are running dry, and sewage treatment facilities are malfunctioning. The reliability of portable water supply across the country has deteriorated significantly.

Almost a decade after the government declared a nationwide “war on leaks” campaign, much of potable water is lost before reaching peoples’ taps, leading to severe shortages.

Countrywide, non-revenue water losses are at a staggering 47.4%, with pipe leaks at 40.8%.

Water and Sanitation Minister Pemmy Majodina said this is mainly self-inflicted by municipal mismanagement, poor maintenance, illegal connections, and a lack of planning and investment.

For similar reasons, numerous Waste Water Treatment Works (WWTWs) are collapsing, causing an ecological disaster and decimating water sources in the surrounding areas.

According to the 2023 Green Drop Report, of the 850 municipal WWTWs assessed, 39%, or 334 systems, were identified as critical, requiring urgent interventions and turnaround.

This has resulted in severe contamination of many of the country’s freshwater sources.

Water expert and environmental advisor Dr Anthony Turton told BusinessTech, “The simple truth is that WWTWs are slowly rendering the country’s drinking water unusable.”

“Without sounding dramatic, South Africa is slowly committing ecocide – national suicide by poisoning its own drinking and crop production water,” said Turton.

The Department of Water and Sanitation (DWS) manages South Africa’s water resources through policy, regulation, and bulk water management.

Water Service Authorities (WSAs), which are municipalities, deliver water and sanitation services to communities within their jurisdictions.

Essentially, the DWS sets the framework, and WSAs provide the services.

Responding to queries about the long-term strategy to address infrastructure, maintenance, and investment issues across municipalities, the DWS said that key interventions are establishing the Water Partnerships Office (WPO) and amending legislation.

Water partnerships

According to a joint 2024 presentation by the DWS, the South African Local Government Association (Salga), and the Development Bank of Southern Africa (DBSA), municipalities in South Africa face “severe financial” and expertise constraints in the sector.

According to data from DWS, at least 33% of municipalities are considered dysfunctional, and more than 50% have no or minimal technical staff.

Meanwhile, it notes that the private sector has the capacity and interest to invest in public infrastructure, especially water and sanitation.

However, for private sector investment to be viable, projects must have sustainable, bankable revenue streams that offer a reasonable return.

The larger and more sustainable the revenue, the more likely the project will attract investment.

Private sector involvement in municipal water and sanitation is low compared to other middle-income countries.

To increase participation, DWS, DBSA and Salga said that projects must be well-packaged, with clear risk allocation, financing models, performance measures, and payment structures, making a strong case for programmatic approaches.

DWS, in partnership with DBSA and Salga established a National Water Partnerships Programme and the WPO in the DBSA.

The WPO’s roles include developing standardised national programs for private sector participation in municipal water and sanitation, supporting municipalities and water boards in preparing bankable projects, and facilitating blended financing, including DFIs, where needed.

Ultimately, the WPO implements the National Water Partnerships Programme (NWPP), designed to increase private sector involvement in municipal water and sanitation services.

The NWPP offers standardised programs in water reuse, non-revenue water (NRW), wastewater treatment, non-sewered sanitation, seawater desalination, and management contracts.

Its NRW program targets reducing losses to 15% by addressing inefficiencies, metering issues, and illegal connections.

The program provides funding and implementation options like municipal balance sheets and performance-based contracts.

Amending legislation

For the strategy going forward, DWS spokesperson Wisane Mavasa said that the department is in the process of amending the Water Services Act.

Crucially, this will introduce operating licences for water service providers, which includes all the municipalities mandated to provide water services.

“These amendments seek to strengthen the role of DWS to intervene where municipalities fail and also to encourage water services providers to improve in order to meet the necessary standards to retain their licence to provide the service,” said Mavasa.

New SOE

This comes amid the DWS looking to establish an state-owned enterprise (SOE) in South Africa.

President Cyril Ramaphosa said that this stems from a “need for a stronger public sector in the key area of infrastructure development, effective maintenance, operation and management of existing infrastructure.”

Dr Ferrial Adam, executive manager of water rights advocacy group WaterCAN, previously told BusinessTech that establishing the agency requires a significant injection of funds, hence the call to the private sector.

However, “the funding model must be made clearer.”

“The close partnership with the private sector and the call for funds from the private sector, of course, raises the question on the direction of our water services and if we are heading towards privatisation – which globally has proven may not always be the best direction for accessibility and affordability,” added Adam.