South Africa has begun the process of establishing a new utility to help it entice private investment in infrastructure needed to head off potentially crippling water shortages.<\/p>\n
The Department of Water and Sanitation plans to submit a bill to the cabinet by the end of April that sets out proposals for the creation of the National Water Resources Agency, according to Sean Phillips, its director-general. It will be created by combining the department\u2019s Water Trading Entity and the Trans-Caledon Tunnel Authority, or TCTA, and could be operational next year.<\/p>\n
With Africa\u2019s most industrialized economy and a growing population, South Africa is struggling to keep pace with water demand. The country is one of the world\u2019s 30 driest, with rainfall, while variable across the nation, averaging less than 500 millimeters (20 inches) per annum, and climate change is expected to make it even more arid.<\/p>\n
A national water plan released in 2019 said R900 billion ($62 billion) needs to be spent on water supply and storage infrastructure by 2030.<\/p>\n
\u201cWe want to create an entity to raise non-fiscus finance\u201d and it should have a substantial balance sheet, Phillips said in a March 28 interview. \u201cIt would use a variety of different approaches,\u201d including raising money based on revenue streams from particular projects, loans and other forms of finance that will draw in private companies to provide water, he said.<\/p>\n
Concessions, which would allow the private operation of water facilities, would be considered, he said.<\/p>\n
A state utility that operates free of day-to-day political oversight may be more efficient at raising finance and running assets, and may help ease pressure on the state to fund water provision.<\/p>\n
It will also combine two organisations, cutting down on costs and bureaucracy, said Barbara Schreiner, executive director of the Water Integrity Network, an international advocacy group that campaigns for transparency and capacity development in the water sector.<\/p>\n
The agency\u2019s formation is in line with president Cyril Ramaphosa\u2019s stated aim of attracting private investment to fund hundreds of billions of rand of infrastructure, a marked break from the government\u2019s previous practice of financing most public water, power and transport facilities itself.<\/p>\n
The cabinet will need to approve the bill before it is released for public comment. It will then go back to the cabinet, whereupon it will be referred to parliament for approval and the president to sign it into law as an Act.<\/p>\n
The functioning of the agency will most closely mirror the way South Africa finances its national road network through the South African National Roads Agency SOC Ltd. The country\u2019s power also mostly comes from a national electricity utility, Eskom Holdings SOC Ltd.<\/p>\n
Water Assets<\/strong><\/p>\n The replacement value of South Africa\u2019s national water assets is currently between R200 billion and R300 billion, according to Phillips, when asked about the potential size of the entity\u2019s balance sheet.<\/p>\n The Water Trading Entity was created in 1983 to develop, operate and maintain national water assets using money allocated from the national fiscus.<\/p>\n The TCTA, an agency of the water department, was established in 1986 and initially raised finance and built the South African section of the Lesotho Highlands Water Project, which supplies the country with water from the mountainous enclave of Lesotho. It has since built a number of other projects.<\/p>\n The TCTA has raised private finance but it has depended on Treasury guarantees that have added to credit-rating risks for the government, which has already accumulated sovereign debt that equates to about 70% of gross domestic product. The authority currently has outstanding loans of R3.8 billion, according to data compiled by Bloomberg.<\/p>\n While the TCTA has raised money on a project-specific basis, the new utility could seek funding based on the national revenue stream from water services, Schreiner said. That could see some of the money directed toward providing water for underserved communities, she added.<\/p>\n The establishment of the agency has been under consideration since before the end of apartheid in 1994, but its creation was stalled after South Africa\u2019s first democratic elections as the new government didn\u2019t regard it as the best structure to make water access more equitable as supply was extended to additional Black households.<\/p>\n A renewed attempt to set it up in about 2008 failed and the idea was then revived several years ago.<\/p>\n
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