Solution to water needs
Private concessions provide great potential for solving the country’s supply challenges
As much as the energy crisis has made headlines, South Africa may also be facing a looming water crisis. With rapid urbanisation, large cities are struggling to meet the growing need for water, but many smaller towns and rural areas are also facing significant water challenges.
Part of the problem, says Chito Siame, investment principal at Mergence Investment Managers, is that investment into water infrastructure has not matched the increase in demand. “Consider, for example, that Cape Town’s population increased 79% between 2016 and 2021 but dam capacity in that same period increased only 15%.”
Though South Africa is regarded as the 29th driest country in the world, it consumes an average of
237l of water per person a day, compared with the world average of 173l. Compounding the problem is that the country loses about 1.5billion cubic metres of water a year due to faulty piping infrastructure.
There are signs that the government has started to heed the alarm bells. Water was singled out in both this year’s state of the nation address and the national budget speech.
More recently, water & sanitation minister Senzo Mchunu mooted the idea of an independent producers programme for water, modelled
on the successful Renewable Energy Independent Power Producers Procurement Programme (REIPPPP).
Siame says this is an encouraging sign as it signals a willingness on the part of the government to harness the power of the private sector and seek a collective solution to the water problem.
“What’s needed is a holistic solution, and one that’s driven by the government, which should drive alignment among local municipalities, national and provincial authorities. But it won’t necessarily be easy,” he says.
“The Municipal Finance Management Act (MFMA) No 56 of 2003 was enacted specifically to make public procurement at municipalities thorough. Strong political will is needed to develop and implement a public-private
partnership (PPP) framework so that water supply and management can be done by means of private water concessions.”
Private water concessions
Proof that private water concessions through PPPs can work are two 30-year private water and sanitation concessions created in 1999, before the MFMA was enacted in 2003. These are the only two private water concessions in South Africa.
These concessions, says Siame, came about as the municipalities were struggling financially and could not expand their services. “Inhouse human resource capacity and the ability to source funding were issues, so the PPP route was considered the most efficient route forward.” The two PPPs, he says, were formed between the local municipality and the concessionaire, responsible for the operation, repairs and management of the infrastructure as well as the supply of water, which they either buy from the Water Board or obtain through the production of their own potable water.
The two concessionaires are Siza Water in Ballito, KwaZulu-Natal, and Silulumanzi in Mbombela, Mpumalanga. Mergence Investment Managers, an