17 May 2019

A series of public–private partnerships (PPPs) with municipalities could
help ailing local

water and sanitation departments (WSDs), many of
which face challenges ranging from deteriorating infrastructure to declining water quality and poor

According to the National Business Initiative (NBI), nearly half of the local
WSDs are in a “critical state” and need help from the private sector.

The NBI has developed a project called Kopano ya Metsi,
which looks into how to strengthen municipal water management and enable PPPs to unlock water investment. This was
outlined at the African Utility Week and PowerGEN conference
and exhibition, in Cape Town.

“The South African water sector is at a crossroads.
Municipalities are key to water and sanitation provision, yet infrastructure is not as it should be.
Many municipalities are not running financially fit businesses. Many
municipalities charge a quarter of what it costs to provide water,” said NBI climate and water programme manager Alex McNamara.

From a water perspective, he said municipalities
faced a mixture of infrastructure, institutional and finance related challenges.
The NBI lists low collection rates, inaccurate
billing and ageing and nonfunctional
 as some of the obstacles in the path to a
swifter local water sector.

The NBI outlined a “virtuous cycle”
to help solve the problems, starting with a targeted subsidy for the poor
combined with cost-effective tariffs for other users. In turn, more accurate
billing combined with improved tariffs would raise revenues. It suggested this
would filter through to better staffing which would improve customer service levels. Increased
revenues would enable improved infrastructure development and maintenance. This would, in turn,
promote investment.

McNamara said metros such as the City of Johannesburg, eThekwini and the City
of Cape Town were most suitable for
PPPs owing to their greater resources, higher household incomes
and larger populations. A further 24 WSAs had very good or good PPP potential.
These include municipalities such as Overstrand, Saldanha Bay and Sol Plaatjie. A total of 116 WSAs fall
within the low or very low PPP potential band, said the NBI.

McNamara said experts had consistently raised desalination, any form
of water reuse, groundwater extraction
and wastewater treatment as among the main PPP
opportunities in the water value chain.

The NBI also suggests developing a pool of centralized transaction advisors to proactively support municipal projects at risk, in areas with sufficient potential and has suggested developing a water investment facility focused on the private sector.


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