It will cost South Africa R140 billion to replace its ageing bulk water infrastructure and take R1.4 billion annually to maintain, with the private sector increasingly unwilling to fund due to poor local governance, unreliable payments, a lack of skills, and complex municipal processes.
Executive manager for business and innovation at the Water Research Commission, Dr Valerie Naidoo, told eNCA that the private sector would have to invest as municipalities do not have the funds or skills for large infrastructure projects.
The commission’s research estimates the replacement value of the country’s deteriorating bulk water infrastructure to be R139 billion.
Naidoo said municipalities are turning to the private sector for project funding, but many are struggling to attract financing as investors do not consider the return justifies the risk of lending money to a municipality.
Historically, local water infrastructure projects and maintenance have been financed through private sector investment and lending.
Private sector companies point to poor local governance, a lack of return on investment, unreliable payments from municipalities, and a lack of technical skills.
On the other hand, municipalities are wary of private sector investment as companies tend to impose strict conditions that they are unwilling to adhere to.
Naidoo said the country is at loggerheads with regard to private investment in water infrastructure as politicians look to maximise local job creation while the private sector aims to create sustainable, long-term, high-skill employment.
The private sector is unwilling to create many jobs tied to specific projects, which will be lost when the project is completed.
Moreover, municipalities are reluctant to invest heavily in maintaining infrastructure as it does not create the same number of jobs as new projects.
To resolve this impasse, the Development Bank of Southern Africa (DBSA) created the Water Partnership Office to facilitate private sector funding into local water infrastructure projects.
The office aims to help municipalities access financing by providing the requisite skills to manage large infrastructure projects while helping private companies navigate complex municipal processes.
“The gap from planning to execution is large. So, we have huge delays in large and small projects,” Naidoo said.
Another issue relates to revenue collection and how private investors will get a return on their investment.
Water and sanitation budgets are not ringfenced, so the allocation of funds depends on the municipality, making it difficult to structure financing for long-term projects.