South African water infrastructure crisis

South Africa’s water infrastructure is deteriorating, with the Department of Water and Sanitation estimating the country needs to spend R90 billion a year over the next decade to repair and upgrade existing infrastructure. 

The country’s water infrastructure crisis has been exacerbated by rapid population growth and urbanisation, climate change, inefficient water management practices, ageing infrastructure, and unequal distribution of water resources. 

Inadequate investment in water infrastructure along with increasing water scarcity have emerged as a further two major challenges. 

While South African households and companies have implemented solutions to cope with Eskom’s load shedding, solving the rising water infrastructure crisis may not be as simple.

Ninety One investment specialists Sinehlanhla Zulu and Thanzi Ramukosi said the magnitude of this challenge is not to be underestimated.

The R90 billion annual investment is essential to refurbish and upgrade existing systems and construct new infrastructure to support the growing population and foster economic growth. 

The DWS has fallen short of this ambitious goal, with expenditure hovering around R17 billion annually for all water programmes, including new projects and maintenance, between 2018 and 2022. 

Even the latest budget allocation from the National Treasury for the 2023 to 2025 period, totalling R69.3 billion, fails to bridge the gap, falling R200 billion short of the necessary target.

This situation stems from several factors, including an alarming funding gap, soaring levels of non-revenue water, the erosion of existing asset value, and tariffs that fail to reflect the true costs. 

Almost 50% of the water supply in South Africa does not generate any revenue through unbilled consumption, theft, and leakages. 

The bulk of this loss lies in the 70.2% attributable to leakages, painting a stark picture of inadequate operation and maintenance of the water distribution infrastructure.

A strong culture of non-payment by customers has also strained the water boards’ financial stability. 

As of September 2022, outstanding payments amounted to R24.5 billion, of which municipalities and waterboards owed R8.5 billion and R7.7 billion, respectively.

Private sector stepping in 

Almost all South Africa’s water infrastructure is developed and managed by the public sector, municipalities and the government. 

However, years of underinvestment and neglect have awakened the private sector to the opportunity to invest in water infrastructure. 

The government has recognised the scale of the funding required for broader infrastructure, focusing on water, energy, and transport, and is now actively seeking private sector participation. 

During the 2023 budget review, the National Treasury indicated that legislative changes would simplify the procurement process of the Public Private Partnership (PPP) legal and regulatory framework. 

A new Public Procurement Bill was tabled in Parliament in 2023, and the government expects this to help with access to funding as well as the implementation of water projects. 

The government has prioritised 11 strategic projects with an estimated value of R115 billion. 

These projects span the entire country and are expected to create about 20,000 jobs during construction and 14,000 jobs during operation. Projects are at various stages of funding and are expected to be completed between 2026 and 2030.

While these projects are promising, it is vital the non-payment issues are resolved to foster a strong partnership between the public and private sectors.