South Africa heading for a water crisis 

South Africa is heading for a major water crisis as the country’s infrastructure continues to deteriorate without any signs of strong government intervention. 

This is feedback from the head of private markets at Mergence Investment Managers Kasief Isaacs, who told Classic Business that the government has to turn to the private sector to address this crisis. 

“In our view, South Africa is heading for a significant water crisis that will be as severe as the country’s energy crisis,” Isaacs said. 

“Unless there is decisive intervention by the government, we will be dealing with a crisis.”

Over the past few years, South Africa’s major metropolitan areas have been plagued by water interruptions and shortages. 

The most public crisis was experienced in Cape Town, which almost hit ‘Day Zero’ in 2018, but other metros such as Gqeberha have been in similar situations in the past two years. 

Isaacs said that worryingly for the economy, water shortages have become more common in Gauteng since 2022, threatening the main driver of South Africa’s GDP. 

Furthermore, there have been sporadic outbreaks of E.coli in parts of the country, threatening the safe supply of water and the lives of South Africans. 

The Green Drop Report, which tracks the performance of South Africa’s wastewater treatment plants, showed that at least 67% of them are unable to operate properly, while some are not operational at all. 

The good news is that there is some low-hanging fruit, such as basic fixes to leaking pipes and inefficient pumping stations. 

Due to these leakages and underperforming pumps, 40% and 50% of potable water in South Africa is lost before it reaches the end user. 

However, even these small fixes will need a lot of capital and resources to fix as they are spread across the country, Isaacs explained. 

He estimated that South Africa would need hundreds of billions of rands to repair dilapidated infrastructure and billions more to meet increasing demand from major cities. 

Where the money will come from

The government cannot afford this with its significant debt pile and flat tax revenue, forcing it to turn to the private sector for funding. 

“If you look at the amount of capital needed to fix what is broken, there is no way the taxpayer can carry that cost,” water scientist Dr Anthony Turton said. 

The Department of Water and Sanitation (DWS) estimated in 2019 that South Africa needs to spend R900 billion on water infrastructure by 2030 to meet increased demand for the resource. 

Turton argued that this would have to be revised upwards to include the money needed to fix existing water infrastructure before the system can be upgraded. 

Isaacs said the private sector has the capital to address this crisis and is willing to help the government, but there is a lack of investable projects. 

Private infrastructure investors have complained about the lack of adequate governance structures to ensure the money they invest at a local level is not stolen or used for other areas of expenditure, such as salaries. 

Last year, the Development Bank of Southern Africa (DBSA) and the DWS created a Water Partnership Office to facilitate private investment in water infrastructure. 

This office aims to help municipalities prepare projects for investment and make them accessible to the private sector.

Isaacs said this is an important step and will help municipalities and water boards attract private investment. 

He explained that there has also been a move to licencing private water service providers at a local level to help municipalities manage their infrastructure.