Financing of water infrastructure takes centre stage in South Africa

#H2ODialogue splashes some interesting facts on water sector

Businesses have begun to recognize that inefficient use of natural resources poses a risk to their operations, and because of that there has been a significant increase in investments in greening their processes. However water has seen far less investments and yet it is a resource that poses shared risk between business, the public sector and the general public.

Poor water infrastructure and management exacerbate the impacts of climate change and increase inequalities. For example, recent flash floods in Johannesburg at the end of 2016 affected the poor significantly. The severity of these floods could be directly-linked to under-investment in water and sanitation infrastructure. In addition, the impact of these floods on the economy can be estimated into the millions. The lack of adequate water infrastructure is also made overt in different sectors of the economy during drought periods. However the hardest hit would the agriculture sector, experiencing millions of Rands in losses.

However, there is an opportunity to explore approaches that drive action by the private sector to create shared value. Green innovations provide an excellent opportunity to create shared value in the context of water management, and infrastructure investment through promoting interventions that result in improved business performance and the broader landscape and socio-economic outcomes.

The African Centre hosted a Water & Sanitation Dialogue in Johannesburg towards the end of 2016, engaging with investors, utilities and environmental agencies on ways to unlock private sector funding for water infrastructure. Major financiers, such as the Development Bank of Southern Africa (DBSA), expressed their continued interest in funding water infrastructure projects, and are constantly on the lookout for opportunities in the sector. The pressure to develop new bulk infrastructure presents an opportunity to model a new system design which would include the identification; and strict monitoring and quantification of losses, which is a strategic approach to optimising water supply.

Several speakers and experts moaned the lack of private sector funding for water infrastructure. Dr Mao Amis, executive director, African Centre for a Green Economy, suggested the market-driven financing solutions such as bonds and commercial loans could be the answer. He added, “The private sector has a role to play as already in 2015, top 10 JSE-Listed companies collectively lost over R840m, due to water impacts.”

Another expert felt there is a need for an independent water regulator as the current institutional structure is complex. “Also bulk water infrastructure is not very profitable and yet it is capital hungry,” he said.

The “flight” of skills was also cited as a factor.” There is diminished local capacity as local suppliers are bought by multi-nationals,” said he added.

The power utility Eskom felt that the discussion needs to be centred on food and energy security as water is an enabler for both the agricultural and power sector. The utility says, although the risk posed by poor water infrastructure, is outside its mandate, it works with municipalities to unlock resources.

The Water Research Commission continues to push for and encourage research and innovation. “Impact is what we focus on,” added the representative.

All agreed that water, a strategic resource, poses significant risks to the economy, if not well-managed. All evidence indicates that, water and its related infrastructure, is chronically under-funded in South Africa. In addition to the impact on business, there is a backlog of more than two million households with no access to basic water and sanitation in South Africa.

To this end, last week, the Water Research Commission (WRC), in partnership with the African Centre for a Green Economy (AfriCGE), convened a Strategic Dialogue to explore ways to craft innovative financing solutions geared at unlocking private sector investment for water and sanitation.

The gathering, included key industry stakeholders, such as the Development Bank of South Africa, Eskom and the Water Research Commission. They shared perspectives on how to address the important challenge of financing water and sanitation.

AfriCGE is a Think Tank and innovation hub supporting the transition to a new/green economy in Africa. Through engaging with policymakers, business leaders and academia, the agency seeks to promote evidence-based policy implementation and the development of appropriate skills for the transition towards a green economy.