Fixing SA's water woes

BLUEPRINT: ALIGNMENT BETWEEN PUBLIC SECTOR AND PRIVATE SECTOR

- Ciaran Ryan

The seemingly impossible task of preventing municipalities from spending water and electricity revenues on salaries and other services has been debated at a national level for more than a decade.

Now, it is finally receiving the attention it deserves. Two reforms in particular aim to curtail municipalities' spendthrift ways.

National Treasury's amended Public-Private Partnerships (PPP) regulations came into effect in June, exempting infrastructure projects below R2 billion from some of the more cumbersome procurement processes.

This will unlock opportunities at the municipal level, said Chito Siame, head of private equity at Mergence Investment Managers.

"In water, this could support more localised projects such as wastewater upgrades, pipe replacement, or alternative water sources in drought-prone areas.

"There is also movement on project preparation and financial structuring, supported by development finance institutions and the Infrastructure Fund.

"These reforms signal growing alignment between the public sector's development goals and the private sector's capacity to deliver at scale."

Ring-fencing and SPVs Another planned reform is to ring-fence electricity and water revenues at the municipal level to ensure funds are used specifically for maintaining and upgrading related infrastructure.

In theory, municipalities are expected to spend 8% of their property, plant and equipment valuations on maintenance, but very few do. The result is visible in untended water leaks, deteriorating roads and electricity outages.

Municipalities owe Eskom close to R100 billion and a further R23.4 billion to SA's nine water boards. Revenues are collected from residents and, often, not paid over. Money is being used at a frightening rate to fund even larger salary bills and other services (including tenders).