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Great opportunities for partnerships in the water sector

If we don’t fix everything now, and we continue to have a drought, it will become a crisis – Nedbank.

The private sector is ready and willing to work together with the government in partnerships that could help stem the shrinking water supply in South Africa.

Mike Peo, head of infrastructure, energy and telecoms at Nedbank Corporate and Investment Banking, sees great opportunities in this space.

“Both water and energy are reaching critical crisis points, but we do have an opportunity to help fill the gap.”

“The slowdown in industry, while not good for the economy, has given the country some time to fund and focus on energy infrastructure, while developing renewable energy. The next big sector is the water sector.” 

Encouraged by the success of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), Peo suggested that a water IPP-style office could be set up in the Department of Energy, or within the National Treasury, with a specific focus on water.

Peo said projects could focus on building infrastructure and managing and conserving water more efficiently in South Africa – one of the 30 driest countries in the world.

South Africa has not invested enough in bulk infrastructure and much of it is also wearing down. This has led to a lot of wastage of water. A third of water in South Africa’s system doesn’t get to the people, as it’s lost through leaking pipes. The quality of the water is also compromised. 

“We can’t control the rainfall. What we can do is build infrastructure and fix leaking and broken infrastructure – much of which hasn’t been replaced or fixed for more than 20 years,” said Peo.

Minister of water and sanitation, Nomvula Mokonyane, said recently that the government has agreed to intensify work towards leak detection, leak repairs and maintenance, to reduce water losses, as well as deal decisively with wastage.

Peo agrees that it’s imperative to take action sooner rather than later.

“If we don’t fix everything now, and we continue to have a drought, it will become a crisis. We are at the cusp. We have got to fix things.” 

Peo said the private sector has the means, the skills and the expertise to fund and build projects.

The construction sector, which has been hard-hit by flagging economic growth, has skilled people willing and waiting to step in and work.

“All major construction companies have people with expertise. We don’t have enough bulk infrastructure. We’re too dependent on large dams, where levels have dropped because of the drought. We need more reservoirs, pumping stations and infrastructure.

“The big problem is that it has been an impossible task for government to tackle alone – from a financial and capacity perspective.”

But he said the private sector is in a good position to help. 

“The private sector is generally able to step in and fulfil a role – particularly in areas where government is constrained by capacity and the fiscus is constrained in providing the spend needed on the balance sheet.

“Delivery on infrastructure enables the private sector to expand capacity, create more jobs and produce more goods and services. This also has a knock-on effect for the success of the industry,” said Peo.

Investment in water infrastructure is a key priority laid out in the government’s National Development Plan and the National Infrastructure Plan that followed in 2012.

It’s aimed at transforming South Africa’s economic landscape, while creating a significant number of new jobs and strengthening the delivery of basic services.

Peo said an independent procurement programme could be an excellent way of alleviating the water shortage.

“Priority projects would need to be defined, before going to banking feasibility. We would need to do a value-for-money test and an affordability test to ensure that procurement would be done in the most effective way.”

He suggested that projects could then be put out for public tender, while external advisors would ensure everything is above aboard.

“Successful bidders would be required to put up financial guarantees to ensure they perform what they say they will do. This would incentivise them to build projects in accordance with this.

“We’ve seen the success of the REIPPPP, where so far not one project has been taken away because of corruption. Not only is the building on time and on budget, but there’s been no corruption. We see great scope for water in this space too.”

Peo says the country’s water resources are bound to come under further pressure once the economy starts growing again.

“If the world economy starts to pick up and commodities move even closer to the super cycle, we will be under severe pressure again, with more demands for energy and water.”

Professor Sue Harrison, the director of UCT’s Future Water Institute, has said South Africa is among countries where water demand is set to surge by 280% over a 25-year period, from 2005 to 2030. 

Public-private partnerships could be key in helping to clear the backlog and under-spending on critical water infrastructure and provide some peace of mind for the future.

This article was sponsored by Nedbank Corporate and Investment Banking

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