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Can the private sector help solve South Africa’s water crisis? Yes, but it is not magic; it will take time and require integrity.
As South Africa’s water and sanitation challenges escalate, there have been more calls – including from the national water and sanitation minister, Senzo Mchunu – for more private sector involvement in water management and projects. This aligns with an international trend, but it will not be a smooth ride, as there has been some very vocal resistance – especially political – to a private sector role in South Africa’s water provision. Past experience has also shown that if government’s procurement and supervisory capacity and integrity are not up to scratch, public-private partnerships can be a risky business. South Africa thus has its work cut out.
In the water sector, the primary benefit of merit-based contracting of private providers would be improved efficiency. This could make up for the government’s general lack and loss of skills in the water sector, and the public would gain from more efficient regional water distribution and local service delivery. Quality and safety standards can improve if service delivery is delegated to service providers with specialist expertise, which clearly are in short supply in many municipalities. By linking service provision to contractual obligations, government, municipalities and the public should be in a better position to hold service providers accountable, and gain from the benefits of competition. Of course, given questionable public procurement standards in many municipalities, the public can rightfully be suspicious of such contracting arrangements.
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Let’s be clear, though – private sector involvement in water is not altogether new in South Africa, and there have been some notable successes.
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Let’s be clear, though – private sector involvement in water is not altogether new in South Africa, and there have been some notable successes. In the early post-apartheid years of the 1990s a few such transactions were initiated, with mixed success. But notably, ratings of service provision, including the 2023 Department of Water and Sanitation’s Blue Drop report, have consistently included the two best-known water concessions of Mpumalanga’s Mbombela-Umjindi municipality and KwaZulu-Natal’s iLembe Dolphin Coast Ballito water supply system among the top service providers. Johannesburg, too, benefited from private sector support in the 1990s when the municipality contracted a private operator through a management contract to guide it to corporatise its water and sanitation function. Although the overall structure remained in the public sector, this enabled the leveraging of an experienced operator for a few years to establish a viable, corporatised service utility. Water management experts agree widely that the five-year management contract in Johannesburg, initiated in early 2001, was a success and a reference point for others to follow.
Private provision does not have to be seen as dogma, though. There are several competent service providers that are ordinary municipal water departments in South Africa and abroad. But this tends to be the case when they are neatly ringfenced so that they cannot be manipulated through political interference. Sadly, trends in South Africa show such professional autonomy to be no longer the norm. This could be fixed through drastic public sector reform, but the trends over the past 15 years or so have cast much doubt on the ability and will of the public sector to resolve these weaknesses by itself.
The immediate impetus for the greater interest in private sector involvement has been water problems in more and more municipalities. Even once well-capacitated metros such as eThekwini, Tshwane and Johannesburg are failing to sustain continuous water supply and to maintain infrastructure. The state of services is even worse in many others, which have either experienced or are heading for more water losses, leaks and long outages due to mismanagement, corruption, inadequate maintenance and weak staff and financial capacity. The most common underlying causes seem to be political interference in municipal water departments with misappropriation of funds, weak revenue collection, and skills losses.
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widespread municipal corruption, management failures, poor skills and continual disruptions raise serious questions about the prospects of municipalities or other public bodies sustainably delivering better services. Meanwhile, National Treasury has often cited ineffective grant utilisation by municipalities as a key reason for why water finances have not reached local low-income groups.
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Yet well-structured, merit-based private sector involvement could help alleviate these problems, but there is no magical solution, and in South Africa has been met with considerable – at times even violent – resistance. Many municipalities, residents and activists remain critical of private sector participation in public service delivery, and fear that private sector monopolies and exploitative practices will not serve the public interest and will make services unaffordable.
These sceptics insist on the public sector as the institutional platform for water and sanitation service delivery. But then, widespread municipal corruption, management failures, poor skills and continual disruptions raise serious questions about the prospects of municipalities or other public bodies sustainably delivering better services. Meanwhile, National Treasury has often cited ineffective grant utilisation by municipalities as a key reason for why water finances have not reached local low-income groups.
A 2021 National Business Initiative (NBI) report, Water public-private partnerships (PPP) opportunities in South Africa, concluded that PPPs could play a meaningful role in attracting private sector investment and expertise that meet the required performance standards. It contended that roughly 20 percent of the country’s 144 Water Services Authorities had good potential for private sector involvement, especially in desalination, wastewater treatment and water reuse, and in reducing so-called “non-revenue water” (NRW).
Of course, private sector involvement and so-called ringfencing of institutions, whether public or private, are not magical solutions. In South Africa they remain slowed down further – if not killed off – because WSS reform is so contentious in government, among political parties, and in the wider society. It is not surprising, then, that since the first enabling legislation for PPPs was adopted in the late 1990s there have been only seven substantial municipal water PPPs, and no new ones in the past five years.
Reluctance has been stronger due to some high-profile international cases that proved how difficult and arduous the introduction of PPPs can be, and that they can go wrong. Right now, for example, there is much disenchantment with the UK’s use of private water companies as Thames Water became unable to settle its debt. Serious operational failures added to this criticism, including sewage spillages, as the regulator seemed to focus more on economic and financial aspects like debt and dividends, rather than attending to technical failure and asset stripping.
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As tired as many South Africans may be of incrementalism, it is unlikely that the private sector or anyone else would be able to magically turn the WSS service delivery system around quickl
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In South Africa, full sell-off of public infrastructure assets has not been the objective, and for most political parties remains unlikely. As tired as many South Africans may be of incrementalism, it is unlikely that the private sector or anyone else would be able to magically turn the WSS service delivery system around quickly. Change requires defining, pursuing and delivering visible, tangible service delivery results, which will not come in a quick sweep.
Yet there have been such reforms in high- and middle-income countries where political scepticism has been as tough as in South Africa, or even tougher. For example:
- Senegal, arguably the continental water leader in sub-Saharan Africa, initially ringfenced its national water public utility as a public entity, but later contracted in a private provider, supervised by multi-stakeholder committees monitoring performance on the basis of independent financial and technical reports. The company continues to function well.
- São Paulo in Brazil passed a bill in 2023 permitting private contracting for the state-controlled water and sanitation utility, SABESP. The process is still in progress, but the new corporate governance structure should be in place by mid-2024, leaving state government with a minority stake in the public-private company.
- Manila in the Philippines signed up two private concessionaires to increase access to water in two different zones of the metro. This allowed for competitive benchmarking, and eventually the weaker performer’s contract being cancelled, leaving the more successful one to build a successful metro water business. By 2022 it had reduced water losses from 63 percent in 1997 to 12,69 percent – better than the 15 percent benchmark for developed countries such as Japan, Germany and the UK. The water utility attributes its success to combining proactive technical solutions, improved engineering and strengthened relationships with local communities through an accountable institutional structure.
In the current South African context and political climate, it will take time to operationalise such changes, so it may be more practical to focus on ringfencing selected functions along with more robust monitoring and skills development. This could provide scope for greater private sector roles in service delivery, while ensuring effective, transparent accountability to local councils. The latter is particularly crucial in South Africa, where public trust in municipalities and other public institutions has been in sharp decline.
What we now is not working. Increasing the role of the private sector in water management and provision could be part of the solution.
- Chris Heymans is an independent advisor, specialising in the political economy of cities, urban development and infrastructure management, especially water and sanitation.
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Durban’s water crisis: far more than pipes and taps at stake