Investment models for the water infrastructure value chain in South Africa: investment measures, needs and priorities (original) (raw)
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Water SA, 2013
The Government of South Africa has been the main provider of public infrastructure, particularly in the water sector. Government administration and institutional structures continue to shape and influence infrastructure investment. The South African constitutional system imposes unique complexities and constraints on infrastructure investment. The country experiences a serious backlog in water infrastructure investment for the development and management of water resources and water services. In 2011, this under-investment was estimated at more than R600 billion (600 x 10 9 ZAR: South African Rand). The national Government traditionally had a pivotal role in shaping water infrastructure investment. Government needs to find a solution to this backlog by putting in place new institutional structures and funding models for effective strategies leading to prompt water infrastructure provision. The research identified several funding models for financing water infrastructure development projects. The existing public provision model continues to characterise much of the publicly-provided water infrastructure in South Africa. These models see Government planning, installing and financing infrastructure with pricing at marginal costs or on a loss-making basis, with returns recovered through the taxation system. Nowadays, water infrastructure provision is split between fully-public and mixed ownership by water entities. Public-private partnerships (PPPs) in the water sector are not yet a reality.
An Appraisal of Water Infrastructure Projects’ Financing Challenges in South Africa
Emerald Reach Proceedings Series, 2019
Purpose-Targets set out by state institutions, with respect to supplying water to deprived communities, seem to be idealistic and not realistic. Study envisioned to assess challenges of financing water infrastructure projects, and determines the role of the state towards infrastructure development by holistically planning and engaging with the private sector. Design/Methodology/Approach-The study adopted a quantitative approach, whereby a questionnaire survey was conducted among different stakeholders involved in water infrastructure projects in South Africa. Data gathered were analysed using percentages, mean item score and standard deviation. Findings-The study revealed that most challenges affecting the success of the financing of water infrastructure projects in South Africa are corruption, hostility towards private participation, cost recovery constraints, high fiscal deficits by state government, unreliable planning and procurement processes, and a rapid increasing number of municipalities that lack technical and administrative capacity to plan implement, operate and maintain water assets. Research Limitations/Implications-This research paper investigates projects' financing challenges with a broad inspection on the role of the public sector. The apparent role of the international structures such as OECD, IMF and World Bank had no influence in the study. From the findings, it is clear that the central government and state institutions lack the necessary resources to accelerate infrastructure development, water infrastructure in particular. The study, thus, recommends a complete expansion and development of state capacity as well as improved collaborations with the private sector to drive the success delivery of services to the public. Originality/Value-Improved and flexible regulations and legislative guidelines are required to ensure that both sectors fulfil their side of the bargain, with an ultimate goal of meeting the predetermined targets of supplying adequate water to the deprived communities.
Water SA, 2015
The standard water institutions, governance and infrastructure reform and policy prescription package of the 1990s and early 2000s, i.e., restructuring, private-public partnerships (PPP), establishment of an independent regulator, have not yielded positive results for South Africa. These water institutions and governance challenges are resulting in inadequate investments, and millions in South Africa not having access to basic water and sanitation services. The framework for water sector infrastructure funding models was designed to meet the challenges presented by the current and growing imbalances that exist between the supply of and demand for water in South Africa. The research results identified 7 overarching governance models for the funding, financing and development of water infrastructure projects in South Africa, i.e. Model 1: direct fiscal (NRF) funding, Model 2: ring-fenced special purpose vehicle (SPV), Model 3: SPV housing dedicated water infrastructure cash-flows, Model 4: stand-alone water institution with strong balance sheet, Model 5: public-private partnership (PPP) with equity, Model 6: private concession, and Model 7: private development. Various institutional options for consideration for the future management and development of water infrastructure were investigated and considered. The emerging model is considered to be a hybrid model consolidating the national water resources and regional bulk infrastructure functions and capabilities, with regional bulk infrastructure primarily being a water board (water services provider) function.
Infrastructure Asset Management
South Africa is facing significant water infrastructure investment challenges, both at the level of water resources and services. Principles for water use pricing, charges, tariffs and use are enshrined in South African legislation but implementation thereof is a major problem. The research paper addresses: 1) economic costs; 2) efficiencies; 3) investment challenges; and iv) the application and maximisation of economic tools. A total of 269 municipalities were sampled and the research exemplified that South Africa was losing ca. US$0.617 – 1.033 billion/annum to various inefficiencies: 1) water use under-pricing was ca. US$0.413 billion/annum. Water use charges and/or tariffs closer to cost-recovery levels would provide and ensure financial sustainability; 2) Return on capital investment inefficiencies contributed ca. US$0.926 billion/annum. Revenue far lower than asset value is illustrative of unsustainable revenue for investments; 3) non-revenue water (NRW) was 36.8% and ca. US$0...
Public and Municipal Finance, 2017
The research article presents catalytic and innovative mechanisms for the use of fiscal grant funding to crowd in private sector investment for water infrastructure projects in the Republic of South Africa. Chapter Two of the South African Constitution (1996) includes a series of socioeconomic rights, of which the right of access to water is one of those afforded its people, but this access is not currently provided to the entire population. The study uses a mixed methods approach, utilizing both quantitative and qualitative data sequentially. The data gathered involved a non-random purposive sample of best practice from European Union-funded projects internationally, South Africa-based projects, and qualitative interviews with officials from international development finance institutions and the National Treasury. It was found that the strategic targeting of grant funding to mitigate project risks, better enabled investor confidence. Through the use of three innovative financing tools, specifically investment grants, interest rate subsidies and technical assistance, government was able to leverage further investment into projects. The research concluded that blended grants for debt financing should be a consideration in South Africa. Specifically, as the current challenges in the water sector relate to constrained financial gaps, as well as capacity and skills deficits, these could be addressed strategically and deliberately through the use of blended fiscal grants targeting innovative financing tools. To allow for blending as recommended, budget reforms in South Africa are necessary.
This paper presents a framework for public-private partnerships PPP) in local government water services infrastructure. Water services infrastructure assets are key to the provision of basic services. Data were collected from various stakeholders, i.e. water boards, and private sector institutions. The framework for Public Private Partnerships (PPP) models comprises three categories, viz., state model, hybrid model and private sector model. Each of these models depends, amongst others, on the funding structure. Case studies for PPP models were drawn from the Limpopo and Gauteng provinces in South Africa. The outcome of this research confirmed that there are successful PPP models for local government water services infrastructure in South Africa. The success of such models depends to a greater extent on a number of variables such as: a. Technical/project risk, b. Financial risk, c. Contractual risk, d. Skills and knowledge transfer, e. Roles and responsibilities of state institutions...