VUTHELA SHINES THE SPOTLIGHT ON PUBLIC-PRIVATE PARTNERSHIPS

New ways to supply water

Shifts in the national government’s approach to private sector participation in providing public services is opening up opportunities for Public-Private Partnerships to supply water in municipalities.

This emerged at a seminar held by the Vuthela iLembe Local Economic Development Support Programme to share stakeholder experiences of South Africa’s first PPP for water services.

The Vuthela Local Economic Development Support Programme aims to improve the economic future of iLembe district residents through sustainable growth of the local economy.  It is funded by the Switzerland State Secretariat for Economic Affairs (SECO) and is being implemented in partnership with the KwaZulu-Natal Department of Economic Development, Tourism and Environmental Affairs, the iLembe District Municipality (IDM), and the KwaDukuza and Mandeni Local municipalities.

About 24 years ago, a 30-year contract was agreed to between the then Borough of Dolphin Coast and Siza Water, a private company, to provide water to communities in an area which is now part of the KwaDukuza Local Municipality which includes the rapidly developing coastal towns such as Ballito, Shakasrock, as well as the peri-urban communities to the west of the municipality.

The seminar heard the views of municipal officials, development agencies, private developers, ward representatives, Siza Water management and other stakeholders on how the Siza Water concession has operated over the past 24 years. With six years to go before the contract expires, it was necessary for those who would be involved in advising decision-makers or who were decision makers to have a full understanding of the lessons learnt, to guide decision making regarding how to proceed after the expiry date, said Vuthela Programme Manager, Richard Clacey.

Clacey emphasised the seminar was an information-sharing session, and was not a decision-making gathering. The decision on how to proceed after the contract ends will be taken by the IDM through structured municipal processes.

Meanwhile, growing appreciation of the value of PPPs to provide efficient services is emanating from national government circles. A dedicated unit has been established as a partnership between the Department of Water and Sanitation and the Development Bank of Southern Africa to accelerate private sector participation in providing water services.

This comes as many municipalities are losing the battle to provide secure water services to an expanding consumer base number amidst rising costs, diminishing resources and high levels of non-payment for services.

Compounding the economic challenge is the social imperative to provide equitable services to regions that include both affluent and indigent communities.

The tension between the municipality’s social aspiration to provide water to all residents equitably and the private sector’s need to generate profits by serving more affluent areas is starkly apparent in the concession area.

Siza Water officials maintained that the company provided water services in both areas strictly according to the terms of the contract.

Managing Director Shyam Misra told the seminar that the company had implemented innovative technology solutions in many areas of its operations, making it highly efficient. Siza Water had been awarded Blue Drop and Green Drop certification for the quality of its water services.

The company had invested about R500 million in water infrastructure, which included upgrading seven reservoirs, six sewer pump stations and two sewer treatment works. These projects were financed through developer contributions or Siza Water’s own funds.

The company had reduced losses in the water system from 33% in 1999 to 8% in 2021.

While acknowledging Siza Water’s efficiencies, innovations and technical expertise, municipal officials expressed concern that many indigent communities within the concession area were still served by shared standpipes and unsatisfactory toilet facilities.

Sikhumbuzo Hlongwane, Executive Director for Economic Development and Planning at KwaDukuza Municipality said that investment in new infrastructure in many areas had not materialised, and indigent communities in these areas were not receiving equitable services.

“PPPs perpetuate inequality and under-development,” said Hlongwane. 

“Private sector investment in providing services tends to go into areas where the company will make money, but we have indigent areas which are a legacy of apartheid. How do we address this legacy of apartheid – this is a big issue for us,” he said.

Linda Mncube, head of the district’s economic development agency, Enterprise iLembe, said PPPs had great potential for efficient service delivery. However, contracts should set targets for capital investment to unlock development.

Equitable profit-sharing models should be created and the concession’s tariff structure and finance model should cater for redistribution and the provision of a higher level of service in historically underserviced areas.

Some of these issues will be tackled by the Water Partnerships Office (WPO) established by the Department of Water and Sanitation and the SA Local Government Association (SALGA).

The WPO is developing standardised national programmes for private sector participation in municipal water and sanitation services. This will make it easier, quicker and cheaper for municipalities to enter into partnerships to provide services.

The WPO will support municipalities to prepare bankable projects, undertake feasibility studies and financial structuring, and to facilitate blended financing which includes direct foreign investment.

Johann Lubbe, head of the WPO, told the seminar that while municipalities faced financial and technical constraints, South Africa’s private sector had substantial expertise. Banks and pension funds were now eager to invest in public water and sanitation infrastructure.

Private sector investment in public infrastructure was feasible where there was a sustainable revenue stream associated with the investment, allowing the private sector to get a reasonable return on its investment.

“The project must be bankable”, said Lubbe.

“There must be a focus on projects with sufficiently large and sustainable revenue streams. The larger the revenue stream in relation to the investment and the more sustainable the revenue stream, the greater the likelihood that the project will be bankable.”

PPPs remained a key default mechanism to enable private sector participation.

With national government about to issue revised regulations for the participation of PPPs in providing essential municipal services, the ensuing opportunities emerging from the WPO will be closely watched by the IDM and its stakeholders as officials prepare for the end of the Siza Water contract.

PHOTO CAPTIONS:

0138: Attendees participated in a Policy and Practice dialogue on lessons learnt from Public-Private Partnership water delivery models, with a focus on the Siza Water concession experience in the iLembe district hosted by The Vuthela iLembe LED Support Programme at Salt Rock Hotel.

The Vuthela iLembe LED Support Programme hosted a Policy and Practice dialogue on lessons learnt from Public-Private Partnership water delivery models, with a focus on the Siza Water concession experience in the iLembe district at Salt Rock Hotel.

Participants:

0156: Richard Clacey, Programme Manager, Vuthela iLembe LED Support Programme; Shyam Misra, Managing Director at Siza Water; and Sazi Mbhele, Municipal Manager of iLembe District Municipality

0166: Linda Mncube, chief executive officer of Enterprise iLembe Economic Development Agency; Gerhard Pienaar, Deputy Head Swiss Economic Cooperation and Development; and Kirsch Bezuidenhout, Acting Chief Director of the Public-Private Partnership Unit at KZN Provincial Treasury

0170: Sibusiso Mahlangu, Manager: Planning and IDP at iLembe District Municipality; Andy Horton, President of iLembe Chamber of Commerce, Industry and Tourism; and Councillor Collen Mdletshe, KwaDukuza Municipality

Richard Clacey, Programme Manager, Vuthela iLembe LED Support Programme; Shyam Misra, Managing Director at Siza Water; and Sazi Mbhele, Municipal Manager of iLembe District Municipality

 

Linda Mncube, chief executive officer of Enterprise iLembe Economic Development Agency; Gerhard Pienaar, Deputy Head Swiss Economic Cooperation and Development; and Kirsch Bezuidenhout, Acting Chief Director of the Public-Private Partnership Unit at KZN Provincial Treasury

 

Sibusiso Mahlangu, Manager: Planning and IDP at iLembe District Municipality; Andy Horton, President of iLembe Chamber of Commerce, Industry and Tourism; and Councillor Collen Mdletshe, KwaDukuza Municipality

 

Attendees participated in a Policy and Practice dialogue on lessons learnt from Public-Private Partnership water delivery models, with a focus on the Siza Water concession experience in the iLembe district hosted by The Vuthela iLembe LED Support Programme at Salt Rock Hotel.
The Vuthela iLembe LED Support Programme hosted a Policy and Practice dialogue on lessons learnt from Public-Private Partnership water delivery models, with a focus on the Siza Water concession experience in the iLembe district at Salt Rock Hotel.