Public–private partnership conceptual framework and models for the funding and financing of water services infrastructure in municipalities from selected provinces in South Africa

Cornelius Ruiters,Maselaganye P Matji

doi:10.4314/wsa.v42i2.13

Cornelius Ruiters, Maselaganye P Matji

Open Access

https://doi.org/10.4314/wsa.v42i2.13

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Abstract

This paper presents public–private partnership (PPP) framework models for funding and financing of water services infrastructure at local government (municipalities) level (sphere) in South Africa. Data were assembled from various stakeholders, viz., private and public sector institutions in the Gauteng and Limpopo Provinces of South Africa. The framework for PPPs identified three models, viz. state, hybrid and private sector models. In the ‘state model’ the water services value chain is 100% government funded and owned infrastructure. Government is a key player in infrastructure investment and inefficiencies within the public expenditure management systems are particularly detrimental, e.g., there are significant problems in spending of infrastructure budgets. In the ‘private model’ harnessing the significant potential for capital markets to finance water infrastructure, particularly local bond markets, is contingent on their strengthening and further development. Well-functioning and appropriately institutional investors (pension funds, insurance companies, etc.) would be natural sources of long-term financing for water services infrastructure because liabilities would better match the longer terms of water infrastructure projects. The ‘hybrid model’ is in the middle of the water services value chain, i.e., a partnership between government and the private sector. The use of this framework is essential in the including of the private sector in the implementation of water infrastructure development projects. The research results highlight the underlying principles that underpin, support, determine and confirm the success of the PPP models and value chain framework for local government water infrastructure in South Africa. Twelve key parameters were identified that would drive the success of any water services infrastructure PPP model. Even though PPP is an alternative procurement vehicle, PPP models are considered to be used as vehicles for addressing institutional challenges in local government. However, in most cases it has been indicated that lack of technical and financial skills and monitoring of the private operator are serious challenges. Keywords: financing, funding, Gauteng and Limpopo Provinces, PPP framework, PPP models, water services infrastructure

Highlights

Many developing countries need water infrastructure to improve the livelihoods of their citizens and their quality of life, and South Africa is no exception
Participants included officials and politicians from municipalities in the study area (Gauteng and Limpopo Provinces of South Africa), Rand Water, Umgeni Water, Magalies Water, Johannesburg Water, East Rand Water Care Company (ERWAT), local and international private companies with an interest in water and sanitation infrastructure within and outside the study area, the Development Bank of Southern Africa, officials from the national Department of Water Affairs, National Treasury and water user associations operating in the study area
Well-functioning and appropriately institutional investors would be natural sources of long-term financing for water services infrastructure because liabilities would better match the longer terms of water infrastructure projects

Summary

Introduction

Many developing countries need water infrastructure to improve the livelihoods of their citizens and their quality of life, and South Africa is no exception. Access to finance is the lifeblood of water services infrastructure delivery, as is the packaging of the funding model for each project or groups of projects. The cost of water services infrastructure delivery continues to escalate to the point where many developing countries cannot afford such infrastructure. The backlog of water infrastructure provision and poor access to service delivery for poor communities have forced a new approach for governments, industries, financiers and other role players. Countries like South Africa have no choice but to look at innovative approaches, such as public–private partnerships (PPP) models, to ensure that they eliminate their water infrastructure backlogs.

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