Water institutions and governance models for the funding, financing and management of water infrastructure in South Africa

Cornelius Ruiters,Maselaganye Petrus Matji

doi:10.4314/wsa.v41i5.09

Abstract

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.

Highlights

Over the past few years, South Africa has made impressive moves in a positive direction with its new investment strategies and initiatives to encourage investment in public infrastructure, in particular water (Economic Development Department (EDD), 2011; Presidential Infrastructure Coordinating Commission (PICC), 2012; National Planning Commission (NPC), 2013; Department of Water Affairs (DWA), 2013a)
The sample included the following: -- Workshops, discussion focus groups and interviews with representatives of selected government departments: DWA, National Treasury (NT), Department of Cooperative Governance (DCoG), and Department of Public Works (DPW).; the national and provincial workshops were attended by 46 participants -- Respondent groups and national organisations, e.g. DWA, NT, and DCoG -- Funding agencies – Development Bank of Southern Africa (DBSA), African Development Bank (AfDB), World Bank (WB) and European Investment Bank -- Water management institutions – Trans-Caledon Tunnel Authority (TCTA), Komati Basin Water Authority (KOBWA), Water Boards (Rand Water, Umgeni Water, Sedibeng Water, etc.) -- Local government – the South African Local Government Association (SALGA), and local, district and metropolitan municipalities
The interplay of the government’s fiscal policies of budget deficit, debt reduction, vexatious financial relations and political considerations present an apparently insurmountable obstacle to overcoming the backlog in South Africa’s infrastructure – and in putting in place fresh institutional structures for effective strategies that would lead to the prompt provision of water infrastructure

Summary

Introduction

Over the past few years, South Africa has made impressive moves in a positive direction with its new investment strategies and initiatives to encourage investment in public infrastructure, in particular water (Economic Development Department (EDD), 2011; Presidential Infrastructure Coordinating Commission (PICC), 2012; National Planning Commission (NPC), 2013; Department of Water Affairs (DWA), 2013a). It has released a 5-year water infrastructure investment plan which set priorities and targeted more than R30 billion for water infrastructure investments by the end of the 2014/15 financial year (PICC, 2012; DWA, 2011a, 2012a, 2013b). Governance improvements, in state-owned enterprises (SOEs), require aligning internal and external incentives, which again require broader reforms of the external environment for water infrastructure service providers

Methods

Results

Conclusion