A series of public–private partnerships (PPPs) with municipalities could help ailing local water and sanitation departments (WSDs), many of which face challenges ranging from deteriorating infrastructure to declining water quality and poor governance.

According to the National Business Initiative (NBI), nearly half of the local WSDs are in a "critical state" and need help from the private sector.

The NBI has developed a project called Kopano ya Metsi, which looks into how to strengthen municipal water management and enable PPPs to unlock water investment. This was outlined at the African Utility Week and PowerGEN conference and exhibition, in Cape Town.

“The South African water sector is at a crossroads. Municipalities are key to water and sanitation provision, yet infrastructure is not as it should be. Many municipalities are not running financially fit businesses. Many municipalities charge a quarter of what it costs to provide water,” said NBI climate and water programme manager Alex McNamara.

From a water perspective, he said municipalities faced a mixture of infrastructure-, institutional- and finance-related challenges. The NBI lists low collection rates, inaccurate billing and ageing and nonfunctional infrastructure as some of the obstacles in the path of an efficient local water sector.

But all is not lost. The NBI outlined what it describes as a "virtuous cycle" to help solve the problems, starting with a targeted subsidy for the poor combined with cost-effective tariffs for other users. In turn, more accurate billing combined with improved tariffs would raise revenues. It suggested this would filter through to better staffing which would improve customer service levels. Increased revenues would enable improved infrastructure development and maintenance. This would, in turn, promote investment.

The NBI has researched which municipalities would benefit most from PPPs. McNamara said metros such as the City of Johannesburg, eThekwini and the City of Cape Town were most suitable for PPPs owing to their greater resources, higher household incomes and larger populations. A further 24 WSAs had very good or good PPP potential. These include municipalities such as Overstrand, Saldanha Bay and Sol Plaatjie. A total of 116 WSAs fall within the low or very low PPP potential band, said the NBI.

McNamara said experts had consistently raised desalination, any form of water reuse, groundwater extraction and wastewater treatment as among the main PPP opportunities in the water value chain.

He emphasised that private sector bidders would have to have the capacity, skills and capability to deliver the projects.

The NBI also suggests developing a pool of centralized transaction advisers to proactively support municipal projects at risk, in areas with sufficient potential and has suggested developing a water investment facility focused on the private sector.