South Africa: PPIAF Support Contributes to Better Water Resource Management
Every drop of water counts in South Africa, where in recent years, cities come dangerously close to ‘day zero’ – where severe droughts threaten availability of water supply.
Compounding the problem of inadequate supply is the high levels of non-revenue water (NRW)—water that is processed and distributed but not paid for. According to a 2021 IFC study, average municipal NRW in South Africa is 41 percent. Reducing these losses could significantly reduce vulnerability of peoples to water shortage
The government of South Africa is promoting efficient water use. One initiative in its arsenal is the No Drop Programme, launched in 2017 to measure and verify water use efficiency in municipalities using strict criteria. Cities that meet these defined criteria in water conservation, water demand management, and water supply management are certified under the program, indicating excellence in resource management. However, many municipalities lack the capacity to address water losses.
Through a series of support initiatives, the IFC, World Bank’s Water GP and PPIAF have been working with eThekwini Municipality Water and Sanitation (EWS) on a pilot project that addresses NRW issues through performance-based contracts (PBCs). PBCs incentivizes contractor performance by linking payments to achievement of defined objectives. Poor performance, however, could result in penalties.
PPIAF worked with EWS and IFC in defining the PBC pilot and concept design. PPIAF and IFC worked with EWS to assess its readiness for a PPP, provided training to better understand what is a PBC, and identified the preliminary scope of the pilot project. In 2018, EWS approved the further development of the detailed project concept, proposed to be a $25 million pilot to reduce NRW by a total of 120 million cubic meters over ten years.
A follow-up activity with IFC is underway to assist EWS further design the project and explore how to structure it in a manner that would attract a private sector partner to finance . This follow-up will detail the technical scope, and conduct financial assessments of the pilot PPP, and later, assist in developing the contractual documents. Capacity building for EWS staff will ensure that they have the knowledge and skills to manage the process. The technical study completed in December 2021, and work on the structuring will commence in June 2022.
PPIAF and the IFC also engage a wider set of local government partners and donors active in the water sector in South Africa, including Switzerland’s SECO, Denmark, and the Development Bank of South Africa, to raise awareness on the topic.
The EWS pilot hopes to prime the market for collaboration between water utilities and private companies on how NRW can be addressed in South Africa.