Study recommends private sector participation in SA water services

THE Siza Water concession in the iLembe District Municipality, KwaZulu-Natal and the Silulumanzi concession in Mpumalanga demonstrate that private operators can achieve high levels of operational efficiency and service quality, and that private-sector participation (PSP) is a viable option if designed correctly.

These are some of the findings of a qualitative analysis of long-term water concessions conducted by Robert Botha and Roy Havemann, published in a research note from the University of Stellenbosch’s Bureau for Market Research (BER) on August 27.

The study concludes that South Africa faces a severe water crisis, with nearly half of its systems in a ‘poor or critical state’ and over 40% of treated water lost before it can be billed.

References to KZN-based Siza Water in the report highlight the exceptional operational efficiency achieved by the operator. It says that, upon taking over the concession in 1999, the company inherited a system with water losses of 33% and has since dramatically reduced this to a mere 8-15%. Furthermore, the report found that Siza Water has consistently achieved high-quality standards, as demonstrated by its repeated Blue and Green Drop certifications from the Department of Water and Sanitation.

The authors report that the financial success of the partnership is equally impressive. Both private operators maintain a high collection rate of 95-98%, significantly higher than the iLembe District Municipality’s average of 40-50%. This robust revenue stream has allowed Siza Water to invest substantially in the system. The private operator’s tariffs are often lower than those of its municipal counterparts, dispelling concerns that private operators lead to unaffordable prices.

Botha and Havemann conclude that while private concessions are not a universal solution for all water challenges, they are a powerful tool for improving efficiency and maintenance of commercially viable networks. The report recommends a hybrid approach, where private operators handle commercially viable services while the public sector focuses on oversight and uses public funds to ensure equitable access for all.

The full report can be accessed online at UNU-Wider case studies.