Challenges and Trade Offs in Private Investment in the South African Water Sector

Chetty, Sugen
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SA is a water-stressed country that suffers from poor water service delivery. Half of the country’s 48 million people do not have piped water access. The major problems are inefficient operations, lack of capacity in spending allocated budgets in rural municipalities particularly, unclear management structure, and a decline in capital expenditure. Private investment, driven by profit-seeking behaviour, would bring good fiscal control and efficient structure and, hence, would assist the water sector with the poor service delivery. However since water is essential for humans it can be seen as a social good. Government has instituted social goals for the equitable distribution of water using legislation. The purpose of this work was to explore the potential trade-off between economic and social goals in private sector investment in the South African water sector. A qualitative method was used for analysis. Qualitative data was collected through interviews with personnel from the Sembcorp Silulumanzi concession in Mbombela and the municipality. The study concludes that private investment has enhanced service delivery by improving efficiency, technical skills and the capacity to spend allocated budgets. Private investment in the water sector has no negative impact on equitable water distribution, to the rural poor particularly. Rural areas with low population density and low cost recovery present a challenge. Private investment is recommended for the water sector, however an owners’ engineer is recommended to support the CMU in managing the concessionaire
MBA thesis
Private sector investment, Public private partnerships, Water resources