Managing the risks of private sector participation in the provision of water services

Abstract

Water services in South Africa are provided by the public sector. The present situation is characterised by a large backlog in service delivery, inefficient management and operation of existing services systems, and limited financial resources available to remedy the situation. Developing countries around the world have engaged the private sector to provide management services and project finance. In South Africa good progress has been made in preparing the sector for private sector participation (PSP). However, to date only a few examples of PSP exist, indicating that there are constraints to PSP in the sector. The literature and international experience indicate that the main constraints are the management of and the access to finance. This research set out to obtain a deeper identify the constraints to PSP in the provision of water services in South Africa, focussed on the identification of risks and the access to finance. The research comprised a literature review, an analysis of international and national cases and interviews with a range of stakeholders from across in the sector. The research results lead to the conclusion that the main constraints to PSP are the perception of legal and regulatory risks, socio-political risks and market risks. The access to private sector finance is constrained by these and the financial risk in the sector, not by limited resources. As a contribution to managing the risks of PSP in the provision of water services, an integrated risk management framework is developed to guide and focus risk management in the sector.