Funding models for financing water infrastructure in South Africa: Framework and critical analysis of alternatives

Abstract

The Government of South Africa has been the main provider of public infrastructure, particularly in the water sector. Government administration and institutional structures continue to shape and influence infrastructure investment. The South African constitutional system imposes unique complexities and constraints on infrastructure investment. The country experiences a serious backlog in water infrastructure investment for the development and management of water resources and water services. In 2011, this under-investment was estimated at more than R600 billion (600 x 109 ZAR: South African Rand). The national Government traditionally had a pivotal role in shaping water infrastructure investment. Government needs to find a solution to this backlog by putting in place new institutional structures and funding models for effective strategies leading to prompt water infrastructure provision. The research identified several funding models for financing water infrastructure development projects. The existing public provision model continues to characterise much of the publicly-provided water infrastructure in South Africa. These models see Government planning, installing and financing infrastructure with pricing at marginal costs or on a loss-making basis, with returns recovered through the taxation system. Nowadays, water infrastructure provision is split between fully-public and mixed ownership by water entities. Public-private partnerships (PPPs) in the water sector are not yet a reality.

Keywords: Department of Water Affairs, funding models, water infrastructure, National Treasury, operations and maintenance