Just when you thought it was safe to say the energy crisis had settled down, another resource scarcity is threatening – water. Residents of Johannesburg have already seen the effects of the water shortage, which experts expect will become a national issue over the next few years.
As far back as 2020, Dr Hlamulo Makelane, at the time a research fellow at Nelson Mandela University, flagged the issue. “South Africa is approaching physical water scarcity in 2025 where it is expected to experience a water deficit of 17% by 2030, and climate change will worsen the situation,” she said.
And sure enough, over the past few months, different areas in Johannesburg have experienced water cuts and, in some cases, been without water for as long as six days. A Gauteng Quality of Life survey in October reflected that 64% of those interviewed were worried that the province would run out of water, affecting three major metros – Johannesburg, Tshwane and Ekurhuleni.
A big part of the problem relates to infrastructure and a lack of maintenance, resulting in burst pipes, declining storage capacity and sewer overflows. Because of the vast amount of water leakages, illegal connections and a high average water consumption, which is 60% more than the world average, the demand for water in Gauteng is occasionally exceeding the available supply of treated water from Rand Water.
The Department of Water and Sanitation issued a media release on Wednesday, 27 November, stating that there is a limit on the amount of water that Rand Water can abstract from the integrated river system, and Rand Water is not able to abstract and treat any more water than it is currently doing.
The department and several Gauteng municipalities agreed at a meeting this week that all of them need to focus on fixing the leaks in their water distribution systems and removing illegal connections, putting in place water-use restrictions and enforcing them, as well as implementing punitive tariffs for customers who use water in a wasteful manner.
The City of Johannesburg reported that it has increased the number of its maintenance teams to reduce response times for the repair of reported leaks. It also indicated that it has started to strengthen its by-law enforcement for water restrictions and is implementing a programme to remove illegal water connections.
Read more: ‘Humanitarian crisis’ — Residents protest at water cuts as Joburg Water says it’s ‘stepped up our game’
The City also indicated that it has started to install more pressure-reducing valves, which is a cost-effective way of reducing leaks during periods of low demand, such as overnight.
Private sector comes to the table
The good news is that the private sector is aware of the issue, and some businesses have taken action.
In the private equity space, Mergence Investment Managers is invested in the only two private water concessions in South Africa, via a public-private partnership with a majority share in South African Water Works, which runs two 30-year water concessions – Siza Water in Ballito, KwaZulu-Natal, and Silulumanzi in Mbombela, Mpumalanga.
The water concession grants a private entity the right to supply water and/or wastewater services to a specific area or city. The concessionaire is responsible for improving and upgrading the facilities, as well as expanding access to the services for as long as the contract runs.
The impact of the Siza Water and Silulumanzi concessions has been significant in terms of seamless water supply to communities and reduced water leakage. Kasief Isaacs, head of private markets at Mergence Investment Managers, believes this model could be replicated across South Africa to help solve the water crisis.
The model used by the Siza Water public-private partnership is that in the early years, it invested in water and sanitation infrastructure and maintained it. It does not own water supplies, but buys in bulk from Umgeni Water.
Mergence first acquired the stake in 2018 and later became a majority shareholder in the two concessions. The Siza Water concession area covers 12.5km² and serves about 55,000 to 60,000 users.
Chito Siame, investment principal at Mergence, says South Africa can learn from other countries. For example, in the UK, some private equity funds acquired water companies with the intention of quickly cashing out, leading to underinvestment in infrastructure maintenance and expansion. “South Africa needs to guard against this by ensuring concession holders are incentivised to reinvest in the water network and not just extract dividends,” he said.
Mergence will still be invested in both water concessions for another five years. “We are in discussions now with both municipalities to extend the tenders of the concessions and look forward to strengthening the relationship with them,” Siame said.
The targeted return on investment (ROI) for both concessions is 16%, which is fairly moderate relative to what Mergence is targeting in other sectors through its private markets infrastructure and development funds. However, Siame says this is due to the control of billing and collection, where the management teams need to be considered. “They have the systems in place. Billing and metering is actually controlled by the concessionaire, and so because the risk is lower, we can adjust our ROI expectations accordingly.”
Dr Manessah Alagbaoso, head of business ecosystems and sustainability at the Standard Bank Group’s business and commercial banking unit, says the bank is implementing comprehensive educational interventions, developing a sustainability learning module focused on water and wastewater management that targets both internal staff and business banking clients.
In terms of innovative solutions for customers already facing water scarcity challenges, one example is a Standard Bank collaboration with a Cape Town-based client that specialises in smart metering technology, which not only tracks water usage but also detects leaks, reducing wastage.
“Such initiatives illustrate how technology can drive efficiency and promote sustainable practices in agriculture and industry,” Alagbaoso said.
He added that the bank is also actively engaging with clients in Zimbabwe and Malawi, assisting them to move away from heavy reliance on groundwater by promoting the recycling of wastewater for agricultural purposes.
“In South Africa, the emphasis on water management is still in its nascent stages compared with energy concerns, yet there is a growing awareness among stakeholders. Both public and private sectors recognise the critical role water plays in the broader sustainability narrative,” he said.
Asset manager Coronation did a study in 2023 looking at the top 100 companies listed on the JSE to identify major water consumers, and picked 58 firms for a closer analysis of their water-related risk exposures and management strategies. The research included compiling data on specific aspects such as water consumption metrics, strategies for water usage reduction, risk management practices, water reduction targets, exposure to geographic areas with high water stress, and any penalties related to water usage.
Marie Antelme, an economist at Coronation, said the initial approach involved reviewing company-provided water disclosures to ascertain whether this adequately addressed the questions posed above.
“Where further information was needed, we engaged with each company seeking additional details. This effort resulted in 25 water-related interactions across 20 companies since the start of 2023,” she said in an investment note earlier this year. DM
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.
