Economic costs, efficiencies and challenges of investments in the provision of sustainable water infrastructure supply systems in South Africa

Abstract

South Africa is facing significant water infrastructure investment challenges, both at the level of water resources and services. Principles for water use pricing, charges, tariffs and use are enshrined in South African legislation but implementation thereof is a major problem. The research paper addresses: 1) economic costs; 2) efficiencies; 3) investment challenges; and iv) the application and maximisation of economic tools. A total of 269 municipalities were sampled and the research exemplified that South Africa was losing ca. US$0.617 – 1.033 billion/annum to various inefficiencies: 1) water use under-pricing was ca. US$0.413 billion/annum. Water use charges and/or tariffs closer to cost-recovery levels would provide and ensure financial sustainability; 2) Return on capital investment inefficiencies contributed ca. US$0.926 billion/annum. Revenue far lower than asset value is illustrative of unsustainable revenue for investments; 3) non-revenue water (NRW) was 36.8% and ca. US$0.402 billion/annum. Investments in water infrastructure maintenance projects will minimise distribution losses; 4) the multipliers were varied and substantially high, viz. 3 – 27. This illustrates the extent and seriousness of prioritising the implementation of water conservation and demand management measures; and 5) The capital investment gap was estimated at US$2.258 billion/annum for the next ten (10) years (2019/20 – 2029/30). Under capital investments have serious downstream implications for socio-economic development and growth.