Next up for Operation Vulindlela: Municipal water delivery

The next phase of Operation Vulindlela – National Treasury’s joint initiative with President Cyril Ramaphosa for structural economic reforms – will target a partnership with the private sector for water delivery.

After years of electricity instability (characterised by load shedding and unscheduled power cuts), water infrastructure challenges have escalated into a critical service delivery crisis across municipalities in South Africa.

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National Treasury Director-General Duncan Pieterse revealed at the Money Summit on Tuesday that it plans to finalise a framework that will outline how the government will partner with the private sector on water delivery, especially at municipal level.

Pieterse said a public-private partnership framework on water delivery will be unveiled before Finance Minister Enoch Godongwana presents the Medium-Term Budget Policy Statement (MTBPS) on 21 October.

The framework is set to outline the terms and conditions of the partnership between private and public sector players, targeting mostly dysfunctional municipalities across South Africa that lack the capacity for water delivery.

“The framework will ensure that the private sector is brought into water delivery,” said Pieterse.

“There are a whole range of reforms in the municipal space that we will unveil soon.”

The idea with water is to replicate the reforms around energy, which spearheaded regulatory changes that have opened up the electricity market to renewable energy from private generators.

The partnership on water with the private sector is included in phase two of Operation Vulindlela.

Read: Investment, not regulation, will drive growth – Kganyago

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Operation Vulindlela seeks to support and motivate government departments to change the fabric of the economy by implementing pro-growth and investment reforms.

Since its launch in 2020, Operation Vulindlela has lobbied for reforms that will reduce the cost of doing business in South Africa and promote productivity by increasing the role of the private sector in areas such as energy, telecommunications, logistics, and now, water.

Roots of the crisis

The water crisis has been blamed on many factors, with Pieterse proffering some causes.

There are massive and centralised systems of dams and pipes that the government can no longer maintain because of financial constraints and tender issues.

There is also a disconnect between the Department of Water and Sanitation and municipalities, as the latter generates revenue by selling water to the public.

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Pieterse said municipalities however tend to spend the revenue on salaries and consumption-led initiatives instead of reinvesting it in water infrastructure and maintenance.

Operation Vulindlela has already identified over 30 water infrastructure projects worth more than R40 billion across 18 municipalities.

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These projects will require funding and skills from the private sector for delivery.

While SA has moved to liberalise energy, water is trickier because it is a finite resource. However, the water crisis across municipalities is forcing change.

The government has confirmed that the proposed Water Services Amendment Bill aims to separate the roles of water services authorities and providers.

This could open the door for more private players to play a bigger role in water supply. The government is proceeding to have the bill passed and adopted by parliament.

Operation Vulindlela wins to date

There is recognition by market watchers that Operation Vulindlela has begun to clock up a few wins since its inception:

Digital spectrum was auctioned;
Private sector investors are being brought onto railway tracks;
The backlog of water-use licence applications has been cleared; and
Reforms are under way to make SA one of the least restrictive countries for skilled visas.

Gina Schoeman, senior economist at Citigroup in South Africa, also speaking at the Money Summit, said if all reform measures are delivered by Operation Vulindlela, substantial economic growth could finally be imagined.

“What we need is basic service delivery improvement that will improve investor sentiment and gross domestic product [GDP].

“The success of Operation Vulindlela has now prompted people and private investors to look at municipal service delivery and fix it,” she said.

Economic growth of 1.5% “at a bare minimum” is required to uplift people from poverty and improve the quality of life for citizens, said Schoeman.

Pieterse is more ambitious, saying the economy could grow by more than 2% by 2028 if all Operation Vulindlela reforms are delivered.

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