Connecting Waterpeople

Public private partnerships: delivering strategic solutions for municipal water and sanitation

About the blog

Dhevan Govender
Senior Manager, Commercial and Business Department, eThekwini Water and Sanitation, City of Durban, South Africa.

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  • Public private partnerships: delivering strategic solutions for municipal water and sanitation

Aging infrastructure, lack of resources, insufficient funding and lack of skills are just some of the challenges that municipalities grapple with on a daily basis. This is further complicated by rising population, increasing demands, high economic costs, and impacts of climate change. When comparing implementation of large-scale infrastructure facilities, for example, water and wastewater treatment plants, the PPP model’s construction, quality, and overall timelines surpass those of conventional project implementation in the public sector. I firmly believe that PPPs are the best vehicle for large-scale infrastructure implementation to achieve a “reliable future water supply”.

It is a well-known fact that funding is a key barrier, particularly for large infrastructure project implementation. PPPs can be a vehicle to mobilize capital and accelerate project implementation. Municipalities normally make provisions for capital funding requirements in their forward capital programs. However, these programs are disrupted due to “shocks “or acute events, for example, floods. The budget invariably gets reprioritized to recover from such events and new infrastructure and upgrade of existing aging infrastructure projects are consequently delayed in the process. This is the causal nexus that municipalities experience on a perpetual basis whereby they must constantly play catch up.

The PPP model provides “budgetary certainty”, forcing the municipality to focus on outputs and benefits from the onset

Municipalities also experience significant delays with SCM challenges for traditional procured projects. Municipal officials find themselves impeded with the majority of their time preparing tenders instead of focusing on core service delivery functions. There are instances when new infrastructure spiral into decay simply due to a lack of resources to undertake the operation and maintenance component. Commissioning of a new water or wastewater treatment plant is only a part of the municipal journey in expanding its services to cater for growing population demands. Operation and maintenance plans exist, however are seldom implemented. Key infrastructure elements that need to be replaced are often shelved due to new priorities, thus creating a domino effect resulting in poor maintenance of key infrastructure. Key strategic spares that are fortunate to make the priority list are, more often than not, delayed in SCM processes, which can take an entire year to complete. A hazard of a municipal official’s job is the constant juggling act of balancing limited resources and maintaining provision of key services, whilst ensuring SCM compliance. It is clear that “Compliance comes first, before service delivery.”

In my mind, PPPs offer a much more structured approach for infrastructure project implementation. International investors and technology providers are rightfully “risk adverse” with their decisions to invest, however with the appointment of qualified transaction advisors and the completion of feasibility studies, the private sector receives some solace that the municipalities are earnest about project implementation. PPP projects’ payment mechanisms ensure that the private party is responsible for maintaining infrastructure assets to a specified standard over the life of the contract, including replacement of key capital components. Ultimately, the PPP partner is responsible for the financial risk over the life cycle of the project. More importantly, the PPP model provides “budgetary certainty”, forcing the municipality to focus on outputs and benefits from the onset. Furthermore, the calibre of service is maintained for the duration of the PPP and the municipality only pays when services are delivered.

In conclusion, the PPP model provides the municipalities with an opportunity to “shock proof “some of its key infrastructure and service delivery mechanisms.

As I see it, municipalities have the vision, and the private sector has the vital funding, resources, and expertise. Municipalities who partner with the private sector become more resilient, thereby providing more sustainable service delivery to communities.

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