(Bloomberg) -- South Africa is setting up an office to facilitate investment in the water industry in a bid to arrest its collapse and emulate the success of the nation’s electricity procurement agency, which has attracted more than $10 billion of private money into renewable energy.
The Water Partnership Office is being established by the state-run Development Bank of Southern Africa, and startup funding may come from the Green Climate Fund, a more than $12 billion international financing facility.
“What the Independent Power Producers Office did for renewable energy,” the WPO wants to do for water, Catherine Koffman, group executive for project preparation at the Johannesburg-based lender, said in an interview.
The new office is another sign that South Africa’s government is trying to lure more private investment to arrest a decline in the quality of services of everything from energy and water to freight rail and ports. A national water plan released in 2019 said 900 billion rand ($47 billion) needs to be spent on water-supply and storage infrastructure by 2030.
The energy agency holds auctions for the provision of electricity by private companies for use in the national grid.
The GCF’s board will meet this month and consider approving the funding, while an offer has been made to an executive who will run the water office, Koffman said, without identifying the person. The office’s creation has been a result of work between the DBSA, the National Treasury and the Department of Water and Sanitation, she said.
The GCF, which is based in South Korea, didn’t respond to an emailed request for comment sent on Monday.
The quality of South Africa’s water provision has suffered as cities have grown and infrastructure has failed to keep pace. A cholera outbreak last month in Tshwane, the municipal area that includes the capital, Pretoria, highlighted the poor state of a wastewater treatment plant that supplies many of the poorest residents of the city of about 3.6 million people.
“We are observing a sharp decline in the delivery of water and sanitation services,” Senzo Mchunu, the minister for that department, told a separate media briefing Tuesday. “We are very concerned about this.”
In addition to urbanization, the country is grappling with climate change. The nation is already one of the world’s 30 driest: rainfall, while variable across its territory, averages less than 500 millimeters (20 inches) per annum.
A report based on analysis of data submitted by municipalities for their financial year ending June 2022 showed daily per-capita water consumption was about 216 liters per person, compared to the international average of 173 liters, said Sean Phillips, the department of water and sanitation’s director-general.
“This is an anomaly given that South Africa is a water-scarce country,” he said. “The high level of physical losses in municipal distribution systems is one of the main reasons for the relatively high level of per-capita consumption.”
Companies have moved factories away from areas that can’t supply adequate water. Astral Foods Ltd., the country’s top poultry producer, sued the government over its inability to provide adequate water to one of its facilities.
“There is a big focus on municipalities,” Koffman said. “It’s an area that’s clearly starting to suffer.”
The WPO will initially focus on six priority areas: limiting wastage, water reuse, wastewater treatment, water-management contracts, seawater desalination and sanitation without the use of sewers, according to Koffman.
South Africa’s water industry has already attracted foreign interest. Spain will consider funding projects that benefit companies from the European nation as part of a 2.1 billion-euro ($2.5-billion) investment program, while the Netherlands has helped fund water quality assessments in the country.
“The market needs a pipeline” of projects, and work is under way to ensure the private investment program has the support it needs when it gets under way, Koffman said.
--With assistance from Janice Kew, Mike Cohen and Monique Vanek.
(Updates with comments from the minister and director-general from the ninth paragraph)
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