African governments cannot hope to attract more private sector investment into water infrastructure to fill the continent’s $30bn (R527bn) investment gap until they guarantee that projects will generate revenue and be free of corruption.
This is according to Alex Simalabwi, executive secretary of the Global Water Partnership (GWP), an international network dedicated to improving water governance and mobilising sustainable water infrastructure investment.
Simalabwi warned governments looking for the private sector to bankroll bulk water projects in the region that funders will not budge until they are assured of adequate governance and returns for such projects.
“It will be impossible to attract finance for water in the private sector without improving efficiency. Most of our utilities are not bankable. Their accounts are not audited, and if they are audited, they are not in good shape.”
The water sector is extremely inefficient in some countries and water losses go up to 60 or 70%. If that was your money that was being invested ... would you invest in it?
— Alex Simalabwi, executive secretary of the Global Water Partnership
He was speaking on the sidelines of the AU-AIP (Africa Water Investment Programme) summit in Cape Town this week. The event is tied to the G20 summit in November this year.
While the private sector has participated in financing a number of bulk infrastructure projects, it often balks due to high costs and the failure to generate revenue — often attributed to water boards' unstable governance.
“Revenue models [of water projects] are basically being subsidised by governments all the time. The water sector is extremely inefficient in some countries and water losses go up to 60 or 70%. If that was your money that was being invested ... would you invest in it?”
He said the AU-AIP summit should focus on securing cross-sector leadership commitment, continued monitoring of the progress of water projects, innovative finance solutions, strengthened regulations and development assistance to cut investment risks.
“The shortfall in investments was between $10bn and $19bn, when you combine all of the financial flows into the sector across the continent from all sources in 2019. So now there is an additional shortfall of about $30bn. But when you look at Africa and the 54 countries, it’s not much.”
Stefan Uhlenbrook, director of hydrology, water and cryosphere at the World Meteorological Organisation (WMO), said it was critical to improve the efficiency, governance and accountability of most utilities.
“One key point is to have better data and information to understand the [efficiencies and] inefficiencies of all processes, which will help to address them with effective measures and also improve risk management for investors.
“Some methods, like scorecards or better estimates of the return-on-investment, [have been] discussed. These can be useful to guide investment and policy decisions. However, all these will need better data and information that needs to be clear, open and authoritative.”
He said water systems were often plagued by scarcity, pollution and confusion.
“More attention to monitoring and data sharing, and related investments, are necessary. This will increase transparency and accountability and, consequently, help investors to make evidence-based decisions.”
He said the WMO supports its 193 member countries across the value chain of hydrometeorological observations, data management, modelling and forecasting.
“This helps to be prepared and implement early action to minimise losses and damage to infrastructure by extreme weather events. AI and machine learning are increasingly becoming key tools to improve processes along the value chain.”
George Joseph, a senior economist at the World Bank's water global practice, said developing an integrated, comprehensive account of the levels of water sector spending was essential for policymakers.
“In many countries, the fragmentation of institutions has thwarted an integrated approach to water resource management. Previous spending estimations in the sector have offered an oversimplified account of the infrastructure spending shortfall.”
President Cyril Ramaphosa called on investors to make more of their capital available for the development of water projects in Africa.
“Water investment must no longer be an afterthought at climate and finance discussions. It must be at the centre of discussions. It must be financed, tracked and championed. Let us leave this summit with deals, pipelines, partnerships and a permanent global mechanism to sustain the momentum.”
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