You're listening to Strictly Business Podcast with Lindsay Williams. I think it was a few decades ago a book was written about water and I think the whole subject of the book was the next world war would be fought over water. Well I don't know about that but certainly there seems to be a growing global water crisis and certainly South Africa is part of that crisis. Let's find out why and what can be done about it with Chapiri Mwedi. Managing Director, SA Infrastructure at 91 in Cape Town.
Is it bad in South Africa, Chapiri? Well, it's very serious. It's extremely serious and the issues are very much systematic. So I think most people would know that South Africa is already a very water-stressed country. In fact, in a recent webinar, the DG of the Water and Sanitation Department indicated that The water supply is currently imbalanced with existing demands on a national scale.
However, beyond that, the real issue that we have is how efficient is the system, the system has become, with nearly half of all the treated water being lost through non-revenue water, that is through leaks, through theft, through poor billing and also some metering issues. So access is also uneven, particularly when you compare you the urban areas to the rural areas as well as the township. So the challenge is that it isn't just about having enough water.
It's about whether that infrastructure is getting the water reliably to the people and to the industries where it's needed. I've got a person that I interview a couple of times a week, Chipiri, and he's very well known. I won't tell you who it is, but he lives in the northern suburbs of Johannesburg, and very regularly he said, Says Lindsay, I didn't have water for four to five hours this morning. I look out my window and there's water pouring out of a water main and running down the street.
And I think of him and I think of his privileged position. And then I think of the rural areas. And it seems to me that it's across the country. And you've sort of confirmed that in your commentary just now. No, it is indeed across the country. And I think one of the challenges in the rural areas, for example, where in the village where I grew up, where I come from, in terms of, you know, the government statistics, they will say there's existing pipelines, piped water coming to the houses.
But the reality is that no water has been flowing in those pipes for probably decades. So I think. The measure itself as well can be a bit misleading to who has access to water and who doesn't have access to water. You know, it's being elevated to a national conversation because this problem is suddenly now flowing to the urban areas, as you are indicating with your friend who's always complaining from Johannesburg that they don't have water.
The rural areas have been living like this all their lives. Yeah, so that's a sobering sentence you've just given me. And when I think of a water crisis in South Africa, I think of two things. I think, well, maybe it's climate change and the weather patterns are changing.
So some areas are getting water that don't need them and some areas that do don't, etc. And also, I think of the mismanagement of the water infrastructure, not just by the current administration, but also previous administrations that have just neglected it. Is there a case to be made for both of those arguments, Chapiri? No, there's definitely a case to be made for both arguments. I don't think anyone can deny the impact of climate change.
I think one of the biggest examples of that was Day Zero in Cape Town a few years ago. The Western and Eastern Cape towards the Garden Route have been experiencing severe droughts, whereas the other areas in the north are having flooding. So recently, if you look at the Limpopo Basin, look at the places like Venda, like Giani. You look at the Kruger National Park and some parts of Mpumalanga, they've had way so much rain that there was flooding. It was a crisis course, didn't open on time.
So climate change, we cannot refuse that it's here. It is here. If you look at Deben over the last five years, they've made a lot of instances of flooding, which also continues to damage, you know, the already, you know, challenged infrastructure. of water that we have in the country. So there is a case of climate change that is impacting the water sector. However, on the other hand, there's also an issue, a case for poor management of that same infrastructure.
Some of the water infrastructure that we have in the country is as old as from the 1970s and without any... refurbishment and rehabilitation. And if that is mixed with municipalities that are not allocating sufficient funding to the maintenance of already that very old infrastructure, then things start to fall apart in some areas. So I think, you know, both cases are affecting South Africa.
But I think You know, in most of the areas, especially inland, it's mostly the impact of the municipalities not doing what they're supposed to do with their water infrastructure and delivering water to the people. Of course, you've touched on anyway the social impact of water that is just simply not getting to people that need it. And that's been a case for decades now. But also we've got to think about investors. And again, when I think of a water shortage, I think of an industry.
that uses a lot of water. It might be a mining industry, it might be a chemical industry, I don't know. But what does it matter that there's a water crisis looming in South Africa for investors? I think it matters because, you know, water is one of the co-enabling infrastructure in the country. Without water, you know, they always say water is life. So without water.
Not much can happen, whether it's your mines, whether it's your industries, whether it's us as people, we cannot really live without water. So I think, you know, what we are seeing in the sector, especially post the 2026 State of the Nation address, as well as the budget in February, what we saw was water being elevated to the national. discussion similar to what they had done with the energy sectors when we had a lot of you know load shedding.
So now I think with the establishment of the National Water Crisis Committee a number of reforms going into that sector like the establishment of the National Resource Implementation, Water Resource Implementation Agency, Water Partnership it's starting to become a national agenda point that this issue is a crisis. However, with that, the flip coin to the investor is that it creates opportunities.
This is how also in energy you saw that once, you know, those discussions came at a national level and, you know, the politicians started to think about the structural reforms of that sector, the investment followed. So for the investors, there's a big opportunity that we see coming through.
These reforms that are going on in the water sector and those investments are not only in the raw and bulk transfer infrastructure, we see a lot of possibilities in terms of the downstream value chain of the water sector, in the water treatment works, in the reticulation infrastructure around the municipalities, in non-revenue water initiatives and other initiatives that will require funding. to be delivered through investment into infrastructure.
There's so many problems, but what I'd like you to do, if you would, is identify the biggest problems and then move from sort of pessimism to optimism by looking at the opportunities in the system, if you would, Shapiri. Thanks for that question. So for me, one of the, maybe the two or three biggest issues, I think, you know, the raw water. And the bulk transfer infrastructure, they're in a way already bankable with organizations like the TCTA driving investment in that sector.
Where the opportunity lies is where the municipality is responsible. So the water treatment works, the waste treatment works, the non-revenue water, the rehabilitation of those pipes. That's where the opportunities lie. I mean, if you look at the reports by the Department of Water and Sanitation, it's estimated that about 47% of the potable water produced in this country is lost through non-revenue water.
So we see a lot of projects and pilots being developed specifically to address those kind of issues. Because if you don't need to, it's much more expensive to implement. large raw water dams, raw water projects, than to fix what you already have in the municipalities and make sure that you just cut down on those losses. Even if it's a 10% reduction, it's still 10% more water the municipalities can sell to the people. There is also an opportunity with regards to the way...
The Department and National Treasury are thinking about restructuring, starting from the metros in the way water entities within municipalities operate. There's an initiative that was launched this year where there's a grant that National Treasury has created to incentivize municipalities to start to re-influence that water they collect from the revenue they collect for water and sanitation. in that way.
It means that, you know, it will be easier to implement projects as the lenders and investors can see the flow of revenue into that sector and how it can be utilized to repay any investment that will be made into that sector. So there's a lot of opportunities coming from municipal side, but I think maybe it will take time because reforms, you know, they are announced to this year.
They will still take a bit of time before it becomes the norm, it becomes the way South African does things in the sector. When you put all this together, Jipiri, I personally think to myself, this is a risk story. I mean, I sort of lean towards pessimism, so I think this is a risk story for the country at the macroeconomic level, government level, right down to the socioeconomic level. But on the other hand, you've also brought in an opportunity factor here.
And there's an investment opportunity. Is it a tale of two stories there, risk and opportunity? Definitely. I mean, you know, any infrastructure projects, any infrastructure development inherently has a risk that it comes with. And I think the water sector, what I've spoken to, obviously, it's, you know, it's the structural risk in terms of the way municipalities operate or are managing the system.
So for me, you know, when you consider the reforms that are coming through, it's slowly turning that risk into opportunity for a lot of investors. And I think, you know, it's something that 91 is keenly following and keenly, you know, anticipating that it will start to see a number of projects coming through from the market given as a result of those. reforms instead of the usual TCT, air and water type of investment that were being done in the country.
So I think it's beginning to become exciting in that, you know, investors in the private sector will start to play a bigger and bigger role into investing in this really challenged sector in the country. I don't think it's perfect. I don't think any sector where you've got government and it's not entirely... It's not entirely private will be perfect, but I think those risks can be mitigated to an extent where investors can start to play a role.
Sounds as though we need to do another podcast quite soon, Jipiri. Thank you very much for your time. Interesting subject. That was Jipiri Mwedi, Managing Director, SA Infrastructure at 91 in Cape Town. The views and opinions expressed in these podcasts are those of Lindsay Williams and various contributors and do not reflect the policy, position, or opinion of any other agency, organization, employer, or company associated with Strictly Business Podcast.com.
Assumptions made on the analyses are not reflective of the position of any other entity other than the speaker or the author. And since we are critically thinking human beings, these views are always subject to change, revision, and rethinking at any time. Please do not hold us to them in perpetuity.