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Privatisation of service provision

Will this be the new normal?

By Anthony Turton

, |

Privatisation of service provision

Will this be the new normal?

By Anthony Turton

, |

5 min read

Recent events indicate the emergence of an alternative model for the management of services like water and waste. Several separate initiatives are under way, currently unconnected, but all moving in a similar direction. In areas where municipalities have failed, courts have ruled in favour of residents’ associations, giving them the right to manage water and waste. It is evident that, with increased support from National Treasury and the Presidency, a new model is emerging that will enable private capital to be raised for clearly defined public services provision.

How did it start?

We now know that over 60% of municipalities are in financial distress, and are unable to render reliable basic services, with water being the most notable and high profile. As government abandons both the Blue and Green Drop Reporting system, the supply of potable water is disrupted, and the quality of water going into the municipal system deteriorates. It is not uncommon to read in the newspapers about the collapse of wastewater management, with horrific stories of sewerage flowing in the streets and into the nearest river; many other municipalities have experienced these persistent crises in some form or another. Reports from Harrismith, Kimberley, Parys and Makhanda (Grahamstown) all present the same story of collapsed infrastructure, and the inability of the local municipality to mobilise sufficient resources to rectify the problem in an appropriate way. We also have the Day Zero crises that originated in Cape Town, but that are now manifesting in East London and Gqeberha (Port Elizabeth).

In response, local communities, often organised as residents’ associations, have been forced to take control of these vital services – and the courts are backing them. Probably the most notable was the judgement in the case of the Harrismith Intabazwe and Tshiame (HIT) Residents Association, which is now managing water services, electricity reticulation and refuse removal, with the support of the court. But this is not an isolated case, because the water services crisis is of such a magnitude that it has become a ubiquitous problem.

The inability of municipalities to solve these problems is in part due to the policy of cadre deployment; unqualified people holding key posts fail to recognise that a problem exists and, even if they do, they are unable to adequately resource a viable solution. This is a key driver of state failure, which can be understood as the inability to resolve local level service delivery problems due to incompetence and a culture of non-accountability.

Good news as citizens take control

These problems have been exacerbated by the onset of the fiscal cliff, making the availability of money a key constraint. Given the gravity of the consequences, as the cumulative effect of municipal failure triggers the domino effect of state failure, something must be done differently. This is now starting to become a good news story of possible green shoots of rejuvenation, made possible by the courts’ willingness to grant citizens the right to regain control where local government consistently fails. Central to this new trend is the growing awareness in both the Treasury and Presidency that service delivery must be managed differently.

Various initiatives are currently under way, often driven by separate groups, but all aimed at finding an alternative model of service delivery at municipal level. Confidentiality precludes me from sharing details, but the various initiatives all have a few things in common. The most significant of these can be summarised by three words: funding, skills, and replicability.

How it will work

On the funding front, the fiscal cliff means that the government is effectively bankrupt, and the taxpayer has been bled dry. This necessitates the sourcing of alternative funding sources, of which a number are available, but all of which require accountability, financial viability and the guarantee of skilled management before any commitment is made. There is no shortage of capital available, but there is a national shortage of bankable projects. The non-bankable projects will never be considered, simply because of the absence of accountability, the non-viability of the project and the absence of skilled management. This is shifting the needle on the dial towards a form of public-private partnership (PPP). Treasury has bought into this notion, and the Presidency is starting to support this via Operation Vulindlela. Details of each PPP model remain confidential, given the sensitivity of the matter, most notably the expected backlash from trade unions, but their numbers are declining as jobs are lost in a shrinking economy. Trade unions only have power when the majority of the population enjoys the luxury of actual employment.

On the skills side, all versions of the PPP model focus on the appointment of technically competent people to manage the programme. This is a direct attack against the cadre deployment policy of the ruling ANC, so it is being contested. But, as with trade union contestation, the reality of a shrinking economy, growing poverty, and a clear failure of government at local level, their grass roots support is also shrinking. Ideology does not put food on the table, but a viable economy, enabled by competent managers, developing viable projects adequately funded by a blend of private capital and Treasury guarantees, is a real game changer.

Regarding replicability, the pilot projects on which the emerging PPP model will be tested can all be replicated elsewhere. This is like a cookie cutter; once defined and working, rapid replication across a wide spectrum of cases should be possible at national level.

What it means for residential estates

This new trend is still invisible, given the sensitivities alluded to, but the progress is becoming irreversible. Soon we are likely to see different initiatives at municipal level, specifically around the management of water, waste and energy. This will improve service delivery to residential estates. In addition to this, we are also likely to see calls for proposals for a range of projects related to the creation of New Water. This is engineered or processed water recovered from contaminated (Old Water) or saline (mine effluent or sea water) sources. These are likely to include the revamping and recapitalisation of specific wastewater treatment works, especially where industrial users are prepared to sign offtake agreements to buy the processed water that will be available in abundance, and at a cost below that of potable water. This was pioneered in KZN at the Durban South sewerage works. Another new trend is likely to be the announcement of utility-scale desalination plants, either in areas impacted by acidic mine water, or in coastal cities where future industrial growth is limited by the non-availability of fresh water. This has been pioneered at Emalahleni and also at Trekopje in Namibia. Gqeberha and East London, both facing Day Zero crises, and being industrialised, are likely to lead the way, with desalination plants of about 120 megalitres (million litres) per day capacity.

The prognosis for the success of these projects is good, but all will be contested by the current beneficiaries of the politics of patronage. But, now that the benefits of patronage have dried up, the timing is right for a more efficient approach to service delivery. Green shoots are starting to appear in a dry and dusty landscape sculpted by service delivery failure.

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