Following two decades of under-investment, vital elements of South African water infrastructure is in serious disrepair, if not in a crisis. The government is challenged by the cumulative demands of sustained economic growth; as well as the new trade and investment opportunities in the post-financial crisis period. There is a serious backlog in water infrastructure investment, for the development and management of water resources and water services. This under-investment is estimated at more than R110 billion. The three spheres of government – national, provincial and local– which have served South Africa well in past decades now appear unable and ill-equipped to grapple with the present planning and delivery challenge. This research project identified a number of funding models (14) for the financing of water infrastructure development projects. However, the classic public provision model of government planned, installed and financed infrastructure with pricing at marginal cost or on a loss–making basis – with returns recovered through the taxation system – continues to characterise much of South Africa’s publicly provided water infrastructure. Nowadays, water infrastructure is split between fully public, and mixed ownership (water agencies and/or entities); Public-Private Partnerships (PPP) in the water sector is not yet a full reality. Further innovation in water infrastructure investment, including closing the circle between public and private-sector capital, is required. Complex issues of pricing, access, public policy and regulation, risk–sharing, tendering processes, taxation and governance have arisen as key challenges that will influence whether private provision of water infrastructure can grow as a viable new model in South Africa. Sustainability has introduced a further new dimension into the calculus of water infrastructure provision. Thus, a framework that takes account of environmental and social aspects, as well as economic aspects, is now widely accepted as necessary.

Following two decades of under-investment, vital elements of South African water infrastructure is in serious disrepair, if not in a crisis. The government is challenged by the cumulative demands of sustained economic growth; as well as the new trade and investment opportunities in the post-financial crisis period. There is a serious backlog in water infrastructure investment, for the development and management of water resources and water services. This under-investment is estimated at more than R110 billion. The three spheres of government – national, provincial and local– which have served South Africa well in past decades now appear unable and ill-equipped to grapple with the present planning and delivery challenge. This research project identified a number of funding models (14) for the financing of water infrastructure development projects. However, the classic public provision model of government planned, installed and financed infrastructure with pricing at marginal cost or on a loss–making basis – with returns recovered through the taxation system – continues to characterise much of South Africa’s publicly provided water infrastructure. Nowadays, water infrastructure is split between fully public, and mixed ownership (water agencies and/or entities); Public-Private Partnerships (PPP) in the water sector is not yet a full reality. Further innovation in water infrastructure investment, including closing the circle between public and private-sector capital, is required. Complex issues of pricing, access, public policy and regulation, risk–sharing, tendering processes, taxation and governance have arisen as key challenges that will influence whether private provision of water infrastructure can grow as a viable new model in South Africa. Sustainability has introduced a further new dimension into the calculus of water infrastructure provision. Thus, a framework that takes account of environmental and social aspects, as well as economic aspects, is now widely accepted as necessary.

The current pressure on water bodies is a structural problem that may compromise the satisfaction of future water demand and the good status of the natural environment. Activities such as wastewater reuse or desalination provide an additional source of water resources to meet demand without the need to increase natural water abstractions. In addition, reuse also contributes to improving water quality by limiting abstractions and reducing discharges. However, reuse has not been widespread as a source of supply in resource-rich contexts. In resource-abundant areas, the high cost of reusing water is a strong disincentive to its use, which puts the focus on reducing pollution through discharge without assessing the potential of reuse as an additional source of resources. The use of reclaimed water has a great margin for development that should be exploited in the coming years to obtain a guarantee of supply and an improvement in the environmental quality of water in the current context of increasing scarcity. However, the financial and environmental situation of reuse requires the involvement of the public sector. In this work, two instruments with the potential to facilitate the development of reuse have been studied. The first of these is photovoltaic self-consumption, in order to reduce the cost of energy consumption of wastewater treatment plants, given that this is their main financial operating cost. This possibility, however, has shown little capacity to reduce these costs since, except in the case of the floating photovoltaic installation, the cost of electricity from self-consumption is higher or similar to the market price. If we consider the reduction of greenhouse gas emissions derived from self-consumption, this alternative is much more competitive. The situation is, once again, of an activity that presents financial losses and environmental benefits derived from the current excess of emissions. The responsibility lies with the public sector in the same way as in the case of reuse. Water tariffs, as one of the main revenues from water treatment, is an instrument that can be evaluated with a view to increasing revenues through an increase in the price of water. The results obtained show large differences in the impact of such an increase depending on the region but make it clear that the potential for additional revenue from this possibility is small. This analysis has also shown that there is a problem in the current tariffs that reduces their effectiveness by not valuing the type of household. The problem lies not in the structure of the tariff or the number of household members, but in the characteristics of the household. By not taking these into account and calculating the bill without these details, the tariffs are not fully effective. In conclusion, both reuse and photovoltaic self-consumption are beneficial activities for society, but the financial costs involved in their implementation require the involvement of a public sector with a reduced capacity to increase current revenues.

The occurrence of water crises in many parts of the world raises the need to consider more efficient and sustainable consumption of water resources. As such, many cities have prioritised water demand management strategies, which are based on price and non-price mechanisms. The literature shows no consensus as to which of these measures are most effective for managing residential water demand. To understand the impact and effectiveness of these mechanisms, there is a need to understand how people respond to them. This requires understanding materials, meanings and competences (skills and know how) that people have, which constitute elements of social practice. In 2017 and 2018, the City of Cape Town (CoCT) ramped up their price and non-price mechanisms to encourage people to save water in response to a severe drought. These mechanisms included water restrictions, increased water tariffs, and the Day Zero communication campaign. However, little is known about how effective these measures were at encouraging people to save water. There is no clear documentation of how the public understands, interprets and incorporates these mechanisms into their own household water use practices. This study explores the impacts and effectiveness of the City of Cape Town’s price and non-price mechanisms on household water use practices during the water crisis. Using information obtained through semi-structured interviews with 20 individuals living in houses where they paid their water bills, a version of social practice theory is used as a lens to understand how respondents interpreted and responded to these mechanisms when it comes to residential water use practices. This allows for an assessment of which of the CoCT’s actions are more effective in achieving sustainable water use practices. Results show that price mechanisms (water tariffs) were considered to be ineffective and did not encourage people to save water. Non-price mechanisms (water restrictions and Day Zero communication campaign) were seen as having more impact on respondents, encouraging water conservation behaviour; especially when it comes to household indoor water use activities related to hygiene. Compared to other studies which have used estimates for the water demand function, this study conducted interviews directly with households on the impact of the mechanisms. This enabled this study to explain how and why household water use practices change in response to these measures. Such qualitative information is important and contributes to a field that often uses quantitative data to suggest whether price or non-price mechanisms are effective.