Thesis (MBA)--Stellenbosch University, 2015. / ENGLISH ABSTRACT: Providing basic access to water and sanitation is critical for poverty alleviation and stimulating economic growth, but at the same time it is putting a huge strain on South Africa’s existing economic infrastructure. Local governments allow their existing wastewater infrastructure to deteriorate to the extent that it no longer functions according to its design, and then apply for capital funding for refurbishment. Capital investment alone will not provide a sustainable solution to meet the increased demand on the ageing wastewater infrastructure, since local governments do not have the financial means and technical capacity to adequately maintain and operate their infrastructure. A paradigm shift is required to develop alternative and innovative business models to ensure a sustainable solution providing continued and consistent capacity as a basis for further expansion. Public-private partnerships (PPP) could provide a feasible solution towards building a sustainable technical capacity at local governments. Engaging the private sector must however not be aimed towards access to private sector finance, but rather the improvement in operational efficiency and increased level in service. Obtaining private sector finances will be the wrong focus for engaging in PPP undertakings in South Africa. Private operation must be combined with public financing. The design-build-operate (DBO) model with public financing would be highly viable. Such an arrangement will hold no financial risk to the private sector entity with revenue collection strictly remaining a local government function. The DBO method of delivery (with public funding) will be an effective way to realize cost savings, achieve efficiencies in construction and operation, utilize expertise, and most importantly, for skills transfers and capacity building at local government level. Ultimate sustainability will only be achieved once local government is able to raise the majority of its own funds for operation and maintenance through tariffs and other instruments, including some towards capital redemption. Grant funding must make provision for maintenance and operation of all capital funded projects. All shareholders must join forces in lobbying this concept at the highest political echelons because in terms of Section 154 of the Bill of Rights, national and provincial governments have a duty towards local governments to support and strengthen their capacity, to effectively perform their functions.