Perfecting the art of
Perfecting the art of water deliveryfor future generationsThe combination of human demographics and activity has in many global regions transformed water from an abundantelement to a scarce resource.Water service is dependent on infrastructure availability and anequilibrium between water demand and the system’s capacity to meetaverage and peak demands. South Africa has an arid to semi-aridclimate and below average annual rainfall of 465mm compared to theglobal average of 860mm. It is the 40th driest country worldwide. Theaverage domestic water use is estimated at 218 litres per person perday, 64 litres higher than the international benchmark of 173 litres.Gauteng’s consumption is high at 279 litres per day, due to waterleaks in municipal distribution systems. Statistics SA’s growth estimatesfurther bolster this figure. In turn, the future needs to dictate therequirements for infrastructure upgrades and refurbishmentsupstream and midstream of the value.The bulk water infrastructure midstream within the value chain isdesigned for average water consumption and peak water demandsof a week. If water demand is of typical consumption, then thesystem can provide water with relative ease. In most instances, everyhousehold receives water without exception. If peak water usageexceeds Rand Water’s purifying output, municipal water is drawnfrom reservoirs, which dry out quickly because of excessive use. RandWater continues to pump at optimum capacity and will deliver to lowlyingareas regardless. Pumping and reservoir filling are impossiblewithout a steady supply of electricity. If there is no electricity tooperate pumps, reservoirs are depleted, and high-lying areas are leftwithout water. The final segment of the value chain (downstream)lies under the purview of municipalities, who draw water from RandWater’s reservoirs and distribute it through a system of its own pipesand reservoirs.Non-revenue water, notably physical water losses because ofageing infrastructure, is the greatest impediment in the value chain,particularly in the downstream. Municipal physical water losses rangebetween 20% and 30% (1 000 to 1 500 million litres of water a day) atmaximum capacity. In a water-scarce nation, this quantity is enormous.As water consumers, we must conserve water and change ourbehaviour. We should not fill swimming pools and irrigate our lawnswith potable water during periods of extreme heat and loadshedding,avoiding these will considerably improve water supply for all. Localmunicipalities must prioritise non-revenue water, which will aidwastage reduction by paying for unused water. To maintain watersupply reliability, infrastructure upgrades and refurbishments needsufficient funding.In the next five years, Rand Water will invest R30-billion to expandits network of pipes and reservoirs. As part of this plan, Rand Waterinaugurated a 210-million-litre storage reservoir in 2023.Revenue generated from paying customers must be ring-fenced forinfrastructure operations, maintenance, renovation and augmentation.The current structural arrangement should be replaced by new utilitiesthat will operate the value from abstraction to reticulation. Governanceand funding mechanisms will ensure success.Special Purpose VehicleRand Water has collaborated with municipalities that are facingsignificant financial strain and impacted by non-revenue water. Thisspirit of collaboration was evident when Emfuleni Local Municipalityagreed to pilot an innovative water services delivery model known asthe Special Purpose Vehicle (SPV).The SPV will include shareholders such as Rand Water, theaffected municipality and other third parties willing to invest inupgrading, refurbishing, operating and maintaining water servicesinfrastructure. Profits generated by the SPV will be distributed toinvestors as dividends, according to the SPV’s dividend policy.Rand Water has adopted astrategic vision focused on growthand sustainability.Municipalities will contribute to the SPV by transferring their waterservices assets, which will be assessed, valued and migrated. The RandWater stake will be determined by its capital injection. This entitywill manage its own assets, liabilities, rights and resources, effectivelyringfencing water services under its umbrella.For day-to-day operations, shareholders will appoint non-executivedirectors, who will select the SPV CEO or managing director. TheSPV will have a chief operations officer, chief financial officer, a fullmanagement team and staff. Governance structures such as audit, riskand investment subcommittees will be established.Consumers will pay their water bills directly to the SPV, ensuringthat funds are exclusively used for water and sanitation services.Water and sanitation grants directed to municipal accounts will beredirected by the municipality into the SPV to maintain liquidity.Compliance with various acts such as the Public FinanceManagement Act, Municipal Finance Management Act, Water ServicesAct, National Water Act, Companies Act and Municipal Systems Actwill be ensured. Permissions for transferring municipal assets to theSPV will be sought from relevant government departments, includingNational Treasury, the Department of Water and Sanitation and theDepartment of Cooperative Governance. Extensive stakeholders’consultations and a change management process will be undertakenbefore implementation.
This reimagined model promises a more sustainable approach tomanaging water services, ensuring better infrastructure and servicedelivery for municipalities.Rand Water successesRand Water has adopted a strategic vision focused on growthand sustainability, aimed at tackling existing water challenges andenhancing water distribution, managing resources responsibly forfuture generations. Rand Water group chief executive, Sipho Mosai’sfocus on maintaining financial health while investing in state-of-the-arttechnologies and infrastructure has yielded significant projects such asthe construction of the biggest post-tension reservoir in Vlakfontein,Ekurhuleni at 210-million litres storage and the biggest purificationplant since the dawn of democracy at 600-million litres a day: Station5A at Zuikerbosch Water Purification Pant.Success is evident with a revenue growth of 11.4% to R21.8-billion,a gross income growth of 15.3% to R7-billion while maintaining agross income margin above 30% year-on-year through a dedicatedfocus on cost efficiencies. This translates to a solid bottom line withnet-income growth of 29.0% to R4 562-million (2023: R3 536-million)and a net income margin of 20.9% further boosted by returns onstrategic investments.Under Mosai’s tenure, immense effort has been made to ensure themaintenance of a strong financial profile amid the economic challengesand tough operating environment. He acknowledges that liquidity andfinancial risk management remain the cornerstones towards RandWater’s financial sustainability. This was underpinned bythe organisation’s ability to successfully redeem theRW21 bond with a total nominal amount of R1.6-billion in 2021 and the RW23 bond in 2023 at anominal amount of R1.2-billion.Rand Water’s financial sustainability wasfurther attested by the issuance of three newbonds in 2021, in senior and sustainability-linkednotes amounting to R1.7-billion, which attractedover R4.5-billion in capital market bids – asolid indication of confidence in Rand Water’sfinancial status by the investor community.The organisation was the first state-ownedcompany to issue sustainability-linked bondsin Africa, which were the largest ZARdenominatedsustainability-linked bonds tobe issued then. In 2022, Rand Water won theBonds and Loans Africa Awards due to theTHE MAN AT THE HELM OF RAND WATERSipho Mosai has been the group chief executive of Rand Watersince 2019. Before that, Mosai was Rand Water’s chief operationsofficer for 10 years. Mosai boasts over 20 years’ executivemanagement and technical experience in bulk and distributionwater operations; water infrastructure planning, maintenance,refurbishment and upgrade; project management, scientificservices, strategic asset management and sector growth anddevelopment.Mosai has served as a non-executive and board memberin various institutions, including serving on the ConstructionIndustry Development Board. He currently serves on the boardsof the Rand Water Foundation and Rand Water Services as anon-executive director.Qualifications• Bachelor of Science(University of the North)• Bachelor of Science (Hons)(University of the North)• Master of Science(University of Free State)• Post Graduate Diploma inManagement(University of KwaZulu-Natal)• Master of BusinessAdministration(University ofKwaZulu-Natal)Rand Water Group ChiefExecutive, Sipho Mosai.sustainability-linked bonds. S Service magazine | 1
