Private sector impact investment in water purification infrastructure in South Africa

McCallum, Stephen Ron (2018-03)

Thesis (MCom)--Stellenbosch University, 2018.

Thesis

ENGLISH SUMMARY : Access to safe drinking water (also called potable water) is a basic human right. Humanity is, however, facing a significant decline in the quantity and quality of available fresh water. The consequences of water crises on human health and economic activity are widespread and likely to deteriorate in future. Presently, millions of South Africans lack acceptable access to potable water, particularly those living in rural and peri-urban areas. Private sector involvement is increasingly needed to address the large and growing financing gap in water infrastructure. Given the limited academic research, the researcher conducted an extensive study on the motives, barriers and opportunities associated with private sector impact investment in water purification infrastructure in South Africa. A qualitative research approach was selected to explore and describe the topic under investigation. To address the primary and secondary research objectives, a conceptual framework was developed, validated and revised. Secondary data were collected and analysed by means of a comprehensive literature review. The result of this literature review was the development of the proposed conceptual framework which outlined the motives of impact investors, ten barriers and seven opportunities in impact investing in general. Furthermore, six barriers and seven opportunities specific to impact investments in water purification infrastructure were presented. An interview guide was developed based on these factors. A combination of judgement and snowball sampling was used to identify 20 experts in the impact investment market and local water provision process. Semi-structured personal interviews were then conducted with the experts. The transcribed interviews were coded using directed content analysis to identify common and contradicting responses which were used to revise the conceptual framework. The findings indicate that most South African impact investors are finance-first investors (they prioritise financial returns over social and/or environmental impact). The critical barriers to impact investments included the shortage of investment-ready deals and the lack of detailed and clearly formulated social and/or environmental impact objectives. Major barriers to impact investing in water purification infrastructure in South Africa centred on the lack of lifecycle support, the possibility of political interference and low financial return expectations. A primary opportunity that was identified in impact investing in general was the prospect to earn a financial return while making major social and/or environmental impact. The large public financing gap in water infrastructure and investing in a convergence of sectors through innovative technologies in water purification infrastructure were the foremost opportunities outlined in impact investing in water purification infrastructure. Based on the results, the researcher made recommendations for impact investors, other role players in the impact investment market, government officials and other policy makers, educators and the media. The main recommendation was to improve lifecycle support to facilitate the growth of small and medium-sized social enterprises in South Africa thereby increasing the number of investment-ready deals. Other recommendations included the development of a standardised format to social and/or environmental impact reporting and the implementation of regulatory reforms to encourage more private sector impact investments.

AFRIKAANSE OPSOMMING : Toegang tot veilige drinkwater is ‘n basiese mensereg. Die samelewing word egter blootgestel aan ‘n skerp daling in die hoeveelheid en gehalte van beskikbare vars water. Hierdie waterkrisisse het omvangryke gevolge vir mense se gesondheid en ekonomiese bedrywighede en sal na verwagting verdere afmetings in die toekoms aanneem. Tans is miljoene Suid-Afrikaners uitgelewer aan onaanvaarbaar lae vlakke van toegang tot drinkbare water, veral diegene wat in landelike of buitestedelike gebiede woon. Daar is ‘n toenemende behoefte aan die privaatsektor se betrokkenheid om die groot en stygende finansieringsgaping ten opsigte van waterinfrastruktuur in die land to oorbrug. Op grond van die huidige gebrek in akademiese navorsingskennis, was die hoofdoel van hierdie studie om dryfvere, hindernisse en geleenthede wat verband hou met privaatsektor impakinvestering in watersuiweringsinfrastruktuur in Suid-Afrika te ondersoek. ‘n Kwalitatiewe navorsingsproses is gevolg. ‘n Konseptuele raamwerk is ontwikkel, vir geldigheid getoets, en aangepas ten einde die primêre en sekondêre navorsingsdoelwitte te ondersoek. Sekondêre data is ingesamel as deel van ‘n omvattende literatuuroorsig. Die faktore wat beleggers motiveer om te belê met die doel om ‘n impak te maak op die samelewing en/of die omgewing is in die konseptuele raamwerk uitgelê wat gebaseer was op die literatuuroorsig. In die raamwerk word tien hindernisse en sewe geleenthede in algemene impakinvestering uitgewys. ‘n Verdere ses hindernisse en sewe geleenthede word genoem wat spesifiek verband hou met impakinvestering in watersuiweringsinfrastruktuur. ‘n Onderhoudsgids is ontwikkel op grond van hierdie faktore. ‘n Kombinasie van oordeel- en sneeubalsteekproefneming is gebruik om 20 kundiges in die impakinvesteringsmark asook die plaaslike watervoorsieningsproses te identifiseer. Semigestruktureerde persoonlike onderhoude is met die kundiges gevoer. Die onderhoude is getranskribeer en gekodeer met behupl van gerigte inhoudsontleding om beide gemeenskaplike en teenstrydige response van die deelnemers te identifiseer, wat gebruik is as riglyn om die konseptuele raamwerk aan te pas. Die bevindinge dui aan dat die meeste Suid-Afrikaanse impakinvesteerders as ‘finansies-eerste’ investeerders geklassifiseer kan word, waar finansiële opbrengs belangriker geag word as samelewing en/of omgewing impak. Onvolledige en onduidelik uiteengesette impakdoelwitte asook ‘n gebrek aan transaksies wat investeringsgereed is ten opsigte van die samelewing en/of omgewing ‘n kritieke hindernis in impakinvestering. Gebrek aan lewensiklusondersteuning, die moontlikheid van politieke inmenging en ‘n verwagte swak finansiële opbrengs verteenwoordig die grootste hindernisse ten opsigte van impakinvestering in watersuiweringsinfrastruktuur in Suid-Afrika. Die voorste geleentheid van belang in die algemene impakinvestering was ‘n vooruitsig van ‘n finansiële opbrengs gekoppel met ‘n beduidende impak op die samelewing en/of omgewing. Die twee vernaamste watersuiweringsinfrastruktuur investeringsgeleenthede was die ernstige openbare sektor finansieringstekort sowel as belegging in ‘n verskeidenheid sektore deur middel van vernuwende tegnologie in watersuiweringsinfrastruktuur. Na aanleiding van die bevindinge, word ‘n aantal aanbevelings relevant tot impakinvesteerders, ander rolspelers in die impakinvesteringsmark, regeringsinstansies, beleidsmakers, opvoedkundiges en die media gemaak. Die belangrikste aanbeveling is om die lewensiklus van klein- en mediumgroot maatskaplike ondernemings in Suid-Afrika te ondersteun ten einde die groter aantal transaksies te verhoog. Ander aanbevelings sluit in die aangaande ontwikkeling van ‘n standard formaat vir verslaglewering oor die samelewing en/of die omgewing impak en regulatoriese hervorminge ten einde stukrag aan impakinvestering deur die privaatsektor te gee.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/103283
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