What should be done to attract private sector participation in the SADC regional strategic water infrastructural development programme?
Thesis (MDF)--University of Stellenbosch, 2010.
The Southern Africa Development Community (SADC) Treaty aims at achieving regional integration, poverty alleviation and economic growth. Water is a catalyst to these aims, thus making it key for the region to manage and develop water resources. Water in the SADC region is a shared resource among the countries, making joint development of the resource important for peace and prosperity. SADC has been promoting transboundary water resources management among its member states. The region has done a lot of work in establishing an enabling environment for the management of water resources. The SADC Protocol for Shared Watercourses (the “Watercourses Protocol”), the Regional Water Policy (the “Water Policy”) and the Regional Water Strategy (the “Water Strategy”) are all instruments that have been developed to support the management of water resources. However, the region remains heavily under-developed in terms of water infrastructure and in order for the region to develop its water resources, the SADC secretariat has developed a Regional Strategic Water Infrastructure Development Programme (referred to as the “SADC Programme for water infrastructure development” in this study). The Programme is aimed at responding to the lack of infrastructural development in the region and identifies regional water projects to be implemented. Water is a sector that struggles in attracting private sector funding and involvement. This study aims to look into ways that the private sector can been attracted to participate in the Programme for water infrastructure development and also proposes ways they can be engaged. Private-sector involvement varies from project identification to project implementation and funding. To attract the private sector to participate in the SADC Programme for water infrastructure development, SADC and the member states have to build on the enabling environment established in the region and also on relationships based on existing institutions. The private sector needs to be assured of good market potential and sound financial returns. This can be achieved if the region better co-ordinates the prioritization of regional projects through integrated planning. NEPAD and SADC working closely together, to issue that a consistent development agenda is communicated to potential investors, could add value and avoid duplication. It is also important to link to national development priorities in order to ensure that local issues are addressed. Capacity of the public sector to support regional projects is also important – capacity to develop bankable projects, develop financing mechanisms and to implement the projects is required at all levels. The SADC region lacks capacity to participate in complex infrastructure projects and this has to be addressed through establishing a Private Public Partnership Unit at the SADC Secretariat. Capacity to also manage and regulate water services is lacking in a number of countries in the region. These are important issues to ensure fair pricing and to give the private sector confidence on issues of tariff setting. To attract private funding into the water sector the region needs to develop innovative financing mechanisms in order to leverage market-based repayable finance. In the implementation of the SADC Programme for water infrastructure development there is a need to evaluate various types of innovative financial instruments and assess their potential use for regional water projects. Local capital markets in a number of the countries are weak, therefore the implementation of the SADC Protocol on Finance and Investment (the “Finance Protocol”) is important in strengthening these markets. Political will and good governance within member states are also important in attracting investors. SADC as the promoter of infrastructure policies in the region should play a proactive role in encouraging its member states to observe the rule of law and also to use existing treaties within SADC to ensure countries do so. Poor governance and unstable economies are a disincentive for private sector involvement.