The business of water

Water is life. It can also drive economic growth – or constrain it severely.

Recognising water’s integral role in advancing the industrialisation of South Africa’s economy, the Industrial Development Corporation (IDC) has put the development and rehabilitation of water-related infrastructure close to its heart.

Lizeka Matshekga, the IDC’s divisional executive of agro, infrastructure and new industries, says the corporation has realised it has to be more “deliberate in focus” to drive businesses to think differently about water.

“When it comes to water, people think of it as a natural resource; an act of God. But we must do what we can to catch water and to also unlock existing water capacity,” she says.

However, changing consumer attitudes towards conserving what many consider to be a free and always available resource seems to be an enormous task.

“Water supply and stable infrastructure is a catalyst for industrial development,” says Matshekga, adding that three of the IDC’s core value chains – agroprocessing and agriculture, metal industries, and chemical industries – are reliant on a stable supply of water.

“No matter how great a business proposal is, we will only consider funding a new mining or agriculture-related business if its owners have a water use licence.”

This is to comply with the regulatory framework.

Alluding to the devastating drought in the Western Cape, she says this challenge can be successfully harnessed to help drive a shift in attitudes towards the business opportunities it uncovers in the water sector.

She cites Eskom’s load-shedding crisis, which effectively wiped out the country’s first-quarter GDP for 2008, as one of the biggest challenges in recent times that helped transform consumer attitudes towards preserving resources.

“Those who didn’t see the value of mounting solar panels on their rooftops suddenly had to think about where the power to run their businesses optimally would come from.”

The upside to this crisis, Matshekga says, is that it helped to galvanise the IDC and private sector participation in government’s renewable energy programme.

Having helped derisk (removing business risk) the renewable energy industry, the IDC has – in the past six years – commited R15.7 billion in support of 31 projects in the department of energy’s Renewable Energy Independent Power Producer Procurement Programme.

While a full-blown water crisis would spell doom for many productive sectors of the local economy, she sees a silver lining.

“We need to encourage companies to adopt water-efficient policies and programmes – to see the opportunities in recycling water, like for use in the mines, or look at how acid mine drainage programmes have unlocked opportunities for entrepreneurs.”

The IDC has since identified opportunities for entrepreneurs looking for a break in the water and sanitation management space.

It is planning to use agroprocessing as a guinea pig to help draw potential and existing black industrialists to such projects.

“We will be asking participants in this sector to approach the IDC to help replace aged infrastructure.

"This is because 60% of the water in South Africa is used for agricultural purposes, such as for irrigating crops, and, if the system is old, water loss is extensive.”

To illustrate just how water-intensive agriculture can be, according to waterfootprint.org, it takes a whopping 1 222 litres of water to produce 1kg of mealies, 4 325 litres to produce 1kg of chicken and 2 495 litres for one cotton shirt.

One of the biggest obstacles to incentivising companies to become more sustainable in their use of water is that the tariffs are so low.

“It is a constraint to getting the private sector to invest in upgrading infrastructure. Drought causes people to think about water differently and we need to change people’s mind-sets – from water being free to it being a necessity.

“If you consider water to be a commodity that could undermine the potential of your business, that should change your perspective and how you use it.”

To prepare for a programme to help people reassess how they think about water and how it affects their business, Matshekga says the IDC has spent the past two years scoping out the external environment.

It has explored acid mine drainage opportunities with private sector developers an has looked at desalination opportunities with municipalities.

It is also cooperating with manufacturers who wish to use water more efficiently, and is looking for quick wins in the area of water infrastructure.

An example of a simple fix is a youth-owned company that the IDC funded.

This company makes a valve that stops toilet cisterns from leaking – all it does is stop the toilet from filling up past at a set level. It is both a quick fix and a preventative measure.

Matshekga makes it clear that, when it comes to maximising our water usage across the spectrum, anything that fulfils the IDC’s manufacturing mandate will be considered.

The IDC is also developing programmes in place to ensure that companies that are heavy water users are more efficient.

Usually, Matshekga explains, it takes 10 to 15 years for investors to reap dividends from a big infrastructure project, which is why the structure of the IDC’s packages are aimed at including traditionally excluded groups – black industrialists, youngsters and women.

To reduce the barriers to entry, the corporation is working on structuring funding products that unlock benefits for targeted participants during the engineering, procurement and construction phases of the long-term infrastructure projects, as well as during the operations and maintenance phases.

In this way, it creates benefits for participants from inception, rather than expecting businesses to lock up capital for upwards of a decade.

The other role the IDC will play is in facilitating the participation of the private sector in solving the challenges that an insecure water supply presents.

Getting business to work with government on solving water supply problems will also have the effect of taking some of the strain off government when it comes to fulfilling its mandate to supply water to all South Africans as a basic human right.

Although the IDC hasn’t yet had as much uptake in the investment of bulk water infrastructure as it had hoped, Matshekga sees opportunity.

Just as insufficient power supply was a risk to the economy that the IDC helped businesses transform into an opportunity, so water has the same potential.

It can kick-start new ventures and drive innovation, which, in turn, will grow the economy and see more people get jobs.

“Authorities in the Western Cape recently announced plans to partner with the private sector to create a short-term emergency water supply using desalination, storm water capture or aquifer extractions as a stopgap to ease the crisis in that region.

"These are opportunities for business to solve a problem and, in the process, facilitate the creation of jobs,” she says.

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