By turning water infrastructure contracts from a once-off capital project into a continuously managed, performance-driven service, public–private partnerships (PPPs) can make infrastructure far more resilient.

Within this framework, EnviroServ, a SUEZ company, brings the technical expertise and operational capability to ensure assets are not only delivered, but consistently maintained, optimised and held to performance standards throughout their lifecycle.

Dhevan Govender, general manager: Business Development (Water and Sanitation), EnviroServ believed that this model is central to addressing South Africa’s infrastructure challenges.

“I have worked in both the public and private sector and remain a strong advocate for PPPs. South Africa urgently needs large-scale infrastructure to tackle the water crisis, yet municipalities face funding, skills and procurement constraints. PPPs bridge these gaps, unlocking investment, expertise and long-term service delivery. PPPs effectively embed long-term performance, funding and accountability into a single contractual framework.”

He notes that this long-term, performance-driven approach is underpinned by lifecycle costing, which is built into the PPP framework.

“Life cycle costing is a way of looking at the total cost of providing a service over the PPP’s contract term, rather than just focusing on the upfront price tag of building infrastructure. In water and wastewater for example, that means asking: what will it cost not only to design and construct a treatment plant, but also to operate it, maintain it, replace critical components, and eventually hand it back to the utility. Instead of a narrow ‘project cost’, it becomes a full journey view of the asset and the service it delivers.”

Because PPPs are structured around long term performance rather than once off construction, the private partner is contractually obliged to deliver a set volume and quality of water or sanitation services for the full term of the agreement, and only gets paid when that output is delivered. This ‘pay for performance’ model, underpinned by life cycle costing and clear penalties for non compliance, effectively guarantees a more reliable and predictable water supply than traditional build and walk away projects.

Misconceptions

Govender maintains that there are three key misconceptions about PPPs:

1. that PPPs are a form of privatisation
2. that PPPs are about procuring an asset
3. that there is always an unfair allocation of risk for either the public or private sector.

He explains that PPPs are often wrongly equated with privatisation, when in reality the public sector retains ownership, regulatory control and oversight. The municipality remains the water services authority, sets tariffs and standards, and ultimately receives the asset back at the end of the contract. The private sector’s role is to design, finance, build, operate and maintain the infrastructure for a defined period, under strict contractual and performance conditions.

“PPPs are also often misunderstood as a way for municipalities to procure infrastructure, but the model is fundamentally different. Rather than buying an asset, municipalities are procuring a service over the life of the contract.”

“The private partner is responsible for designing, financing, building, operating and maintaining the infrastructure, and is only paid when it delivers the agreed output, such as water and sanitation services that meets the agreed quality and standards. This shifts the focus from once-off capital delivery to long-term performance, reliability and accountability, ensuring that infrastructure continues to function as intended well beyond commissioning,” he adds.

The third misconception is around risk. In practice, PPPs are structured to allocate risk to the party best equipped to manage it. The private partner takes on significant delivery and performance risk, including financing, construction, operational efficiency and meeting output specifications. Payment is typically linked to performance, meaning the private sector is only paid when it delivers the required service standard.

At the same time, certain risks remain with the public sector, particularly those linked to its mandate, such as providing effluent feedstock or maintaining broader system integrity. The public sector is often called upon to provide guarantees. From a private sector perspective, there needs to be confidence that payments will be honoured over the life of the contract, which is where mechanisms such as payment guarantees, credit enhancements and, in some cases, government-backed support become critical in enabling meaningful progress in South Africa’s water sector reform. The model is therefore built on balanced risk sharing, not risk dumping.

Expertise

Looking ahead, Govender believes PPPs will play an increasingly important role in ensuring water security, particularly as cities face aging infrastructure, rapid population growth and rising demand.

However, there is a clear shortage of institutional expertise when it comes to structuring PPPs, particularly within the public sector.

“Many municipalities lack the technical, legal and financial skills required to develop bankable projects, resulting in poorly defined scopes, weak feasibility studies and contracts that fail to attract private sector participation.”

On the private side, experience is often concentrated among a limited number of players, which further constrains the market. Without the right skills to structure, assess and manage these partnerships, viable projects are either delayed or fail to progress beyond concept stage.

To address this, the Water Partnerships Office has been established to support project preparation and improve the quality of PPPs entering the market. Its role includes assisting municipalities with feasibility studies, standardising processes, and helping to package projects in a way that meets National Treasury requirements and attracts investment.

“This is a critical intervention, as it begins to close the skills gap and create a more consistent pipeline of credible, well-structured PPP opportunities,” adds Govender. “There are unfortunately no short cuts; feasibility studies and fair, robust contractual frameworks must be in place to attract private investment.”

Making PPPs work

In addition to guarantees, every PPP needs termination clauses as they define what happens if the agreement needs to be ended early due to non-performance, financial distress or unforeseen events. In long-term infrastructure projects, these clauses provide clarity and protection for both parties by outlining the conditions under which termination can occur and the associated financial implications.

Viability gap funding (VGF) has also been introduced to PPPs. In practice, VGF bridges the gap between what a project can earn through user charges or municipal payments and the actual cost of delivering the service. This support can take the form of an upfront capital contribution, ongoing subsidies or blended finance mechanisms.

Importantly, VGF does not replace private sector investment. Instead, it de-risks the project and improves its bankability, enabling private partners to participate while still ensuring affordability for users. In this way, it allows socially necessary but financially constrained projects to move forward.
Transparency is also critical to the success of PPPs, particularly in a sector as sensitive as water and sanitation. Because these projects involve public funds, long-term contracts and essential services, there must be clear visibility on how decisions are made, how risks are allocated and how performance is measured.

“Ultimately, a transparent process builds trust among stakeholders, including communities, regulators and investors. It also strengthens accountability, ensuring that both public and private partners deliver on their obligations. Without transparency, PPPs risk being misunderstood or misrepresented, which can undermine public confidence and delay much-needed infrastructure delivery,” explains Govender.

Recent amendments to Section 16 of the Public Finance Management Act are intended to streamline the approval process for PPP projects with a contract value below R2 billion.

“This is a positive development and well suited to smaller-scale projects,” says Govender. “However, for the country’s larger metropolitan municipalities, the full lifecycle cost of major infrastructure – such as a wastewater treatment plant, including design, construction, operation and maintenance over the term of a PPP agreement – will typically exceed the R2 billion threshold.”

Moving forward

EnviroServ, through its association with SUEZ, brings deep, specialised experience across the full water and wastewater value chain, not just construction. As Govender explains:

“SUEZ is a global leader in the water and waste management sectors with a strong global track record. In 2025, the Group supplied 67 million people with safe drinking water and served 14 million people through waste collection services. SUEZ has built 10 000 water and waste treatment plants around the world, over 2 850 wastewater plants as well as 260 desalination plants. That means EnviroServ can draw on proven technologies and operating models for exactly the kinds of complex, long term solutions South African municipalities now need, from non revenue water reduction to upgrading and optimising existing wastewater treatment works.”

Unlike short term engineering, procurement and construction contractors that build and walk away, EnviroServ’s model is to stay in for the long haul through concessions and long term operation and maintenance contracts. That aligns with the PPP principle of procuring a service, not just an asset, and ensures that plants are operated and maintained to a guaranteed standard over the life of the contract. The company’s focus on localising expertise and partnering with South African contractors also means capacity is built within the country rather than imported temporarily.

The public sector needs to consider the cost of not implementing water and sanitation PPP projects. Reliable water and sanitation services are a prerequisite for investment, with industries requiring guaranteed supply before committing capital.

“What is the cost of having no water? If municipalities cannot guarantee water and sanitation services, investors will simply go elsewhere,” warns Govender. “Municipalities have the vision and mandate while the private sector has the expertise and funding.”