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Water projects have been deemed risky for private investment due to socio-political sensitivity, public resistance and social repercussions of deficient water services (Ameyaw et al. 2017). Ameyaw and Chan (2013) summarised the risks as high capital intensive, high sunk cost, highly fragmented sector, multiple and public policy objectives, numerous performance objectives, and high asset conditions. Ameyaw and Chan (2013) indicated that the build, operate and transfer (BOT) PPP projects have common risks, such as uneconomic water tariff, financing, interest rate variation, tax policy change, government breach of contract, public resistance, weak host country banking capacity, and government interference. Ameyaw and Chan (2013) indicated that PPPs in the water sector can be approached in various forms, either as finance- based or utility management (service-based). According to Dailami and Leipziger (1998), most private infrastructure projects are financed with a mix of 20%–40% equity and the balance sourced as a debt (loans, bridge finance, bonds, back-up facilities, guarantees, multilateral and export credit agency loans).
Wang and Wang (2020) mentioned that Tapio decoupling and the Logarithmic Mean Divisia Index (LMDI) can be used as decomposition methods to quantify the relationship between water consumption and economic growth. The LMDI decomposition method can quantify factors influencing water consumption change per different water use activities. The results are easy to interpret, unique and consistent. However, it cannot decouple water consumption from economic growth.
Hence Tapio decoupling has been considered (Kong et al. 2019). Decoupling refers to different change trends between two physical quantities in physics and was later adopted in economics (Qui et al. 2018). Tapio decoupling can accurately reflect the relationship between resource consumption and economic development. It has three categories: coupling, negative decoupling and decoupling (Wang and Wang 2020; Qiu et al. 2018).
Background
Emalahleni is the economic hub of Mpumalanga province (South Africa); according to the 2020 municipal Integrated Development Plan (IDP), the municipality contributes approximately 18% of the provincial GDP due to coal mining, energy generation and manufacturing economic activities. The city is in the Highveld region, the electricity- generation centre of South Africa, whereby more than 70% (Municipal IDP 2020) of the national electricity supply is generated through coal-fired power stations in the region. Emalahleni is a water-stressed coalmining town and faces the challenge of ever-growing water demand due to potential employment opportunities. The area has a population growth rate of 3.2% (Municipal IDP 2020). The municipality has a water demand higher than the available supply. It was estimated that by 2019 (Municipal IDP 2020) the deficit was approximately 45Ml/d, excluding 35% water distribution losses. The town mainly depends on one water-endowed surface water source (Olifants River) (refer to Figure 1), and there are no alternative water-endowed sources to augment the supply.
Figure 1: Olifants River catchment management zones (Department of Water Affairs – Development of reconciliation strategy for the Olifants River water supply system, 2011)
46 | Proceedings of the conference on Public innovation, develoPment and sustainability