Limp from the Lack of Investment: Moody’s flags South Africa due to Infrastructure Underinvestment

South Africa is underinvesting in its energy and water systems, putting households and the economy at risk. Water infrastructure in South Africa is aging many drinking and wastewater treatment systems have neared or are nearing the end of their life cycles.

Moody’s Investors Service said that underinvestment in water and electricity infrastructure makes South African towns and cities vulnerable to events such as floods and disruptions in these services can be a credit risk for some municipalities, “Physical climate events like floods and droughts can also expose infrastructure deficiencies and lead to severe water stress or blackouts,” Moody’s highlighted. “These events can damage already poor infrastructure even further, like the severe flooding and landslides did in the south and southeast of the country in April 2022.”

Accordingly, the capital expenditure in most of the country’s municipalities that Moody’s rate; are below the 10% to 20% of total spending recommended by the National Treasury to ensure sustainable infrastructure development. “Any losses or extended disruption related to the provision of services like water and electricity have severe credit implications,” Moody’s said. “The ineffective provision of electricity and water services also weighs on economic activity more broadly.”

The 2030 Agenda for Sustainable Development was adopted by all United Nations Member States in 2015 and provides a shared blueprint for peace and prosperity for all. Most of the SDGs will be endangered without sound water management and adequate water resources. The infrastructure necessary to manage water resources and provide water services is of high quality, is very complex. Its benefits to humanity and to the natural aquatic environment that is our lifeline can be clearly shown.

SDG 6 specifically deals with water, sanitation and hygiene. Building such infrastructure requires an amount of capital investment, roughly three times more. The reality is that we are failing to ensure that everyone has access to water and sanitation by 2030; as outlined in Sustainable Development Goal 6. While changes are being made, current advancements need to quadruple in order to reach the desired outcome. Chronic underinvestment in water and sanitation disadvantages and harms vast numbers of individuals. This is not up to par with the South African development goals.

Five ways the private sector can play its part:

assisting national leadership with the investment in water infrastructure;

support governments with implementing projects;

build efficient, resilient and green infrastructure;

improve the economic viability of water infrastructure and services;

activate new funding mechanisms.

The above tasks require a strong development partner, to overcome the challenges faced by vulnerable communities and water service providers.

MEB is committed to intensifying efforts to truly valuing water and energy. We want to close the investment gaps and create new jobs, which will result in equitable access to the county’s most precious resource. We have a wealth of experience in financing utility scale infrastructure with a minimal footprint - for smarter communities.

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