Industry Insight: New frontiers in wastewater

Ranking with the world’s best, Ekurhuleni Water Care Company (ERWAT) is among the leaders in South Africa, Africa and the globe in the field of wastewater process engineering. IMIESA speaks to Tumelo Gopane, managing director, ERWAT, about new developments that include participation in a Covid-19 research project and potential publicprivate partnership projects.

Currently, ERWAT has 19 operating wastewater treatment plants, serving major industries that include agriculture, aviation, logistics, manufacturing and mining. In turn, these industries make a major contribution to the region’s economy, helping to fund essential infrastructure and create jobs for the more than 3.5 million people who call the City of Ekurhuleni home. It’s a symbiotic relationship.

Given ERWAT’s strategic role, the company has developed a series of comprehensive programmes to keep pace with intensified urbanisation. These are included in the ‘ERWAT Plants & Conveyancing Regionalisation and 50 Year Masterplan’. A central theme is the need to reduce the number of treatment plants from 19 to 10, along with a reconfiguration of the existing pump and pipeline system and conveyancing network, respectively.

Tying in with this plant rationalisation study, ERWAT has also recently completed a pricing analysis that enables detailed financial modelling of present and future operational scenarios. This will prove invaluable for potential investors, in addition to providing a clearer understanding of where present-day cost efficiencies can be improved in a typical wastewater utility. The financial model is zero-based, from each and every plant.

Based on this analysis, the break-even cost to operate and maintain the current plants and network optimally is around R3.84/kℓ. Adding the capex cost for upgrades brings this to approximately R5.34/kℓ. Compared to the double-digit figures charged by some South African potable water utilities, ERWAT’s pricing is still very competitive, considering that treating wastewater is far more complex than treating potable water.

“This has been a very rewarding exercise when it comes to benchmarking opex and capex costs in line with local and global best practice. We are excited about sharing this model with our industry stakeholders,” says Gopane. ERWAT employees will be presenting papers on this initiative at various industry forums in the coming months.

“We understand that costs will vary slightly from one utility to another, based on factors such as the age of their plants, the technologies employed, staff complement, etc. However, we need some form of standardisation that we can agree to as a country and the broader industry, especially when it comes to PPPs (public-private partnerships),” he continues.

ERWAT’s financial model also highlights the funding gap. Currently, the City of Ekurhuleni pays ERWAT around R2.99/kℓ. Going forward, this figure is not likely to increase significantly given the current economic downturn pre and post Covid-19. This results in huge operational and capital investment backlogs, which compels entities like ERWAT to continually assess its strategic risks. Tariff revenue shortfalls from private and commercial residents have so far contributed to a city deficit in excess of R2 billion.

Funding shortfalls, in a small part, are being offset by ERWAT’s ongoing diversification strategy, albeit still miniscule looking at the maintenance and expansion backlog. This includes the conclusion of a series of outsourced operations and maintenance agreements with key blue-chip industrial clients to manage their wastewater process requirements. However, new revenue streams need to be urgently added.

Expansion plans

Allied to this are three key ERWAT initiatives, namely:

- The ERWAT Beneficiation Programme

- The ERWAT Plant & Conveyancing Regionalisation Programme

- The ERWAT Technology & Self-funded Programme.

The first hinges on a PPP-funded programme, the second on both grants and loans, and the third on loans for self-sustainable loan funds, looking at the customer base.

“The ERWAT Beneficiation Programme explores fresh opportunities to commercialise wastewater by-products, taking into account what other industry leaders are doing globally,” Gopane explains, adding that these by-products include biogas, sludge beneficiation and wastewater reuse.

In addition to waste-to-energy, other opportunities could include the local refining of biogas fuels for the taxi, truck and bus industries. This cheaper, cleaner and greener solution is already being applied in developed markets, spearheaded by engine technology innovations from leading OEMs.

The way ERWAT manages faecal sludge is also being revisited. Like most wastewater utilities nationally, ERWAT currently pays farmers to collect it; however, that could soon change, with plans in place to produce Class A1a graded product – the highest and safest standard.

“As an Agri SA advisory board member, I’m proposing that South Africa shifts its focus beyond the use of faecal sludge for purely manure and compost applications. As a Class A1a product, wastewater utilities will be able to brand, bag and sell it as approved compost/manure/fertiliser,” says Gopane.

In other areas, ERWAT now forms part of a Water Research Commission group working on a study to determine the possible link between wastewater sludge and Covid-19 transmission. Other members of the group include the City of Cape Town, plus local and international universities.

Industrial effluent and leachate investigation

ERWAT is also investigating the potential of constructing a dedicated industrial effluent treatment plant for local industry. This comes in response to a Department of Environment, Forestry and Fisheries decision to ban the disposal of all liquid waste to landfill, effective August 2019. This has created a gap in the market for treatment specialists.

Discussions are at an advanced stage with key private sector waste management companies to build a pilot plant to test its commercial viability prior to going the PPP route. Gate fees for liquid disposal will be charged on a per kℓ rate. Services would also include the treatment of landfill leachate.

The ERWAT Plant & Conveyancing Regionalisation Programme

ERWAT’s Plant & Conveyancing Regionalisation Programme is the most important element in the company’s restructuring plans, since it forms the backbone of the whole operation. When ERWAT was formed in 1992, it assumed responsibility for the management of a diverse range of plants. Some are more modern, while others are close to 85 years old, like the Benoni water care works built in 1935. The technology employed across these plants also varies.

“A number of these plants were originally designed to predominantly handle domestic effluent. Over time, though, allied industrial and commercial growth has steadily increased the organic loads, placing major pressure on our ageing wastewater treatment works,” Gopane explains. “With opex and capex costs rising, we needed to revisit the current business model.”

This yielded the decision to reduce the existing 19 regional plants to 10 and approach the open market for funding. “ERWAT will shortly be releasing a request for information (RFI). We are inviting wastewater technology providers to study our plants and propose the optimum process solutions to upgrade their future capacities and efficiencies. Their proposals also need to be backed by a private sector investor,” he continues.

ERWAT has categorised the 10 shortlisted treatment facilities into either commercially or non-commercially viable plants. Flagship plants like Hartebeestfontein, Olifantsfontein and Welgedacht are all located in affluent commercial, industrial and residential zones, and are in a stronger position to attract finance from the market. Those plants deemed non-commercially viable will remain 100% funded by the public sector, through grants. Once all RFI proposals have been received, ERWAT will shortlist the technology providers and then put out a request for proposals.

A positive outlook

ERWAT remains world class and geared for positive longer-term growth. This was confirmed recently by Moody’s, which graded ERWAT as Ba1 stable.

“We regard the Moody’s opinion as a positive assessment of our efforts over the past two to three years to restructure the organisation, as well as its strategic focus, reduce debt, improve cash management, and put in place sound business plans for future growth – prime examples being our three main programmes discussed above,” adds Gopane.

When Gopane joined ERWAT as managing director in Q3 2016, he outlined his vision for the company over the ensuing five years. A lot of ground has been covered since then.

“At the time, I predicted that within five years ERWAT would be acknowledged as a successful and internationally recognised innovator in wastewater treatment. And we’ve come a long way in getting ourselves on that trajectory – this, thanks to our commercial and technical acumen. Now it’s time to take the next step, in partnership with the market,” Gopane concludes.