COVER STORY In 2018, Mergence Investment Managers acquired a majority stake in Siza Water and Silulumanzi from Sembcorp, a Singapore-based company. The management of these entities has since been entrusted to the South African Water Works (SAWW).
Nelspruit Water Treatment Works
PROUDLY SOUTH AFRICAN WITH AN INTERNATIONAL FLAIR
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AWW is a 100% South Africanowned water utility that has a Level 2 BBBEE rating. The change in ownership has ensured that all revenue generated from Siza Water and Silulumanzi remains within South Africa. The majority of those funds will benefit South African pensioners via Mergence, our majority shareholder,” says Shyam Misra, Group MD of SAWW. Both Siza Water and Silulumanzi commenced business in 1999 as the first pilots of water public-private partnerships (PPPs) in South Africa. Initially competitors, SAUR (a French utilities company) was Siza Water’s majority shareholder while Biwater (a British utilities company) was the majority shareholder of Silulumanzi. In 2007, Biwater took ownership of
both entities. Three years later, in 2010, Sembcorp acquired the shareholding of Biwater’s concession assets. In 2018, Sembcorp was looking to concentrate more on energy and wanted to dispose of its water assets. Siza Water and Silulumanzi were then sold to a consortium put together by Mergence, which included Rex Trueform and the senior management teams of both companies. “We have learned a lot from our former international shareholders, especially regarding governance, technology, risk management, business continuity, organisational culture, and accountability. While SAWW is five years old, the management team heading both Siza Water and Silulumanzi has been involved with the water concession contracts for many years, with most serving the companies more than 10 years. For example, I joined Siza Water in 2002 as a financial manager. In 2008, I was promoted to MD and became Group MD of SAWW in 2019. There are many other managers that have similar journeys,” Misra notes. A water business Siza Water and Silulumanzi have contributed towards growth in Ballito, KwaZulu-Natal, and Mbombela, Mpumalanga, respectively by providing reliable, high-quality water utility services. The concessions are run as a business and must operate profitably and efficiently. The focus is to deliver efficient services and Shyam Misra, Group MD of SAWW
responsibly manage infrastructure through deploying competent and efficient staff. “We do not have the luxury of relying on government grants, subsidies, and bailouts. Our operations are funded by the revenue we receive for our services. Siza Water and Silulumanzi are proof that the provision of water services can be reliable and profitable, provided there is a focus on efficiencies and the utilities are managed properly,” adds Misra. PPPs The two concessions are PPPs that were created prior to the Municipal Finance Management Act (No. 56 of 2003). “Established 24 years ago, Siza Water and Silulumanzi prove that PPPs within the water sector can work. However, procurement processes that were developed after 1999 have added a level of complexity to forming new PPPs. First, the public side needs to prove that they do not have the capacity to provide that service. There is also a rigorous process to get all the necessary approvals, and most municipalities do not have the capacity to even take part in that process. Fortunately, the Water Partnership Office headed by the Development Bank of Southern Africa can now assist municipalities with developing PPP frameworks and engaging with the private sector. SAWW is excited about the Water Partnership Office – it is a step in the right direction,” says Misra. The two PPPs are formed between the local municipality and the concessionaire, which is responsible for the operation,
