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South African Municipal Water Market: 2010 Operational and Capital
Frost & Sullivan, Nov 2010, Pages: 144
The South African municipal water and wastewater sector is dominated by metropolitan municipalities, with regards to the value of the water and wastewater budgets. Most metropolitan municipalities are well managed and invest a lot of money into water and wastewater infrastructure. Metropolitan municipalities also commit substantial amounts of their budgets towards repairs and maintenance of water and wastewater infrastructure This research was aimed at establishing factors that have an impact on municipalities ability to utilise their allocated budgets. Market dynamics such as challenges, drivers and restraints were also identified.
This Frost & Sullivan research titled South African Municipal Water Market: 2010 Operational and Capital Expenditure Analysis tracks annual changes in operational and capital expenditure across South Africa’s municipal water and wastewater sectors. It identifies which municipalities are increasing or decreasing their capital or operational expenditure for the financial year and analyses where South African municipalities are focusing their operational and capital expenditure within their water and wastewater departments. Also included are an examination of breakout capital and operational expenditure in terms of equipment and service type for the financial year ahead. Key market drivers and restraints and challenges for product and service providers that supply into the municipal sector are also tracked.
Market Overview
Governmental Intervention to Boost Municipal Compliance with Water and Wastewater Quality Requirements
The weak enforcement of municipal legislation, particularly the Municipal Finance Management Act (MFMA), has resulted in limited investment into water and wastewater infrastructure in South Africa. Most municipalities do not report on their expenditure trends and hence prioritise employee related expenses when compared to repairs and maintenance work.
Nevertheless, the market is set to grow due to government intervention in ensuring that municipalities comply with the current legislative requirements on the operation of water and wastewater treatment plants. “The increased need by municipalities to comply with their operational requirements is currently driving growth in this market,” notes the analyst of this research. “Most local municipalities barely undertake routine maintenance of their wastewater infrastructure and this has resulted in the poor to non-functional state of the bulk of the wastewater treatment plants.”
According to the Green Drop Report released on 29 April, 2010 by the South African Department of Water Affairs, only 32 of the 449 wastewater treatment plants that were assessed were awarded Green Drop status. The bulk of these plants (28) are operated by metropolitan municipalities that have both the capacity and resources to operate efficiently. Most municipalities do not comply with the legislative requirements of maintaining up-to-date information on their operations. Lack of information gathering prevents any meaningful attempt at plant control and effluent compliance.
“The Department of Environmental Affairs needs to ensure that municipalities maintain up-to-date information with regards to their wastewater treatment works,” emphasises the analyst. “Most wastewater treatment plants are not operating according to the expected requirements and therefore not in possession of management information required for Green Drop assessments.” This information assists equipment suppliers in assessing the infrastructural needs of municipalities.
Despite numerous challenges present due to the lack of compliance, the market still presents significant opportunities for growth. Equipment suppliers need to supply products within the budgets of most municipalities to complement the technology types currently on offer. “Municipalities are faced with budget constraints and prioritise their most important needs,” remarks the analyst. “Therefore, the provision of cost-effective technologies and services that are reliable is an important element in this market.”
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following application sectors in this research:
-Water treatment within municipalities
-Wastewater treatment within municipalities
By Area
-Gauteng Province
-KwaZulu-Natal
-Western Cape Province
-Eastern Cape Province
-Northern Cape Province
-Free State Province
-North West Province
-Mpumalanga Province
-Limpopo Province
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