The DBSA Partners with Green Climate Fund to Bolster the Department of Water and Sanitation’s Efforts Towards Climate Resilient Water Security

11 July 2023 - The Development Bank of Southern Africa (DBSA) is pleased to announce that the Water Reuse Programme (WRP) was approved by the Green Climate Fund (GCF) at the 36th GCF Board meeting.  As the world’s largest climate fund dedicated to supporting adaptation and mitigation projects in developing countries, GCF approved US$235 million in funding for the programme.  The GCF Board approved the project for implementation.

Several cities across South Africa face the threat of  the so-called Day Zero, when  water runs out , most notably Nelson Mandela Bay, in the Eastern Cape, where a severe drought has depleted the region’s dams. Observed water scarcity in South Africa is to a large extent attributable to physical causes. These are exacerbated by the impact of global climate change and increasing demand on available water resources.

The WRP is a sector-first alternative funding approach that seeks to enable the scale-up of water reuse projects that will improve water security and climate resilience at local and provincial levels in South Africa. It is a standardised programme within the Water Partnerships Office (WPO), a ring-fenced programme office, owned by the Department of Water and Sanitation (DWS) and housed at the DBSA.  The WPO is one of the outputs from the National Water Partnerships Programme (NWPP), the brainchild of DWS, DBSA and the South African Local Government Association (SALGA).

The approved capital will enable the WRP to coordinate a government-wide response that provides financial resources and building institutional capacity. A critical focus point for this intervention will be at municipal level, where climate-induced water insecurity has a debilitating effect on the lives of citizens. The programme expects to directly increase the resilience to climate change of 3,424,737 beneficiaries.

“As it stands, between 22% to 32% of our citizens are reportedly using water from unprotected sources. Water security is mission critical for us - we are a water scarce country. As a country we are currently ranked 30th on the global list, with three of our nine provinces having previously being declared disaster areas for drought. The impact of climate change has compounded the rate of poverty due to water-related public health hazards, among other challenges. With the WRP, we seek to address the dire situation, and doing so in partnership with municipalities to ensure that they are better capacitated to prepare, structure and implement projects that deliver water to our citizens. That is most important,” said Catherine Koffman, Group Executive Project Preparation at the DBSA.

“Through this catalytic investment by GCF, the programme will address water scarcity in South Africa by transforming and scaling up the wastewater system.  Furthermore, the programme aims to attract private sector investment, which will pave the way for future growth by having water considered as a new asset class aimed at  stimulating and activating the water reuse market,” said Henry Gonzalez, GCF Executive Director a.i.  

The WRP will be a national programme that facilitates the preparation, implementation, and scaling of water reuse projects in municipalities. Due to its novelity in the sector, its construct is a critical proof point of possible innovative, sustainable and climate resilient interventions for water services infrastructure in South Africa. 

At the core of the WRP is a blended finance solution that brings together private and public sector players. Particularly, it is built to attract the crowding of funding from players such as commercial banks, asset managers, pension funds and other institutional investors, alongside development finance institutions, concessional and grant funding. 

The WRP will comprise of two components. Firstly, the WPO will house a Water Reuse Unit that supports the preparation, financing, and implementation of municipal water reuse projects. This component is critical in supporting municipalities and in some instances water boards, the primary custodians of sewerage effluent reuse opportunities, to identify, prepare, finance, and implement water reuse projects at scale. The WRP will, amongst other community engagement activities, run a national and regional public awareness and education campaign to ensure the successful scaling and implementation of water reuse projects in South Africa. 

The second component is the development of an alternative funding solution to support the scaled roll out of water reuse projects. This new asset class will offer acceptable financial return in line with ESG impact tracking, simultaneously crowding in private sector funding. As the WRP matures, project bonds will define the asset class, driven to realise better development impact, particularly towards the UN’s Sustainable Development Goals 6, 14 and that speak to safe and clean water and sanitation, sustainable oceans, and the involvement of the private sector in development endeavours.

“Our reality is that the current water prices do not reflect the availability and cost of supply of water, the result is that the sector is not particularly attractive for private investment in water reuse infrastructure. Looking into the future, projections of water demand and supply are however showing a supply gap that can be met with private sector participation and investment in water services infrastructure. It is encouraging for the proliferation of public infrastructure that water tariffs are steadily trending upwards; but we do need to think several steps ahead and bring in that needed intervention right now, to start working on plugging that future gap whilst at the same time ensuring that affordability for the poor in our society is not compromised. The WRP is a key  solution that  makes it easier for numerous players to actively participate and ensure minimum, if any, potential water shedding in the future,” concludes Catherine Koffman.

In keeping with the DBSA’s development position and the Bank’s strategic role in the NWPP, the implementation of the WRP and its projects will explore the displacement of fossil-fuelled electricity at treatment plants. We remain resolute and committed to making significant steps toward sustainable water management, addressing water scarcity, and mitigating the impacts of climate change for South Africans. 

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