Assessment of the water and sanitation sector in the gauteng city region final

1. ASSESSMENT OF THE WATER
AND SANITATION SECTOR IN THE
GAUTENG CITY REGION
June 2019

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Table of Contents
1. Executive Summary 5
2. Introduction 7
3. The Challenge of Water Scarcity 9
4. Overview of the Gauteng City Region 13
5. Governance and Management of the Sector 16
6. Private Sector Participation in the Sector 20
7. Challenges for SMME’s 25
8. Opportunities for SMME’s 27
9. Market Sizing the opportunity for the SMME sector 31
10. Recommendations to Unlock Opportunities 34
11. Conclusion 36

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List of Tables
Table 1: Government Programmes for SMME’s...................................................................................18
Table 2: Assessing the Market for SMME’s..........................................................................................21
Table 3: Potential Public Sector Clients................................................................................................22
Table 4: Potential Size of the Public Sector Market for SMME’s in Gauteng .......................................31
Table 5: Potential Size of the Private Sector Market for SMME’s in Gauteng......................................33
List of Figures
Figure 1: Water Demand by User, South Africa, 2020 ...........................................................................9
Figure 2: Water Supply and Demand Forecasts for South Africa, 2020, 2025, 2030 & 2040 ..............10
Figure 3: Shortfall in National Capital Expenditure and Critical Maintenance Backlog in 2017 ...........11
Figure 4: System Input Volume indicating Revenue and Non-Revenue Water for Gauteng, 2012......12
Figure 5: Spatial Overview of Gauteng & Population Distribution Across the Metropolitan and District
Municipalities, 2018...............................................................................................................................13
Figure 6: Sectoral Composition for the Gauteng Economy, 2016 ........................................................14
Figure 7: Access to Safe Drinking Water & Flush Toilets, Gauteng, 2016 ...........................................15
Figure 8: Water Pricing Chain...............................................................................................................19
Figure 9: Water Value Chain & Entry Points for SMME’s .....................................................................20
Figure 10: Economic Value Chain and Potential Private Sector Clients ..............................................23
Figure 11: Gauteng, Residential Water Tariff Trajectory ......................................................................29

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Abbreviations
CDP Carbon Disclosure Project
CoJ City of Johannesburg
CoT City of Tshwane
CSIR Council for Scientific and Industrial Research
DSBD Department of Small Business Development
DST Department of Science and Technology
dti Department of Trade and Industry
DWS Department of Water and Sanitation
GA General Authorisation
GCR Gauteng City Region
GDP Gross Domestic Product
GEP Gauteng Enterprise Propeller
MFMA Municipal Finance Management Act, No. 56 of 2003
ML Mega Litre
NCPC National Cleaner Production Centre
NDP National Development Plan
NRW Non-Revenue Water
SALGA South African Local Government Association
SANS South African National Standards
SEDA Small Enterprise Development Agency
SEFA Small Enterprise Finance Agency
SIV System Input Volume
SMME Small Medium and Micro Enterprises
StatsSA Statistics South Africa
TCTA Trans Caledon Tunnel Authority
TIHMC The Innovation Hub Management Company
WADER Water Technologies Demonstration Programme
WEF World Economic Forum
WRC Water Research Commission
WSA Water Services Authority
WSP Water Services Providers
WUA Water User Associations
WWTW Wastewater Treatment Works

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1. EXECUTIVE SUMMARY
Globally, water scarcity is becoming an ever-growing concern and South Africa is not immune to these
pressures. Rapid urbanisation and population growth are forcing municipalities and organisations to
use innovative solutions to address challenges in the water and sanitation sector. Projections show that
South Africa will have a negative water balance of 1.7 billion m3 of water by 2020 and that without policy
changes this imbalance will worsen over time. In order to address the shortage, over R70 billion
additional investment in water infrastructure will be required nationally. In addition to the water
challenge, South Africa faces lagging economic growth and high levels of unemployment.
South Africa’s National Development Plan (“NDP”) has identified small medium and micro enterprises
(“SMME”) as central to the attainment of an annual Gross Domestic Product (“GDP”) growth rate of
above 5% and increased employment.
Combining the above, the opportunity exists for SMMEs to contribute to the growth of the South African
economy through providing innovative solutions to the water security challenge. An understanding of
these opportunities, and challenges for SMMEs in accessing them, is key to ensuring the potential value
is unlocked. The purpose of this Report is in identifying those opportunities and challenges within the
Gauteng City Region (“GCR”) and providing recommendations on how to unlock this potential value.
Gauteng is the engine of the South African economy, accounting for 35% of national GDP and housing
26% of the population. Gauteng is driven by economic activity in the tertiary sector (75%), whilst activity
in the primary sector contributes the smallest share of the economy (3%).
Commensurate with its economic size, Gauteng accounts for 43% of water demand in the country. Of
the water supplied to Gauteng, 35% was classified as Non-Revenue Water (“NRW”), or water for which
the province received no income. At an aggregate level, Gauteng provides access to safe drinking water
to 93% of its households and sanitation services (as defined in this Report) to 84% of its households.
Demand for water and sanitation services are expected to increase in Gauteng due to high levels of in-
migration, while the supply of water is expected to decrease due to climate change impacts and failing
infrastructure.
Governance within the water and sanitation sector is primarily legislated by the National Water Act, No.
36 of 1998 and the Water Services Act, No. 108 of 1997. These acts regulate the use of water resources
in South Africa and provide for the establishment of entities mandated to provide water and sanitation
services. Further regulation occurs at municipal level where responsibilities are assigned to
municipalities to provide water and sanitation services and govern the procurement of goods and
services.
The water and sanitation value chain consists of five tiers, namely: 1. Natural Water Resources; 2. Bulk
Storage, Transfer and Supply; 3. Water Treatment; 4. Water Use; and 5. Wastewater Treatment and
Reuse. Private sector participation occurs at each tier, however, due to the nature of projects in tier 1
and 2, SMME participation is most likely to occur in tiers 3, 4, and 5. Potential clients for SMMEs in
these tiers include municipalities and water service providers. Private sector clients are also a potential
market for SMMEs. These clients are typically interested in reducing their water consumption to lower
costs and increasing water security for their operating procedures i.e. improving their water efficiencies.
Given the potential market for SMMEs, a number of challenges to access the market were identified
through consultations with sector experts and SMMEs currently operating in the sector. These
challenges are as follows:

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● Difficulty in testing and prototyping new technology;
● A lack of institutional frameworks that incentivise water efficiency;
● Doing business with municipalities as a result of procurement regulations; and
● Taking a product from conception to market, due to possible lack of funding and commercial
experience.
Specific opportunities for SMMEs lie in providing:
● Water metering services to monitor and identify leaks;
● Wastewater reuse and treatment services to treat wastewater to specified standards for reuse
or discharge into the water resources system;
● Water efficient devices to reduce demand for water; and
● Expanding the use of alternative water sources.
These opportunities are applicable for business to be undertaken with public and private sector clients.
The size of the potential market for SMMEs is estimated at R 2.1 billion and R 238 million for business
opportunities in the public and private sector respectively.
Given the challenges and related opportunities, recommendations were presented that, if implemented,
could help to unlock the opportunities for SMMEs. These are as follows:
● Development of an institutional framework to incentivise water efficiency and the uptake of
water efficient devices;
● Standardisation of certification of new water technologies to lower risks associated with
adopting new technologies;
● Increased awareness of support systems for SMMEs seeking to enter the water and sanitation
market ensuring they are aware of support available should it be required; and
● SMMEs forming partnerships with established companies to increase their chances of securing
work and providing a chance to improve their service offering.
The challenges identified in the Report are diverse and require concerted action to solve them.
To facilitate this action, the following steps were recommended:
• Dissemination of this Report to obtain inputs/comment through forums and workshops to
assess the applicability of the identified challenges and recommendations;
• Test the recommendations through implementation with an SMME identified through a
competitive process;
• Conduct further, detailed studies, on specific sectors to fully understand the challenges;
• Determine the form of the regulatory/institutional changes;
• Development of a strategy to rank and prioritise the implementation of support required; and
• Establishment of a water forum to enhance networking and accessibility between SMMEs and
large companies

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2. INTRODUCTION
This study assesses the water and sanitation sector in the GCR in order to foster
entrepreneurship, innovation and growth by identifying challenges and opportunities for
SMME’s in order to enhance economic growth and build a resilient economy.
2.1. Background
Globally, water scarcity is becoming an ever-growing concern. South Africa is not immune to these
pressures and rapid urbanisation and population growth are forcing governments to use innovation to
address the challenges in the water and sanitation sector. Water conservation initiatives introduced by
Sydney Water (in Australia), are an example of such government innovations. Between 2009 and 2010,
the state-owned corporation saved 116,703 Mega Litres (ML) of water through: providing opportunities
for residents to save water by installing water efficient appliances; providing recycled water to
households and businesses; and supporting regulations aimed at making homes more water efficient.1
Projections show that South Africa will have a negative water balance of 1.7 billion m3 of water by 2020
i.e. water demand will exceed supply by around 12%, and that without policy changes this imbalance
will worsen over time. In order to address the shortage, over R70 billion additional investment in water
infrastructure will be required.2
Gauteng is the engine of the South African economy, accounting for 35% of national GDP and housing
26% of the population. Historically, Gauteng developed around the location of rich mining resources
which shaped the settlement of people close to these resources as opposed to the location of water
resources. This has resulted in Gauteng having some of the most complex inter-basin water transfer
schemes in the world.3 Gauteng accounts for 43% of System Input Volume (“SIV”) for the country.
The forecasted water deficit is a key driver for opportunities in the sector and it necessitates better use
of existing resources as well as expanding the resource to move beyond reliance on traditional
surface water.
2.2. Aim of the Study
The aim of this study is to provide a deeper understanding of the sector which will enable the Gauteng
provincial government to pursue its objectives of fostering entrepreneurship, innovation and growth by
building a body of knowledge clearly identifying challenges and opportunities within the water and
sanitation sector that will foster opportunities for SMME’s, enhance economic growth and build a
resilient economy.
This report covers the following topics:
● Overview of the water and sanitation market in Gauteng;
● Appraisal of the legislative and regulatory framework in driving economic development and
sustainable service provision;
1 Sydney Water. 2010. Water Conservation and Recycling Implementation Report 2009-10
2 Department of Water and Sanitation. 2018. National Water & Sanitation Master Plan, Volume 2 – Version 3
3 Muller, M., 2002, March. Inter-basin water sharing to achieve water security—a South African perspective. In Director-
General, Department of Water Affairs and Forestry, Pretoria. Speech at the World Water Forum, The Hague. Available at:
http://www. dwaf. gov. za/Communications/Departmental% 20Speeches/2002/hague% 20transfe r% 20final. doc.

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● Exploration of Gauteng-specific challenges considering the region’s three metropolitan and two
district municipalities;
● Benchmarking the size of the water and sanitation sector in Gauteng; and
● Potential economic opportunities for SMME’s that stem from the challenges identified.

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3. THE CHALLENGE OF WATER SCARCITY
Water shortages are forecast both nationally and for the GCR. This will require better use of
existing resources, as well as augmenting supply with alternative water sources beyond the
traditional reliance on surface water.
3.1. National Water Balance
South Africa has a reliable water yield of around 15 billion m3/annum, comprising 68% surface water,
13% groundwater, 13% return flows and 6% from other sources, such as desalination.
Current water usage is estimated to be between 15-16 billion m3/annum (or around a 10% deficit), with
the agricultural sector being the largest user comprising 59% of demand, followed by the municipal
sector, which accounts for 29% of water demand. It is important to note that water tariffs for the
agricultural sector are relatively low, and as the largest user of water the relatively low tariff level does
not incentivise efficient use of water. This issue has been identified as a key driver hindering the financial
health of the water sector. The National Water and Sanitation Master Plan Volume 2 has called for a
review of the subsidy provided to the agricultural sector which currently includes a cap on price
increases.4
Figure 1: Water Demand by User, South Africa, 2020
Source: National Water and Sanitation Master Plan Volume 2 Version 4.2, Department of Water and Sanitation 2018
Both economic and population growth will result in increased water demand. It is forecast that water
requirements will continue to outstrip the available yield, with demand exceeding supply by 12% in
2020, and that without interventions the projected gap will remain at this level (see Figure below). The
4 Department of Water and Sanitation. 2018. National Water and Sanitation Master Plan, Volume 2: Plan to Action Version 4.2

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projected deficit results from increased water demand driven by growth for the major users of water in
South Africa, including the agricultural, municipal and industrial sectors.
Figure 2: Water Supply and Demand Forecasts for South Africa, 2020, 2025, 2030 & 2040
Source: National Water and Sanitation Master Plan Volume 2 Version 4.2, Department of Water and Sanitation 2018
Figure 3 shows that there is a gap in the actual national capital expenditure and the required expenditure
of R15.8 billion. The critical maintenance backlog amounts to R70 billion.

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Figure 3: Shortfall in National Capital Expenditure and Critical Maintenance Backlog in 2017
Source: Department of Water and Sanitation, 2017, Strategic overview of the water sector in South Africa 2017
3.2. Gauteng Water Balance
In 20125 the SIV6 for Gauteng was 1.4 billion m3/annum, accounting for 43% of SIV in South Africa. 7
Of this supply, 88% was attributed to the three metropolitan municipalities (which have about the same
share of the population). Figure 4 presents the SIV of the Water Service Authorities (“WSAs”) in
Gauteng.
The City of Johannesburg (“CoJ”) is the largest water user in Gauteng having been supplied with 537
million m3/annum of water in 2012 and accounting for 40% of SIV in Gauteng. Ekurhuleni and the City
of Tshwane (“CoT”) are the second and third largest users of water in Gauteng, with 338 million
m3/annum and 319 million m3/annum of water supplied respectively. Rand Water is the bulk supplier to
all of the WSAs with Magalies Water providing additional supply to the CoT.
SIV comprises of revenue water and NRW. NRW is the volume of water for which a water utility receives
no income and consists of unbilled authorised consumption, commercial losses, and physical losses. 8
9 The percentage of NRW for a region is used as an indicator of the non-productive water distributed.
5 This is the latest year for which comparative data is available.
6 SIV is the volume of potable water supplied to the water supply system and is calculated as follows: SIV = Potable supply
from water treatment plant + supply from bulk or other water services providers + supply from boreholes, springs, fountains if
not supplied through water treatment plants. Source: Guideline for the Preparation of an IWA Water Balance to Determine
Non-Revenue Water and Water Losses, Department of Water and Sanitation, 2014.
7 National Water Services Knowledge System
8 Department of Water and Sanitation, Metropolitan Municipality Water Balance Assessment, 2015
9 Commercial Losses are made up of unauthorised connections and consumption plus all technical and administrative
inaccuracies associated with customer metering and billing. Physical Losses are the physical water losses from a water
system. Source: Department of Water and Sanitation, Guideline for the Preparation of an IWA Water Balance to Determine
Non-Revenue Water and Water Losses, 2014

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Of the water supplied to Gauteng, 35% was classified as NRW.10 From Figure 4, the local municipalities
have the highest percentage of NRW in Gauteng, followed by closely by Ekurhuleni, with CoT having
the lowest.
Figure 4: System Input Volume indicating Revenue and Non-Revenue Water for Gauteng, 2012
Source: National Water Services Knowledge System. Local Municipalities include: Emfuleni, Lesedi, Merafong City, Midvaal,
Mogale City, and Rand West City.
Note: SIV and NRW data are both sourced from the DWS for 2012 for consistency. More recent NRW data for the municipalities
is presented later in the report.
The forecast deficit in water supply, together with high levels of NRW create pressure within a
water constrained environment. This will be a key driver for municipalities, large water users
and households to adopt solutions that reduce their water losses and reduce reliance on scarce
surface water resources. This should create business opportunities for SMME’s in the sector.
10 National Water Services Knowledge System

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4. OVERVIEW OF THE GAUTENG CITY REGION
The GCR is the economic hub of South Africa and home to the largest share of the population.
As such, this region represents an opportunity for active participation of SMME’s in the sector.
4.1. Demographic Overview
The GCR is an integrated cluster of cities, towns and urban nodes that together make up the economic
heartland of South Africa. At the core of the GCR is the province of Gauteng.11 As a result of its
economic status, Gauteng is home to the largest share of the South African population, accommodating
(13.4 million people in 201612) 14.7 million people or 26% of the population in 2018.13 The provincial
population is set to grow further due to the number of people migrating to Gauteng in search of economic
opportunities. This will have implications for the increase in water demand within the province.
Figure 5 shows the spatial structure of Gauteng, which is divided into three metropolitan municipalities
(Ekurhuleni, CoJ and the CoT) and two district municipalities (Sedibeng and the West Rand). Sedibeng
and the West Rand District Municipalities are each subdivided into three local municipalities.14 The vast
majority of people (87%) reside in the three metropolitan municipalities, with the largest share living in
the CoJ (37%).
In Gauteng, water and sanitation services are provided by the WSAs, these include the three
metropolitan municipalities and six local municipalities.
Figure 5: Spatial Overview of Gauteng & Population Distribution Across the Metropolitan and
District Municipalities, 2018
Source: Municipal Demarcation Board (Shapefile) and Provincial Profile Gauteng Community Survey 2016, StatsSA
11 As the major sources of data available in South Africa do not recognise the GCR as a defined geographic region, there is
little, if any, data published on the GCR. Therefore, for the purposes of this Report, data for Gauteng will be used as a proxy
for the greater GCR.
12 The 2016 figure relates to the regional population breakdown issued by StatsSA, depicted in Figure 5.
13 Mid-year population estimates 2018, StatsSA
14 https://municipalities.co.za/provinces/view/3/gauteng, accessed on the 20th
of February 2019

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4.2. Socio-economic Overview
Gauteng accounts for 35% of national GDP.15 As the economic hub of the country, Gauteng is driven
by economic activity in the tertiary sector (75%), whilst activity in the primary sector contributes the
smallest share of the economy (3%) (Figure 6). 16 Although the primary sector contributes the smallest
share to the Gauteng economy, it contains the largest water users (agriculture and mining) which use
approximately 68 of water nationally.17
Figure 6: Sectoral Composition for the Gauteng Economy, 2016
Source: StatsSA, Annual Regional Growth 4th Quarter 2017
Along with the rest of South Africa, Gauteng suffers from high unemployment, using the official
unemployment rate, 29% of the population in Gauteng is unemployed and using the expanded
unemployment rate 33%.18 SMME’s provide an avenue for employment creation and can assist in
tackling the high unemployment rate.
4.3. Access to Water and Sanitation Services
At an aggregate level Gauteng provides access to safe drinking water to 93% of its households, with
the CoT having the lowest level of access to water services at 90%. Although the level of service for
water is high, there remains a large amount of physical water loss due to the lack of maintenance of
existing water distribution infrastructure. The provision of sanitation services shows less progress, with
only 84% of households having access to a flush toilet connected to a public sewerage system. The
15 Gross Domestic Product 4th
Quarter 2017, StatsSA
16 Industries in the Primary Sector include: Agriculture, Forestry, Fishing, Mining and Quarrying. Industries in the Secondary
Sector include: Manufacturing, Electricity, Gas, Water and Construction. Industries in the Tertiary Sector include: Trade,
Catering, Accommodation, Transport, Storage, Communication, Finance, Real Estate, Business Services, Personal Services
and General Government Services.
17 National Water and Sanitation Master Plan Volume 2 Version 4.2, Department of Water and Sanitation 2018. Figure
comprises of: Agriculture, Mining and Bulk Industrial and Afforestation.
18 StatsSA, Quarterly Labour Force Survey Quarter 4: 2018

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CoJ has the highest proportion of households with access to a flush toilet. Roughly 2% of households
in Gauteng use bucket toilet systems that are collected by the municipality.19
Figure 7: Access to Safe Drinking Water & Flush Toilets, Gauteng, 2016
Source: StatsSA, Provincial Profile Gauteng Community Survey 2016
Factors expected to affect access to water across Gauteng relate to the risk of climate change and
failure of aging infrastructure. 20 The impact of climate change was experienced by Gauteng, in 2015,
when water restrictions were put in place to combat the worst drought the country had experienced in
23 years. 21 This impact is expected to be exacerbated as critical infrastructure related to the supply of
water continues to fail due to lack of investment.
The recent challenges experienced by Eskom, resulting in extended periods of load shedding, are
further expected to affect access to water. During the load shedding period, Johannesburg Water issued
a statement warning residents that load shedding would result in pockets of areas having water
shortages and low water pressure as Johannesburg Water uses electricity to pump water into its storage
towers. 22
19 StatsSA, Provincial Profile Gauteng Community Survey 2016
20 IOL News, “Gauteng could be ‘starved’ of water”, 2017
21 Mail and Guardian, “Water Restrictions Begin in Gauteng”, 2015
22 Business Tech, “Load Shedding to Hit Johannesburg’s Water Supply”, 2019

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5. GOVERNANCE AND MANAGEMENT OF THE SECTOR
The role of different bodies (public and private) in the water and sanitation sector is governed by a
number of acts and regulations, and public entities at national, regional and local level. Legislation and
regulations that are relevant to SMME opportunities in the sector are outlined below. The legislation
and regulations set out below define the institutional structure and governance within the water and
sanitation sector. Some of the important aspects contained within the legislation include: definitions of
water use and licensing procedures; definitions of Water Services Providers (“WSP’s); regulations for
building and construction; procurement procedures for doing business with the public sector; and
municipal by-laws that create governance structures at local government level.
5.1. National Legislation
The National Water Act, No. 36 of 1998 is the primary legislation governing the use, development and
management of water resources in South Africa. The Act defines permissible “uses” of water within the
following categories:
● Use permissible in terms of Schedule 1 for a small quantity of water use which includes
domestic use, non-commercial irrigation and rainwater harvesting;
● Use in terms of a General Authorisation (“GA”) which allows water use without a licence
provided the water use is within the conditions of the authorisation; and
● Use requiring a license for bulk water users that represent a higher risk.
These water use categories are important within the context of expanding water resource supply
through the use of rainwater harvesting (use is permitted in terms of Schedule 1), groundwater
abstraction (this requires a GA) and for bulk water users (this requires a Water Use License
which can be obtained from the Department of Water and Sanitation (“DWS”).
The Water Services Act, No. 108 of 1997 provides for the establishment of WSAs, WSP, Water Boards
and water services committees. This legislation regulates municipalities and Water Boards.
At a regional level, the responsibility of water supply is delegated to WSA. WSAs are responsible for
planning, implementing and operating the necessary infrastructure to provide effective, affordable and
sustainable water services to their customers.23 WSAs may appoint WSP to provide water and/or
sanitation services and perform duties as specified by the WSA.
Gauteng currently has nine WSAs, comprising the three metropolitan municipalities and six local
municipalities. The major WSPs that service the Gauteng region are: Rand Water, Magalies Water, and
Johannesburg Water.
The National Building Regulations and Building Standards Act, No. 103 of 1977 provides building
and construction specifications. The design and construction of water systems are required to comply
with the South African National Standards (SANS 10400) contained in the National Building
Regulations. It is important to note that the existing building standards do not contain specifications for
the installation of water systems, therefore, there is no specification or requirement for property
developers to make use of efficient water systems.
23 Strategic Overview of the Water Sector in South Africa 2018, Department of Water and Sanitation

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5.2. Municipal Regulations
The Municipal Systems Act, No. 32 of 2000 and Schedule 4 of the Constitution sets out a
categorisation of municipalities into three tiers and outlines responsibilities for service provision for basic
services as shown below24:
● Category A (metropolitan municipalities) - to provide water and sanitation services (including
CoJ, CoT and CoE)
● Category B (district municipalities) - water and sanitation services are not provided by this
category in Gauteng
● Category C (local municipalities) - to provide water and sanitation services (including Emfuleni,
Lesedi, Midvaal, Merafong, Mogale and Rand West)
As discussed in the preceding section, the three metropolitan and six local municipalities are the WSAs
for their respective service area. They are, thereby, mandated to provide water and sanitation services
to their customers. Therefore, the key public sector clients for SMME’s in Gauteng would include the
three metropolitan and six local municipalities.
The Municipal Finance Management Act, No. 56 of 2003 (“MFMA”) and the Municipal Supply Chain
Management Regulations of 2005 define the minimum requirements for procurement procedures for
municipalities. These regulations provide for a competitive procurement process and a system of
checks and balances required in order to award and manage contracts. SMME’s need to comply with
the procurement processes outlined by these regulations, and specifically with the procedures defined
for each of the municipalities with whom they want to enter into business.
Unfortunately, the range of regulations governing the sector make it particularly difficult for SMMEs to
enter and provide services to the sector, as many projects involve managing the considerable, and
time-consuming bureaucracy. Procurement processes as required by the MFMA create a range of
bidding and contracting procedures that often serve as a constraint to doing business with
municipalities. This also inhibits the uptake of innovative products which are often offered through
unsolicited proposals from the private sector.
The Municipal By-laws govern the use of water at the municipal level by empowering municipalities to
set measures to prevent wasteful use of water, to provide technical specifications and standards for the
installation of water equipment and to impose water restrictions when required. It is important to note
that a big gap in municipal by-laws is the fact that they are yet to introduce specifications for water-use
efficiency. In their current form, municipal by-laws have not been drafted to create efficiency standards
for the private sector to adhere to, therefore making it difficult to crowd-in investment toward technology
driven solutions to improve on the efficient use of water resources.
5.3. Support Programmes for SMME’s and Innovation
Various government departments and agencies provide financial and non-financial support for SMME’s.
Some support programmes provide general business support, capacity-building and training, however,
there are a number of programmes that provide specific support within the area of innovation,
technology development and with a water and sanitation sector focus. Table 1 provides an overview of
some of the support programmes available for SMME’s.
24 Municipal Systems Act, Act No. 32 ,2000

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Table 1: Government Programmes for SMME’s
Source: Authors Illustration
5.4. Demand Management and Pricing
A key element in balancing the demand and supply for water is the tariff regime that applies to different
users. The pricing chain in the water sector, as depicted in Figure 8, consists of charges at different
stages in the value chain that accumulate to the end consumer’s tariff. The DWS sets its raw water
price in terms of the National Water Act, No. 36 of 1998 and national pricing strategy for raw water use
charges. Water Boards set bulk water prices in terms of the Water Services Act, No. 108. of 1997 and
prices are approved by the DWS. Municipal tariffs are then determined and set by local councils in
terms of local tariff policy which must comply with nationally defined terms.25
25 Department of Water and Sanitation. 2017. Water Services Tariffs: A National Assessment of Water Services Tariffs from
Source to Tap and Return Flows to Source
DEPARTMENTS AND AGENCIES SUPPORT PROGRAMME FOR SMME’s
DEPARTMENT OF SMALL
BUSINESS (DSB)
DEPARTMENT OF TRADE AND
INDUSTRY (dti)
DEPARTMENT OF SCIENCE &
TECHNOLOGY (DST)
GAUTENG ENTERPRISE
PROPELLER (GEP)
THE INNOVATION HUB
MANAGEMENT COMPANY (TIHMC)
SMALL ENTERPRISE
DEVELOPMENT AGENCY (SEDA)
SMALL ENTERPRISE FINANCE
AGENCY (SEFA)
The Department of Small Business (DSB) is a relatively new department and has been
in operation since 2014. The DSB provides the following programmes to support small
businesses: Black Business Supplier Development Programme (BBSDP), Co-
operative Incentive Scheme (CIS) and the Shared Economic Infrastructure Facility
(SEIF).
The dti provides a range of support programmes for SMME’s, as follows: Incubation
Support Programme (ISP), SEDA Technology Programme (in conjunction with SEDA),
Strategic Partnership Programme (SPP), Support Programme for Industrial Innovation
(SPII) and Technology & Human Resource for Industry Programme (THRIP).
The DST, in partnership with the Water Research Commission (WRC), runs the Water
Technologies Demonstration Programme (WADER). WADER provides some financial
support for demonstration projects, access to information on technologies, business
support and advice from entrepreneurs.
GEP provides support to SMME’s in Gauteng. The support provided includes: financial
support for start-ups, personalized services, business solutions, business planning and
post investment support.
TIHMC is a wholly-owned subsidiary of the Gauteng Growth and Development Agency
(GGDA). TIHMC operates a range of enterprise development, skills development and
innovation enabling programmes both in the science park and throughout the Gauteng
region. Some of the applicable programmes include: various business incubators, the
GAP Innovation Competition and CoachLAB Green.
SEDA is an Agency of the Department of Small Business. SEDA’s mission is to
develop, support and promote small enterprises throughout the country. SEDA runs
enterprise development and incubation programmes.
SEFA is a wholly-owned subsidiary of the Industrial Development Corporation (IDC)
and provides financial support through a hybrid of wholesale and direct lending
channels, as well as creating strategic partnerships and providing support to SMME’s.
DEPARTMENT OF WATER
AND SANITATION (DWS)
The DWS started the War on Leaks initiative in 2015 as a means of addressing water
losses countrywide. The initiative aims to create jobs in the water and sanitation
industry over a period of five years. Johannesburg Water has adapted to the initiative
by starting a project aimed at reducing water loss in schools in the city. The initiative
seeks to capacitate SMMEs to work on an as and when needed basis.

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Figure 8: Water Pricing Chain
Source: Water Services Tariffs A National Assessment of Water Services Tariffs from Source to Tap and Return Flows to
Source; Department of Water and Sanitation, 2016
In the Gauteng region, pricing of water to end users is governed by a tariff schedule that applies a basic
(subsidised price) for low volume users and progressively higher rates for larger users. Tariffs are
anticipated to rise in real terms to incentivise heavy users to implement policies and solutions that
reduce their water demand and promote water use efficiency, and to generate additional revenues to
allow water service providers to reduce the infrastructure backlog already described.
Rising tariffs are anticipated to drive the demand for better water management solutions from private
sector providers and generate the margins to support investment in the businesses that provide these
solutions.

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6. PRIVATE SECTOR PARTICIPATION IN THE SECTOR
Addressing the forecasted shortage of water will require investment, innovation and behaviour
change across the water and sanitation value chain. The private sector, and SMME’s will have
an opportunity to play a role in introducing technology and water efficiency solutions.
6.1. Water & Sanitation Value Chain
The water and sanitation value chain consists of five tiers (as illustrated below): 1. natural water
resources; 2. bulk storage, transfer & supply; 3. water treatment; 4. water use; and 5. wastewater
treatment and reuse.26 Although the private sector operates across all the tiers of the value chain, the
two upstream tiers (natural water resources and bulk storage, transfer & supply) lend themselves to
participation of large companies that are mostly large engineering process and construction firms,
supported by engineering consultants. Given that bulk water projects are large projects that require
significant initial capital investment and management functionality this space is dominated by large
engineering firms who specialise in providing design and engineering services. Natural entry points for
SMME’s in the sector include water treatment, water use and wastewater treatment & reuse, where the
key public sector clients include water boards and municipalities.
Figure 9: Water Value Chain & Entry Points for SMME’s
Source: Author’s illustration
From the three tiers where SMME services would be best-placed, the table below provides a summary
of the types of services that could be offered, the potential public and private sector clients as well as
some of the existing companies that already provide services in the space. The existing companies
tend to provide services that span across the three tiers, often incorporating water treatment
technologies, metering and efficiency solutions as well as wastewater treatment and reuse.
26 Strategic Overview of the Water Sector in South Africa 2018, Department of Water and Sanitation

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Table 2: Assessing the Market for SMME’s
6.2. Business Opportunities in the Sector
Based on market consultations and input from sector experts, there are four principle areas of
opportunity for the private sector to contribute towards addressing water scarcity. These include
water metering, wastewater reuse, water use efficiency and alternative water sources. These
opportunities are applicable for business to be undertaken with public and private sector clients.
6.2.1. Public Sector
Business opportunities for SMME’s in the public sector in Gauteng are most likely to be sourced from
the WSP’s which include: water boards; metropolitan municipalities; and local municipalities. The table
below assesses the relative size of each of these potential public sector clients in terms of the volume
of water that they provide and the area that they service. In addition, the share of their NRW and their
capital expenditure. These indicators provide information on where some of the opportunities for
SMME’s could come from within the public sector.

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Table 3: Potential Public Sector Clients
Source: SIV: National Water Services Knowledge System; NRW (%): Institutions Annual Report; Water & Sanitation Capital
Expenditure: Institutions Medium Term Revenue and Expenditure Framework, Annual Reports for Water Boards
Water Boards the opportunity at water board level will mostly be driven by Rand Water given the
relative size of this water board and its capital expenditure budget of over R2 billion for 2018/19.
Although Magalies Water does provide some Gauteng municipalities with bulk water, this is a very small
share and capital expenditure for 2017/18 was only R167 million.
Metropolitan municipalities all three of these potential clients service a large area and have the
largest population shares in the province of between 3 and 5 million people. NRW continues to be a
challenge, particularly for the CoJ and Ekurhuleni who have 38.4% and 33.5% in NRW respectively.
The combined capital budget for water and sanitation in 2018/19 is R2.3 billion.
Local municipalities service a relatively small surface area and only accounts for 11% of SIV,
however, there are many challenges at this level where SMME’s can play a role, particularly within the
area of smart metering, leak detection and maintenance of distribution infrastructure. The estimated
capital budget for water and sanitation for 2018/19 is R566 million.
The total capital budget for water and sanitation services in Gauteng for 2018/19 was R4.9 billion,
a subset of which could be unlocked by SMME’s for the provision of services and products for
the public sector. Given the large backlog in the maintenance of water and sanitation

23. 23
infrastructure of about R70 billion nationally27
, the potential opportunities for SMME’s is even
larger than the current budget. 28
Municipalities may represent a good entry point for SMME businesses but there are real challenges at
the municipal level for SMME’s to introduce innovative solutions. Given the large area and populations
served by municipalities, SMME’s can also unlock economies of scale by selling services and products
to municipalities. However, it is important to note that there are numerous challenges involved with
working with the water boards and municipalities. In particular, procurement procedures are relatively
onerous and the level of red tape involved with procurement, contracting and delivering on projects is
a significant barrier to entry. More information on these challenges is presented in Section 6.
6.2.2. Private Sector
The World Economic Forum (“WEF”) has identified water crises as one of the top five potential risks
globally.29 Over the last decade, water scarcity has become increasingly topical and is now at the
forefront of the issues discussed at board level for many large companies. As water scarcity increases
and the price of water increases accordingly, so does the demand for water efficiency devices and re-
use.
Given the challenges of doing business with the public sector, many SMME’s have diversified their
business away from reliance on the public sector and towards providing services and products to the
private sector.
Some of the key private sector clients that could provide business opportunities include water-intensive
businesses who are vulnerable to potential water shortages and variance in water supply. Supplying
services to upstream businesses (manufacturers of water efficient technology as an example) as well
as downstream businesses (treatment of waste and reuse of water) are also potential opportunities.
These clients operate across the economic value chain and across a number of industries.
Figure 10: Economic Value Chain and Potential Private Sector Clients
Primary Sector activities involve the extraction of raw materials. The sector is water intensive and
faces challenges related to the constant supply of water and treatment of wastewater once
27 Department of Water and Sanitation. 2018. National Water & Sanitation Master Plan, Volume 2 – Version 3
28 Under the Preferential Procurement Policy Framework Act 30% may already be allocated to SMMEs
29 World Economic Forum. 2019. Global Risks Report. http://www3.weforum.org/docs/WEF_Global_Risks_Report_2019.pdf

24. 24
contaminated. The mining industry is an example of a water-intensive industry in Gauteng. Nationally,
mining activities account for 2% of total water use.
Secondary Sector this sector typically involves the processing of raw materials into finished products,
this sector is dominated by manufacturing. Manufacturing processes often require large amounts of
water. The water also, often, needs to be provided at a certain quality. Challenges faced by companies
in the secondary sector, therefore, relates to the constant and/or assured supply of quality water and
the treatment of wastewater. Examples of water-intensive industries in the tertiary sector include:
chemicals; manufacturing of food and beverages; and construction and engineering. Nationally,
industrial activities account for 3% of total water use. 30
Tertiary Sector industries provide finished goods and services to the economy. As the Gauteng
province is dominated by business activity in the tertiary sector, the sector is a large consumer of water
through its backward linkages in its supply chain. Industries with high volumes of water use include:
health care; hotels and hospitality; and retail.
Across the private sector value chain, the need for water is an important input to ensure operations
continue. The increasing price of water and the need for the assured supply of water will drive demand
for services and devices that improve water use and minimise losses. Further, once used, the water is
often required to be discharged at a certain quality and this presents an opportunity for innovative
technology to treat the wastewater and minimal cost.
30 Figure 1 presents Mining and Bulk Industrial as 6%, Figures presented for water use in the Primary and Secondary Sector
sum to 5% due to rounding.

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7. CHALLENGES FOR SMME’S
The challenge of water scarcity is a key driver for opportunities for SMME’s to provide services
in the sector. As water shortages loom there is an increasing demand for services to increase
the efficient use of existing water resources, as well as expanding supply to alternative sources
such as rainwater harvesting.
Challenges for SMME’s within the water and sanitation sector are outlined below.
7.1. Difficulty in testing and prototyping new technology
Having technology solutions that are “proven” in the market is often a market entry requirement.
Municipalities require that technologies be tested and demonstrated. There is currently no
standardisation and certification process for such devices/solutions. The Water Research Commission
(“WRC”) together with the Department of Trade and Industry (“dti”) and the Department of Science and
Technology (“DST”) are all running innovation programmes (refer to Section 4.3. for examples of such
programmes) to incentivise innovation, however, there is a lack of one national co-ordinated approach
to certifying new technologies.
7.2. A lack of institutional frameworks that incentivise water
efficiency
Municipal by-laws and national building standards (as outlined above) that incentivise the efficient use
of water have not yet been developed. Therefore, there is no standard specification for water efficiency
devices and products. However, some countries have set standards for efficiencies e.g. in the USA,
codes and standards are set under the National Energy Policy Act of 1992 (EP Act 92) which sets
maximum water consumption standards for showerheads, faucets, urinals, and toilets.31
7.3. Doing business with municipalities
Municipal procurement procedures are often onerous and involve a lot of red tape. This is necessitated
by legislation such as the MFMA. This is costly and time consuming for SMME’s and is often a deterrent
to working with municipalities.
The WADER programme, a partnership between the Department of Science and Technology (“DST”)
and the WRC, provides some facilitation between SMME’s and municipalities through their support in
creating demonstration projects that are implemented at municipal level.
7.4. Taking a product from conception to market
The process of taking a product from conception through to launch is a complex procedure that requires
a wide variety of skills; from design of the product through to marketing and promotion. Launching an
innovative product further increases the complexity due to a lack of proof of concept in the market. As
31 http://www.allianceforwaterefficiency.org/codes_and_standards_home_page.aspx

26. 26
such, SMMEs require a range of support (for example: access to funding, technical knowledge, and
business mentoring) in their mission to launch their product.
The Innovation Hub, an agency of the province’s economic development department is
mandated to nurture and support innovative technologies developed locally, in a bid to improve
the region’s economic growth as well as efficiency. Technology start-ups are supported via
various programmes, including: mentorship, networking opportunities, market intelligence (this
report forms part of this effort) and a small amount of grant funding – albeit extremely
competitive and widely sought after.
An introduction by TIHMC to e.g. the National Cleaner Production Centre hosted by the Council for
Scientific and Industrial Research (“CSIR”) and funded by the dti, may lend support to SMME’s to
promote the implementation of resource efficiency devices e.g. lower use of water. TIHMC could make
it easier for SMME’s to achieve certification and accreditation by facilitating better access to entities like
the National Cleaner Production Centre (“NCPC”) or National Bureau of Standards.

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8. OPPORTUNITIES FOR SMME’S
8.1. Water Metering
Industrial users: there are opportunities to provide smart water meters that allow for monitoring of
water use and leak detection. This service/product offering allows the private sector who are large
consumers of water and property developers/owners to carefully monitor their water consumption. The
market for smart metering globally, and in South Africa, has grown in the last decade, with forecasts
indicating that global smart meter shipments will more than double in size by the end of 2024.32 As
water scarcity increases, the need to self-manage water consumption will also provide further growth
in demand for smart metering.
A barrier to entry for this product offering is the initial capital cost required to install such
systems. As an example, for a medium-sized manufacturing facility the capital cost of
implementing smart metering technology was R 156,000. 33This means that the initial market is
limited to are large water users and have an incentive to guard against the mis-management of
water consumption, physical water leaks and incorrect billing from municipalities.
Municipalities: Water metering solutions at the municipal level also presents a significant opportunity.
Municipalities are faced with the challenge of Non-Revenue Water (“NRW”) which comprises of physical
water losses that arise through theft and leaks, as well as errors in billing systems, unmetered/illegal
connections. NRW for South Africa is estimated at 41%, which equates to a loss in revenue of R6.3
billion per annum, roughly 40,000 RDP houses. 34 The Gauteng average for NRW is 35.9%, equating
to a revenue loss of R2 billion per annum.35 The returns to the water balance & the municipalities from
addressing this challenge are significant. However, SMME’s will nonetheless face the same barriers
to entry for doing business with municipalities, listed above
8.2. Wastewater Reuse & Treatment
Industrial users: Water-intensive industrial producers who generate large amounts of effluent have
increasingly expressed interest in reducing their production costs by treating and re-using their own
effluent in order to reduce their costs for purchasing potable water from the municipality and/or reducing
the cost of disposal of their own effluent. This presents an opportunity for SMME’s who focus on
wastewater treatment technologies.
A significant barrier to entry is the significant cost involved for the industrial users in setting up
wastewater treatment plants. An indicative cost is R 10 million capital cost for a sewage
treatment works treating 1 ML per day (capable of serving 5000 people). 36
Municipalities: this represents a potentially large market for SMME’s because municipalities currently
discharge a large amount of wastewater into water bodies. Water shortages can be reduced significantly
32 Green Building Africa; Smart Water Meters on the Rise Globally, 2019
33 Green Cape, Water 2019 Market Intelligence Report
34 Average cost of building an RDP House – R 155,000, source: Daily Dispatch, “Time to Sort Out the Shambles”, 2018
35 Department of Water and Sanitation (DWS) and Strategic Water Partners Network (SWPN) 2015b 2015 No Drop Report –
The status of water loss, water use efficiency and non-revenue water in metropolitan municipalities.
36
Department of Water and Sanitation, “Cost Benchmark for Water Services Projects”, 2016

28. 28
if water supply is augmented by treating wastewater to potable standard and feeding it back into the
municipal distribution network. SMME’s can play a role in providing technological solutions for
wastewater treatment as well as for the re-use of the by-products that are produced in the treatment
process i.e. sludge and brine. There are a number of SMME’s who provide wastewater treatment
solutions and reuse by-products. To, initially, improve their service offering and chances of municipal
procurement SMME’s may choose to partner with larger companies already providing services to
municipalities. To facilitate these partnerships, a forum of SMMEs could be established. This forum
could provide larger companies with access to SMMEs providing services they require and allow
SMMEs to showcase their services.
Further possibilities, related to the treatment of wastewater, could relate to the recovery of resources
from wastewater, an example of which is the recovery of urea which could be used to produce fertilizer.
37
A barrier to entry for both industrial users and municipalities is the SMME having to provide
“proof of concept” for the reliability of their treatment technologies. This stems from the
perceived risk of being the “first mover” in implementing a new technology leading to a
reluctance for engineering consultants to suggest new technologies or for municipalities to
adopt new technologies. In addition, for municipalities in particular, the onerous procurement
procedures and red tape involved in contracting and delivering services is also a constraint.
8.3. Water Use Efficiency
As water scarcity increases there will be an increase in the demand for devices that increase water use
efficiency. Some of these devices include, for example, waterless toilets, water-efficient shower heads
and tap fittings etc. There is significant scope to increase the development and deployment of
technology that improves water use. Demand for such devices will flow from the increase in prices that
the municipalities are anticipated to implement to reduce household demand. Figure 11 presents the
historical tariffs for residential water in Gauteng for various consumption brackets. The increasing
trajectory across all the brackets is clear.
37 GreenBiz, “Wastewater is an asset, with nutrients, energy and precious metals — and scientists are learning how to recover
them”, 2019

29. 29
Figure 11: Gauteng, Residential Water Tariff Trajectory
Source: National Water Services Knowledge System
A barrier to entry for such rollout is for SMME’s to achieve economies of scale in providing these
devices to a large enough market that would reduce the cost of production and make such devices
affordable to a wider portion of the market – moving them away from being ‘premium products’. These
devices would need to be provided directly to property developers and households through wholesalers
and retailers
8.4. Alternative Water Sources
Expanding water resources beyond the use of traditional surface water resources will be crucial for
reducing water demand and stress on the limited surface water supply in South Africa. This will reduce
reliance on costly water distribution networks and empower businesses and households to become
more self-reliant, essentially moving “off the grid”.
Rainwater harvesting at the business and household level will create additional storage capacity
enabling the capture and storage of rainwater during rainy seasons, which can then be used during the
dry season. This is also a solution that ensures the re-use of water that would otherwise end up in storm
water drains that feed into the municipal wastewater treatment system that has a treatment cost born
by the municipality. SMME’s can create devices for collection such as water storage tanks, gutter and
drainage systems and small-scale distribution within commercial and residential properties, as well as
for individual households.
A barrier to entry is the scale at which rainwater harvesting is expected to occur. At the business
and household level SMMEs would need to target individual households or businesses to sell

30. 30
their solutions, this would pose a challenge to achieving economies of scale potentially needed
to make a venture profitable.

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9. MARKET SIZING THE OPPORTUNITY FOR THE SMME SECTOR
With the impending water deficit of 12%, there are a range of business opportunities for SMME’s
to either enter the market, or to expand their existing service and product offerings. Quantifying
the potential opportunities will provide a basis for SMME’s to focus their strategic direction and
enable targeted business development.
9.1. Market Sizing for Opportunities in the Public Sector
Although there are many challenges associated with doing business with municipalities, they are a
major purchaser and supplier of water and sanitation services. Therefore, the public sector represents
a range of opportunities for SMME’s and numerous points of entry.
Table 4: Potential Size of the Public Sector Market for SMME’s in Gauteng38
Source: MTREF’s for metropolitan municipalities (2019/20 for COJ and Ekurhuleni, 2018/19 for COT), Preferential Procurement
Act of 2017 and authors’ calculation
From the above analysis, the total potential market for SMME’s from the three metropolitan
municipalities in Gauteng is over R 1.8 billion. Extrapolating this estimation to the remaining local
38 Estimation of the market size for the public sector is undertaken using the detailed budgets contained within the Medium-Term
Revenue and Expenditure Frameworks (MTREF’s) for the metropolitan municipalities. Given that the three metropolitan
municipalities account for 88% of SIV in Gauteng, the market sizing for the remaining local municipalities was extrapolated based
on the data for the metropolitan municipalities.

32. 32
municipalities in Gauteng, the total potential market for SMME’s in the public sector is R 2.1 billion,
of which R1.3 million and R882 million are from the capital and operating budgets respectively.39
This estimate of market size is based on the budgeted per annum expenditure by the municipalities of
Gauteng on the procurement and provision of water services. The figure serves as an estimate of the
market size for SMME’s and will change based on changes to municipal budgets as well as the actual
services procured.
9.2. Market Sizing for Opportunities in the Private Sector
Opportunities for SMME’s within the private sector include the provision of goods and services to:
● Water-intensive businesses: this client base consists of large businesses who are either
directly vulnerable to the risks of water scarcity as their production processes use large volumes
of water, and/or companies that have exposure to risks through their supply chain. Additionally,
companies whose shareholders or clients expect some level of environmental responsibility –
who are therefore incentivized to reduce their environmental footprint, including their water
footprint.
● Domestic market: this client base is at the level of the household. Although the domestic
market provides a market for water saving, water efficiency devices and unique sanitation
solutions, this market is fragmented and represents a challenge in terms of achieving scale. In
order for SMME’s to tap into this opportunity they would need to enter this market at the level
of wholesale and retail in order to get their products to market in a scalable way.
Estimating the market size from the private sector is targeted at business that could come from water-
intensive companies. The marketing sizing is based on the financial impact of water-related risks for
145 large listed companies who reported their exposure to water-related risks through the Carbon
Disclosure Project (CDP). In 2016, the CDP conducted a survey of the detrimental impacts companies
experienced as a result of water challenges. 40 41
39 Of the potential private sector market, it has been assumed that SMME’s will have access to 30% of the market. This
assumption is based on the Preferential Procurement Act of 2017, which requires public sector tenders to include 30%
subcontracting to SMME’s, as defined in the Act.
40 Source: https://data.cdp.net/Companies/2016-Water-impacts-experienced-by-companies/uwiu-u3yu. Given the CDP data,
companies that operated within South Africa were investigated. The service areas of the companies are defined according to
water management areas. Companies with operations in the: Limpopo, Vaal, and Olifants water management areas were
chosen and their impacts represented. The financial impact that the companies experienced were aggregated to provide a
proxy for the potential private sector market size.
41 The CDP, a not-for-profit charity runs a disclosure system for investors, companies and cities to manage their environmental
impact. Through their water program, CDP targets the largest listed companies in the world, as determined by market
capitalisation, in sectors which water is a material issue to determine the challenges those companies face with relation to water.

33. 33
Table 5: Potential Size of the Private Sector Market for SMME’s in Gauteng
Source: Authors calculation based on CDP data
The financial impacts provided by the companies within the CDP survey are used as a proxy for the
potential budget of the private sector to spend on water and sanitation services. For 2016, this
amounted to R 238 million which is indicative of the potential market size for SMME’s. It is
important to note that this is a lower bound estimate as it is based on the water-related
expenditure for only the large listed companies included within the CDP survey. In reality there
is a wider range of potential private sector clients that SMME’s could tap into for further business
opportunities, including equipment suppliers and construction firms.

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10. RECOMMENDATIONS TO UNLOCK OPPORTUNITIES
There are multiple opportunities for SMMEs in the Water and Sanitation Sector in Gauteng. However,
accessing these opportunities are not without their challenges. Recommendations to assist in unlocking
the potential markets for SMMEs are presented below.
10.1. Development of an Institutional Framework to Incentivise
Water Efficiency
With municipalities and water intensive industries forming the largest part of the potential market for
SMMEs, incentivising those entities to improve water efficiency will increase the uptake of water efficient
devices.
While municipalities and some water intensive companies have done well in improving their water
efficiency, further encouragement is needed to increase these efforts. This could be done through the
establishment of municipal by-laws and building standards that require new developments to install
devices that achieve a certain level of water efficiency or even the imposition of penalties for wastage
(i.e. leaks) or higher tariff setting.
10.2. Standardisation of Certification of New Water Technology
Given the costs involved in adopting a new technology, particularly if the costs are high, there is often
hesitation to implement the technology as the implementer is uncertain if the benefits will be realised.
The case for new technology in the water and sanitation sector is no different. Companies and
municipalities, including the engineering consultants providing the advice, are often hesitant to be the
first adopter of any technology and face the risk of the technology not working as promised. There is
thus an incentive to hold off on adoption until the technology has been proven.
To combat this challenge, it is recommended that an accelerated standard testing and certification
procedure be developed for new water technology. Once a technology has a seal of approval, uptake
will be increased as the risk to the implementer is lowered.
WADER has provided a similar platform for the proof of concept of a technology, but it could be
beneficial to create a formalised standardisation and certification process.
10.3. Increased Awareness of Support Systems for SMMEs
With the challenges SMMEs face in entering the water and sanitation market, the development of a new
product or procedure is only part of the process to break into the market. SMMEs may require
assistance during and post the development of their product to bring it to market. This assistance could
take the form of: securing funding, market identification and assessment, assistance navigating the
regulatory environment, and facilitating access to larger firms.
There are numerous support programmes available to SMMEs seeking to enter the water and sanitation
sector (examples of which are provided in this report), however, increased awareness is needed to
ensure that SMMEs are connected to the support they require.

35. 35
This Report provides a first step in increasing awareness but further work should be done to establish
a platform highlighting the avenues and support available to SMMEs.
10.4. Form Partnerships with Larger Firms
A challenge for municipalities in contracting SMMEs is a lack of confidence in their ability to deliver.
This is related to the challenges surrounding proof of concept of a new technology. A sad reality is that
new entrants to a market will always face doubts regarding their capability until proven otherwise.
A recommendation to SMMEs, therefore, is to partner with established firms in the market they are
seeking to enter. This will serve the dual purpose of increasing their chances of procuring work and
providing an opportunity to refine and improve their service offering. Legislation surrounding the
preferential procurement of SMMEs will provide the incentives for larger firms to contact SMMEs where
possible.

36. 36
11. CONCLUSION
This study has provided an assessment of the water and sanitation sector in the GCR in order to foster
entrepreneurship, innovation and growth by identifying challenges and opportunities for SMME’s in
order to enhance economic growth and build a resilient economy.
South Africa will have a negative water balance of 12% by 2020 and without policy changes this
imbalance will worsen overtime. As the key driving force of the South African economy, Gauteng will
be significantly impacted by, and contribute to, this forecasted shortage. Gauteng accounts for 43% of
the SIV in South Africa, and provides access to clean drinking water and sanitation services, at an
aggregate level, to 93% and 84% of its households respectively. Water demand in Gauteng is expected
to increase due to high levels of population growth as people migrate to the province in search of
economic opportunities. Challenges related to climate change and failing infrastructure are further
expected to contribute to the forecasted shortage.
The challenge of water scarcity is a key driver of opportunities for SMME’s to provide services in the
water and sanitation sector. As water shortages loom there is an increasing demand for services to
increase the efficient use of existing water resources, as well as expanding supply to alternative sources
such as rainwater harvesting. These opportunities for SMMEs occur primarily in the later stages of the
water value chain, as the earlier stages are dominated by entities legislated to provide services and
large companies able to afford the high capital costs needed to complete projects typical of those tiers.
Despite the opportunities, SMMEs face challenges accessing the market. Some of the challenges
associated with SMME’s working in the sector include: difficulty in testing and prototyping new
technology; a lack of institutional frameworks that incentivise water efficiency; the difficulties in doing
business with municipalities due to procurement regulations and inertia in adopting new technologies,
and taking a product from conception to market. Understanding that there are challenges in accessing
the market, opportunities have been identified that could serve as entry points for SMMEs.
Based on market consultations and input from sector experts, there are four principle areas of
opportunity for SMMEs to contribute towards addressing water scarcity. These include:
• water metering;
• wastewater reuse and metering;
• water use efficiency;
• alternative water sources.
These opportunities are applicable for business to be undertaken with public and private sector clients.
The size of the potential market for SMME’s is estimated at R2.1 billion and R238 million for business
opportunities in the public and private sector respectively.
Given the opportunities and related challenges, recommendations have been developed that, if
implemented, could help to unlock the opportunities for SMMEs. These include:
• Development of an institutional framework to incentivise water efficiency and the uptake of
water efficient devices;

37. 37
• Standardisation of certification of new water technologies to lower risks associated with
adopting new technologies;
• Increased awareness of support systems for SMMEs seeking to enter the water and sanitation
market ensuring they are aware of support available should it be required; and
• SMMEs forming partnerships with established companies to increase their chances of securing
work and providing a chance to improve their service offering.
The challenges faced by SMMEs entering the water and sanitation market are diverse and require
concerted efforts to solve. However, the potential benefits to be gained by doing so will unlock significant
value, not only in terms of direct water security but also through increased economic growth and
employment. The need for action is, therefore, clearly established.
To facilitate this action, the following steps are recommended:
• Dissemination of this Report to obtain inputs/comment through forums and workshops to
assess the applicability of the identified challenges and recommendations;
• Conduct further, detailed studies, on specific sectors to fully understand the challenges;
• Development of a strategy to rank and prioritise the implementation of support required; and
• Establishment of a water forum to enhance networking and accessibility between SMMEs and
large companies.

38. Physical Address: Mark Shuttleworth Street,
The Innovation Hub, Pretoria, South Africa, 0087
Tel: +27 12 844 0000
Web: www.theinnovationhub.com
InnovHubZA InnovHub @InnovHub
The Innovation Hub is a subsidiary of the Gauteng Growth & Development Agency, an
agency of the Gauteng Department of Economic Development.