Africa-Press – South-Africa. South African companies and households are forced to pay for government services, which are often unreliable and of poor quality, as well as invest in private-sector alternatives for these services.
This includes water, electricity, waste removal, security, education, and healthcare – services the government is constitutionally obligated to provide.
Investec Corporate and Investment Banking’s head of infrastructure, Bukiwe Pantshi, explained that, in response to government failures to provide water services, in particular, businesses have had to step up and provide their own.
“Companies increasingly self-provision by drilling boreholes, installing filtration systems and expanding storage capacity,” she said.
While understandable, Pantshi said this is not a national solution. “Businesses cannot and should not replace the government’s constitutional duty to deliver basic services,” she said.
She pointed out that this is not only a problem because the government has a constitutional duty to provide these services, but also because outsourcing to the private sector widens South Africa’s inequality gap.
“This trend is widening the gap between those who can afford resilience and those who cannot,” she said.
“We saw the same phenomenon during the peak of the energy crisis – those who could afford to install solar systems did so out of necessity, while the rest of the citizens and businesses were left behind.”
Pantshi explained that, while the private sector can play a constructive role, this should be done in collaboration, not in competition, with the government.
She said it can only work within a framework that is “transparent, accountable and tied to measurable improvement”.
“Poorly structured partnerships risk enabling failing institutions to outsource responsibility without reforming governance or operations,” she said.
“But for such partnerships to work, municipalities must meet the private sector halfway with credible governance, clear rules and enforceable performance standards.”
The graph below, courtesy of Statistics South Africa, shows the decline in the use of public or government services between 2019 and 2022.
Companies stepping in to do the government’s job
Data from Statistics South Africa shows that the use of government or public services by those 16 years and older decreased significantly between 2019/20 and 2022/23.
Financial services firm PwC explained this trend in its South African Economic Outlook 2024, stating that the country’s public sector is overwhelmed and unable to deliver the quantity and quality of services it previously could.
While it is not a sustainable solution for every citizen, certain companies in South Africa have achieved significant success by filling gaps where government services are lacking.
For example, companies like Curro, STADIO and Advtech have boomed in recent years in response to a growing demand for private education services.
This demand has, in part, been driven by the deterioration of government-provided education, as South Africans continue to turn to the private sector for basic services.
In the security sector, private companies like Fidelity have also seen significant demand for their services, even expanding their offerings to provide firefighting services.
Similarly, private medical aid and other healthcare providers have reported consistent growth over the past decade.
Netcare, for example, recently reported that it plans to increase its capacity, which will include converting 36 existing beds into higher-demand disciplines and adding 53 new beds at established acute facilities where demand remains robust.
Even some of the most basic government services like water and electricity have increasingly attracted private players, with demand for rooftop solar installations and borehole drilling booming in recent years.
Allan Gray ESG analyst Raine Adams recently revealed that rooftop solar went from supplying just under 2.5 GW of electricity four years ago to 7.5 GW today.
In addition, Bloomberg reported that a pipeline of 13 GW of private generation capacity is expected to come online through 2029.
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