Realising the Green Climate Fund’s vision for water security

South Africa’s Water Reuse Programme, a U.S. $ 1.5 billion project developed in partnership with the Green Climate Fund (GCF), the Development Bank of Southern Africa (DBSA) and others seeks to overhaul the country’s wastewater system and reuse treated wastewater as a response to increasing demand for the resource. Southern Africa is one of the most vulnerable regions in the world to climate change, and many of the impacts such as droughts, floods and tropical cyclones are felt in the water sector. The government's National Adaptation Plan stresses the need for enhanced water efficiency as water usage already exceeds reliable yields in a time when the predictability and reliability of the water cycle is declining.

The programme represents an innovation in finance for water: although the UN 2023 Water Conference highlighted a funding gap in the water sector, the Green Climate Fund (GCF) argues that climate finance can help bridge the funding gap in the water sector and encourage private sector investment. According to GCF, through their call to action for climate and water initiatives, this requires a combination between research, clear allocation of roles, and the treatment of water as a new asset class. It is the latter that represents the real innovation: treating water as a separate asset class worthy of leveraging investment, recognising the potential for growth by reusing wastewater and at the same time addressing a critical environmental challenge.

The South African Water Reuse Programme will identify a series of pilot areas for ‘water transitions’ A co-investment platform is envisaged which will operate as a coordinating and executing entity for the programme, developing a pipeline of projects that fall under the heading of ‘water asset transitions for reuse’. The GCF itself is contributing $ 235 million towards the overall investment, which represents the first time that the organization has engaged at this scale within a single country’s water programme. The GCF sees its investment as a catalyst, which reduces risk exposure for private financiers and municipalities. The investment platform will oversee three separate clusters of activity for water reuse: pipeline development, capacity development, and blended finance.

Firstly, a 60-million-dollar grant will ensure project preparation support to help municipal water reuse project to advance to a bankable stage. Municipalities will be supported in the identification, preparation, and structuring of bankable proposals. Secondly, a 5-million-dollar grant will go towards education to ensure capacity building and information communication. And thirdly, a 1,4-billion-dollar blended finance facility will address market constraints and catalyse climate related water reuse investments, thus creating a new asset class around reuse infrastructure in South Africa.

With the approval of the GCF board in July 2023, the vision of the GCF is to propagate the concept to other countries and regions to increase the bankability and affordability of water projects. The GCF explicitly extends an invitation to other stakeholders in the water sector to collaborate and co-invest to accelerate the implementation of the Water Action Agenda.