Water utility creditworthiness: Reduce leaks, secure future

Operational efficiency, particularly in the reduction of water losses, is the fundamental driver of a water utility's financial credibility and ability to grow.

This critical insight highlights that the path to financial sustainability for water utilities lies as much in managing physical infrastructure as it does in balancing the ledger, with significant potential for job creation. "Operational efficiency is a prerequisite for financial credibility" is emerging as the new mantra for water security in Southern Africa.

A key concept in this is non-revenue water, which refers to the volume of water that has been produced and is lost before it reaches the customer, whether through physical leaks in the distribution network, including illegal connections, or through commercial losses like unbilled consumption. 

The "Aha!" Moment: Efficiency Drives Credit

The most striking takeaway from the workshop was the undeniable link between operational efficiency and financial credibility. Utilities with low non-revenue water rates consistently achieve high creditworthiness scores, while those with high non-revenue water rates score low. The message is clear: if a utility seeks to borrow from commercial lenders to expand its services, it must first address these leaks, both physical and financial. This assessment is often made using tools like WaterCred, which allows utilities to self-assess their creditworthiness based on various metrics, including non-revenue water performance.

This crucial connection between operational efficiency and financial health was a central theme of a specialized training program on water utility creditworthiness, WaterCred, and non-revenue water performance-based contracting held in Pretoria, South Africa, from March 2–5, 2026. 

This workshop, supported by the Global Water Security and Sanitation Partnership and The Coca Cola Foundation, convened over 70 representatives from 18 water service providers across five Southern African countries to develop a roadmap for regional reform.

Financial Sustainability and Job Creation: The Impact of Reducing Water Losses

Non-revenue water presents a daunting challenge, with all participating utilities reporting levels above 45%. However, the potential for improvement is substantial:

• Significant Water Savings and Service Enhancement: By implementing performance-based contracting models, five utilities mapped out a plan to reduce non-revenue water to an interim target of 35%. This reduction could save 31 million cubic meters of water annually, enough to serve 1 million people. This directly translates into enhanced water security and improved service delivery for communities.
• Substantial Financial Gains: The aggregate financial savings from this non-revenue water reduction across these five utilities is estimated at US$57 million per year.
• Job Creation and Economic Development: These financial savings are not merely figures; they represent a powerful opportunity for economic growth. 
  • Reinvestment in Infrastructure: The US$57 million in annual savings can be reinvested in infrastructure expansion, which inherently generates employment across engineering, construction, operations, and maintenance sectors.
  • Private Sector Engagement: The shift toward performance-based contracting models creates demand for specialized private sector engagement and expertise in areas like non-revenue water diagnostics, leak detection, meter management, and financial auditing, supporting a growing ecosystem of professional service providers and small contractors.
  • "Bankable Institutions" and Large-Scale Projects: The broader effort to make utilities "bankable institutions" capable of accessing commercial capital markets unlocks the possibility of large-scale service expansion. Such projects require labor-intensive construction workforces, and sustained utility operations demand ongoing staffing, leading to durable employment, especially in regions with significant infrastructure gaps. For instance, Eswatini Water Services Corporation has successfully used commercial financing four times to fund such expansion.

The Way Forward 

Key lessons emerged from the workshop, offering transferable insights for utilities globally:

• Institutional Frameworks Matter: Structural hurdles, such as the lack of "ring-fencing"—separating utility finances from municipal accounts—in some regions like South Africa, can significantly impede the attraction of private investment. Establishing clear financial independence is crucial.
• Accessing Capital is Achievable: Utilities can become "bankable." Botswana, for example, is recognized for its history of bond issuance, demonstrating that publicly owned utilities can successfully tap into capital markets. Eswatini has consistently accessed commercial finance to fund service expansion.
• The Power of Integration: The most effective approach is "back-to-back" training, linking technical non-revenue water management directly with financial creditworthiness. This approach shifts the focus from simply "fixing pipes" to "building bankable institutions." Future success depends on ensuring both finance and technical decision-makers collaborate effectively, speaking the same language to promote real reform.