Siza Water Company Pty.

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The local government awarded a 30-year concession for the management of the supply of water and waste water services in the Dolphin Coast, South Africa, to Siza Water Company in April 1999. The contract was awarded in competition with two other French multinationals: Vivendi and Suez. The service area included the borough north of Durban where Ballito, Chaka's Rock, Salt Rock, Uhlali, Sheffield Beach are found, as well as the Dolphin Coast municipal area. The total population to be served was 56,000. The municipality chose to involve private sector participation partly as a result of projections in developmental growth and also because they lacked the money to upgrade the existing bulk water and sanitation infrastructure, which was in a poor state. Siza Water Company was initially led by Bouygues Group’s former subsidiary Saur (58%), Metropolitan Life Ltd. (23%), Women’s Development Bank Investment Holdings (5%), the Investment Progress Group Holdings (IPG) (5%), and NANO Investment Holdings (Pty) Ltd (5%). In February 2005, Bouygues sold its water sector arm, Saur, to PAI Partners (a private French equity firm). However, the sale did not include Saur’s African and Italian interests, which was retained by Bouygues. On May 3, 2007, Cascal (subsidary of Biwater) acquired a 73.4% interest in Siza Water. They acquired 58.4% of the shares from Finagestion, a subsidiary of the French group Bouygues, and 15% of the shares from the Women’s Development Bank Investment Holdings (5%), the Investment Progress Group Holdings (IPG) (5%), and NANO Investment Holdings (Pty) Ltd (5%). The private concession was to provide new investments in water infrastructure of approximately US$40 million (R200 million in 1997) over the 30 year life of the contract. Siza was also required to send out bills on time and improve repayment collections up to 97%. The Council was to receive R2.6 million annually (approx. US$425,000) for the first 17 years of the lease of the assets. Financing was arranged through equity contributions from the stake holders and debt financing through local commercial banks. The contract was expected to generate a turnover of US$5 million/year for Siza Water. In April 2001, Siza Water claimed they were unable to pay the annual concession fee to the Dolphin Coast Council of R3.6 million. Siza Water claimed that the expected development of the area (i.e. market size) had fallen short of expectations and that the cost of water charged by the bulk supplier increased by 20%. When the contract was renegotiated, the concession payments were halved until 2006, investment commitments were lowered and a tariff increase of 37% was accepted. According to the South African Institute of International Affairs (SAIIA), the concession was regarded as a partial success in that water and sanitation targets in the wealthier areas had been achieved. However, targets in the poorer areas had not all been met as of 2003. None