Jan 252012
 

Keeping an eye on a growing private sector footprint: Sembcorp acquires South Africa’s concessions and becomes one of the big five water and sanitation providers in Asia

Private sector acquisitions of water concessions in developing countries occur quietly through stock exchanges and negotiations amongst firms. Not only does this mean that the nature of the concessions that affect local peoples’ water are changing, but that the overall composition of the global private sector is changing—with potentially significant implications for its strength and our resistance.

A few months ago, a Singapore based firm called Sembcorp acquired New York-listed water firm Cascal, which ran Biwater’s concessions. This means that the contracts of the three concessions previously owned by Biwater/ Cascal in South Africa, Dolphin Coast and Nelspruit, will be renegotiated each contractual period by a different firm and the effectiveness of delivery by the concession could change, depending on any changes in management structure or use of income.

Globally this means that Sembcorp Industries is set to become one of Asia’s top five providers of water and wastewater services. Sembcorp expects the acquisition to help it venture into new markets such as South Africa and Latin America where Cascal already has a presence. It will also be able to increase its footprint in Britain and China while expanding into new markets such as Indonesia, the Philippines, Chile and Panama.

Sembcorp will have water and wastewater facilities in 31 operating locations in 11 countries around the world, serving industrial and municipal customers (more than half its turnover is presently from Singapore).

The conglomerate’s operating capacity in the water sector could increase by 50 percent as a result of this acquisition. Sembcorp CEO Mr Tang told The Straight Times that it would “transform Sembcorp into a global water service provider and provide the platform for the group to accelerate its growth in the future” (‘Sembcorp to buy water firm Cascal’, 27 April 2010).

A private sector water firm with increased reach and strength? We will need to keep an eye on Sembcorp.

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