Advice about opportunities in the water business

By Mike Muller

When people ask me about my work, I tell them that I have fun learning about other people’s interesting problems.

If people want more information, I say that I give advice, which leads to questions like “What do you give advice about?” That gives me a chance to tell the story about one of the worst pieces of advice that I have ever given. It was about rainwater tanks.

Australian academics have shown that rainwater tanks don’t really help to improve water supplies in urban areas. In cities like Sydney, water from rooftops was more expensive than tap water. What with air pollution and the bad habits of birds, it was sometimes dangerously polluted and not suitable for human consumption. Most important though, rainwater harvesting did not provide a reliable water supply.

That’s not surprising. Droughts cause water shortages because it’s not raining. If you go for six months without rain, a 5 000-litre rainwater tank will only supply a household for a month or two. And when there is water in the taps, you don’t need a tank.

So, when a few years ago, a South African investor asked me what I thought of the household water tank business, I wasn’t enthusiastic. Yes, they were useful in small towns (where municipalities are failing) and rural areas. But there was limited money in those areas. And, surely, there wasn’t going to be much demand in cities where water security was more or less guaranteed. I didn’t think it was much of a business.

About a year after that conversation, there was a small drought in Cape Town. Over the next few years, it became a really bad drought. And there were pictures of truckloads of plastic tanks on the N1 to Cape Town because local moulding factories couldn’t keep up with the demand.

Fortunately, my advice wasn’t taken. By the time it rained again, the company concerned had made a substantial profit for the investor. I didn’t mind. If the right answer depends on knowing what the weather is going to be, you are bound to be wrong most of the time. My advice comes without any warranty. I tell the story and the client is free to take the advice or ignore it. And I can either take the credit or just walk away.

But I can also tell stories about more useful advice. One consistent success has been with people who think that they sell a new product or service into the municipal water sector. I warn them that they will be dealing with over 200 difficult, conservative, and often quite bankrupt potential customers. On this, I have generally been right. So, for instance, most of the global water companies who rushed to find opportunities in South Africa after 1994 have left, disappointed.

But, 25 years later, watching the crises in water and electricity, I think things are now changing. Citizens fed up with political incompetence are starting to push for water services to be privatised. My advice now is for private sector operators to start with sanitation — politicians don’t open sewage works but they do get into trouble when the stuff pours down the streets or into the river. There is going to be a win-win opportunity for business and politicians. Watch this space, that’s my advice!

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