Business Maverick

DIGITAL FINANCE

South African company launches world-first crypto water token

South African company launches world-first crypto water token

A new model for financing water projects around the world has been developed by a local company.

As the people in Gqeberha know only too well, water is a scarce resource and growing even scarcer. They are not alone. Globally, more than two billion people — almost 30% of the world’s population — live in water scarce conditions and this number is expected to increase to 50% of the population by 2030.

Compounding the problem is a lack of funding for water infrastructure. 

The global funding gap for water infrastructure could exceed $18-trillion by the end of 2030, as highlighted by a 2016-18 OECD report. This presents a major risk to business and society.

Water infrastructure finance

Now, a South African company with an established pedigree in providing global water solutions has developed a financing model for water infrastructure.

A key component of this model is a crypto token, called H2ON (Water Network) token, which will be listed on Bitmart, a global cryptocurrency exchange, on Monday.

It will be available on secondary markets by Thursday, which means that for the first time, ordinary people will be able to invest in water infrastructure.

The token has been available on decentralised cryptocurrency exchanges for the past few months.

“Our initial decentralised listing provided us with proof of great interest in the concept of a digital H2O Securities token. With an initial listing price of about $0.75 and a trading volume of $100,000, it increased to $5 within just a few hours and exceeded $11 less than 24 hours later,” says Julius Steyn, CEO and founder of H2O Holdings.

Steyn was the former CEO of Grahamtek Holdings, the Cape Town company that won a R5-billion tender to design, build and operate a desalination facility in Saudi Arabia in 2018. 

The company also assisted the Saudi government with the development of a financial model for the water sector, which the government was privatising at the time. This model was subsequently accepted by the world’s capital markets.

H2ON token

The token, H2ON has already attracted investment, with $150-million worth coming from GEM Digital Limited, a digital asset investment firm based in the Bahamas that invests in utility tokens listed on over 30 centralised and decentralised exchanges around the world.

The token is simply a means to an end — in this case, raising capital to finance global water projects. 

Once up and running, the sale of the water repays the initial project finance costs. Water is priced at an equitable rate determined by the World Bank. For their trouble, investors can expect a return on investment in the order of 20% per annum.

“The only way to lessen the world’s water scarcity is to increase water production and reduce the cost of water,” says Steyn. 

“After our experiences in Saudi Arabia, we were looking for a way to harness our intellectual property and industrialise it.”

Despite the current “crypto winter”, modern finance tools have a role to play. 

Market efficiencies

“There is a big crypto world out there, and most of it is the wild west. But if you can use this new technology as a means to an end, and not an end itself, then you will be able to achieve incredible market efficiencies,” he says.

The result is H2O Water Securities, a company that combines finance, infrastructure and expertise in the deployment and operation of water plants globally. Not all of the expertise resides within the company.

Steyn said that the focus with the H2ON token is mainly on the financing of water projects internationally and not so much on the technical engineering and construction of such projects.

By way of example, he equates the company to SA Homeloans. “They don’t build houses… they finance houses. But they want to know that the plans are solid, the builder is qualified and your house is insured.”

But where SA Homeloans is limited by its traditional methodology, the sky is the limit for the H2O Water Network, created by H2O Securities.

This is effectively a technology platform underpinned by blockchain that enables projects to be screened by international experts and engineers around the world.

By making use of this network, the approval chain is simplified; financing becomes easier and the risk is lowered as the blockchain diversifies exposure over several projects in any given portfolio.

There are currently numerous water projects worldwide that are ready for development, but which lack financing to bring to fruition, says Steyn. Alternatively, the need may exist, but the local government may not have the capability or skills to put a project and the finance together. 

This solution aims to close those loops.

The company has broken ground on its first project and will do one more this year. “We want to prove the concept to our investors.” 

Sadly, for the people of Gqeberha, the ground that has been broken is nowhere near them — not for lack of trying, Steyn says. BM/DM

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