Governance Principles for successful introduction of PPP in rural water Sector

Experiences from Rwanda, Uganda and Senegal

Rural Water Symposium, April 13 – 15, 2010Kampala, Uganda

Water and Sanitation Program (WSP)

Samuel Mutono and Madio Fall

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Presentation outline

• Good Governance – Why / Key Principles

• What are the PPPs and Why

• Experiences of Public Private Partnerships (PPPs) in Rwanda, Uganda, and Senegal

• Benefits of PPP in the 3 countries

• challenges

• Lessons and Recommendations;

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Good Governance

What is Good Governance-Process in government actions and how things are

done-Quality of institutions and their effectiveness in

implementing policies.

Why: - Important for economic development. Service

delivery to the poor/vulnerable/less privileged.- Corruption increases costs, reduces efficiency

and threatens the ability to deliver required results.

- Effective water provision depends more on the quality of governance.

- To deliver services to the poor, PPPs have to take into account Good Governance

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What are Public-Private Partnership (PPPs)?

• Public-Private Partnerships (PPPs): Form of legally enforceable contracts between the public & private sectors

• Require new investments by the private contractor (time/expertise, technology, money, reputation, e.tc)

• Transfer risks to the private sector ( operation, service delivery, design, construction, e.t.c.),

• Payments are made in exchange for performance for the purpose of delivering a service traditionally provided by the public sector

PPPs are output-based- Publicly-provided services, the Govt decides the inputs- PPP the private operator is told the outputs to meet

- Value comes from telling the operator “WHAT needs to be achieved” and NOT “HOW to achieve

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Overview of Reasons for PPPs

1. Improving the value for money that end-users receive from their services

2. Additionality: More public services are available than without PPPs

3. Avoided Public Borrowing: Attracting new private investments into public services sectors

4. Improved management, technology, & performance: clear standards and force of contracts

5. But, the private sector is NOT always more efficient & effective than the public sector.

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Reform of the management of the RWSS - Rwanda

• 2002: First experience of Public Private Partnership developed spontaneously by Districts (in Byumba districts)

• 2004: Community management is recognised as a failure based on a specific extensive field survey ( over 30% of facilities non functional)

- 2004: Decision to move from community O & M to towards PPP. New Approach: A PPP approach introduced to shift management from communities to the local private sector.

• 2007: 30% of the RWS piped systems (#172) are managed through PPP by 21 operators;

• Association of POs formed: Weak technical and financial management skills in WSS schemes management

- Rwanda on track to transfer the management of 50% of the systems to the private sector by 2012

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Results of PPP - Rwanda

• 42 POs now manage over 25% of the RWSS in Rwanda. • A forum for POs has been established – Association• Functionality of RWSS increased from 30% to 75% by

2007• Improved efficiency of the systems: POs able to control

water losses, pay maintenance costs and create jobs• PPP contributing to sustainability

• Increased number of connections• Job creation ( water saler, fontainers & technicians,

water meter readers)• Fiscal revenue to districts & benefits to the PO

(monthly rent)

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Uganda reforms in small towns Water Supply systems

• Previously, Central & Local Governments used to run small towns WSS using own staff, but this was found to be not sustainable and efficient

• Reforms were initiated to improve efficiency and effectiveness and reduce burden on government.

The Reforms early (2000) emphasized the need for:

• Separation of asset ownership and operations• Commercialization of service delivery• Establishment of an effective regulatory framework.• Engagement of most appropriate form of PSP

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Framework of operation Uganda

Performance ContractAssets Delegation

Customer Contract

Management Contract

Water Authority(Assets Management)

Users/Clients

Ministry of Water & Environment

Private Operator(Management of Technical, Financial and Commercial Operations)

5 Member WSS Board• Town clerk• Chair Social Services Committee• Rep of domestic consumers• Rep of institutional consumers• Rep of Other Consumers

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RESULTS OF THE REFORM- UGANDA

INDICATORSVALUE

(BEFORE PPP)

VALUE (AFTER 5YRS OF

PPP)

Average Billing Efficiency (%) 50 95

Collection Efficiency (%) 40 85

Unaccounted For Water (UFW) (%)

>50 21

%age of Total Costs of O&M for all towns combined financed by revenue (%)

<50 84

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Challenges & Emerging Issues - Uganda

• Rapid increase of small towns WSS, hence increased problems of monitoring & regulation

• High rate of urbanisation, increased pressure on available capacities/need for system expansions.

• Equipment is growing old, need for a budget for assets renewal.

• Growth and changing environmnet, need review of Performance & Management Contracts

• Low capacities especially of the WA and POs • Sanitation & Hygiene issues need appropriate attentionBaseline Survey on integrity in WSS:• Private Operators: -High levels of political

interference in selection of POs, -10% of contract value estimated to be lost to corruption

• Water Authorities: - Only 50% had business plans

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Conclusions - Uganda

• POs are established, their role is clearly understood and appreciated by all stakeholders.

• Government’s major challenge is to improve on their Regulation (which is under way) and regular audits.

• Growing number of Small Towns calls for clustering to enhance economies of scale.

• Higher levels of PPP are now being piloted, in partnership with GPOBA, 10 schemes are being implemented, with pre-financing by the PO.

• Key consideration include selection of appropriate type and size of PSP interventions, stakeholder consultation and effective Regulation.

• Use of community score cards & citizens report cards is being piloted to improve service delivery

• Association of Private Water Operators (APWO) set up

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Reforms in Senegal

RWS PPP experience from Pilot

The GoS promoted a phased approach:- Up to 1984 water supply was free of charge- From 1984 tp 1996, all the boreholes managed by

committees, including fixed charges- From 1996 Pilot project (REGEFOR)

- Precondition for borehole construction

• To pay water by volume• To form an ASUFOR (water user association)• To open a bank account

• Plus To transfer of maintenance activities to a private operator.

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Current situation of RWSSS management, the players – Senegal

• Public:- ASUFOR (Water User association): Responsible for

water supply management- DEM (operating & Maintenance directorate) for borehole

maintenance

• Private sector: .- Borehole operator- EQUIPLUS (REGEFOR) for borehole maintenance- The public standpipe keeper + meter reading person

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Stakeholder Capacity building – Senegal

1) Training; organisation of users for ASUFOR:- Democracy & transparency in management- Implication of different types of users- Collective decision making2) Training: Financial management for ASUFOR:- Financial autonomy of ASUFOR- Saving account opened in local banks,- Transparency in expenses allocation and use of money- Follow-up balances by users during regular meetings3) Training: Maintenance for ASUFOR, Maintenance

Operator and GERANT- Technical documents - Operation oif equipment- Contract managment.

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RESULTS : Improved maintenance of 80 RWSS serving about 240,000 people -

Senegal

Effective PPP in the REGEFOR area enabled

1. Better quality of services,

-Borehole availability rate of 98%

-Waiting time for borehole repair< 48 hours

2. Enhancement of ASUFOR’s finacial capacity

- Average saving per ASUFOR # $ 10,000

Rest of the Country:

-Borehole functionability rate of 80%

-Waiting time for borehole repair # 4 days

-Average savings by each Water Committee or ASFOR of # $ 5000 to $ 0.000

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General benefits of PPP in the 3 Countries

• Improved quality of service – functionability

• Increased access to services (connections) – Expansion

• Improved financial standing of WSS

• Better management and at lower levels.

• Enhanced participation of users

• Job creation

• Greater opportunity for checks and balances

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Key challenges of water PPPs – 3 countries

• Water’s key role in public health, a “public good” - should be provided free

• Water as a “local-level” service:- Limited local funds to prepare PPPs-Limited local-level capacity to administer PPP contracts

• Attracting long-term private investment will require more risk-sharing ($) by Govts. Water user-fees will not be enough

• Benchmarking & monitoring sector performance• Funding environmental challenges

- The need to pay for more water treatment- Limited water resources available-The need to pay for water source catchment protection-The need to pay for more wastewater treatment

• Improving Hygiene and sanitation.

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Lessons and recommendations for PPP from the experience of the 3 countries

• An enabling policy and legislation is required

• Start on a pilot basis• Build capacity of the actors in their respective roles –

Including governance. • Promote POs association – Codes of conduct

• Set up/ stregthen Monitoring and evaluation systems • Benchmarking, performance indicators & clear targets • Set up/stregthen regulation and audit functions

• Strengthen consumer voices• Gradually move to higher levels of PPP -= e.g. Build-

operator and transfer contracts

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Lessons and recommendations for PPP from the experience of the 3 countries

• An enabling policy and legislation is required• Take time to consult with stakeholders

• Promote POs association – Codes of conduct• Encourage each RWSS to have a business plan• • Benchmarking, performance indicators & clear targets

• Plan for Incentives and sanctions• Plan for Clustering for economies of scale

• Gradually move to higher levels of PPP -= e.g. Build- operator and transfer contracts

• Assist POs to access financing for improving and expansion of service delivery

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Good Governance – Key principles

1. Accountability: the extent to which political actors are responsible to society for what they say or do

- An enabling policy and legislation is required- Benchmarking, performance indicators & clear

targets- Set up/strengthen regulation and audit functions- Plan for Incentives and sanctions2. Transparency: the degree of clarity and openness

with which decisions are made:- Set up/ strengthen Monitoring and Evaluation

Systems3. Participation: Degree of involvement of all

stakeholders- Take time to consult with stakeholders4. Fairness: the degree to which rules apply equally to

everyone in society; and- Strengthen consumer voices

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Good Governance – Key principles

5. Efficiency: the extent to which human & financial resources are applied without waste, delay or corruption or without prejudicing future generations.

- Start on a pilot basis- Build capacity of the actors in their respective

roles – Including governance.- Encourage each RWSS to have a business plan- Plan for Clustering for economies of scale- Assist POs to access financing for improving

and expansion of service delivery6. Decency: degree to which information &

stewardship of the rules is undertaken without harming or causing grievances to people.

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Thanks