Can Public Policy be Implemented by the Private Sector?

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1 In Small Towns and Rural Growth Areas Can Public Policy be Implemented by the Private Sector? Jemima Sy Business Area Leader, Domestic Private Sector

2 Through WSP s sustainable services through domestic private sector, we support: 1. Banking for the Un-banked Systems Kenya, Mali 2. Business Development to Serve the Poor Rwanda 3. PPPs in Rural & Small Towns Benin, Burkina Faso, Mozambique, Senegal, Uganda Targets in Africa: US$ 21 M invested 170 schemes delegated Improve performance of schemes 1 Kenya 3 Benin 3 Senegal 1 Mali 3 Burkina Faso 3 Uganda 2 Rwanda 3 Mozambique 3 Niger

3 Can rural people afford it? Does it make sense? How high will tariffs climb? Will private Can Public sector Policy comply be Implemented with regulations? by the Private Sector? Where and when? Does it violate human right? Is the private sector interested?

4 Africa s rural water challenge affects 290 million people, who are mostly poor 2010 Rural Water Supply Coverage Levels Source: UNICEF/WHO. JMP Progress on Sanitation and Drinking Water: 2010 Update.

5 Equitable realization of development budgets & maintenance are key barriers Enabling Developing Sustaining Policy Planning Budget Expenditure Equity Output Maintenance Expansion Use East Africa Southern Africa West Africa Central Africa Source: WSP, Country Status Overviews 2 (2011)

6 Barriers are exemplified by low rates of functionality; income is not the only factor Functionality of rural systems ~30 to 50% Lower per capita investment in rural water Lower quality of service shallow wells, etc. Dispersed populations Poverty intensity: 52% in Burkina to 75% in Madagascar (2010) Availability of alternative sources of water Decentralization without resources Elite capture Low rates of consumption (~ 5 lcd)

7 There is also need to recognize that rural settlements are urbanizing Source: United Nations Population Division, World Urbanization Prospects 2011

8 Ten years ago, Uganda embarked on an experiment of engaging the private sector Required a clear policy shift that: Developed decentralized institutions Program of continuing investments Provided a framework for engaging domestic private sector Transferred responsibilities in which the private sector had comparative advantage Managed tariff increases by public investments and subsidies Pre-1990 Central delivery, poor O&M 1990s Water Statute, Local Gov t Act 2000s Private Participation 2010s Consolidation

9 Sector institution focused on separation of responsibility between investment and operations, but control and maintenance typically lacks Ministry of Water and Environment (MoWE) MoWE gazettes Water Supply Area and appoints Water Authority (WA) Performance Contract between MoWE and WA Water Authority (typically a Town Council) appoints: Water Supply and Sanitation Board (WSSB) WSSB may hire a private operator (PO) Contract between WSSB and PO Private Water Operator (PO)

10 Key features of the contracts exhibit the balancing of public policy and viability Scope Delegated Type of contract Contract term Upwards of 2,000 people Mixed connection and standpipes Operations and maintenance, including new connections Hybrid lease 1-3 years in Uganda Fee structure Operator: Began with management fee but later, to % of collections in Uganda District: Administrative fee +rehabilitation fund Operator Risks Clusters Commercial and operational risks, but little investment Inflation and system quality Yes, but uncoordinated: up to 20 schemes in UGD

11 The political investment is paying off today; considering how they can take the partnership further

12 Summary Yes, public policy for rural and small towns water can be implemented through a partnership with the private sector. It will need leadership and dedication of the public sector to shepherd the process towards a win-win Countries like Uganda are now reaping the benefits of that commitment started ten years ago. Africa s rural water challenge requires bold and brave steps. Start soon.

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