Small Private Sector Providers in Water Supply and Sanitation

1
Small Private Sector Providers in Water Supply
and Sanitation an overview and some
experiences from the World Bank and WSP

• Meike van Ginneken
• Sr. Water and Sanitation Specialist, World Bank
• With thanks to Ede Ijjasz Ella Lazarte (WSP)
  Mukami Kariuki (World Bank)
• OECD Global Forum on Sustainable Development
• Paris - November 29-30, 2006

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Overview

• Why bother?
• What kind of SPSPs are where?
• What good practices do the World Bank WSP have
  working with SPSPs?
• What are the policy implications of what we have
  learned?

3
Water PPPs by country income categories
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The context Service levels
Urban water supply by type of service by region
source Global Water Supply and Sanitation
Assessment 2000 Report
5
Many with house connection still require small
providers India as an example

• Accessibility to Water Supply in India
• In 2001 74 of the population had access to a
  piped water supply
• Water availability is at average of 2.9 hours per
  day
• Connections with 24/7 service in Delhi is 1
  (compare to 90 in Jakarta, 88 in Manila, 60 in
  Colombo)

Source Bridging the Gap between Infrastructure
and Service, World Bank 2006
6
The water market in an African city
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Why focus on SPSPs?

• The ultimate goal - a household connection for
  all - depends on much more than service
  expansion. What to do in the meantime or in the
  long term?
• Ignoring the problem has not made it go away in
  some countries coverage/access has declined. Is
  the best the enemy of the good?
• Put all the cards on the table you can only
  regulate it once you recognize it
• Work with what you have - for the unserved or
  under-served the gaps is being filled by self
  provision or SPSPs. Reaching the MDGs through
  SPSPs?

8
But there is a lot to do..
Kariuki, et al, Small-Scale Private Service
Providers of Water Supply and Electricity A
Review of Incidence, Structure, Pricing and
Operating Characteristics, 2004
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Overview

• Why bother?
• What kind of SPSPs are where?
• What good practices do the World Bank WSP have
  working with SPSPs?
• What are the policy implications of what we have
  learned?

10
Typology of SPSPs

• Dependent SPSPs
• 1.Piped network operator
• 2.Point source
• 3.Mobile distributor
• Independent SPSPs
• 4. Piped network operator
• 5. Point source
• 6. Mobile distributor

Utility
Consumers
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SPSP Typology main policy issues
Independent

• Dependent

• Bulk price from utility? tariff
  structure/pricing,
• Ownership of assets - laid at operators cost?
• Hold contract/licence? regulation by utility
• Quality of water at point of sale (utility)
• Authority to connect new customers utility or
  operator

• Exclusivity/Monopoly what regulation, who
  monitors?
• Develop own source groundwater abstraction
  permit?
• Licensed to sell? authority to connect new
  customers
• Quality of water testing frequency, monitoring

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Estimated SPSP Coverage Percentage of households
relying on SPSPs
SourceKariuki et al., 2004
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WSS Coverage Levels and SPSP Activity
SourceKariuki et al., 2004
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Additional characteristics

• Motivation? for profit or non-profit, own use
  (community) or business
• Organisational form? -cooperatives, self help
  groups, company, sole proprieter, family business
• Legal status? license, permit, contract with
  utility, registration with chamber of commerce
• Financing? savings, family, commercial bank,
  loan shark, member fees, customers, micro-credit

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Overview

• Why bother?
• What kind of SPSPs are where?
• What good practices do the World Bank WSP have
  working with SPSPs?
• What are the policy implications of what we have
  learned?

16
good practices from the World Bank WSP

• Fostering subdelegation from utilities to SPSPs
• Kisumu, Kenya Medellin, Colombia Manila,
  Philippines
• SPSPs for construction operation of sanitation
  facilities
• Ulaanbatur, Mongolia Mumbai, India
• Fitting SPSPs in longer term sector policies
• Paraguay
• Using consumer surveys to inform reform choices
• Sri Lanka
• Fostering SPSP associations

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Subdelegated management models in Kisumu, Kenya
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Existing situation in Kisumu, Kenya
Spaghetti Network
Water contamination risks
Metered Connections
Illegal Connections
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Situation after project in Kisumu, Kenya

• Focus on interface between SPSP utility
• Utility sells bulk water to a community private
  operator
• The selected operator acts as agent for utility
• Performance-based contract
• Profit-making social enterprise
• Reduced tariffs/fees

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Initial results include increased access to water
and decreased prices

• Estimated 2,000 people served by the new
  operators
• Monthly consumption is high at 30 cubic meters
  due to HH reselling
• Fees have been reduced significantly

Old charges New Charges
Household meter rents 2.12 0.99
Household meter deposit 25.40 14.10
Connection fees 56.41 21.16
Cost of water to end consumer 0.03 or 1.41/cu.m .02 or .92/cu.m
in US (1USD71KES)
Project developed jointly by WSP and AFD, in
support of 20M infrastructure project
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Key lessons emerge for scaling up the model in
Kenya and rest of Africa

• Institutional financial and technical support
  to operators
• Increase confidence among stakeholders
  utility-master operator-community
• Marketing and (utility) communication strategy
  crucial
• Encourage prepayments from community to minimize
  risk

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The Contratación Social Program of Medellin
public utility

• Model
• Institutional direct relationship between
  utility-community - contract managed by
  newly-formed local organization that is run like
  a firm
• Social intensive capacity building
• Financial partly financed by the municipalitys
  Social Funds

• Results (after 5 years)
• Approximately 41,400 users in five years
• 149 Contracts with community organizations
• Total investment from 1998-2000 USD11.4 M
• 16,900 hours of training to the communities
• 6,900 jobs with an average duration of four
  months

Source WSP-LAC Seven Cities Project
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10 years of experience in subdelegation in Manila

• 1997 two concession contracts signed for Manila
  metropolitan area
• 2005 80 piped network coverage (12 million
  people)
• Since 1997, 1.1 million reached through sub
  networks (third party provision)
• 2005 survey of 183 small providers and 271 of
  their customers in 5 locations within Manila
• 60 had access to piped water supply (38 of
  these rely on utility network) 6 neighbors 7
  deep wells
• Prices are 1.4 - 6.2 higher (compared to 10 -
  20 in literature)
• Prices have fallen since 1997 (tankers from 4/m3
  to 2/m3)
• Small piped networks offer lowest price
• Water reselling business is on the rise -
  treated (bottled) water
• Most small providers licensed
• 58 - 68 SPSPs feel theyll still be operating in
  5 years

Source World Bank/BNWP report, forthcoming
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World Bank support to water and sanitation SPSPs
in Ulaanbatar, Mongolia

• Ulaanbaatar Services Improvement Project (1997 -
  2004) resulted in more reliable water supply
  services to about 140,000 people by connecting
  water kiosks to the network
• Second project (from 2004) broaden approach to
  sanitation
• Social assessment showed on-site sanitation is
  very high on the list of priorities for residents
  in the Ger areas
• World Bank sponsored city wide sanitation plan
  based on stakeholder consultation (a novelty)
• Now pilot in some Ger areas support to create
  enabling environment for scaling-up of
  implementation of low cost sanitation by
  community groups

Source World Bank, 2006a
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Going to scale in Mumbai, India CBO operated
community toilet blocks

• 55 of Mumbai 14M population lives in slums
• IBRD/IDA 192 million Bombay Sewage Disposal
  Project (1995- 2003) with 6 to Slum Sanitation
  component provided sanitation services for 400K
  slum dwellers
• Model
• municipality provide capital to build blocks,
  community groups pay for OM
• Community Based Organizations (CBOs) were
  created Municipality issues a building permit
  after 50 of the community contribution collected
  and sound plan endorsed by the community
• MOU municipality - CBO as service provider
  defines standards
• CBOs can decide direct user involvement or use
  private operator
• Most of the CBO are performing well, raising
  enough funds within their communities to
  efficiently manage the toilet blocks

Source World Bank, 2006b
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Paraguay how to fit SPSPs into longer term
sector strategy

• Traditionally strong presence 400 aguateros
  serving 30 of population
• World Bank Project in rural town WSS support
  transformation of SPSPs to formalized operators
• Aim to attract private sector managers
  aguateros, others
• Competition for small settlements, simplify
  bidding process/contracts
• provide financing - output based aid
• Urban areas 2000 law ensures that small systems
  can be integrated in normal grid
• SPSPs get 10 year license from regulator at end
  of license period, state can appropriate
  infrastructure to include in grid
• SPSP tariffs are regulated
• Idea is to provide SPSPs clear framework Jury
  still out

Source World Bank/BNWP report, forthcoming
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Sri Lanka how consumer surveys can inform reform
choices

• 2003 Government planned PSP in Negombo and
  Kalutra-Galle
• study of 1,800 households to inform the design of
  the transaction
• Key findings from the study
• 60 of poor households rely on wells 28 on
  private connection
• Poor use unsafe sources but treat water,
  quality not judged a problem
• Poor do not consume significantly less due to
  free groundwater source
• Diversity among the poor necessitates service
  differentiation
• Uptake rate (willingness to connect) with
  connection fee 50 overall, 27-32 among poor) ?
  instead of 95 assumed
• Without connection fee 70 uptake among poor
• Conclusion Access to and use of alternative to
  piped water as well as household perceptions and
  attitudes are critical in determining whether a
  household will connect to the network

Source Van Den Berg, 2005
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SPSP associations can play an important role
mutual support, voice to govts, utilities donors

• Association of tanker drivers in Kathmandu, Nepal
  
• first created to help members confront police
  harassment
• also supported members involved in accidents
• assisted tankers to get registered
• Tried to install a shared borehole and treatment
  plant but this failed and led to the
  association dissolving

• Association of standpost operators in
  Ouagadougou, BF
• Provides small grants to its members who are
  celebrating a wedding or baptism
• Extends credit to members who temporarily cannot
  pay their water bill
• Will help members deal with troublesome clients
• Organizes members participation in city-wide
  events

• Association of 150 SPSPs in Bandung, Indonesia
• fee varies according to size
• association revenues are used to improve road
  conditions and traffic control support members
  emergency medical care or suffer work-related
  accidents related accidents and support
  community events

Source World Bank/BNWP report, forthcoming
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Overview

• Why bother?
• What kind of SPSPs are where?
• What good practices do the World Bank WSP have
  working with SPSPs?
• What are the policy implications of what we have
  learned?

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Policy implications Understand the market and
consumers preferences

• Review existing service delivery arrangements
• What sources do the poor currently use are they
  likely to move from existing sources to utility
  service
• Who provides them with WSS services is the
  utility well placed to offer better services
• How well are these services being provided
  drinking water quality is a priority for poor
• Assess customer preferences
• What are they willling to pay for an improved
  service both consumption and connection
• What is the nature of improvements they seek
  (if any) - affordability, volume, service level,
  reliability, in house facilities

utility expansion may not be the logical next
step!
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Policy implications Understand the utilitys
supply constraints

• Review the primary utilities plans and
  constraints what is a realistic timeframe for
  meeting the goal of universal piped water supply?
  
• Expansion plans need to increase production
  capacity, extend distribution network
• Performance with respect to improving cost
  recovery, revenue generation, achieving 24/7
  service, reducing NRW
• External constraints slum policy, land tenure,
  subsidy policy, etc., - and options for
  sidestepping them
• Financial implications for accelerating service
  coverage who will pay for expansion

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Policy implications Understanding small scale
service providers

• Third party provision can be a useful means of
  scaling up services
• As a short to medium strategy, plan for and
  involve existing service providers, but find ways
  to improve their efficiency to the benefit of
  customers
• Distinguish between various providers
• Independent/dependent
• Motivation? for profit or non-profit, own use
  (community) or business
• Organisational form? -cooperatives, self help
  groups, company, sole proprieter, family business
• Legal status? license, permit, contract with
  utility, registration with chamber of commerce
• Financing? savings, family, commercial bank,
  loan shark, member fees, customers, micro-credit

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Policy implications what can we do more?

• Sanitation, sanitation, sanitation
• Establish appropriate country framework Policy,
  legislation, regulations, standards ? allow for
  and regulate SPSPs
• Build capacity for engaging small-scale providers
  contract design, training, competition,
  guarantees
• Improve quality and use of information collected
  - household surveys often not qualified
  (secondary sources)
• Foster community participation - Adapt to local
  context, involvement in planning monitoring,
  tap local resources
• Enable monitoring - regulation or facilitation,
  establish benchmarks to improve service quality

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Thank you !This is work in process, more info
www.worldbank.org/watsanwww.wsp.org