HOW MUCH POTENTIAL HAVE PPPS TO ASSIST SUSTAINABLE WATER SERVICES DELIVERY AT LOCAL LEVEL?

1. HOW MUCH POTENTIAL HAVE PPPS TO ASSIST SUSTAINABLE WATER SERVICES DELIVERY AT LOCAL LEVEL? Kevin Wall CSIR Gauteng municipal PPP conference Johannesburg, 18 February 2010

2. The CSIR Mandate “The objects of the CSIR are, through directed and particularly multidisciplinary research and technological innovation, …….. to contribute to the improvement of the quality of life of the people of the Republic.” (Scientific Research Council Act 46 of 1988, as amended)

3. Contents • Public-private is a continuum • Some South African realities: operation and maintenance • Case study: microentrepreneurs in a partnership model

4. Public-private is a continuum …. Public ownership of assets and control of policy Private ditto High Other Activities Degree of PSP Major Design Construction Low Selective outsourcing: -- design -- construction -- maintenance (not O&M) -- niche operation Contract for full O&M Private operation Purely public operation

5. What have we learned? • Water and wastewater utilities are the engines of the economic well being of cities • Problems associated with water and sanitation service provision in lower and middle income countries are increasing, not shrinking • The potential contribution of private sector support in the form of specialized knowledge and general know-how is significant • Discussion of PSP/PPP has been overshadowed for 15 years by one form of PSP, i.e. full delegation of responsibility to the private sector in the form of concessions or affermage arrangements

6. Why look wider? • Full delegation approaches to PPP have been controversial, in part because of real/perceived lack of control by public sector and community • Need to look at broader range of possibilities for improving service delivery in the water sector. • The traditional private sector marketplace has evolved in a way that could provide additional tools for strategic outsourcing • Other forms of PPP – forms which allow public sector to retain full ownership and more managerial control

7. New service offerings: • Increasing use of management contracts • Performance-based outsourcing of specific functions (e.g., leakage reduction) • At the same time, non-traditional resources are emerging • Public sector utility service providers • Contributions through Water Operator Partnerships • Scope for supporting microentrepreneur operators, and raising their standards

8. Moving on (1): Develop a common understanding that • Recognizes that water and san are special • Acknowledges that high (or low) performance not necessarily characteristic of either public or private • Broadens the discussion beyond utility management to the entire supply chain • Acknowledges that in the ”grey zone”, both public and private operators have role to play

9. Operating in the Grey Zone Public ownership of assets and control of policy Private ditto High Other Activities Degree of PSP Major Design Construction Low Selective outsourcing: -- design -- construction -- maintenance (not O&M) -- niche operation Contract for full O&M Private operation Purely public operation

10. Moving on (2): • Make the needed commitments • Performance standards • Accountability, and mechanisms for monitoring and rewarding performance • Sufficient institutional underpinnings are in place • Financing needs addressed • Recognize each unique situation – one size does not fit all • Facilitate capacity development to support process • Understanding of different modes of private participation and when/where each are appropriate • Alternative procurement models • Risk management

11. Contents • Public-private is a continuum • Some South African realities: operation and maintenance • Case study: microentrepreneurs in a partnership model

12. Regulator (i.e. DWAF) Regulation WSA Funding partner Capital and ops funds – e.g. ES, MIG e.g. govt, donors Contract payments Contracts Service Customers WSP Service agreements Payment of service charges e.g. WSA, Water board, NGO, SMME

13. In South Africa, ownership of water infrastructure to serve the public can only be by the public sector – in the case of water services infrastructure, invariably by the statutory water services authorities (WSAs) or water boards. • However the public sector owners can, and often do, use private sector for specific tasks.

14. What problems with public service delivery? Understand origins of decentralisation in SA: • Uncommon to decentralise to local government so quickly • Particularly when some of the institutions did not even exist A product of negotiations for a peaceful transition • Minority wanted some autonomy to retain control of their lives • ANC supported decentralisation -- and vision of participatory local democracies M Muller

15. How are we doing with WS IAM? SAICE report card 2006

17. How does infrastructure get to be “bad” or “ugly”? • Poor operation. Or too little maintenance. Or both. • Ageing infrastructure » growing replacement need • Maintenance backlog of existing infrastructure • Why?

18. Why? • Too little O&M budget. And/or • O&M budget during year got diverted to other things. And/or • Staff insufficiently skilled. And/or • Staff insufficiently motivated. And/or • Wrong infrastructure (i.e. too complex, not robust, wrong process (e.g. in relation to local water types), etc.

19. Numerous studies have pointed to skills shortfalls as the main problem area What skills? • Simply put, higher up the ladder, the greater the scarcity • But, lower down the ladder, training, supervision, quality control, and mentorship are needed.

21. 65% =NC 22.8% =NC 65% =NC

22. What is required to ensure that the infrastructure delivers the service reliably and safely? For example, in the case of water infrastructure, drinking water quality standards are met, and the water is fit to drink?

23. There are no quick fixes! • Essential: the correct infrastructure. • Essential: sufficient budget (for repairs, for planned maintenance, for spares, for infrastructure refurbishment and renovation, etc). • Essential: that the staff are competent (training and experience) and committed (i.e. have correct attitude).

24. Can the private sector more effectively be held to performance criteria than the public sector can be held?

25. Way forward (1 of 2): • Public provision, led by local government, will remain dominant model • Conventional consultant/contractor role will remain important • Finding the right skills will remain a challenge, whatever model • Franchising partnerships could enable central specialists, standardisation, training. • Regionalisation of public domain could ditto

26. Way forward (2 of 2): • Already many different partnerships in different contexts • Traditional partnerships, will continue • Consultants will develop long term relationships with clients • If procurement rules allow • More plant outsourcing? • More functional outsourcing? • Some “contracting” to local operators • or to community itself? • makes practical sense, • but may be hard to put into practice. • Availability of funds is key and will remain limited. • Between the extremes, a variety of options

27. There must, at least sometimes, be a strong case for more outsourcing. Especially (but not only) for the more remote municipalities that can’t afford (and it isn’t warranted anyway) to employ the higher skills – and/or don’t have the more experienced staff to supervise and mentor those less experienced and/or skilled.

28. South Africa has further issues: • Aside from finance and perceptions of “private”, further complicated by identity issues • Must consider representativity • Communities may prefer “black” to “white” company. (But does not mean an easy ride for “black business”) • Attitudes to private sector still apply • May also prefer “local” • Perceptions also apply to “external” public organisations, not under local political control, as profit-seeking contractors M Muller

29. Contents • Public-private is a continuum • Some South African realities: operation and maintenance • Case study: microentrepreneurs in a partnership model

30. Can a partnership model, making use of the basic principles of franchising, be applied – where appropriate – to water services operation and maintenance?And thereby improve service performance – particularly reliability?

31. A partnership model • A partnership model … • To assist the owners of water services infrastructure … • To operate and maintain … • The infrastructure that they continue to own.

32. Levels of skill – and obligations • Each person correctly skilled, and contractually bound • On most days, nothing extraordinary happens. Low-level skilled staff able to cope. • When major maintenance, or upgrading, or breakdown – those staff know who to call, who will bring the higher level of skill • And they know that the people they call WILL help, because there is a binding contract • Cost of the higher-skilled, who are needed only intermittently, is spread among many sites – thus cost per site is low

33. Franchisor Franchisee 1 Franchisee 2 • Microenterprise franchisee receives business ‘know-how’ from franchisor; and provides services or products to customers • Franchisor monitors quality of product/service to customers • Customers pay franchisee for products and services, and a % is passed back to the franchisor

34. What a franchisee of municipal infrastructure could typically look after

35. Clients: • Owners of municipal engineering infrastructure. • Owners of engineering infrastructure for education and health facilities (schools and clinics), hostels and the like

36. Pilot project in the Butterworth Education District, Eastern Cape Province

39. What a schools sanitation franchisee could typically look after What a schools sanitation franchisee typically looks after

41. Scope of franchisee training: Franchisees have been trained in: • Correct use of on-site sanitation facilities and rural water systems • Pit emptying using on site sanitation methods • Occupational Health & Safety, including basic First Aid • Environmental management practice • Health and hygiene education • Basic plumbing / rainwater harvesting • Pump operation and maintenance procedures

43. Scope of franchisee services: The franchisees do the following: • Clean inside the toilet facilities • Undertake basic maintenance of facilities • Remove foreign material and dispose safely at designated solid waste site (solid waste management may be added to scope later) • Remove excess liquid, dispose liquids safely through irrigation • Educate learners and teachers on water & sanitation

48. Health and hygiene education Explain to learners correct usage of toilets and good hygiene practices Hand washing and hand sanitizing practice

49. Conclusion:There is surely, at least sometimes, a strong case for more outsourcing. Public ownership of assets and control of policy Private ditto High Other Activities Degree of PSP Major Design Construction Low Selective outsourcing: -- design -- construction -- maintenance (not O&M) -- niche operation Contract for full O&M Private operation Purely public operation