In much of Africa it is now thought that only privatisation can deliver improved water supply services. Is this assumption correct and is it based on concrete evidence? Can privatisation address the chronic problem of under-investment? How have management and institutional frameworks adapted to the arrival of major international water firms?

A study from the University of Greenwich’s Public Services International Research Unit (PSIRU) reports that there have been 14 major water privatisations, mostly in Francophone Africa but also in South Africa and Mozambique. The market is dominated by French multinationals, particularly SAUR and Vivendi. The study reviews evidence from three African countries: Cote d’Ivoire, Guinea and Senegal.

On the basis of World Bank research, PSIRU finds much that has gone awry. Confused institutional frameworks have not clarified responsibilities for maintenance and investment. Regulatory powers of governments are weak and frequently ignored by private investors. The widespread use of lease contracts means that governments must still pay for capital investment. Privatisation has failed to make public operators pay their bills. When they don’t, the private sector companies claim compensation from governments, further reducing funds available for investment.

In Guinea the military government, under pressure from donors, adopted a lease contract for water supply in 1989. Water quality has improved, almost all houses are now metered and billing is better. There is a downside however:

• Very high levels of leakages still exist with no incentive for the operator to reduce them.
• The number of new connections is far less than expected – partly because of a big increase in prices.
• The private operator is not required to use competitive tendering and sources products from its parent company.
• The regulator has also failed to make the operator comply with reporting requirements or to justify price hikes.

Cote d’Ivoire’s privatisation, the first in Africa, has achieved more. The public sector retains ownership of assets, provides investment financing and sets tariffs for end-users. Water quality is good, connection rates are rising, leakages are low and labour productivity is increasing. Though the regulatory regime is more robust than elsewhere, the operator is still able to get round competitive tender rules.

Further findings include:

• Billing procedures and collection rates are improving with privatisation.
• Increases in revenue do not reach the bodies responsible for investment in the water sector.
• Authorities are generally powerless to determine the revenue position of private investors.
• High prices and disconnections affect poor people and increase use of unsafe water sources.
• Private firms are the real winners from poorly regulated lease contracts.

The implications for policy makers are that:

• More research is needed on the impact on those excluded from privatised water supplies.
• Governments have found it difficult to police the operations of private firms. Effective regulation remains elusive.
• Despite privatization, the public sector still has to source finance for long term investment. Private investors tend to focus more on raising revenue from the operation.

Source(s):
‘Water privatisation in Africa: lessons from three case studies’, Public Services International Research Unit, University of Greenwich, by Kate Bayliss, May 2001 Full document.

id21 Research Highlight: 18 September 2001

Further Information:
Kate Bayliss
Public Services International Research Unit (PSIRU)
University of Greenwich
30 Park Row
London SE10 9LS
UK

Tel: +44 (0)208 331 9993
Fax: +44 (0)208 331 7781
Contact the contributor: k.bayliss@gre.ac.uk

Public Services International Research Unit, UK

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Insights #37 'Tapping the market. Can private enterprise supply water to the poor?'

'PPPs, PWUs or PUPs? Alternatives to private sector water delivery'

'Competing for water: is integrated management an elusive goal?'

IPWA promotes opportunities for private sector participation in water utilities

IRC focuses on Water and Sanitation

Refer to WHO's 'Water Supply and Sanitation Assessment 2000'

WSSCC enhances collaboration in the water supply and sanitation sector