Uganda’s National Water and Sewerage Corporation (NWSC) was struggling to service its customers and building up an ever greater debt. Privatisation looked like the only option until the government decided to strengthen the company and give a new director the tools and powers to turn the business around.

WaterAid and the World Development Movement organised a seminar to gather best practice on the theme of ‘Reforming public utilities to meet the water and sanitation Millennium Development Goal’. This contribution describes the improving performance of Uganda’s water utility from 1998 to 2006, which proves that state utilities can be run efficiently and effectively, provide good service to customers and make enough profit for reinvestment

Prior to reforms, the corporation had a large and inefficient labour force, high volumes of unaccounted for water, poor customer service, low collection efficiency, and corruption within the work force. They also had debt to service. On the other hand, government was willing to support proactive managers and freeze the debt, and the economy was relatively stable.

The new director and board embarked on aggressive revenue collection strategies and cost cutting measures. They improved customer service and made service providers and managers accountable. Bureaucracy was reduced, staff productivity increased, and worker involvement encouraged. Staff numbers were reduced by half. Teamwork was encouraged, and individual performance reviews were brought in. Area managers have more autonomy, and take on more well-rewarded risk as a result. The company and its staff are sharing experiences internally and externally. In the 19 urban areas it operates in, NWSC’s successes include:

• Service coverage has increased from 48 to 70 percent and network coverage has increased by 52 percent.
• New connections have increased from 3,317 to 23,312 per year.
• Unaccounted for water has fallen from 51 to 29 percent.
• Metering efficiency has increased from 65 to 99.6 percent, and connection efficiency from 63 to 93.9 percent.
• Annual turnover has improved from about US$11 million to US$34 million, turning an annual loss of US$0.4 million to a profit of US$3 million.
• Positive cash flows have financed network expansion and enabled maintenance programmes to be scheduled and implemented.

While outsourcing can work, it should help good managers be more productive, rather than replace poor managers. Changes should address the company’s weaknesses to enable it to perform better. Managers need to be flexible, and the system needs to reward improved performance. The following factors can lead to transformation:

• Build a hard-working and committed Board of Directors with a good mix of skills.
• Create a dynamic management and staff team motivated by a clear vision, mission and objectives.
• Secure government and donor commitment to support key initiatives like the debt freeze, pension reform, and payment of government debts.
• Promote managerial autonomy through decentralisation and provide incentives to managers through target-based competition and financial incentive packages.
• Strengthen information systems via monitoring and evaluation programmes.
• Create a strong customer and commercial orientation.

Source(s):
‘Turning around struggling state-owned enterprises in developing countries: The case of NWSC Uganda’, Papers prepared for a seminar on ‘Reforming public utilities to meet the water and sanitation Millennium Development Goal’ at the UK’s Department for International Development, 4 July 2006, by Silver Mugisha and Sanford V. Berg, 2006 Full document.

id21 Research Highlight: 13 April 2007

Further Information:
Silver Mugisha
Research, Monitoring and Evaluation Department
National Water and Sewerage Corporation (NWSC) Headquarters
Plot 39, Jinja Road
PO Box 7053
Kampala
Uganda

Tel: +256 41 315100
Contact the contributor: info@nwsc.co.ug

National Water and Sewerage Corporation (NWSC), Uganda

Sanford V. Berg
Distinguished Service Professor of Economics and Director of Water Studies
Public Utility Research Center (PURC)
University of Florida Warrington College of Business
P.O. Box 117142
Gainesville, Florida 32611-7142
USA

Tel: +1 352 3926148
Fax: +1 352 3927796
Contact the contributor: sberg@ufl.edu

Public Utility Research Center (PURC) University of Florida Warrington College of Business, USA