Institutional development newsletter 5

March 1996

Limited sharing on the Network this year - hence the failure to move the Network News to a six monthly mailing.

Andrew Nickson of School of Public Policy, University of Birmingham, has asked me to tell you about the Research his group is carrying out in the water sector in conjunction with WEDC:

The Urban Water Supply Sector As part of the work on the sector a desk study of private sector participation in urban water supply (UWS) around the world has been carried out. The study has revealed a variety of motives for private sector participates in UWS, ranging from pressure by external donor agencies to a desire to achieve efficiency gains on existing operations. However, the overriding motive in most low-income countries appears to be the need to obtain finance to expand networks to meet the demand arising from rapid peri-urban population growth.

The desk study has also revealed the enormous diversity of experience around the world in the form that private sector participates is now taking in the water sector. Four interesting features of current trends have emerged from the study to date. First, the global trend towards private sector participates in UWS is a very recent one. Many countries especially in sub-Saharan Africa, although committed to this, have yet to implement reforms in this direction. Second, in Latin America, where the trend is most pronounced, private sector participates is taking place through the introduction of concession contracts based on the French model. Third, the British model of private sector participates via the divestiture of assets is not being followed anywhere else in the world. Fourth, a surprisingly wide range of countries, especially in Southern Africa, are achieving major efficiency gains without private sector participates, preferring instead to use best practice in the private sector as a benchmark against which to measure performance by publicly provided and operated UWSs.

Finally, the study has revealed a wide variety of experience with regard to the regulation of private sector participates in UWS. In countries where contracts granted by the public sector to the private sector have traditionally provided fertile ground for corruption, the danger exists that such illicit rent-seeking activity could negate the efficiency gains associated with private sector participates. In many countries, regulatory structures are still embryonic, in others they lack transparency, while in others they appear to be excessively complex in their organisational structure, laying them vulnerable to political interference. In particular, the study has identified questions concerning the limited accountability of the essentially 'political' nature of the regulatory process associated with the French-style concession contracts. Email: R.A.Nickson@bham.ac.uk

Contracting-out of services for water and sanitation
The UK Overseas Development Administration have just approved funding to research small scale private sector participation. The research aims to determine which watsan institutions (in L&MIC) are contracting-out what range of services with what declared benefits by which contract approach - for improved, cheaper service to consumers through NGO and SME development. This research may well generate questionnaires to you in the future! Email: R.W.Franceys@Lboro.ac.uk

And next Because of the generous response in the last newsletter it almost appears that we have run out of items to share. However I have been impressed with the work being carried out by postgraduate students in WEDC and offer abstracts and summaries of research for your interest and, I trust to stimulate further work in the institutional development area.

Management of Urban Water and Sanitation, Bahia, Brazil
Maria de Fátima Dimas Carteado
This study investigates the British and French models for providing Watsan services, and proposes the development of an institutional framework for managing Watsan in Bahia. This framework is based on the study of the two European countries and responds to the hypothesis that an extension of private sector involvement is the most suitable method to solve problems related to Watsan in Bahia. These problems are associated, as in other developing countries, with inadequacy of organisations and institutional frameworks. Development and implementation of a new policy The French model for managing Watsan services was put in place in an incremental way according to necessities and political balance. Changes in the system seem to occur without great traumas and conflicts between those involved. Private sector involvement is an issue dealt with at local level in accordance with local politics and administration. In England and Wales private sector participation was part of the Central Government policy at the time and involved a radical change in the system, imposed on society as part of a political agenda aimed at reducing the PSBR (Public Sector Borrowing Requirement) of the state and at providing investment in the sector in order to comply with EC directives. For the French, Watsan services are local public services, decisions are taken at local level, within the community, between users and providers. Being a local service, the local representative, the Mayor, is the one able to take decisions on the subject. The central state only intervenes in those subjects related to supra communal issues such as river basin matters. This is different from the British approach where decisions are taken at central level by the regulatory bodies, without the participation of local authorities. As a result, this research seeks to demonstrate that the most important aspect in urban Watsan is not who runs the service or who owns the assets, but is the capacity building of who runs it and the coherence and internal logic of the system, which makes it work efficiently. In other words the way services are managed will define their efficiency. A management by objectives approach with well defined targets where managers are accountable for their actions seems to be an efficient way for Watsan organisations to achieve high performance levels. The general lesson learned from the study was that there is no single model that can be used to solve any specific case. A context-specific approach should be set up according to legal and institutional needs. Thus, the proposal developed for Bahia, while drawing from the differing European models, does not follow either of them faithfully. The study illustrates the idea that private sector involvement is not the only means for providing higher efficiency levels in Watsan institutions. The tools used by the private sector to maximise profits, either in a competitive environment or constrained by regulation, end up improving effectiveness and should be used by any organisation, private or public, responsible for running the service. These tools are related to a managerial approach with clear objectives. This means that in whatever sort of Watsan organisation, public or private, the management style should comprise functions, objectives and responsibilities clearly defined and easily attained to avoid confusion and overlapping of action, and that targets are set to achieve the objectives. These characteristics could be achieved in a public organisation through an institutional strengthening programme which includes setting tariffs, managers being accountable for results, etc.. Thus the ownership of assets or who runs the service is not the core issue in the provision of services. However, in practice, public-private partnership seems to be the most efficient means of providing Watsan, as it represents a short cut for putting into use the necessary managerial tools for achieving high efficiency, because experience has shown that the private sector is better motivated. The research also made clear the need for defined legislation and rules and an institutional framework where the actors involved know their roles, without overlapping. This can exist in a formal or informal way. The first approach is the one used in England and Wales, where the Water Act 1989 and complementary legislation gave the regulatory bodies the power to resolve issues in the system. In France, although there is no formal regulatory body, the service is organised in such a way that the Mayor is responsible for the service and different levels of Government deal with different defined issues at supra-communal or national level. From the literature review and the study of Embasa the conclusion is made that the Bahian company is not different from other state owned Watsan organisations in developing countries, which suffer the impact of institutional aspects as consequences of political implications, and of legislation which is a consequence of a political culture with Administrative Control. Regarding this point, the study considers that action must be taken to remedy inadequacies in such institutions and organisations. In this sense, it is necessary to examine those aspects of the institutions which affect performance. Once more the problem is not technical, but depends upon the managerial approach adopted, where supply has been stressed rather than demand. The research also revealed that important issues that have either been neglected or superficially examined by decision makers in Bahia, must be considered key points in the management of the service. Among them are the bias about subsidies and the use of an appropriate level of service and technology. The discussion on the possibility of reducing the use of subsidy has always been taboo in the sector, due to the high level of poverty in the country. Discussion on this point is regarded as indicating a position against the poor and a lack of social sensitivity. However, experience throughout the world has shown that subsidising tariffs is not always the best way to provide services to the poor. On the contrary, those who take advantage of subsidies are often the middle class, with house connections. In this sense, adequate budgetary allocation to particular sections or regions, removal of price distortions which supports a bias against the poor and the selection of more appropriate technology, can be more effective than the use of subsidies alone, which end up subsidising the or better off . In fact, the use of subsidies becomes an excuse for many of the actors within the system, mainly some politicians, some of the staff in the state owned company and large contractors. If one assumes that the service can never reach sustainability it is easier to justify putting resources into the system for big construction projects, sometimes unnecessary, for the sake of public health and to increase the coverage mainly for the poor population, who will not always be the beneficiaries and could end up paying more for the service. The assumption of lack of sustainability also favours the unresponsiveness and mismanagement of some managers that are not accountable for their mistakes. One other problem to be faced in the system is the use of appropriate technology in the provision of services. The preference for big construction projects often makes it impossible to use lower cost technology, which in some cases is presented to the population in a biased way, as 'second class' technology that has been provided only for the poor. As a consequence, the poor are often the ones who end up having no access to the service because the high technology makes it unaffordable. The main problem is not whether the service is running under a private or public organisation, but is to seek the managerial approach that meets the needs of the population, considering the diversity of necessities according to the level of income, at the lowest cost. The proposal defined in this paper suggests an approach in which the necessities of the customer are the main input for definition of technical solutions. Above a lifeline tariff, the level of service should be compatible to the willingness to pay and affordability. It is necessary to include the different income profiles that define different markets with different necessities, without prejudice. Thus, the bench marks and the standard of service must be different. The consumer or potential consumer must have channels to disclose his wishes and, which are at the same time, responsible for the level of service provided. In this sense, technology, even in urban areas should take into consideration the customer’s affordability. As Henri Coing points out, the management of urban services in Latin America has been characterised by consecutive transformation which shows instability in the system. This pendulum in which the service keeps swinging, cited by Carteado & Franceys (1993) referring to the management of Watsan services in Salvador during the 20th century, demonstrates that the models do not succeed when there are internal contradictions and incoherence and a lack of socio-political commitment about the stability of issues such as financing, quality of service, tariff policy, etc. So far it seems that transformation in urban services management has occurred to overcome crises or external demands without being sufficiently internalised by the bodies involved. The author strongly believes that a defined combination of public and private sector involvement will provide the best balance in order to enable the system to achieve its objectives to provide a reliable service to the urban population of Bahia state, according to customers’ ability and willingness to pay, under a fair tariff, able to ensure self sustainability and a long life for the system. In the proposal the main executive body is the private company, together with Embasa, which will be responsible for operation and maintenance in different cities. It is planned that cities with different income profiles will be regarded differently in the provision of the service. Entry by the private sector should be paced so as to make it possible to monitor the changing system. This will be necessary as, initially, all the actors will be involved in a learning process: the public bureaucracy and technicians and the private providers, the consumers, who will have more responsibility within the system, and the regulatory bodies, will all have to accustom themselves to a new approach for which they have little experience. Within the implementation process, an important step is the method of disciplining and organising participation of NGO's and communities in project designing, execution of systems such as providing extensions of the network, etc.. This type of participation in urban areas is rather new and has become a trend, mainly for poor areas. Therefore, this system should be encouraged but, at the same time, rules should be set up in order to avoid overlap of functions and conflicting measures in the system. Thus, flexibility must be one of the principles of the proposal. In this sense, the Administrative and Technical Department together with the council placed below the Regional Government, have the important duty of making a permanent assessment of the system during implementation to provide changes in direction when necessary, in order to assure a long and stabilised life to the system. Recommendations The research does not assume that privatisation or a major private sector involvement are the only solutions to the inefficiency of public institutions or to serving the unattended demand. Efficiency, good management and other good practices are not intrinsic in any form of management, private or public, centralised or decentralised. The most efficient water and sanitation service in Asia appears to be the Singapore water utility, which has a low level of autonomy (Asian Bank of Development, 1994), for example. The argument of inefficiency and the use of populism and clientelism of local authorities were the basis of the Brazilian military government policy for centralising the financing and management of public services from the early 60's to the late 80's. This centralised policy lead to the same faults. The interviews conducted in the field research in Brazil also pointed to the lack of autonomy and political interference as one of the problems in the current system. In the same way that one can not ensure that the private sector will run the services better than the public sector, it is impossible to restrict the problem of efficiency and effectiveness of the service to management aspects only, disregarding the political issues involved. Thus, it is necessary to ensure political commitment to the principles of the plan. The research recommends Embasa's efficiency to be compared with that in the private companies. Also, it is important to assess the follow up of Embasa and its response to the institutional development programme currently in operation, sponsored by The World Bank. There is a doubt about whether or not a programme that was, once more, brought from an external agency, will last long after that agency's withdrawal. If the programme was not internalized throughout Embasa's staff, any improvement achieved by the company could be jeopardized by changes in the board of directors, or after elections. Further research into the French system is needed in two ways. First, an analysis of the contracts, and the protection they provide for the customers as well as for the private companies. Second, a follow up of the Sapin Law: the changes in the relationship between local authorities and private companies and the consequences, if any, for the provision of the services, that will occur in order to accommodate this law which was brought in 1993 to decrease the level of corruption within the system. Apart from the already mentioned studies within the French system, a rich field of investigation would be the gains in productivity and effectiveness achieved by public bodies that had undergone different types of programme focusing on managerial strengthening. In this sense, useful research could be conducted into organisations that had used the Total Quality Management approach for services, where "the client/customer is the king", and into different managerial approaches to improve efficiency in the public sector. Finally, the important thing is to be aware that changing the form of management is not an abstract choice or just a decision among different solutions. It is the consequence of specific conditions in a specific place at a specific point in time, in order to overcome a crisis. Hence, it is fundamental for the system to have trust amongst all those involved, customers, providers, public bodies, regulators. Edited Conclusions to unpublished MPhil Thesis, Carteado, 1995, Loughborough University, Leics.

National Water Supply and Sewerage Corporation, Uganda
Sam Kayaga
National Water and Sewerage Corporation (NWSC) is a parastatal organisation that was set up by Uganda Government legislation to provide water and sewerage / sewage treatment services in the urban centres of the country. It started off with Uganda's three primary towns and has so far extended its services to six secondary towns. Serious cost recovery efforts by NWSC started in 1987 when Uganda Government required all state parastatals to become self-financing.

The problem and method of study:
Since NWSC expanded its services to secondary urban areas where consumers' income levels are relative low, coupled with an inherent culture of 'free' services (i.e. fully funded by the state), recovery of water rates from customers has increasingly become difficult. Data obtained from NWSC Finance Department show that Bill Collection Efficiency (the percentage of bills collected) has declined from 63% in 1991 to 55% in 1994. With the tough stance NWSC has adopted of disconnecting premises with high unpaid bills, the number of active connections have been on the decline. It is suggested that this trend of events is to a great extent influenced by inadequacy of marketing on the part of NWSC. The purpose of this project study is to investigate the current performance of NWSC in the marketing of its service products, and subsequently recommend actions geared towards improving marketing management in the organisation. In addition to literature survey, pilot questionnaires were sent to customers and managers of NWSC.

The Organisation's environment:
Analysis of the macroenvironment indicated that the organisation faced more threats than opportunities. Notable threats are high customer illiteracy rates, the national dependency on imported technology, low income levels (national per capita annual GNP of below $200) of the populace, and an uncertainty of the political situation. The main opportunities identified were a high potential market growth, abundant water resources in the country, the monopolistic legal position which NWSC enjoys in the urban centres and the goodwill exhibited by the donor agencies. In the task environment, the markets for Watsan services in the service areas of NWSC are assured, if only ill-served. Porter's model of analysing the competitive environment was utilised: the power of NWSC's suppliers is considered high, since most of them are monopolistic dealers; the power of most customers is perceived as low, since they are scattered and consume small amounts of service products; barriers to entry to the industry are enormous, with no threat for substitute. Competitive rivalry is considered negligible. The corporate image of NWSC is unsatisfactory; the organisational structure is considered bureaucratic and thickly layered, with no provisions for effectively carrying out marketing functions, making it unresponsive to customers' requirements.

Existing situation:
Table 1 indicates the perceptions of customers about the performance of NWSC.

Customers also indicated that 70% of their encounters with staff in NWSC received good response; Plumbers, billing staff and other technical staff (in that order) were perceived incompetent, rude or uncooperative. Management of NWSC indicated, through a questionnaire how they perceived the performance of their organisation thus: * The technical quality of water services is good, unlike for sewerage which is poor. * The organisation's performance in corporate image; information collection and dissemination; complaints monitoring; customer acquisition and retention; and customer focus management, is perceived as below average. * The organisation's services are considered generally accessible to customers, apart from the poor performance of the front office staff. * Aspects of internal customer care are not well developed in NWSC. * Training in customer service is perceived to have picked up. * NWSC's performance in facilitating external customer participation in the affairs of the organisation; and promotional tools of advertising, sales promotion, personal selling, PR, and Social marketing, was perceived to be the lowest. * The pricing structure of NWSC was viewed as being inequitable, generally inaffordable by the majority, non-conserving, difficult to enforce, and not so easy to understand.

Table 2 shows the most frequent suggestions made by customers and managers of NWSC. The perceptions mentioned above confirm the following existing situation:

* NWSC is a product/production oriented organisation whose primary concern is getting the product/production process right, rather than the customers' needs and wants. Emphasis is put on technical quality at the expense of corporate image and functional quality. No marketing information system is in place, and marketing decisions are, more often than not, made on intuition of the decision maker. No segmentation of its markets is done, for marketing purposes. * Until recently, NWSC has had no official policy on customer service quality. Front office staff and other employees who interact with customers are not given guidelines on how best to handle customers. The internal customer philosophy is still in the introductory stage. Training in customer service, has so far been concentrated on senior and middle cadre staff. Customer participation in activities of NWSC is quite minimal, resulting in misconception about NWSC. * Differentiated block pricing (both metered and flat rates) based on consumers' ability to pay, is supposed to be the underlying principle although the markets are not well segmented along these lines. Affordabilty to pay for services by the consumers is low (using roles of thumb based on household income), so is the ability at national level. * Although no studies have ever been done to determine the willingness to pay of the customers, it is considered much lower than the affordability to pay, possibly because of the poor corporate image and functional quality of NWSC. Construction, maintenance and production costs in Uganda are considered to be among the highest rates in the world. The existing tariff structure is considered inequitable, non-conserving, difficult to understand, and hard to implement. Similarly, price levels of NWSC's tariff structure are perceived as being high, and price changes are effected with no notice. Pricing is the main cause of conflict between NWSC and its customers. * Apart from an existing Public Relations (PR) section, there is no promotion strategy in place in NWSC. No research has ever been carried out with a view of creating a database for promotion activities, and funding for promotional tools is considered inadequate. Advertising and PR activities are perceived as insufficient, while personal selling is not officially recognised as a major promotion tool. The relationship between the press and NWSC are unfavourable. The functions of sales promotion and social marketing are practically non-existent.

Conclusion and recommendations:
From the analysis presented above, it is evident that despite the dynamic environment in which NWSC is operating, very little emphasis is being put on marketing management, to make the organisation responsive and adaptive to the environment. Kotler and Andreasen (1991:38) define marketing management as " ..the analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchange relationships with target audiences for the purposes of achieving the marketer's objectives." If the prevailing situation continues, NWSC's customer base will increasingly diminish, its effectiveness and efficiency will similarly ebb, resulting in reduced service levels. This will in turn compel Uganda Government to take drastic measures to change the institutional set-up of the organisation, for improved services. The following is a summary of recommendations made for the benefit of introducing aspects of marketing management in all functions of NWSC: * Marketing function: PR section should be uplifted into a Marketing Department and given the necessary human and material resources to carry out marketing functions such as research, analysis, customer service training, advice to other departments and other promotional activities. * Strategic marketing planning process: An environmental analysis, mission statement revision (to include aspects of marketing), goal formulation, organisation re-design, and system design to be carried out by management, with the necessary input from employees and customers. * Product/Place decisions: Market segmentation, based on income levels and other related demographic factors, should be carried out and suitable service forms should be offered accordingly. Water vending should be institutionalised, regulated and supported in dry zones. * Customer service: service quality philosophy should be initiated through formation of a steering committee, with the full support and commitment of the senior management team; internal customer service should be consolidated by encouraging staff participation in all affairs of NWSC (e.g. by initiation of suggestion schemes), information dissemination, empowerment and confidence-building. Staff training in quality service should traverse the whole organisation, and should be continuous. Complaints monitoring and handling, and information dissemination to customers, should be streamlined. Formation of user panels should be facilitated and customer participation in affairs of NWSC, like price setting, product/place decisions, promotion efforts, should be encouraged. * Price decisions: In the prevailing macro-environment, the pricing strategy might easily be the most important marketing decision. It is therefore important that prices be made affordable to the majority of the customers. In the long term, measures should be instituted to reduce the costs of the services, such as the building of the institutional capacity through an Institutional Development programme, careful consideration of design technology and criteria, effective and efficient O&M management, and decentralisation of more functions to Area level. In the short term, NWSC should target at metering all the consumers, and apply an increasing block tariff based on consumption rates. Customers with minimum consumption rates for bare survival (lifeline rates) should pay according to affordability estimates, while customers who require extra supplies for convenience should pay at approximately marginal cost pricing rates.

* Promotion decisions: Funding of promotional tools should be stepped up, and using customer research, optimal promotion mix should be determined. Personal selling being one of the most cost-effective promotional tool, staff should be trained in relationship marketing. Advertising and PR activities should be intensified and sustained at high levels, in order to negate the biased attitudes many customers currently hold against the organisation. Sales promotion activities such as promotional pricing, the organisation's involvement in sporting activities and other functions of public concern should be started. In view of the high illiteracy rates among the customers, limited social marketing activities such as public health education and environmental awareness information should be incorporated in the publicity and advert messages.

References:
Kotler, Philip and Andreasen, Alan, (1991), Strategic Marketing for non profit organisations, Prentice Hall, New Jersey, USA.

Kaduna State Water Board, Nigeria
Nasser Yakubu
KSWB was established in 1971 as an autonomous organisation responsible for water supply in Kaduna State of Nigeria. Its tariff recovers a part of operating costs while Government provides subvention to cover the remaining part (about 43%). KSWB also has foreign debts but loan repayment does not seem to be one of KSWB's main objectives. Recent Government policy indicates that subvention has been stopped and also, KSWB is to repay future loans. There are many proposals for loans to fund new projects. Operating cost is rising due to high cost of chemicals, electricity and fuel. There is also a need for improving the quality of service. This project therefore, looks at how water supply services can be improved and how the improvements could be sustained.

The need for reform
It can be said that KSWB and other State Water Agencies in Nigeria share similar problems. The poor performance of SWAs cause water shortage problems in most towns and cities. Bukar M.(1994) attempts to give some reasons for the poor performance as follows:

Reasons For Poor Performance Poor organisational structures, lack of spare parts, absence of carrier opportunities, inappropriate technology, lack of trained staff, insufficient funding, legal framework problems, lack of motivation by sector personnel, lack of operation and maintenance culture in the sector, inadequate tariff and collection system and political interference or lack of autonomy to State Water Agencies (Bukar, 1994)

Judging from World Bank's experience, Baum and Tolbert (1985) suggest that there is need for reform so as to increase efficiency and reduce deficits of public enterprises. Reforms seem to have been applied with success in several developing countries. For example in Africa, case studies show that some water supply services in Guinea, Botswana and Cote d'Ivore are performing excellently. Reform in other developing countries like Malaysia, Indonesia and Mexico may have also been achieved through institutional development. This may show that the problems facing KSWB and SWAs in Nigeria have been experienced and tackled elsewhere. Institutional development aims to strengthen an institution and the people running it, so that a 'developed' institution is achieved. A developed institution is one that achieves customer satisfaction, sustainability through cost effectiveness, quality of service and product (Edwards, 1988). Institutional and Financial Analysis may specify the development approach to be used. INSTITUTIONAL ANALYSIS This attempts to assess the external and internal factors that may affect KSWB's performance. PEST (Political, Economic, Social & Technological) analysis shows that political uncertainty has not daunted KSWB's political support as water supply is always a government's priority. Economically, the state is very poor but the private sector is very active. University, polytechnics, other relevant institutions and contact with local and foreign consultants may have some influence on KSWB's technology. Socio-culturally, there is a tendency for high power distance and very low individualism. Objective performance indicators adapted from WASH 376 (1992), reveal some KSWB's operational performance as shown below:

Operational Indicators KSWB 1993 Target Population 1,765,756 Service Coverage in service area 77% Consumption per Connection [m3/day/connection] 2.1 Unaccounted-For-Water [UFW] 40% Metered Connections 26% Consumers per Employee 1189 Connections per Employee 41 Number of Employee 1477.

A comparative analysis with other utilities shows that KSWB's UFW is too high. There is need to improve on service coverage and employee productivity. Indicators of reliability and quality could not be assessed due to lack of data.

Using subjective indicators as suggested by Cullivan D., et al.(1986), KSWB has an overall medium performance in Commercial Orientation, Leadership, Management and Administration. However, Technical Capability, Customer Orientation and Organisational culture were classified as very low.

Financial analysis:
KSWB's 1993 financial statement shows that the total revenue is almost equal to the total operating costs. However, due to unsettled financial charges and exceptional items, huge operating deficits is generated each year. (Exchange rate: 1$ * 80 Naira).

The above table shows the extent of KSWB's reliance on government subvention. It shows that tariff covers only about half of the overall costs. An indication of a slight improvement is that the gap between operating costs and revenue has finally closed in 1993.

Financial Ratios:
Return On Fixed 16% Operating Ratio 0.98 Days receivable (days) 312.

The high ROFA may be due to the undervalued fixed assets. According to KSWB (1993a) the fixed assets were last revalued in 1985. High days receivable suggests a serious lag in revenue collection efficiency. Debt-equity ratio could not be determined due to negative equity (deficit).

Assessment of the problems:
The institutional and financial analysis came out with interesting facts about the institution. Poor economic situation and unstable political environment may mean that interference in management and operation is possible. High staff per connection, and high unaccounted for water also relates to the technical and operational deficiencies of the organisation. Low tariff and reliance on government's subvention indicate poor financial performance. Undervalued assets and accumulation of deficits indicates the weak capital structure of the institution. One may conclude that the institution is weak, in such a situation institutional development may be necessary.

Institutional development techniques:
Vonk M.(1990) suggests that for the external environment, Institutional Development (ID) may help in reshaping some governments policy. For the internal institution, institutional development may focus on strengthening capacity of the institution by aiming to improve the quality of its staff and management. An institutional development menu (Franceys, 1994a) suggests that appropriate structural and organisational adjustment may involve issues like decentralisation, delayering, autonomy, change management and privatisation. Thereafter, attention is focused on customer orientation of the business. This may involve marketing, information, communication, customer charter etc. The process continues with commercial orientation, using techniques such as priority budgeting, tariffs, cost accounting, project planning etc. With adequate customer and commercial orientation, there is the need to establish measurable objectives. The techniques for measuring, assessing and monitoring objectives for performance improvement may include bench marking, spreadsheet, management information systems etc. However, improvement of performance may not be possible until the capability of staff is developed. Using institutional development, human resources and management development can be achieved through team work, leadership, motivation, incentives, creativity and innovation etc. The process of institutional development may lead to private involvement.

Private involvement options:
Options which may not involve the transfer of ownership to the private sector may include Performance, Services, Management, Lease, Concession and Build Operate & Transfer (BOT) contracts. Those that will involve complete transfer of ownership may include divestiture and joint venture. Case studies of private involvement in water supply in developing countries (e.g. Guinea, Ivory Coast, Malaysia, Indonesia, Mexico and Botswana) seem to be in favour of privatisation without transfer of ownership. Among the options, concession and BOT may require huge capital investment whereas the others in the group may only require working capital.

Recommended approach:
Institutional development approach is suggested as a way of tackling the problems of KSWB, rather than immediate privatisation. Due to the influence of external environment, the appropriate solution may have to start at the national level. An autonomous unit (ID Unit) at the nation level is suggested as the promoter and manager of Institutional development networks in the states. The process may involve the use of local and foreign expertise to assist KSWB's staff to develop themselves and strengthen the institution. Through a 'working along with' approach, the experts will coach, demonstrate, support and mentor KSWB's staff over a suggested ten year development plan. The experts, themselves may learn new experiences in the process. The plan for each state may involve the following stages:

Foundation Stage: Year 1 and Year 2 At this stage, there will be high contact between the staff and the ID team. Structural adjustment, change management, training, coaching and skill transfer may be in a high level. The indicators for this stage may include bill collection efficiency and possible reduction in operating costs. If the indicators are not satisfied the process may be repeated.
Break-Even Stage: Year 3, Year 4 and Year 5 The objective of this stage is to give the management/staff the opportunity and incentives to prove their performance. At this stage, the management enters into a performance contract with the government. The level of Contact between the team and the Staff will reduce. This gives the staff a chance to independently try out new skills and approaches. The main indicator is cost recovery. The organisation is expected to break-even between overall costs and revenue. (Note: costs = operating cost + Capital recovery).

ID Status:
Year 6, Year 7 and Year 8: Institutions that have successfully passed through the break-even stage will then be recognised to have attain an ID status. This means that the capacity of management and staff has been strengthened such that they can now run an independent viable institution. The management and staff will now turn private and enter into a management contract with the government. The indicators at this stage include surplus, Revenue collection efficiency and reduction of Un-Accounted-for- water, and hours of service. Consolidation Stage: Year 9 - Year 14 At this stage, a lease contract between the management/private sector and government is to be negotiated. It is assumed that at this stage the agency has been transformed into a viable organisation which could make it attractive to the private sector. The institution is so developed in that government only has to regulate. The major indicators are ROFA, UAFW and average hours of supply and water quality standards.

Conclusions and recommendations:
The problems of KSWB seem to be a symptom of a larger problem. The institutional and financial deficiencies tend to suggest that the institution is weak. However, it is observed that other SWAs in Nigeria are facing similar problems. There is the fear that solving the problem of one state, may not be a sustainable option. Vonk M.(1990)'s suggestion, that a national policy is necessary for sustainable institutional development, may therefore apply to Nigeria. The approach recommends a gradual development of institutions and their staff through a process of sharing, coaching and learning. Some benefits of this approach may include relieving of governments' budgets, ability to secure loans for expansion of coverage, may contribute to economic development in the state, may relieve the political pressure in adjusting tariffs, both the people running the company and the users have a feeling of ownership in the business. One message of this approach is that institutional development should move along with the organisation as a whole, even if it does not involve privatisation. All staff in all departments, divisions or sections should be involved. State governments may have to intensify and consolidate their regulatory roles. There is also the need to set standards against which performance can be judged. At the national level, a definite institutional development plan is highly recommended. There is also the need for on-going institutional development activities in the country to be under an appropriate network. REFERENCES Baum, Warren C. and Tolbert, Stoke M., (1985), Investing in Development, Lessons of World Bank Experience, International Bank for Reconstruction and Development, The World Bank, Washington, USA. Bukar M., (1994), A paper presented during the National Water resources Conference, KSWB's WaterLine, KSWB, Kaduna, Nigeria. Cullivan D., Tippet B., Edwards D. B., Rosensweig F., and McCattery J.,(1986), Institutional Analysis of Water and Waste Water Institutions, WASH Technical Report No.37, Water and Sanitation, U.S. Agency for International Development, Washington. Edwards, Daniel B., (1988), Managing Institutional Development Projects, Water and sanitation Sector, WASH TR No. 49, USAID, Washington. Franceys, Richard, (1994a), Institutional Development, Unpublished Lecture notes, WEDC, LUT, UK KSWB (1993a), 1993 Progress Report for Kaduna State Water Board, KSWB, Nigeria. Vonk, M., (1991), Institutional Development: Theoretical Aspects in Urban Practice, In Monique Peltenburg, IHS Working Paper Series No. 4, Netherlands. WASH FR 376 (1992), Performance Indicators For Selected Water Utilities in Ecuador, Water and Sanitation, U.S. Agency for International Development, Washington.

Rural Water Supply, Uganda
Andrew Green
Although the progress made world wide by the IDWSSD was substantial, one major issue has never been satisfactorily resolved. In remote rural areas how does one ensure that a piped water supply scheme is operated and maintained in a sustainable manner? Over the last fifteen to twenty years developmentalists have advocated ever more sophisticated methods of involving the beneficiaries in the construction and management of their systems. So sophisticated, that currently staff qualified in sociology and social anthropology are probably as necessary as the engineering staff. Such an approach is possible where an NGO is implementing a project with highly trained and motivated staff. The question is how does one take these concepts and get government departments to replicate them within their bureaucracy. Piped water systems are expensive and require a substantial initial capital investment. The ethos of many organisations and Government bodies has been to treat water as a basic need that should be available to all. To ensure such overall coverage, the result has often been a minimum level of public standposts with little allowance for the community's aspirations. The argument has been that the community cannot afford it, and neither can the government if the level of service required is private taps. During the first half of the decade very little investigation was made into peoples willingness or ability to pay for the supply of water. In the Mount Elgon area of Uganda the Government of Uganda (GOU) with assistance from WaterAid initiated a gravity flow water supply programme. This programme involved the communities in both the design and construction of the projects. The projects were also used as a vehicle for other development interventions in health and hygiene. Although a contribution from the community for the construction works has been possible after mobilisation, contribution towards the O & M has proved much more difficult to organise. This study looks into two basic aspects of the programme: * What level of service is economically the most optimal use of resources? * Should a supply driven 'welfare' approach be used on water supply projects at all? The cost of different levels of service In piped water schemes the usual government/ donor response has been the provision of public standposts. This was also the case in Uganda and this 'as built' design is taken as scenario A in this study. The antithesis of this is the 100% provision of private yard taps, and this is taken as scenario C. Internal household plumbing is not a practical option as most of the houses in this part of rural Uganda consist of a rammed mud floor and wattle and daub walls. The third level of service, scenario B, consists of public tapstands, but more in number such that no point in the project area is greater than 200 metres from a tap. All the scenarios have been designed with a series of ferro cement reservoir tanks being fed from a main MDPE transmission main. This splits the system into manageable parts for operation and maintenance purposes. For scenario A the source is a spring where the water requires no treatment. The other two scenarios use a stream source with the water treated by a slow sand filter. The cost estimates for all three scenarios have been done using a set of standard designs and estimating procedures developed for the Uganda programme. The labour rates used have been taken from the World Bank Country Study for Ugandan agriculture. Having established the construction costs, estimates have been made of the operation and maintenance costs. These have been based again on the known labour rates and assuming 1% of capital costs per annum for repairs. From the capital costs and the stream of O & M costs all the scenarios have been analysed in economic terms over a twenty year lifetime. The overhead and training costs of the programme have been calculated separately as the very small nature of the programme causes diseconomies of scale which would not be typical of a country wide programme. However, they do illustrate well the high cost of the social and training side of a community based programme. The economic indicators that have been calculated are the average incremental cost (AIC), Internal Rate of Return (IRR) and the Net Present Value (NPV) of the project. Although the AIC only includes the financial costs, the NPV and the IRR are calculated allowing for the benefits of time saved through reduced journey times. THE CONCLUSIONS Economic Analysis The economic analysis of the three scenarios shows that in all three indicators (AIC,NPV & IRR) Scenario B appears to be the optimal solution. This has to be qualified by saying that the three scenarios consisted of two extremes with scenario B in the middle. Further investigation into a mixture of the scenarios might provide evidence of an even better solution. The benefits to health are not quantified as an externality in this study. However, the evidence suggests that Scenario B would be a better solution than A in terms of health as well. Greater quantity of easily accessible water is likely to have greater benefit to health than a lower amount of higher quality water. Demand driven or Supply driven? The case studies of rural water supply schemes also investigated as part of this work show sustainable projects evolving from the grass roots with minimal government intervention. In fact in some cases the projects are successes in spite of government efforts. The key point in this is that these projects evolved and have not been imposed. That they have been able to evolve is not only because the people demanded a certain level of service. They have been sustainable because these communities are educated and have reached a certain level of economic development. In addition, these communities have had easy access to credit, professional advice and construction services. In many rural areas none of this infrastructure is readily available . The provision of water supply alone is unlikely to have an immediate impact on peoples standard of living. The evidence suggests that the demand for water supply follows the economic development of an area, and not the other way around. Therefore in rural water supply there is a choice to be made: i) Governments make a political decision to supply water as a basic welfare need, and pay the financial cost in terms of both capital and O & M cost. OR ii) Governments make an economic decision to improve overall standards of living by other means and pay the political cost of not supplying water. This may seem a stark choice, but it should always be remembered that every community has access to water of some kind. The problem is that water supply is politically popular, whereas land and agrarian reform (the real source of poverty) is fraught with difficulty. For many countries there is no choice at all. This is because the political and economic consequences of either alternative are too expensive. A subsidy for rural water supply is simply beyond their means , and the political and social costs of waiting for standards of living to rise are too high. Further Donor/NGO involvement in subsidising the community approach will only help restricted areas. It is not a sustainable approach nationwide, especially when one considers the overhead costs. Continuing to subsidise piped water schemes will also create dependence. What is required is a reasonable level of service at a much cheaper cost than can be provided by piped water. Until peoples income is sufficient to pay for piped water programmes one must consider lower level technologies where possible. Although not an option everywhere, hand dug wells with a bucket and rope (no expensive handpump) is a possible option. A family well , as in Zimbabwe, means that the externality benefits from reduced journey times and health improvements are likely to be as high as yard taps. Such an approach would release money for areas where such technology is not possible. Email: agreen@iafrica.com

Updated 03/03/03

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