PUBLIC PRIVATE PARTNERSHIPS IN SMALL TOWN WATER SUPPLY IN UGANDA

Sharon Price, MSc Water Management 2002, Institute of Water and Environment, Cranfield University, UK

The apparent failure of governments and pubic agencies to supply adequate water has lead to the promotion of private sector participation by those same governments, keen to reduce their burden of obligations. Recently, the focus of the private sector has turned towards small town water supply, which has often been neglected. This process has recently started in Uganda where the central government is attempting to move small towns away from full public sector management towards private sector participation after some attempts at community management.

The Role of Public-Private Partnerships

In 1994, with the objective of improving water supply and sanitation services, the Government of Uganda and the World Bank identified 63 small towns to participate in the Small Towns Water Supply and Sanitation Project (STWSP). The new water systems, developed with funding from government and donors, were intended to be operated and maintained by the communities. However the subsequent central government drive towards privatisation, before the community managed concept has been proved or disproved, resulted in 23 of the towns involved now being managed under two-year private operation and maintenance contracts. The primary objective of the contracts is to develop the systems with cost recovery to a point of self-sustainability. Each private operator is paid a fee for management, water sales, billing, pipe network, maintenance and new connections.

There was not a complete hand over of responsibilities to the private sector. Each town taking part in the STWSP was required to set up a Water Supply and Sewerage Authority Board (Water Authority) to exercise management control and regulation of the operations of the Town Council (which remains in control of the systems) and the private operator. The relationship between the various stakeholders in each town is illustrated in Figure 1. below.

Figure 1. Stakeholder Relationships

In June 2002 five small towns involved in the STWSP with private operation and maintenance contracts were visited in order to assess the performance of the Public-Private Partnerships. Luwero (population 20,000) and Lugazi (population 35,000), have been served for 6 months and 1 year respectively by Kalebu Ltd. Lyantonde (population 6,000), Kalisizo (population 10,000) and Rakai (population 5,000), have each been served for one year by WSS Services Ltd. Both of these companies are Ugandan owned and managed.

The study, recognising that it is perhaps too early to come to definite conclusions, involved the examination of the Management Contracts and the private operator Business Plans. There was consultation with local stakeholders including the operator; local government; the Water Supply and Sewerage Authority Board, some water users as well as stand post attendants in each of the towns.

The Private Operators

Kalebu Ltd is currently under contract to operate and maintain the water systems of the small towns of Busia, Malaba, Lugazi, Luwero and Wobulenzi. However, the community is currently still operating the system in Wobulenzi as they do not want to hand it over to a private operator. Six staff members are employed in each of the towns with two management staff in the central office in Entebbe. During this study the towns of Luwero and Lugazi were visited. In both of the towns water is drawn from groundwater wells and distributed to metered household connections and stand posts.

Table 1. Kalebu Water Supply Data (June 2002)	Luwero	Lugazi
Population	20,000	35,000
Household connections	256	151
Stand posts	5	5
Average water sold per month (m^3)	2,159	4,219
Household Water Tariff (US$ per m^3)	0.57	0.57
Stand posts Water Tariff (US$ per m^3)	1.44	0.95
Operating Ratio (tariffs collected/operation expense[1])	0.70	1.31
Average monthly management fees (US$)	1,766	1,841
Average monthly revenue collected (US$)	1,242	2,427
Private operator monthly expenditure (US$)	1,443	1,402

From the performance shown in Table 1 it appears that coverage is still limited with water sales averaging just 3.6 litres per day in Luwero and 4 litres per day in Lugazi.

WSS Services (U) Limited is a consulting firm with 30 full time staff (22 water supply operatives) with a current turnover of US$ 150 000 per year, 75 percent of this coming from water supply operations. WSS Services is currently under contract to operate and maintain the water systems of the small towns of Kalisizo, Kyotera, Lyantonde, Ntungamo, Rakai and Rukungiri. However, the Church of Uganda is currently still operating the system that they built in Kyotera town. During this study the towns of Lyantonde, Rakai and Kalisizo were visited. The Management Contract for these three towns was awarded to WSS Services (U) Ltd on 1^st July 2001. Lyantonde, Kalisizo and Rakai have all had a piped water supply system since mid 2000. Water is treated and fed by gravity to metered household connections and stand posts. In Lyantonde and Rakai water is sourced from surface water, in Kalisizo it is sourced from springs. The current state of water service in the three towns operated by WSS Services (U) Ltd is shown in Table 2. Water use appears to be higher than for the Kalebu towns, with average daily consumption of 13 litres, 5.7 litres and 5.8 litres respectively. The water tariffs are higher in Lyantonde and Rakai as extra chemicals are needed to treat the poorer quality surface water. Even with these tariffs the systems are operating at a loss.

Table 2. WSS Services Water Supply Data	Lyantonde	Kalisizo	Rakai
Population	6,000	10,000	5,000
Household connections	195	181	105
Stand posts	11	7	5
Average water sold per month (m^3	2,333	1,709	867
Household Water Tariff (US$ per m^3)	0.86	0.67	0.86
Stand posts Water Tariff (US$ per m^3)	1.44	1.44	1.44
Operating Ratio (tariffs collected/operation expense)	1.09	(Unknown)	0.60
Average monthly management fees (US$)	1841.20	(Unknown)	1265.82
Average monthly revenue collected (US$)	2,013	1,150	747
Private Operator monthly expenditure (US$)	1,237	747	978

Can PPP fulfil the water supply need in small towns? What is happening one year on?

Service Delivery and Management Efficiency

According to the four stakeholders in each of the towns, water quality and delivery, consumer relations and management efficiency have improved under the Public-Private Partnership. “there have been great changes over the past year, the quality is improving, the number of people per tap has reduced, even the cost has reduced” (Water User Lyantonde). “It’s a good service, the quality is good, water is very clean, available 24 hours a day” (Water User Luwero). The Town Council, town engineering departments and DWD perform regular quality assurance checks to ensure that the specified standards are being met. The general feeling communicated by the users was that they had confidence in the private operators who have responded quickly and efficiently to breakdowns or problems. As a result the users tend to approach the operatives in the field with feedback instead of going through the official communication channel of the Authority. Interviews with the Town Councils and the operator indicated that management and operational efficiency has also improved under the partnerships; billing efficiency in all five towns is now at 90 percent meaning that revenue for maintenance and operation of the system is available.

Provision for the marginalized groups

The management contract is a useful tool allowing the government to remain in control of the outputs of the Public-Private Partnership. This is achieved through incentives, the setting of water tariffs and control of investment. However, the contracts do not obligate the private operator to supply poorer and peri-urban areas. These areas tend to be neglected because they are not cost effective to serve due to low population densities and income. Neither does the contract recognise the role of the independent vendors who supply these areas.

Due to management and production efficiencies the price of stand post water has fallen under the partnerships (from US$ 2.88 per m³) to US$ 1.44 and US$ 0.95 per m³ in Luwero and Lugazi respectively, and (from US$ 5.75 per m³) to US$ 1.44 in Lyantonde. Although the standpost water tariffs have fallen, they are on average US$ 0.63 more expensive per unit cost of water (almost double) than that from household connections. The poorer groups cannot afford the US$ 29 connection fee for household connection and, as indicated in Tables 1 and 2, the number of people presumed to be served per standpost in each town is high. Some cannot afford the water from the standpost and use untreated sources. Untreated borehole water is sold in the hard to reach peri-urban areas by vendors at the same price as the treated standpost water. Generally vendors also sell treated water from household connections at US$ 2.8 per m³. In Lyantonde, Lugazi and Luwero there are some shallow wells and boreholes where water can be obtained free of charge. However, in collaboration with the local Government, both private operators plan to phase out the use of these in order to encourage people to use the piped water system. This would mean that due to the introduction of tariffs for borehole water, the independent vendors would have to charge more per water unit to the poorer and peri-urban areas, or they would be forced to sell poorer quality water from surface sources. Recognising the role that these independent vendors are playing, and encouraging them to supply the poorer and peri-urban areas that they are already serving, may be more successful than for the private operator to attempt to serve these areas themselves. This could be facilitated through regulation and coordination with the private operator.

Conflicts between stakeholders

It seems that the main limitation to the Public-Private Partnership in Luwero and Lugazi is lack of education, communication, and the time for all four stakeholders to clarify terms, roles and responsibilities. Although both private operators went through the same process when the management contracts were signed, the local stakeholders in Luwero and Lugazi felt that they were bypassed by central government during the process. This has lead to strained relationships between the local government and Kalebu Ltd. In Lugazi there was initial resentment from the community who were originally operating the system. In Luwero, the local government does not feel ownership of the system and the resultant lack of support towards Kalebu Ltd is still making operations difficult.

Conclusion

The primary goal of the Public-Private Partnerships is financial sustainability. So far the private operators have only reached this goal in Lyantonde, Kalsisizo and Lugazi. The main obstacle to this is low water sales, as a result of low household incomes and high water tariffs. The household water and stand post tariffs shown in Tables 1 and 2 are both higher than average Ugandan tariffs of US$ 0.48/m³ (World Water Vision, 1999).

In conclusion, it must be remembered that Lyantonde, Rakai, Kalisizo and Lugazi have only been under private operation and maintenance for 12 months, Luwero for only 6 months so there are many future opportunities for changes in service, good or bad. However, in these apparently early days (though in fact half-way through several of the contracts) the private operators appear to be having a positive impact in terms of efficiency, value for money, quality, service delivery, customer care, and financial sustainability. There is a need now to undertake a survey of the communities to identify unfulfilled demand and ability to pay for treated water. After all the local stakeholders, including the presently unserved population, have come together to clarify their individual roles and objectives the management contracts should be revised for subsequent contracts, particularly to ensure adequate provision for the poor and peri-urban areas.

Reference:

World Water Vision (1999) The Poor Pay Much More for Water…Use Much Less – Often Contaminated. Press Release World Water Vision Thursday, August 5, 1999. Washington DC.

Note: this overview of MSc research was also published in Waterlines, January 2003

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[1] Operation expense is that of the Town Council (ie. management fees paid out)