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WELL FACTSHEET - Regional Annex GhanaPPP and the Poor in Water Supply Projects: The Ghanaian Experience Author: Eugene Larbi, TREND, November 2005 Quality Assurance: Andrew Cotton This
fact sheet highlights some key issues that
have emanated from the Ghanaian experience
with Public Private Partnerships (PPP) and
how these efforts are impacting on supply of
water to the poor. The information was
gathered from the Author’s experience in
the Ghanaian Water Sector, and also from a
number of publications relating to the
sector reform in Ghana as well as on the
outcomes of a recent study sponsored by NGO
caucus of the Netherlands Water Partnership
(NWP-NGO). Context to the PPP Process in Ghana Ghana
water sector is segmented into two parts. The
community water sector deals with over 16000 rural
communities and some 287 small towns. Management of
water supply is the responsibility of District
Assemblies with facilitation and oversight role by
the Community Water and Sanitation Agency (CWSA).
The urban water sector comprises about 87 cities and
towns where the state water utility- the Ghana Water
Company Limited (GWCL) owns and manages water
supply. The
term “public” as used within the sector in the
Ghanaian context includes all government agencies
(Ministries, Departments and Agencies), and local
authorities (District, Municipal and Metropolitan
Assemblies). The Ghana Water Company Limited (GWCL),
the main utility in charge of urban water supply,
though registered currently as a limited liability,
company still receives financial support from
Government. It has no shareholders and does not pay
dividends. Hence within the context of the current
discussions, the GWCL is still considered as a
public organization.
The
term “private” refers to the private sector and
is used in two different contexts. Firstly, to
describe the formal private sector ranging from
multi-national companies through to small/medium
sized private enterprises and informal service
providers who basically operate with a profit
motive. In the second instance, the word private in
the developmental context is used simply to contrast
the public sector.
Within this context NGOs, civil society
groups, community-based organizations and other
not-for-profit organizations can all be considered
as part of the private sector although they do not
meet the criteria of profit making and their status
as economic agents is open to discussion. The
terms ‘public private partnership (PPP),’
‘private sector participation (PSP),’ and
‘privatization’ are often used interchangeably.
Generally the terms PSP and privatization refer to
the involvement of the private sector in some form,
at some stage in the delivery of water supply
services. The involvement could range from PSP in
management contracts to complete divestiture of
public utilities. There are some examples of
public-public and public-private partnerships in
small towns – but most of the discussions on PPP
within the urban sector in fact relate to PSP. In
discussions on water supply to poor areas the term
tripartite partnership (TPP) is an increasingly
popular concept that is used to describe situations
where NGOs work in tandem with the public and
private sector.
Ghana's Urban Sector-Recipe for Privatization? Under
the management of the public sector (through
the GWCL), the urban water sector has
experienced considerable deterioration.
Coverage figures are given as 70% but it is
estimated that only about 40% of the urban
population have water flowing regularly
through their taps. There has been no
significant rehabilitation or extension over
a long period and a lack of autonomy and
weak management has resulted in poor
operational efficiency and a very precarious
financial situation.
Since 2002, GWCL
has more or less been bankrupt. Cost
recovery barely keeps the company
operational or meets the recurrent costs.
Meanwhile the company is estimated to be
indebted to the tune of US$400 million.
About 50% of all water production is
unaccounted for. In 2003 alone, losses in
operations were of the order of US$34
million – almost 100% of total revenues.
It is also estimated that the company
actually needs about US1.8 billion to
extend, rehabilitate and renew systems so
that water can be extended to all the urban
population over the next 20 year period.
Since 1995 very little inflow of capital has
occurred to meet this need. Generally water
supply in urban poor areas is very poor and
communities are forced to buy water from
tankers – often at prices of up to 10
times the recommended tariffs. Overview of PPP in Small Towns Under
the on-going decentralization process,
management of small towns water supply is
the mandate of the district assemblies with
the support of the Community Water and
Sanitation Agency (CWSA). Until the year
2000, PPP was virtually unknown in small
towns. A pilot project sponsored by the
World Bank’s “Public Private
Infrastructure Advisory Facility (PPIAF)”
initiated private sector involvement in
decentralized water supply management in 4
small towns with populations between
5000-25,000. This process involved
relatively small local water enterprises. A
feasibility study sponsored by the Netherlands Water
Partnership in 2004 broadly reviewed PSP processes
in small towns and peri-urban areas in cities. The
review of the PPIAF Projects
led to some important conclusions. (i) The
introduction of private operators allows some
continuity in a regularly changing political stage
where local level institutions (like the District
Assembly, small towns Water Boards and Watsan
Committees) regularly change composition due to
elections or power play; (ii) Before PPP can be
feasible and adequately pro-poor, fine-tuning of
institutional frameworks and substantial capacity
building is required for most stakeholders.
Regulation of small towns water supply, in
particular, needs clarity; (iii) There is strong
evidence that NGOs in small towns often contribute
in a creative and innovative way to support the
roles of these small scale water operators and are
effective in advocating for the needs of the poorest
in the community.
Tripartite partnership involving public,
private and NGOs presents a feasible option for
effectively dealing with the needs of the poor.
On-going PSP Effort in the Urban Sector and it's Implications for the Poor. Between
1995 and 2002 the urban water sector made
significant advances in pursuing PSP as a feasible
option for improving efficiency and attracting
investments in the sector. Initial proposals for PSP
involved 87 urban water systems packaged into two
large concessions to be leased to two different
foreign companies over a period of about 10 years.
Like many business framework documents for
PSP in the sector, the initial proposals
laid emphasis on the legal, technical and
financial issues. The initial proposals for the PSP
were hotly debated. Key NGOs and civil society
organizations (CSOs) formed a ‘Coalition against
the Privatisation of Water in Ghana (CAP)’ to
oppose the official plans. The key arguments of the
CAP was that the proposals for the PSP were not
pro-poor. The CAP also questioned the transparency
of the process and the track record of many of the
short-listed operators with regard to their
performance in similar assignments in other
countries. Following several months of social and
political agitation, plans for implementing the PSP
were finally suspended in 2002.
Following the unsuccessful initial attempt to introduce PSP in the urban sector, the original proposals have been revised. A new Project - “The Water Sector Restructuring Project” has instead been put together to advance the PSP agenda and a grant of about US$105 million has been made available by the World Bank to start implementation. The key strategies of the new project involve:
Generally debate in the sector on how to make
the PSP process pro-poor has led to a convergence on
a multi-pronged approach for raising the profile of
service delivery to the poor: Box 1: Some Options for making PPP more pro-poor.
Despite
the lack of success in achieving the ultimate
objectives of PSP in the urban sector so far, the
experiences have provided many useful insights as
follows. Acceptability
of the Process
The
Ghanaian experience clearly shows that the process
towards the introduction of a PPP in urban areas and
small towns is a complicated process with far
reaching socio/political consequences. Political
will for the PSP process is a key pre-requisite but
not enough to guarantee a successful PPP process.
The processes adopted prior to the award of contract
– during the stage when the rules of the game are
set - ultimately determine the acceptability of the
PPP process and the level of success with regard to
the ultimate quality of service delivery to the
poor. Stakeholder
Involvement
A key
lesson is that stakeholder involvement is crucial in
the process of setting out the framework for the PPP
and all effort should be made to ensure dialogue
between government agencies, donors, civil society,
NGOs and private groups. Ignoring stakeholder
concerns could result in a limited success or
complete failure of the process. Successful
engagement with NGOs and CSOs in this area requires
a long time frame. Pro-poor
Measures PSP
efforts are unlikely to work without a commitment to
protect low-income consumers. The Ghana experience
has clearly shown that there is a dearth of
knowledge on policies and strategies that make PPP
efforts truly pro-poor. Key constraints to
delivering services to the poor such as inequitable
tariff structure and unaffordable connection fees
are difficult to deal with at a sectoral level. Other
Alternative Approaches to PPP
For
poor urban areas and small towns, options that
involve NGOs and CBOs working in tandem with public
and/or private bulk providers are feasible in
ensuring improved sustainable service delivery to
the poor. Recent discussions in the sector have led
to agreement on the need to review current
approaches to PPP which only emphasizes the
involvement of large multi-nationals and places less
emphasis on local small scale private entrepreneurs
and the potential facilitative role of NGOs. Leadership
Role of Government Government’s ownership and
technical leadership of the process is essential to
ensure stakeholder acceptance. In Ghana the public
perception of the process was negatively affected
by: (i) an excessively strong influence by donors
like the World Bank and (ii) a rather inexperienced
team of Government advisors to provide management of
the process. This led to a lingering perception
among the public that the Government did not
‘own’ the process and the donors are driving the
process to suit the foreign operators. These factors
contributed to the mass resistance by civil society
groups which led to the rejection of the initial
proposals of the PSP process. The
Myth of Increased Investments The Ghanaian experience leads to the conclusion that PSP
does not always lead to leveraging of financial
resources (credit, capital and insurance markets) as
the proponents of PPP often strongly argue. In
developing countries like Ghana, the process of PSP
does not imply financing problems can be overcome by
mobilizing finances from the private sector. In the
case of Ghana, only about 20% of the needed funds
were secured or pledged from donors before the
process was stalled in 2002. Challenge
of Linking up with CSOs The
Ghanaian example clearly illustrates the immense
influence that Civil Society Coalitions can wield in
the PSP process. On one hand the CAP effectively advocated for the poor and helped highlight
issues concerning the inadequacy of the PSP
proposals. But the entrenched position of the CAP to
discussions on the involvement of multinational
companies and their failure to bring forward any
viable alternatives led many stakeholders, including poor urban communities, to
question the real intentions and
commitment of CAP to improving the plight of
the poor. The general lessons are that adequate
government-driven public education, a greater
transparency in the PSP process, and increased
stakeholder involvement which provide for the voices
of the poor to be heard is important in ensuring
that the PPP process is not derailed by
well-resourced civil society groups who have little
to offer by way of alternative proposals for meeting
the real needs of the poor. Capacity
Building of Sector Institutions.
Ongoing discussions in Ghana have clearly established the need to develop the capacity of the Regulating Body and to emphasize its independence in the process. From the Ghanaian context the Public Utilities Regulatory Commission (PURC) could have a crucial role in ensuring service delivery to the poor in two ways: (i) regulation of informal service providers (eg. tanker services) which serve about 40% of the populations in some cities, and (ii) defining a social tariff that is better structured to benefit low income households and by eliminating access to the lifeline tariff by middle and upper income customers.
This
Factsheet was developed by Eugene Larbi (Sanitary
Engineer) of TREND Group, Kumasi, Ghana. More
information could be obtained from eugenelarbi@yahoo.co.uk
and www.trend.watsan.net
WELL Factsheet - PPP and the Poor in Water Supply Projects
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