1 how much potential have ppps to assist sustainable water services delivery at local level? kevin...

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HOW MUCH POTENTIAL HAVE PPPS TO ASSIST SUSTAINABLE WATER

SERVICES DELIVERY AT LOCAL LEVEL?

Kevin WallCSIR

Gauteng municipal PPP conferenceJohannesburg, 18 February 2010

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The CSIR Mandate

“The objects of the CSIR are, through directed and particularly

multidisciplinary research and technological innovation, …….. to

contribute to the improvement of the quality of life of the people of the

Republic.”

(Scientific Research Council Act 46 of 1988,as amended)

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Contents

1. Public-private is a continuum2. Some South African realities:

operation and maintenance3. Case study:

microentrepreneurs in a partnership model

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Public-private is a continuum ….

Contract for Contract for full O&Mfull O&M

Public ownership of assets and control of policy

Selective outsourcing:Selective outsourcing:-- design-- design-- construction-- construction-- maintenance (not O&M)-- maintenance (not O&M)-- niche operation-- niche operation

Purely Purely public public operationoperation

Private ditto

Private Private operationoperation

Construction

Major Design

Other ActivitiesDegree of PSP

High

Low

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What have we learned?• Water and wastewater utilities are the engines of

the economic well being of cities• Problems associated with water and sanitation

service provision in lower and middle income countries are increasing, not shrinking

• The potential contribution of private sector support in the form of specialized knowledge and general know-how is significant

• Discussion of PSP/PPP has been overshadowed for 15 years by one form of PSP, i.e. full delegation of responsibility to the private sector in the form of concessions or affermage arrangements

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Why look wider?• Full delegation approaches to PPP have

been controversial, in part because of real/perceived lack of control by public sector and community

• Need to look at broader range of possibilities for improving service delivery in the water sector.

• The traditional private sector marketplace has evolved in a way that could provide additional tools for strategic outsourcing

• Other forms of PPP – forms which allow public sector to retain full ownership

and more managerial control

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• Increasing use of management contracts• Performance-based outsourcing of

specific functions (e.g., leakage reduction)

• At the same time, non-traditional resources are emerging – Public sector utility service providers – Contributions through Water Operator

Partnerships– Scope for supporting

microentrepreneur operators, and raising their standards

New service offerings:

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Moving on (1):

Develop a common understanding that– Recognizes that water and san are special – Acknowledges that high (or low)

performance not necessarily characteristic of either public or private

– Broadens the discussion beyond utility management to the entire supply chain

– Acknowledges that in the ”grey zone”, both public and private operators have role to play

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Operating in the Grey Zone





Private ditto


Construction

Major Design


High

Low

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Moving on (2):• Make the needed commitments

– Performance standards– Accountability, and mechanisms for monitoring

and rewarding performance– Sufficient institutional underpinnings are in

place– Financing needs addressed

• Recognize each unique situation – one size does not fit all

• Facilitate capacity development to support process– Understanding of different modes of private

participation and when/where each are appropriate

– Alternative procurement models– Risk management

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Contents




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Regulator(i.e. DWAF)

WSA

WSP Customers

Regulation

ContractsContractpayments

Service

Service agreements

Payment of service charges

Fundingpartner

Capital and ops funds

– e.g. ES, MIG e.g. govt, donors

e.g. WSA,Water board, NGO, SMME

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• In South Africa, ownership of water infrastructure to serve the public can only be by the public sector – in the case of water services infrastructure, invariably by the statutory water services authorities (WSAs) or water boards.

• However the public sector owners can, and often do, use private sector for specific tasks.

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What problems with public service delivery?

Understand origins of decentralisation in SA:• Uncommon to decentralise to local government so quickly

• Particularly when some of the institutions did not even exist

A product of negotiations for a peaceful transition• Minority wanted some autonomy to retain

control of their lives• ANC supported decentralisation -- and vision of

participatory local democracies

M Muller

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How are we doing with WS IAM?

SAICE report card 2006SAICE report card 2006

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How does infrastructure get to be “bad” or “ugly”?

• Poor operation. Or too little maintenance. Or both.

• Ageing infrastructure » growing replacement need

• Maintenance backlog of existing infrastructure

• Why?

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Why?• Too little O&M budget. And/or• O&M budget during year got

diverted to other things. And/or• Staff insufficiently skilled. And/or• Staff insufficiently motivated. And/or• Wrong infrastructure (i.e. too

complex, not robust, wrong process (e.g. in relation to local water types), etc.

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Numerous studies have pointed to skills shortfalls as

the main problem area

What skills?• Simply put, higher up the ladder, the

greater the scarcity• But, lower down the ladder, training,

supervision, quality control, and mentorship are needed.

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65% =NC

Current Employed: C&NC Process Controllers 268Vacant Process Controllers 69Amount of Employed Personnel NC 175

Current Employed & C Plant Managers

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Vacant Plant Managers 7Amount of Employed Personnel NC

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65% =NC22.8% =NC

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What is required to ensure that the

infrastructure delivers the service reliably and safely? For example, in the case of water infrastructure, drinking water quality standards are met, and the water is fit to drink?

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There are no quick fixes!

• Essential: the correct infrastructure.• Essential: sufficient budget (for

repairs, for planned maintenance, for spares, for infrastructure refurbishment and renovation, etc).

• Essential: that the staff are competent (training and experience) and committed (i.e. have correct attitude).

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• Can the private sector more effectively be held to performance criteria than the public sector can be held?

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Way forward (1 of 2):

• Public provision, led by local government, will remain dominant model• Conventional consultant/contractor role will remain important • Finding the right skills will remain a challenge, whatever model• Franchising partnerships could enable central specialists, standardisation, training. • Regionalisation of public domain could ditto

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• Already many different partnerships in different contexts• Traditional partnerships, will continue

• Consultants will develop long term relationships with clients

• If procurement rules allow • More plant outsourcing?• More functional outsourcing?

• Some “contracting” to local operators • or to community itself?• makes practical sense, • but may be hard to put into practice.

•Availability of funds is key and will remain limited.•Between the extremes, a variety of options

Way forward (2 of 2):

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There must, at least sometimes, be a strong case

for more outsourcing. Especially (but not only) for the more

remote municipalities that can’t afford (and it isn’t warranted anyway) to employ the higher skills – and/or don’t have the more experienced staff to supervise and mentor those less experienced and/or skilled.

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South Africa has further issues:

•Aside from finance and perceptions of “private”, further complicated by identity issues •Must consider representativity•Communities may prefer “black” to “white” company. (But does not mean an easy ride for “black business”)•Attitudes to private sector still apply•May also prefer “local”•Perceptions also apply to “external” public organisations, not under local political control, as profit-seeking contractors M Muller

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Contents




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Can a partnership model, making use of the basic principles of

franchising, be applied – where appropriate – to water services operation and maintenance?

And thereby improve service performance – particularly

reliability?

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A partnership model

• A partnership model …• To assist the owners of water

services infrastructure …• To operate and maintain …• The infrastructure that they

continue to own.

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Levels of skill – and obligations

• Each person correctly skilled, and contractually bound

• On most days, nothing extraordinary happens. Low-level skilled staff able to cope.

• When major maintenance, or upgrading, or breakdown – those staff know who to call, who will bring the higher level of skill

• And they know that the people they call WILL help, because there is a binding contract

• Cost of the higher-skilled, who are needed only intermittently, is spread among many sites – thus cost per site is low

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• Microenterprise franchisee receives business ‘know-how’ from franchisor; and provides services or products to customers

• Franchisor monitors quality of product/service to customers

• Customers pay franchisee for products and services, and a % is passed back to the franchisor

Franchisor

Franchisee 1 Franchisee 2

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What a franchisee of municipal infrastructure could typically

look after

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Clients:

• Owners of municipal engineering infrastructure.

• Owners of engineering infrastructure for education and health facilities (schools and clinics), hostels and the like

Pilot project in the Butterworth Education District, Eastern Cape

Province

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What a schools sanitation franchisee could typically

look after

What a schools sanitation franchisee typically looks after

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Scope of franchisee training:Franchisees have been trained in: Correct use of on-site sanitation

facilities and rural water systems Pit emptying using on site sanitation

methods Occupational Health & Safety, including

basic First Aid Environmental management practice Health and hygiene education Basic plumbing / rainwater harvesting Pump operation and maintenance

procedures

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Scope of franchisee services:

The franchisees do the following: Clean inside the toilet facilities Undertake basic maintenance of

facilities Remove foreign material and dispose

safely at designated solid waste site (solid waste management may be added to scope later)

Remove excess liquid, dispose liquids safely through irrigation

Educate learners and teachers on water & sanitation

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Health and hygiene education

Hand washing and hand sanitizing practice

Explain to learners correct usage of toilets and good hygiene practices

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Conclusion:There is surely, at least

sometimes, a strong case for more outsourcing.





Private ditto


Construction

Major Design


High

Low

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- Warren Buffett

Pay heed to the words of a wise old man:

“You don’t have to do extraordinary things to get extraordinary results.

Just do ordinary things and do them well.”

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• “Private sector involvement. The private sector can be involved in a wide range of ways, including but not limited to the following: acting as an external water services provider in terms of a contract (service delivery agreement) with a water services authority, investing in a public utility (provided ownership control vests with national government), and supporting other water services providers as water services agents.

• Public preference. The provision of water services by public institutions is preferred.”

SFWS 2003

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WRCWRC

Eastern Cape Department of

Education

Eastern Cape Department of

Education

CSIR(Technical Assistance)

CSIR(Technical Assistance)

IRISH AID(Donor Funder)

IRISH AID(Donor Funder)

SMME Franchisee

SMME Franchisee

Amanz’ abantu / Impilo Yabantu

(Franchisor)

Amanz’ abantu / Impilo Yabantu

(Franchisor)

SMME Franchisee

SMME Franchisee

SMME Franchisee

SMME Franchisee

WRC(RESEARCH

COMMISSION)

WRC(RESEARCH

COMMISSION)

CSIR(Research Team

Leader)

CSIR(Research Team

Leader)

Amanz’ abantu Services

(Sub-consultant)

Amanz’ abantu

Services(Sub-consultant)

Water Services Franchising Research Project

Service Level

Agreement

O&M ContractsLicensing Agreement

Franchise Agreements

(Optional)Implementing

Agent (IA)

(Optional)Implementing

Agent (IA)

Service Level Agreement

Funding Agreement

Butterworth Schools Sanitation and Water

Pilot Project

1 how much potential have ppps to assist sustainable water services delivery at local level? kevin...

Documents

water sector

private operators

service delivery

strategic outsourcing

managerial control

forms of ppp forms

ompublic ownership of

utility management