PRIVATE SECTOR INVOLVEMENTIN WATER SECTOR O & M

11 May 2010

By John Petzer

INDUSTRY ROLE PLAYERS

• SAICA• CESA• IMIESA•

SAFCEC• SAICE

IDENTIFIED VARIOUS ROLES

• Short term service provider• Long term service provider• Regulatory and contractual function

SHORT TERM

• Capacity of available resources• Probably no single organisation has sufficient capacity• Private sector almost definitely has a role to provide stop

gap

SHORT TERM (cont)

Various possible models

1. OPTIONS FOR URBAN CENTRES• O & M contracts / Management Contracts

– Short term – 3-5 years

• Technical /Institutional/Financial Assistance Contracts

– Normally minimum 5 years (e.g. M-A-P Water)2. OPTIONS FOR RURAL WATER SERVICES

• Appointment of Support Services Agents

– 3-5 years (e.g. CHDM & ANDM)

• Technical/Institutional/Financial Assistance• Mechanical & Electrical Maintenance Contracts

LONG TERM

• More cost effective• More difficult to establish • More contractually complex

LONG TERM (cont)

Various possible models

1. OPTIONS FOR URBAN CENTRES• Lease Contracts (Affermage)

– 10–15 years (e.g. Stutterheim, Richards Bay)

• Concession / BOT contracts

– 25-30 years with private funding– Infrastructure O & M

2. OPTIONS FOR RURAL WATER SERVICES• Water Services Franchising

– New approach utilising local small business entities

• O & M using Local CBO’s or SMME’s

RISKS OF PRIVATE SECTOR

• Cost – typically 5 – 10% profit, may be more efficient BUT depends where risk is allocated

• Infrastructure run down – depends on control• Quality not achieved – depends on control• Cherry picking e.g. only do large bulk, leave reticulation to

WSA

BENEFITS OF PRIVATE SECTOR

• Competitive bidding – lowest cost (cost effective)• Access to best practise and skills• Private sector manages performance and risk• WSA’s manage regulation and control

REGULATORY AND CONTRACTUAL ADVICE

• Contract preparation and managemento Risk adviceo Expertise in drawing up contractso Researching contract types; controls etco Define performance parameterso Contract management

• Business consultingo Provide financial expertise in setting up entitieso Advice on best legal entities

CONCLUSIONS

• Extensive skills and manpower in private sector• Short term and long term involvement is probably

required• Win-win solutions are possible