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Abstract:
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PPIAF funding was requested by the government in 2000 for a study to determine potential options for involving the private sector in the provision of water in Blantyre and Lilongwe as a means of extending coverage to the urban poor at affordable prices, meeting future demand, improving efficiency and service levels, and providing for sustainability. The private sector participation options study presented a diagnostic of the current challenges facing the water boards. LWB served an estimated 450,000 residents and non-revenue water was calculated at 26% in 2000. BWB served an estimated 615,000 residents, and non-revenue water had grown steadily from 1996, standing at 35% by 2000. Both utilities were confronting financial challenges related to poor revenue collection, increasing operating costs, indebtedness, and relatively high tariffs that dissuaded subscriptions, and both systems had huge investment needs related to rehabilitation, new source development, and service improvements. Despite this, both LWB and BWB were committed to achieving financial self-sustainability in order to be able to carry out the government’s objective of increasing service coverage, especially for peri-urban areas. The study concluded that the problems facing LWB and BWB needed to be addressed through a dual approach of sectoral reform and private sector participation in order to stem the current decline in performance. This approach would also provide an attractive platform for the private sector, which would bring long-term benefits to the sector, including investment. The options report delivered several recommendations to assist LWB and BWB in becoming efficient, financially sustainable water utilities and attracting private sector participation. Some of the most important recommendations are included below:
a) Reconstitute the Water Boards as limited liability companies, required to operate in accordance with the principles of good governance, and given the freedom to make decisions on a commercial and technical basis.
b) Develop a regulatory framework to ensure affordable service and define standards and targets for water service quality, either embodied within a contract with the private sector and/or embodied in regulations enforced by a regulator. The regime should provide for a fair return on investment, while at the same time protecting consumers from excessive profit-margins.
c) The options study did not initially support a concession or lease contract due to insufficient revenues, thus private sector support should first be targeted toward commercial improvements and management contract options should be considered to support the commercialization process. The specific role for the private sector might include: reduction of non-revenue water losses; improvement of billing, metering, and revenue collection; management of outsourced functions like new construction, fleet, meter reading, laboratories, etc; and management of kiosks.
d) Based on the success of the Phase I management contracts, a more in-depth form of private sector participation through a lease contract with investment requirements could be considered as part of a Phase II. |