Water Supply issues in developing countries

Water: the most important food

Water is the single most important resource for humans. Beyond that it is indispensable for food production and important for economic development. Nevertheless, 1.2 billion humans live world-wide without access to clean drinking water. More than 1.7 billion humans do not have appropriate sanitary facilities. According to WHO estimates approximately 80% of all diseases and a third of all deaths are caused by inadequate water and lacking hygiene in developing countries. Water supply and waste water treatment are therefore central fields of bilateral and multilateral development co-operation.

Resource Management in crisis

The crisis of the state in many developing countries has led to a reduction of states' activities in key areas over the past 10 to 15 years. This includes the water sector. Typically this was characterized in a first phase by a crisis due to reduced efficiency, lack of maintenance, no reinvestments and high rates of water losses. This led to an inability to produce and distribute sufficient treated water for a growing population and an inability to collect and treat the resulting waste water. In a second phase diverse models of privatization were often applied, with the objectives to produce and distribute sufficient clean water, to collect and treat waste water, and to provide these services at reasonable rates.

However, so far the results of these efforts were rather limited especially in rural water supply and sanitation.

General Policy Issues

Governments role in the water sector

The essential and scarce water resource has to be treated as a public good which implies that management of water resources must be a government responsibility so that public interest can be served. Therefore Governments involvement should concentrate on strategic planning of water resources development in line with future demand and through effective regulations. However, we know from experience in many countries that the adoption of adequate water laws and regulations is a sensitive and time-consuming task. Water rights and ownership issues should be reflected to equity of access to water, if possible through a central water rights allocation system. Public awareness of water rights, regulations and economic instruments are important to ensure understanding and acceptance of all stakeholders.

Specific water services (drinking water supply and sanitation) are best delivered by autonomous agencies, either private, public-private or co-operative entities. But even when water services are in the public sector, a strong and effective regulatory system is essential. Autonomy and accountability are pre-requisites for efficiency in the public and private sectors. Furthermore, also public service providers need strict enforcement of commercial incentives and non-revenue water should be an absolute exception.

The Government - besides its role in regulatory functions - has to prepare, negotiate and control contracts with the water supply utilities. Private and public-private investors require a clear definition of scope of work, security of bulk water supply and pumping rights, clear water tariffs and enforceability of commercial and customer obligations. To encourage private investments Governments should set-up a unit facilitating the establishment of commercial water utilities.

Expertise and Experiences of GFA Management in the Water and Sanitation Sector

World-wide experience

GFA Management supports the necessary modifications in the water sector and can count on experience of many years. This experience was gained in planning and implementing of water supply and sanitation projects, in the organisation and presentation of workshops, through sector studies and in direct consultation of water user groups, private and public water supply entities and regulatory authorities.

Organisation of User Groups for Drinking Water and Sewage in Brazil

Participation of local user groups

Of special interest are the results obtained by GFA Management with the sensibilization, mobilization and organization of local water user groups.

In the project SISAR-CE (Brazil), operating in the State of Ceará and servicing 45,000 inhabitants, we introduced a unique legal construction for a water utility, which joined cooperative and associative legal forms under private law. It succeeded in creating ownership by local communities in the management of "their" water and sewerage utility.

SISAR in Brazil

The local community associations, as well as their federation, follow private business principles, without losing their public character or their social linkage to the users/consumers. The dozen municipalities are represented by three mayors on SISAR's supervisory board. The inclusion of the municipalities in the organization of the local water sector guarantees that this important sector is not detached from the requirements of local development policy. However, local elites do not exercise influence on consumers, can not take the business character out of SISAR, nor can they politicise the water tariffs or use water as a power lever in this semi-arid region, as was characteristic in the past. SISAR improved water supply and sewage coverage significantly. The water tariffs have shown to be socially acceptable. The SISAR federation is financially sound.

Public Utilities at the Beginning of a Privatization Process in Cape Verde

ASAAE in Cape Verde

The project ASAAE (Cape Verde) has chosen another way. In a first step of a long-term privatization process, state-owned establishments (serviço autónomo) were outsourced from local administration in five municipalities with a total of 133.000 inhabitants. The local administrations set up the operators of the water and sewage systems at the beginning of the project. Services provision based on business logic overcame the inefficiency of the public water and waste water services. Crucial items for this were the elaboration and implementation of an adapted enterprise statute. lt gives full operational autonomy to the Managing Director and installs a supervisory board with the participation of the municipality as the enterprise owner, together with independent technicians from outside. At the same time, the outsourced utilities installed their own commercial departments. Their heart is an IT-supported commercial billing and accounting system. The consumption metering and invoicing activities were technically and organizationally improved.

The ASAAE operations improved the water supply in their municipalities and became increasingly customer-oriented. They led to a socially acceptable tariff policy and are financially sound. Despite of their status as public enterprises, they succeeded in actively involving interested population/consumers to take part in the expansion of the water networks.

Reform Models in Sector Reform Consultation

Water Sector Reform in Cape Verde

Also in Cape Verde, the national government and its specialized authorities were assisted in the context of the reform of the water sector. Most important result here was the fact that the government after long and intensive discussions adopted the model of the public utility of the ASAAE type as the country-wide reform model for the present phase of privatization. The model introduced by GFA Management finally became generally accepted; in the beginning of a privatization process the public utility was the temporary and locally adapted solution. This model permits further options, such as the transformation of the operations into a Limited Company or a Joint Stock Company and enables a later participation of private and foreign capital in diverse joint venture constructions.

Of importance here was also the consultation of the Cape Verdian Government for the reorganization of the National Water-Institute INGRH. lt shall function in the future as a technical supervising authority controlling water quality standards, and technical standardization in the water and waste water area. At the same time, it is to withdraw itself from all operational activities.

Services of GFA Management in the Water and Waste Water Sector

GFA Service Areas

In the water and waste water sector, GFA Management provides services in the fields of institutional and legal framework conditions, commercialisation and corporatization of water utilities and management consulting to improve the efficiency of water utilities. The important technical components are provided by our partner company CES, a specialised water engineering company.

Review and Improvement of Institutional and Legal Framework Conditions

The need of a strong regulatory framework and of enforceable laws remains as a water utility shifts from an uncommercial to commercial to corporatized and perhaps to public-private or completely privatised organisation. Our water sector economists assist in the installation of an independent regulatory authority, in a tariff reform to achieve full cost recovery within a framework of a socially compatible tariff policy and in the establishment of water laws which guarantee water rights and water fee collection.

Commercialization and Corporatization of Water Utilities

Our consulting team analyses the institutional structure of the water utilities. In many countries the water supply utilities operate the headworks, bulk water transmission and treatment as well as the retail distribution of water. It has to be analysed whether a vertical separation of the utility could achieve a higher efficiency.

Our services include the design and establishment of a corporate structure, technical and financial analysis of water utilities focussing on tariff implications of a proposed project. We review demand forecasts and willingness-to-pay information, propose capital structure and we determine the necessary Government support. Prior to the implementation phase our team can assist in public awareness campaigns.

Infrastructure and Equipment: Planning, Final Design and Supervision

Construction and Rehabilitation of water utilities

Technical engineering consultants from our strategic partner company CES analyse the technical status of water supply and wastewater treatment systems, identify and specify necessary building and renovation work and determine financing needs for infrastructure and equipment in order to achieve realistic performance standards. The results produced by the engineering consultants will be the key inputs for the financial consultants.

Engineering consultants supervise construction and rehabilitation of water systems and compile operation and maintenance guidelines and manuals. The decentralization of certain operations in water and waste water systems (also energy systems) to a local level has proven to be efficient and effective. This includes preventive maintenance and resource protection.

Improving Efficiency of Water Utilities

A prerequisite for improving efficiency is a transparent cost structure. Commercial and non-commercial activities have to be separated and the performance targets have to be specified. Investment costs to improve water supply, distribution, and sewerage systems as well as reinvestments necessary to achieve expected service levels have to be calculated. In addition the utility`s current operating and maintenance costs for the various water services have to be known. Our consulting team is introducing customized accounting and billing software and conducts training courses. Human resources development is especially important in many smaller municipalities due to limited administrative and institutional capacity.

Our Strenghts

GFA Management provides the full range of services in co-operation with its sister companies GFA Terra Systems and GFA Medica and with a specialised water engineering company. This combined know-how is an asset and the teams have shown to work effectively in complex systems. They solve problems in close cooperation with their clients and financing institutions.