WATER P-NOTES 48726 ISSUE 38 MAY 2009 Public-Private Partnerships to Reform Urban Water Utilities in Western and Central Africa W esternandCentralAfricahavelengthyexperi- · Short-term contracts,bothforcombinedpower encewithpublic-privatepartnerships(PPPs), andwatersupplyandwaterutilities. bothforwatersupplyandforcombinedpower andwatersupplyutilities.Côted'Ivoire'ssuccess- · Performance-based servicecontractstoimprove fulPPPdatesfrom1959,and,overthelasttwo thecommercialandfinancialoperationsofa decades,asmanyas15outof23countriesinthe publicwatersupplyutility. regionhaveexperimentedwithPPPs.ElevenPPPs arestudiedhere,anddetailedperformanceindica- Successes and Failures torsarereportedforsixlargecases--Côted'Ivoire, Senegal,Niger,Mali,BurkinaFaso,andGabon. FiveofthestudiedPPPprojectscanbebroadlycon- ThesePPPsallhavehadatleastfouryearsofpri- sideredassuccesses(seetable1).InCôted'Ivoire vateoperation. andSenegal,theperformanceofthewaterafferma- Throughitssuccessesandfailures,theWestern geshasbeenverysatisfactorywhenmeasuredby andCentralAfricanexperienceoffersinteresting indicatorsofaccess,reliability,operationalefficiency, lessonsforotherdevelopingcountriesonhowto financialsustainability,andaffordability.Inboth improvethequalityofurbanwatersupplyservices, countries,thewatersupplyserviceisnowprovidedby increasetheefficiencyofoperations,andestablish localprivateoperatorsundercontractwithefficient thefinancialcredibilityofthesector. publicpartners.Indicatorshavealsoimprovedforthe watersupplyserviceinGabon(acombinedpower Thecountriesoftheregionhaveexperimented andwatersupplyconcession)andBurkinaFaso(wa- withaspectrumofcontractualarrangements(see tersupplypublicutilitywithaservicecontractfrom Table1): 2001to2007).TherecentPPPinNiger(awater supplyaffermage)alsoshowspromisingtrendsinim- · Long-term concessionsthattransferthetechni- provingperformanceinachallengingenvironment. cal,operational,commercial,andfinancing risksandresponsibilitiestoprivateoperators ThreePPPscanbeclassifiedasmixedinout- mostlyforcombinedpowerandwatersupply come.Althoughnotableimprovementsinaccess utilities. andservicequalitywereachievedbyGuinea's wateraffermage(1989­2001)andinMali'spower · Medium-termaffermagesthatcombine andwatersupplyconcession(2000­2004),the privateoperationoftheservicewithshared PPPshavebeencompletedorterminatedandthe commercialriskandpublicfinancingfor twoutilitiesreturnedtopublicmanagement.In developingtheinfrastructuremostlyforwater CapeVerde(apowerandwatersupplyconcession supplyservices. since1999),theprivateoperatorisstillinplace, Thisnotereportskeymessagesfrom"ReformingUrbanWaterUtilitiesinWesternandCentralAfrica:Experi- enceswithPublic-PrivatePartnerships,"byMatarFall,PhilippeMarin,AlainLocussol,andRichardVerspyck (WorldBank,May2009).Volume1reviewsexperienceandreportslessonslearned.Volume2contains11 casestudies.Readersmaydownloadthecompletepaperfromwww.worldbank.org/water. WATER P-NOTES butthecontractwasrenegotiatedtolowertherisks fulPPPsaremakinggoodprogresstowardincreasing andresponsibilitiesoftheprivateoperator. directaccesstopipedwaterthroughresidentialcon- nections,asopposedtopublicwaterpoints.Overthe FivePPPsfailedtosignificantlyexpandaccessto 1990­2004periodaccesstopipedwaterhasbeen pipedwaterorimprovetheefficiencyofoperations providedtoanadditional9.8millionurbanresidents andendedupbeingeitherterminatedornotrenewed inthefivecountrieswithsuccessfulPPPs,plusMali,of (seetable1).Itistooearlytojudgetheperformance whichabout6.8millionarethroughresidentialcon- ofthetworemainingPPPsinGhanaandCameroon. nections. Expanded Access to SuccessfulPPPshavealsoimprovedthereli- More Reliable Services abilityofservice.Privateoperatorsprovidea24/7 serviceprovidedbyprivateoperatorsinCôted'Ivoire, Gabon,Senegal,andNiger.Servicecontinuityhas PPPshavehadapositiveimpactontheexpansion helpedtoimprovethequalityofthewaterdistrib- ofaccesstopipedwater,mostlythroughresidential uted;inthesecountries,ahighpercentageofwater connections.Acrosstheregion,accesstopipedwater samplestakenfromcustomers'tapsmeetnational hasbeenincreasinginrecentyears,withmostWest- bacteriologicalqualitystandards. ernandCentralAfricancountries(withthenotable exceptionofNigeria)makingprogresstowardmeet- InsuccessfulPPPs,privateoperatorshave ingtheobjectiveofhalvingby2015thepercentage achievedsignificantoperationalefficiencygains. oftheurbanpopulationthathadnoaccesstosafe PrivateoperatorsinCôted'Ivoire,Senegal,Gabon, waterin1990.Butonlythosecountrieswithsuccess- Mali,andNigerhavereducedwaterlosses(see Table 1. Successes and failures with water PPPs in Western and Central Africa Water PPP Combined power and water PPP Country Urban pop. PPP type Status Country Urban pop. PPP type Status Successes Côted'Ivoire 7.5 Aff. Active Gabon 0.75 Conc. Active Senegal 4.7 Aff. Active Niger 1.8 Aff. Active BurkinaFaso 1.8 SC Active Mixed outcome Guinea 1.1 Aff. Completed Mali 1.5 Conc. Terminated CapeVerde 0.2 Conc. Active Failures CAR 0.6 Aff. Completed TheGambia 0.3 Aff. Terminated Chad 1.1 MC Terminated GuineaBissau 0.2 MC Completed SaoTome 0.1 MC Completed Too early to judge Ghana 4.7 MC Active Cameroon 3.0 Aff. Active Notes:Urbanpopulationservedcorrespondsto2007orlastyearofthePPP,basedoncoverageestimates. Aff:affermage;SC:servicecontract;Conc:concession;MC:managementcontract. 2 ISSUE 38 · MAY 2009 Figure 1. Western and Central Figure 3. Western and Central Africa: Evolution of Connection Ratio Africa: Evolution of Staff Productivity under PPPs under PPPs (percent of urban population with direct access to piped water (staff per thousand connections; start of PPP = year 0) through residential connections since start of PPP in year 0) 10 80 8 60 connections 6 40 1000 per 4 20 Staff 2 0 0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 11 12 Côte d'Ivoire Senegal Niger Mali Burkina (public) Côte d'Ivoire (1990) Senegal Niger Mali Gabon Source: Authors' calculations based on individual case studies, see volume two. Source: Authors' calculations based on individual case studies, see volume two. Note: The year of reference (zero) is in each country the year of the start of the PPP, except in Côte d'Ivoire where 1990 was taken as the reference point. figure2)andimprovedbillcollection.Withrapid expansionofcustomerbases,laborproductivityhas Lessons Learned: The Importance alsoimprovedwhilelaborforcesremainedattheir of Accompanying Sector Reform originallevels(seefigure3).Inthefirstthreecases, operatorsreachedlevelsofoperationalefficiency SuccessfulPPPshavebeenpartofwell-designedsec- comparabletowell-runutilitiesinWesternEurope torreformswithclearpoliciesandstrictadherenceof andNorthAmerica.Mostcountrieswithsuccessful governmentstotheirpolicycommitments.Unbundling PPPsalreadyhadapolicyofrecoveringfullopera- thekeyfunctionsofpolicyformulation,regulation, tionsandmaintenanceandcapitalcostsfromuser financing,assetownership,andserviceprovision, charges,althoughthosepolicieshadbeeninconsis- whileestablishingcontractualrelationsbetween tentlyimplemented.Theefficiencygainsachievedby publicandprivatepartners,hasenhancedthesector privateoperatorsandlowfinancingcostsobtained accountabilityframework.SuccessfulPPPstempered bypublicpartnersincaseofaffermageorbythe unrealisticexpectationsofimmediateimprovementsin concessionshaveallowedcustomertariffstode- service,whiletakingeveryopportunitytomakeearly creaseinconstantterms(seefigure4). improvementsandbuildstakeholders'confidence. Figure 2. Western and Central Figure 4. Western and Central Africa: Evolution of Non-Revenue Africa: Evolution of Customer Tariff Water under PPPs Indexes (percent of production; start of PPP = year 1) (start of PPP in year 0 = 100) 40 140 35 terms 120 30 real 100 in 80 25 (%) 60 20 40 15 index 20 10 ariffT 0 1 2 3 4 5 6 7 8 9 10 11 0 1 2 3 4 5 6 7 8 9 10 Côte d'Ivoire (1990) Senegal Niger Mali Gabon Côte d'Ivoire Senegal Niger Mali Gabon Source: Authors' calculations based on individual case studies, see volume two. Source: Authors' calculations based on individual case studies, see volume two. 3 WATER P-NOTES SuccessfulPPPshaveoftenincludedsocialcon- problem,sometimesthreateningthefinancialsus- nectionprogramsforlowincomehouseholds.Such tainabilityofurbanwatersector. programs,whichtypicallyoffersmall-gaugeconnec- tionstoeligiblehouseholdsagainstthepaymentof OfthevariousPPPschemes,theaffermagear- asmallportionofthetotalconnectioncost,began rangementappearstohavebeenthemostsuccess- inCôted'Ivoireinthemid-1970sandwerelater fulintheregion.Governmentsalwaysretainedthe replicatedinSenegal,Niger,andBurkinaFaso.The responsibilityforsettingcustomertariffs,butwhile popularsupporttheygeneratedtranslatedintorapid privateoperatorshadtorecovertheiroperation expansionofcustomerbases,increasedrevenues andmaintenancecostsfromtheverybeginning, andbetterabsorptionoffixedcosts.Socialconnec- affermageshaveprovidedflexibilityformovingto- tionprogramsrequiredmajorextensionsofdistri- wardrecoveryofcapitalcostsinagradual,socially butionnetworks,butinsomecasesPPPshavenot acceptablemanner.Thiswaspossiblebecause beenallowedtodoitininformalsettlements,where Governmentshadaccesstofundsfromdonorsat mostlypoorlive;inthesesettlements,households concessionarytermstofinanceinfrastructurere- stillhavetorelyonsharedpublicwaterpoints. habilitationandexpansionprograms.The"African Affermage"modelthatseemstoemergeincludes SuccessfulPPPsreducedthecostoffinanc- strongfinancialincentivesintheremunerationof inginfrastructuredevelopmentbyachievingthe theprivateoperatortoimproveoperationaleffi- rightmixofcashgeneration,long-termdebt,and ciencyandsocialconnectionprogramstoincrease developmentgrants.MostPPPscontributedlarge sales. amountsofcashfromtariffrevenuestotheircapital expenditureprograms.Forexample,between1990 Regulationbycontracthasusuallyworked and2006,thePPPinCôted'Ivoirehasfinanced betterthanregulationbyindependent regulator. theextensionofthewaterservicetoanadditional Regulatoryriskshaveusuallyincreasedwherean threemillionpeoplethroughabout300,000new independentregulatorhasbeencreated,oftenfor connectionsentirelyfromcashsurpluses.Theyalso lackofregulatorytoolsandexpertise. attractedsignificantinternationalpublicfinancing, mostlychanneledthroughgovernmentstothepub- Looking Forward licagenciesorasset-holdingcompaniesthatwere responsiblefordevelopingthewatersupplyinfra- TherecentarrivalofnewoperatorsonthePPPmar- structure.ButPPPsintheregionhavenotproduced ketintheregionisapositivesignthattheindustry amajorinflowofprivatecapital,ingreatpart isalsoevolvingtowardgreatercompetition.For becauselocalmarketsarenotabletoprovidelong- manyyears,PPPsinurbanwaterservicesinWestern termdebtinlocalcurrencies. andCentralAfricainvolvedonlyalimitednumber PPPsincombinedpowerandwaterutilities ofFrenchprivateoperators.Butsince2000,profes- havefacedmoreproblemsthanwater-onlyPPPs. sionaloperatorsfromPortugal,theNetherlandsand MostcombinedPPPshaverunintotroublebecause SouthAfrica,havebeenawardedPPPcontractsin ofpoweroperations,eitherduetorisingfuelcosts, CapeVerdeandGhana.Theaffermagecontractfor obligationstofinancehydropowerprojects,orpoor watersupplyservicesinCameroonawardedtoa performanceoftheregulator. publicentityfromMoroccoisthefirstexampleofa trueSouth-SouthPPPintheregion. InsuccessfulPPPs,privateoperatorshave alwaysbeenallowedbytheircounterpartgovern- Theregion'sexperiencewithPPPsforurban mentstoimplementstrictdisconnectionprocedures watersupplyprovidesvaluablebackgroundforthe forprivatecustomersinarrears.Butthecollection currentdebateaboutwhetherPPPscanhelpefforts ofbillsfrompublicaccountshasbeenarecurrent toachievetheMillenniumDevelopmentGoals. TheWaterSectorBoardPractitionerNotes(P-Notes)seriesispublishedbytheWater SectorBoardoftheSustainableDevelopmentNetworkoftheWorldBankGroup. P-Notesareavailableonlineatwww.worldbank.org/water.P-Notesareasynopsis oflargerWorldBankdocumentsinthewatersector. 4 THE WORLD BANK | 1818 H Street, NW | Washington, DC 20433 www.worldbank.org/water | whelpdesk@worldbank.org