The Situation

Quick index to topics:

Low-Income Communities
National Policy on Services
Low-Income as Customers
Appropriate Standards
Alternative Service Providers
Low-Income Voice
Unplanned Settlements
Regulatory Structures
Integration of Services
Private Sector Participation

See also: Making Space for the Poor in Institutional Reform. (PowerPoint Presentation)

Photo: Dar es Salaam, Tanzania
Dar es Salaam, Tanzania

LOW INCOME COMMUNITIES: Do low-income communities form a large part of the customer base and the majority of the unserved population? Will the bulk of future utility customers be low-income households?

As a result of declining economic performance and urbanisation, many urban centers are expanding at a fast pace, and are increasingly characterised by rising poverty levels and a growing informal sector. As a result a disproportionate number of urban residents are housed in informal settlements that are not planned, often unserved and sometimes illegal. To meet future requirements, utilities will need to develop the skills and knowledge to adequately respond to demand of low-income households, who will comprise the majority of potential new customers.


See: Knowing Your Customers

The Challenge of Urbanisation in Africa
The rate of urbanisation in Africa is the fastest in the world. From 300 million in 2000, Africa’s urban population is expected to grow to 700 million by 2025 and the share of Africa’s population living in cities is expected to grow from 30 to 50 percent during the same period. In many countries, 40 to 70 percent of these urban residents live in low-income settlements. Across the continent, lack of access to basic water and sanitation services is an issue with consequences for the environment, health, mobility, productivity and poverty.

See: Regional Overview - Africa

See: Serving the Urban Poor: An Overview of Regional Experience


A Vision for Action

The challenge:

  • 400 million urban poor by 2025 means …
  • roughly 4 to 5 million new connections per year (5 to 8 inhabitants per connection)
  • 6,000 to 10,000 connections per day on average.

The way forward:

  • Recognize the role of utilities as leader and institutional anchors
  • Carry out institutional reforms to meet the condition necessary for delivery of services to the poor: i.e. an efficient and financially sound utility
  • Draw in all stakeholders as partners under a coherent strategy.
  • Set clear targets, publicize commitment and accept accountability
  • Foster a culture of continuous learning and exchanges within utilities, within countries and among utilities and countries.


• Poverty Line = $1 per day
Poverty rates have declined in most regions, except for the transition economies of Europe and Central Asia. The greatest number of poor people live in South Asia, but the proportion of poor is highest in Sub-Saharan Africa, where civil conflict, slow economic growth, and the spread of HIV/AIDS have left millions at the margins of survival.

Income is not the only measure of poverty. The poor lack education. They suffer from malnutrition and poor health. They are vulnerable to natural disasters and to crime, and they lack political freedom and voice. But in a world where 1.2 billion people live in extreme poverty, obtaining less than $1 a day, increasing economic opportunities is fundamental.

Over the past decade, the proportion of people in extreme poverty declined more in some regions than in others. In East Asia, especially in China, poverty rates have declined fast enough to meet the goal in 2015. Most other regions could achieve the goal, if economic growth continues and income distributions do not worsen. But Sub-Saharan Africa lags far behind, and in some countries poverty rates have worsened.

Slow growth meant increased in both the share and number of the poor in the 1990s leaving Africa as the region with the largest share of people living below $1 a day. Urban poverty has grown faster than rural poverty, owing to massive migration from rural areas to the cities, with the incidence of urban poverty now matching that of rural poverty.




In 1999, the World Bank institutions and the IMF (International Monetary Fund) initiated an approach intended to strengthen domestic policies and use external assistance more effectively for poverty reduction. Poverty Reduction Strategy Papers (PRSP) describe a country's macroeconomic, structural and social policies and programs over at least a three-year horizon, explicitly addressing strategies to promote broad-based growth and reduce poverty. They are prepared by low-income member countries through a participatory process involving domestic stakeholders as well as external development partners, including the World Bank and International Monetary Fund.

For more information, see the IMF’s "Poverty Reduction Strategy Papers: A Factsheet" (August 2002). Indivdual PRSPs are also available on line and include documents from more than 20 African countries, including Benin, Burkina Faso, Cameroon, Chad, Cote d'Ivoire, Djibouti, Ethiopia, The Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Sierra Leone, Tanzania, Uganda, and Zambia.

See: Responding to Demand
See: Policies and Legal Framework


Declining Urban Centres and Peri-urban Dwellers

A distinction must be made between urban centres with declining water distribution systems due to inadequate, aging and overloaded networks and the issue of peri-urban dwellers. There is an obvious connection between the two. It is precisely due to the lack of such social amenities like water and electricity which drives the poor urban and rural youth to the larger relatively prosperous urban centres for illusive job opportunities and better living conditions. At its initial stages governments, in an attempt to discourage such influx of people, either disregarded the phenomenon or intentionally refused to cater for their needs. These urban settlements are therefore devoid of any planning schemes. It is in this unplanned physical environment that water service providers are being called upon to provide water and sanitation amenities. For such an exercise not to fall into the usual trap of ad hoc interventions, there should be the political will to recognize these areas as part of the urban set up and hence initiate urgently needed physical and urban planning arrangements.

Dr. Kodwo Andah
Scientific Co-ordinator
Water Resources Research and Documentation Centre


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NATIONAL POLICY ON SERVICES: Does national policy recognise the right of all people, including the urban poor, to access to a basic level of water and sanitation services? Are appropriate policies backed by supporting legislation and appropriate commitment?

Urban and rural water supply policy and related legislation often do not address the specific problems of informal settlements. Although equity and poverty concerns are highlighted in policy, it has often been assumed that the particular needs of low-income consumers can be addressed in the same manner for all consumers. However the informal nature of these settlements necessitates a different approach that starts with recognition of the necessity of extending services to these settlements. Utilities have often been barred from serving these areas by policy, legislation or regulations that restrict access or hinder implementation (e.g. inappropriate standards).

See: Policy does matter! Developing Policies and Strategies for Improving Water Supply and Sanitation for the Urban Poor.

See: Policy and Legal framework.

Designing water and sanitation projects to meet demand is a key task. Demand is defined as an informed expression of desire for a particular service, measured by the contribution people are willing and able to make to receive this service.
Principles of meeting demand:

1 - Communities, households and individuals are enabled to make an informed choice of:

- Whether they want to participate in a project
- How services are to be allocated, managed, and maintained,
- Service level options
- How contributions are to be made and managed

(In practice, options will be limited not only by their absolute feasibility, but also by the capacity of project staff and communities to deliver and sustain them).

2 - Specific provision is made to ensure that marginalised groups are able to participate.

3 - The right of people to an affordable, basic level of service is not compromised;

4 - Systems for effective collection decision-making are established; and

5 - Facilities are designed and management systems are established which are capable of responding to future changes in demand.


Ten Steps Towards Serving the Poor

1. Policy Matters! The WUP urges governments, municipalities, utilities and their partners to develop specific policies, strategies and plans for improving access to services in low-income communities.

2. Support the policies with legislation and regulations that enable utilities to deliver services to informal settlements.

3. Provide incentives to extend services to informal settlements in utility contracts and performance plans.

4. Train utility staff, allocate finances, and develop specific plans to improve services for the poor either directly or in partnership with small scale providers.

5. Offer a wide range of service delivery options to meet the needs of all consumers, including the poor.

6. Develop appropriate operational and service standards to meet the needs of low-income consumers.

7. Recognize and support small scale service providers in order to reduce the high cost associated with the risks of carrying out informal or “illegal” activities.

8. Encompass all types of service providers in regulations that are simple, user friendly, fair and appropriate.

9. Reform block tariffs to help - not hurt - the poor.

10. Don’t forget sanitation! Support on-site sanitation improvements and carry out hygiene/environmental health education programs.


From: Designing Water and Sanitation Projects to Meet Demand

See also: Regional Workshop on financing Community Water Supply and Sanitation, White River, Mpumalanga, South Africa, November 26-December 2, 1999. Demand Response Approach (DRA).

See also flyer: Ten Steps Toward Serving the Poor. Building Capacity to Deliver Services to Low Income Communities.


Case Example:
Unauthorized Settlements in Ouagadougou, Burkina Faso

The political (rather than technical or economic nature of unauthorized settlements is well illustrated by the case of Ouagadougou. In 1983, more than 70 percent of Ouagadougou’s structures were classified as unauthorised. Between 1983 and 1987, the Sankara regime undertook a massive regularization of more than 95 percent of all constructed lots in the city (over 80,000 lots). However, since 1987, the application of this policy has languished and the incidence of unauthorized construction rose to 25 percent in 1993. Thus a quarter of the city’s residents live outside the areas eligible to receive basic water and other public services, and their numbers continue to grow.

– Independent Water and Sanitation Providers in African Cities,
– April 2000, p.7

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LOW INCOME AS CUSTOMERS: Does the utility have a policy and strategy that treats all households, whether in planned or unplanned and/or informal settlements as legitimate customers? Are low-income households in unplanned and/or informal settlements traditionally accepted as “legitimate customers” by utilities?

Many utilities do not have a clear mandate from Government to serve low-income households that reside in informal settlements. As a result, many utilities have not focussed on developing an understanding of the needs of their low-income customers and do not have the capacity, products or programmes tailored towards improving services in these areas. The high priority placed on urbanisation and poverty eradication by many Governments, will make it necessary for utilities to take a more proactive approach towards serving the poor.

See: Needs of Low-income customers

See: Policy and Legal Framework
See: Customers and Providers

One service option does not fit all consumers – segment the market and respond to demand.
Many utilities limit services to informal settlements to a communal standpost or water kiosks aimed at serving a prescribed number of users within a given distance. This “one size fits all” approach, does not respond demand from the heterogeneous, segmented and complex markets in low-income areas. The resulting proliferation of parallel/self-initiated approaches including vendors, illegal connections, etc., indicates that variety in levels of service and technical options is necessary and desirable.
See: Levels of Service

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APPROPRIATE STANDARDS: Are the service and technical standards – often designed for formal/planned settlements - appropriate for informal settlements?

Opening up standards for review and revision is essential to improving services to low income communities. Technical and service standards designed for formal and often middle and high-income areas, are often assumed to be adequate for addressing the needs of low-income communities. In many cases these standards are now inappropriate for the majority of urban dwellers who fall below the poverty line and do not reside in planned areas. Flexibility and innovation are required to enable service delivery in difficult physical environment.


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ALTERNATIVE SERVICE PROVIDERS: Does the utility recognize the proliferation of alternative service provider despite the extent of the services they offer?

In the absence of utility services, small-scale providers, including private and non-governmental organisations have stepped in to fill the gap. In some countries, these providers account for up to 70% of service provision and offer a wide range of services that are tailored to their customers needs. They often go where utilities are unable to and recover costs where utilities have failed to do so. Some have noted that “Vendors are human pipes.”


Small-scale providers of infrastructure services are proving to be more responsive than utilities to needs of poor consumers. They might be delivering water services by tanker, transport services by minivan, or electricity through mini-grids or household solar panels. They make their services affordable to the poor by using cheaper technology or permitting flexible payment. Regulators are customarily hostile to these alternative providers. The interests of the poor would be better served if regulators treated them as valid service providers and brought them under a regulatory umbrella.

See: Micro Infrastructure: Regulators Must Take Small Operators Seriously.

See Reports:
Independent Water and Sanitation Providers in African Cities: Full Report of a Ten-Country Study. Water and Sanitation Program. UNDP-World Bank. April 2000.

See: Intermediate and Independent Service Providers: Filling the Gaps


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LOW-INCOME ‘VOICE’: Do the low-income have a ‘voice:’ do they have the right to a vote but not to a service?

Due to their status as “illegitimate customers” low income households are often unable to demand a service from utilities. This ‘lack of voice’ limits their choices. Due to the informal status of the settlements they reside in, they are sometimes poorly organised and lack access to formal institutions that can represent their views or speak on their behalf. Although they are often considered an important voting block, their political influence does not translate into policy decisions in their favor. Electoral promises are not fulfilled.


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UNPLANNED SETTLEMENTS: Is the unplanned nature of low-income settlements physically difficult to provide services and at a higher cost?

The most common denominator in all informal settlements is poor geographical location. Physical constraints to infrastructure and service provision constitute the primary challenge to most utilities. The high cost of laying infrastructure in rocky, hilly and waterlogged areas is also a result of inflexible standards which can not be met without disruption to life and . This is especially the case because informal settlements are by nature unplanned.


Promote the upgrading of slums and regularization of squatter settlements, within the legal framework of each country. In particular, embrace the aim of the Cities without Slums initiatives to make a significant improvement in the lives of at least 100 million slum dwellers by 2020.

Overview of upgrading in Africa
From: “Urban Upgrading in Africa: A Summary of Rapid Assessments in Ten Countries” A summary of a World Bank report, June 2002.

What should upgrading programs include?

  • Longer-term programmatic approaches are suggested, not short-term one-off projects
  • Basic infrastructure is a necessary component, linked to city networks and services
  • Formal land regularization and titling should be handled separately

How should upgrading programs be financed?

  • Financing should be a package of: central government grants + local government budget + user contributions
  • Ideally, financing should be 'on-budget' not 'off-budget' at the Local Government level

Who should do what?

  • Different approaches exist but it is still unclear as to which is the preferred approach, when considering central government vs. local government responsibilities, specific sites vs. citywide efforts, targeted funds vs. flexible funds.
  • The following principles should be kept in mind in deciding responsibilities:
    • Central Governments - policy and finance,
    • Local Governments - manage service delivery and finance
    • Utilities & service providers - deliver and maintain
    • Communities - influence decisions, pay, assist operation and maintenance (O&M)

How to scale-up: unresolved issues, challenges and next steps.

  • Deciding between multi-sector vs. single sector approaches.
  • Improving financing, cost recovery and operation and maintenance.
  • Linking investments to broader networks/service systems.
  • Need for empirical data, analysis, impact assessments.

See: "Experience with Urban Upgrading in Africa" (PowerPoint presentation)

For detailed country assessments, see: Burkina Faso, Cameroon, Cote D'Ivoire, Ghana, Mali, Namibia, Senegal, Swaziland, Tanzania, Zambia

See: Declaration on Cities and Other Human Settlements in the New Millennium, in Istanbul+5.

See: Taking Urban Upgrading to Scale: Where are the Bottlenecks?


The Manila Water Concession: A Key Government Offical's Diary of the World's Largest Water Privatization; July 2000

Adobe Acrobat pdf download 6.1MB

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TARIFFS: Do the tariff structures disadvantage the poor, as well as the unconnected, second or third-hand customer?

The majority of low-income households are not directly connected to utility networks. Many share a yard tap with several households located within the same compound. Others purchase water through vendors who deliver water door to door, or from kiosks and neighbours who sell water at a fixed location within proximity of their dwelling. As a result tariff structures that set ‘lifeline’ or ‘social blocks’ to serve the poor, often miss the mark. Many low-income households pay up to 10 times per litre consumed for water purchased second- or third-hand from intermediaries.


Direct subsidies are an increasingly popular means of making infrastructure services more affordable to the poor. Under the direct subsidy approach, governments pay part of the water bill of poor households that meet certain criteria. This approach was first used in water sector reforms in Chile in the early 1990s and is an alternative to the traditional method in which governments pay subsidies directly to utilities, often allowing the price of water to fall below economic costs indiscriminately.

See: Designing Direct Subsidies for the Poor—A Water and Sanitation Case Study, Vivien Foster, Andres Gomez-Lobo, and Jonathan Halpern, May, 2000. The full article explains how simulation techniques can be used to inform the design of direct subsidy schemes, ensuring that they are both cost-effective and accurate in reaching the target population.


Tariffs, Subsidies and the Poor in the Urban Water Sector was the focus of the 12th Urban Think Tank held in Mumbai on 3-4 April 2001, and explored suggestions on policy actions. Three presentations were made: (i) Reflections on Water Pricing and Tariff Design by Dale Whittington; (ii) Types of tariff and subsidy models prevalent in Indian cities by Usha Raghupath; and (iii) International models of tariffs and subsidies and their distribution effects by Javier Jarquin.

The issues that came out of sessions were summarized as:

1.Decision-makers are aware of the need for tariff reform in India
2.Evidence suggests that tariff reform is possible in India
3.Tariff reform without institutional reforms will not be effective,
4.Decision makers face a common challenge of how to recover O&M and capital costs
5.Better data and improved accounting systems are required; and
6.Awareness-creation and public involvement at all levels is a must.

For more details, Pushpa Pathak, Urban Specialist at

Other lessons from Asia: five recent papers discuss the experience on tariffs and subsidies in the south Asia region, and may provide insights for Africa as well. (pdf downloads)

• Paper 1: Understanding the basics (16 pages)
Water pricing decisions affect several different objectives or goals of policymakers, often in conflicting ways. An efficient tariff will create incentives that ensure, for a given water supply cost, that users obtain the largest possible aggregate benefits. A tariff structure is a set of procedure rules used to determine the conditions of service and the monthly bills for water users in various categories or classes. From an economic efficiency perspective, the problem with a fixed-charge system is that consumers have absolutely no incentive to economize on water use since each additional cubic meter comes free of charge. A uniform volumetric charge has the advantage that it is easy for the consumer to understand, in part because this is how most other commodities are priced. Two-part tariffs have an important role to play in enabling water utilities to simultaneously achieve economic efficiency and cost recovery objectives. It is clear that there is wide variation in tariff setting practices around the world, and that there is no consensus on which tariff structure best balances the objectives of the utility, consumers, and society. Scarce subsidy resources may be more effectively used to reduce the initial cost of new connections, rather than to lower volumetric charges to existing users.

• Paper 2: A scorecard for India (14 pages)
There is a very wide variety of water charging practices across India. However, behind this diversity, there are a number of common underlying characteristics. The charges levied on residential users are less than a tenth of the likely full economic cost. With low tariffs and low effective meter coverage, there are no real economic incentives for Indian consumers to economize on water use. More than 70% of those benefiting from subsidies channeled towards private connections are not poor, while 40% of the poor do not use any public water services are excluded altogether.

• Paper 3: Tariff Structures in Six South Asian Cities (14 pages)
Where an Increasing Block Tariff (IBT) approach exists, the size of the first block varies widely, but in every case is well above what would be considered a true 'lifeline' block to meet basic human needs. Utility managers admitted they either do not have appropriate information to draw conclusions on the effectiveness of IBTs or have not attempted to analyze existing information.

• Paper 4: Do current water subsidies reach the poor? (10 pages)
A high proportion of poor people in South Asia do not have private connections; as a result they are unable to benefit from the heavy subsidization of this service. The average non-poor household receives 44% more subsidy than the average poor household in Kathmandu, Nepal, and 15% more in Bangalore. The absolute value of subsidies to public taps is very small compared with subsidies to private taps, absorbing only 5% to 10% of overall subsidy resources. Barely a quarter of the subsidies provided by State governments and distributed by water utilities in the cities of Bangalore and Kathmandu end up benefiting the poor.

• Paper 5: Can subsidies be better targeted? (10 pages)
Targeting of subsidies can substantially improve the financial position of utilities, with revenues rising between three and fivefold as seen in two case examples. The modified Increasing Block Tariff (IBT) approach barely performs any better than the original one, indicating that it is not possible to improve targeting simply by playing around with the design of the IBT structure. The fact that the accuracy of geopgraphical targeting is just as good as individual targeting is an important finding given that the administration costs are substantially lower. Targeted connection subsidies have leakage rates and errors of exclusion that are barely a quarter of those associated with the status quo IBT.

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REGULATORY STRUCTURES: Are the regulatory structures and capacity to administer weak? Are the regulations inappropriate and outdated?

Many informal settlements function outside the legal and regulatory framework of the city. By nature their informal status often means that they do not meet planning standards, do not have full legal status, and do not comply with regulations. Weak or no enforcement is a direct outcome – one cannot enforce what does not legally exist – and leads authorities to turn a blind eye to activities that are considered a necessary evil.


Nontraditional infrastructure service-providers supply many low-income consumers in slums and urban peripheries in developing countries. Technological change has eased entry by new providers. But the current approach to private participation in infrastructure typically gives exclusivity to a local monopoly for a long period. In return, the monopoly utility is obligated to provide service to all in the area at a certain standard, charging a rising block tariff and using some cross-subsidies. This approach can inadvertently erect barriers to improving service for low-income households. Policymakers therefore need to rethink their approach to private participation transactions and their regulation. In particular, they need to focus on facilitating new entry.

See: Reaching the Urban Poor with Private Infrastructure, Penelope Brook Cowen and Nicola Tynan, June 1999.


As long as alternative service providers remain 'illegal', they are difficult to monitor and regulate. Once recognized as playing a vital role in water service delivery, and when accommodated through a contractual relationship, it is possible to put in place rules to enable monitoring of quality, guidelines on pricing and to convert what was originally recorded as water losses to income.

Illegal activities are often charged at a premium due to the high stakes/risks involved. Once risk is reduced through recognition and regularization, the small-scale private sector is willing to invest resources and to improve services to consumers. Monitoring by the utility (enforcement of contract), other members (peer pressure) and consumers (voting with their feet) provides some checks and balances, and all parties have some degree of protection under the law.

See: Delivery of Water Supply to Low-Income Urban Communities through the Teshie Tanker Owners Association: A Case Study of Public-Private Initiatives in Ghana, Mukami Kariuki, Water and Sanitation Program and George Acolor, Ghana Water Company Limited, Accra-Tema Branch.

See also: Water Sector Reforms in Zambia - NWASCO. This is an example of government action in addressing the failure to deliver acceptable levels of service. Critical analysis of the problems revealed that they were not necessarily technical, but more the result of weaknesses in the institutional, legislative, and organizational framework of the sector. Government refocused policy at promoting and encouraging development of the private sector so as to make it the main thrust of economic growth, and formulating various measures aimed at facilitating a conducive environment for private sector participation.

See: Improving Access to Infrastructure Services by the Poor: Institutional and Policy Responses. Penelope Brook and Warrick Smith. Background paper for the Private Sector Development Strategy Paper, World Bank, Washington D.C., October 2001. (46 pages)

This paper provides an overview of the access challenges in developing countries, of the policy options available to governments seeking to improve access by the poor, and of the institutional drivers that shape both feasible policy options and policy effectiveness. It discusses the erosion of various kinds of monopoly power through the removal or reduction of exclusive service prerogatives, the trimming back of regulatory prerogatives, and the reform of standards to increase the range of acceptable technologies. The paper outlines some of the deregulatory measures in countries and regions with low coverage levels, low per capita incomes, weak regulatory and administrative capacity, and high political and regulatory risk environments.
(PDF Download)

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INTEGRATION OF SERVICES: Are water, sewerage, sanitation and hygiene services adequately integrated?

Many utilities are only responsible for water supply. A few have responsibility for sewerage, almost none are responsible for on-site sanitation, and only a handful support hygiene and environmental health education programmes. As a result, public health objectives are often not met and environmental health objectives are considered somebody else’s responsibility.


An example from Durban, South Africa shows a successful integrated approach.

Despite being a modern industrial city and the largest port, many Durban communities are without basic water and sewerage services, and there is poor maintenance and management of these services. Historical imbalances resulted in communities placing little value on the proper use and maintenance of sewerage systems. Abuse and misuse of sewerage systems was costing the Council about R6 million per year.

An education and public information programme was established to inform people that the provision of improved services must be accompanied by corresponding responsibilities. Components included an initial education campaign to schools and communities with focus on long-term sustainability. The following were incorporated: a curriculum guide, a roadshow, street theatre performances, establishment of an education awareness centre and the development of a legal framework for pollution management.

See: Sewage Disposal Education Programme, Durban Metro Water Service, Department of Wastewater Management, Durban, South Africa.

PDF Adobe Acrobat pdf download 1.4MB in size of the Durban Metro Water Service presentation. PPT PowerPoint ppt download 4.1MB in size of the Durban Metro Water Service presentation.

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PRIVATE SECTOR PARTICIPATION: Is the private sector involved and what are the implications for the poor?

Private sector participation (PSP) is increasingly viewed as a means by which efficiency and effectiveness of water and sanitation utilities can be improved. However, PSP is often considered as potentially negative for the poor. Much depends on how contracts and policies are structured, how targets for extending services are specified and financed, and on Government’s ability to regulate operations of private operators. In designing PSP the role of alternative service providers, who may play a major role in the sector should not be overlooked. Where possible they should be integrated into service provision arrangements.


Countries suffering from low incomes, limited administrative capacity, and an unfavorable government track record—some of the poorer countries of Central and Eastern Europe, for example, or Sub-Saharan African countries emerging from long periods of internal conflict—struggle to attract private investors to their water sectors. The settings they offer are not conducive to the large, long-term sunk costs characteristic of water sector investments. But there are a number of ways to reduce the costs of contracting and increase the attractiveness of deals. Strengths and weaknesses of options should be assessed, including building up from a management contract to a full concession in a two-step approach, simplifying contracts, contracting out some regulatory functions, and increasing the predictability of regulatory discretion.

Getting the Private Sector Involved in Water—What to Do in the Poorest of Countries, Penelope J. Brook Cowen, January, 1997.

"Privatise Water Sypply in Nairobi", Editorial, The Nation News, June 21, 2000.

"Insights Into Ghana's Privatisation Process", Mariam Ayoti.

"Privatised Water Service in Ghana Boosts Efficiency", Mariam Ayoti.


When addressing policy issues surrounding private provision of infrastructure and the poor, it is first important to assess whether agreement exists on issues underlying ideas for shaping good policy among the professional community. Surveys often include the following issues: demand, priorities, public awareness, supply networks and technology, economies of scale, land tenure, exclusivity, micro-entrepreneurs, informal suppliers, quality, and subsidies.

The private sector is starting to take on a growing responsibility for delivering water and sanitation services in low-income countries. However, the private sector can take many forms. Scattered examples of small-scale private sector operations, either independent or with community-based support, show that poor households not connected to a formal network often receive improved services from private sources. Technological innovations are providing ways for these small-scale providers to expand and improve the quality of their service, and at the same time raising a challenge to the standard assumption that economies of scale are pervasive. Poor households show a high willingness-to-pay for services. Future policy should look more carefully at the barriers - such as technology requirements and land tenure requirements, or billing schedules and connection fees - that prevent them from doing so. There is recent awareness that PPI does not automatically overcome the difficulties of extending network services has encouraged innovations in contract regulatory design to try to improve the incentives. Shifting the focus towards explicitly pro-poor contract and regulations may encourage policy-makers to consider formally opening the market to alternative private suppliers, and to facilitating co-operative relationships between formal utilities and informal operators.

See: "Private Solutions and the Poor: Perceptions of Private Participation in Infrastructure and the Poor." Melissa Houskamp, World Bank. June 2000.

See: "Private Participation in Infrastructure and the Poor: Water and Sanitation" Nicola Tynan, George Mason University. June 2000.

See also: The Private Sector and Water Sanitation—How to Get Started, Penelope J. Brook Cowen. January 1997.

See: Private Participation in Infrastructure in Developing Countries: Trends, Impacts, and Policy Lessons. Clive Harris. Private Sector Development. The World Bank. 2002. 60 pages.

Many of the problems that relate to difficulties in sustaining cost-covering user fees relate to a tradition of pricing below costs. This report aims to distill the experience with the private sector provision of infrastructure over the last 15 years. It looks at the growth tht occurred during the mid 1990s, and the subsequent declines. The main factors driving this are examined. The report assesses the impact that athe private provision of infrastructure hs had on service delivery, and what the consequences for other important goals have been. Finally, it looks at the main policy lessons that can be drawn, what governments have to do moving forward if they are to ensure that the supply of infrastructure services dow not become a bottleneck to growth.
(PDF Download)

See: Favourable Policy and Forgotten Contracts: Private Sector Participation in Water and Sanitation Services in Stutterheim, South Africa. Janelle Plummer. Working Paper 442 01. GHK International, London, November 2000. (62 pages)

This paper evaluates public-private partnerships in water and sanitation service delivery to the poor in South Africa, describing the regulatory framework as well as national efforts to build capacity. In addition, this case of an affermage (lease) contract, entered into in 1993, illustrates a number of typical problems observed in public-private partnerships: difficulties for the municipality to manage the split in responsibilities between public and private sectors; the need to strengthen the municipality's capacity for effective monitoring and oversight of the contract; and the challenge of how to adapt a contract to changing goals and circumstances.
(PDF Download)

See: Transitory Regime Water Supply in Conakry, Guinea. Claude Menard and George Clarke. Policy Research Working Paper 2362. World Bank, Washington, D.C., June 2000. 53 pages.

In 1989, Guinea introduced a lease contract for the provision of water services in the capital, Conakry, and other cities. Despite a weak institutional environment, the reform resulted in clear improvements in sector performance. This paper assesses the benefits of reform and looks at the factors that constrained the extent of these gains.
(PDF Download)

See: Toolkit: Selecting an Option for Private-Sector Participation in the Water & Sanitation Sector. Prepared by World Bank staff, academics, privatization advisers, government officials and water operators. Task Manager Penelope Brook. Funding support from the Department for International Development (U.K.). The World Bank 1997. 176 pages.

The document is broken down into three separate Toolkits, with an easy to follow Table of Contents: 1 - Outlines the broad-brush analysis required to assess the need and potential for introducing PSP and selecting a PSP option from a menu of options. 2 - Develops the more detailed analysis required in the run-up to the transaction (with a focus on arrangements where the private sector takes on a substantial role), and the issues related to managing the process, such as organizing the bidding. And 3 - For three main types of contracts (concession, lease and BOT), detailed lists of issues that need to be considered for drafting contracts and revising contracts drafted by adviser. (PDF Download)

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