Professional Documents
Culture Documents
Presented by
Owolabi Ajayi
Department of Geology Obafemi Awolowo University Ile-Ife, Osun State, NIGERIA
owolabi_ajayi@yahoo.com
AT THE CONSULTATIVE FORUM ON CURRENT TRENDS IN PRIVATE SECTOR PARTICIPATION IN LAGOS WATER SUPPLY: WHAT ROLES FOR CIVIL SOCIETY ORGANISATIONS
DATE: TUESDAY 20TH OCTOBER 2004 TIME: VENUE: 10:00 AM 1:00 PM Heinrich Bll Foundation, 9b Omo Osagie Street, off Okotie Eboh Street, Southwest Ikoyi, Lagos, NIGERIA
Public-Private Sectors Linkage in Water Supply Provision: Role of Civil Society Organisations in Lagos State, Nigeria
Owolabi Ajayi Department of Geology Obafemi Awolowo University Ile-Ife, Osun State, NIGERIA owolabi_ajayi@yahoo.com
Abstract
Historically in Lagos State and throughout Nigeria, the government or public sector was solely responsible for water supply provision (WSP) to the populace. The strategy adopted was based on an almost total dependence on large scale water supply schemes which are very expensive to install and maintain. Water supply utilities owned and operated by the public sector were neither efficient in service delivery nor able to remain solvent financially.
A vast majority of the population are averse to paying the high water charges needed to keep the utilities afloat, partly due to their low-income levels. Water supply will need to be subsidised until government introduces wealth creation strategies which will enhance the willingness and ability to pay of the vast majority of the population. A subsidy can be justified on the bases that provision of potable water enhances primary health care and improves social welfare.
It is increasingly clear that government agencies alone cannot provide adequate water supply to the people, effectively, efficiently and economically, hence the need to stimulate and encourage public sector participation (PSP) in WSP. Civil Society Organisations (CSOs) including Non-Governmental Organisations (NGOs) active in the water supply sector have a role to play in strengthening the public-private sectors linkage in WSP. The CSOs can articulate the needs and concerns of the private sector, protect private sector social rights to water, and moderate the policy and programmes of the public sector-led initiatives for PSP in water supply so that the profit motive, which drives the private sector, does not override other social considerations, by excluding the vast majority of the population from access to safe water supply.
Introduction
On-going reforms by the Lagos State Government (LASG) in the water supply sector encourages Private Sector Participation (PSP) in what historically was the monopoly of a government agency, the Lagos State Water Corporation (LSWC). This is the first time that official encouragement and formal recognition is being accorded the private sector in water service provision (WSP) in Lagos State or anywhere in Nigeria (Coker 2004), although there has always been unofficial private participation in water supply delivery such as the ubiquitous water vendors using water tankers and other delivery mechanisms. The decision to embrace PSP officially in Lagos State is unique in Nigeria and reveals new opportunities and challenges for all the stakeholders in the water supply sector. 2
The public sector is hereby defined as the government and its agencies. The private sector is defined as everyone else including non-government owned companies incorporated to conduct any business, including WSP. Civil Society Organisations (CSOs) include Non-Governmental Organisations (NGOs). The various Community Development Associations (CDAs) and Community Based Organisations (CBOs) also belong in the category of CSOs. These organisations are non-profit bodies established as watchdogs of the society to moderate and influence public sector driven initiatives and programmes in order to safeguard the interest of the populace. In the absence of CSOs, there is a dichotomy between the public and private sectors. There is at best a tenuous linkage between the public and private sector characterised by frictional relationships between the two sectors. The interaction between government officials and their agencies (Public) and the populace (Private) can be facilitated by purposeful programmes of CSOs. Historically, WSP was a monopoly of government agencies with no officially sanctioned or active roles for the private sector. The water supply situation was characterised by dismal failure in performance by the public agencies to provide water for the vast majority of the population. The situation was also characterised by high inefficiency, high operating costs, and low economic and financial returns. The prevailing view then was that water is a social service to be provided at all costs regardless of financial returns (Ajayi 2003). Current thinking regards water as a resource or economic good subject to the same market mechanisms for efficient allocation as for other resources. However, the nature of water requires some special considerations, since water really has no substitute and whose provision has historically been treated as a social right (Ariyo 2004). Experience worldwide, with few exceptions, has shown that the private sector is capable of providing relatively more effective, efficient and economic water supply than the public sector, at a price which is driven by the profit motive. Water use charge, or tariff, is usually demanded by the private sector to recoup investment, operating and maintenance costs and to generate a return on investment, called profit. The tariff arrived at by market forces may not be affordable to all segments of the society. Hence there is a need to protect the interests of the poor segments of the society to allow them enjoy the benefits of WSP without jeopardising the sustainability of the water supply projects by providing a subsidy to bridge the gap between market determined tariff and socially acceptable charges for provision of water services. Whether water is regarded as a social right or as an economic good, it is imperative that a sustainable mechanism be found for WSP to all segments of the population.
utility, the public sector also has the responsibility of providing the enabling environment, in terms of laws and regulations, to guide the operations of the utility. Theoretically there are five possible scenarios when considering the proprietorship and entrepreneurship of the utility. Four of the options involve sole ownership or sole proprietorship of the utility by either the public or private sector, while the fifth option involves some form of dilution of the ownership or entrepreneurship or joint public sector-private sector ownership or entrepreneurship. Each of these options has its advantages and disadvantages. o o o o o Public Ownership and Public Entrepreneurship Public Ownership and Private Entrepreneurship Private Ownership and Public Entrepreneurship Private Ownership and Private Entrepreneurship Joint Public-Private Ownership and Joint Public-Private Entrepreneurship
the beneficiaries of such grants for WSP in opportunity cost for other foregone social services such as expenditure on education, health, improved security and provision of roads. The more commercial is the funding mix of grants and loans (that is, the higher the loan component), the higher is the tariff required to service the financial outlay and recover the costs of the project. Costs of the project may not be related to prices paid by the consumers. Any shortfall is usually covered by the government, in the form of subsidy on the price paid by the consumer. However, the sustainability criterion requires that money be found from somewhere, whether from the public coffers or from private pockets to keep the project on track. The mechanism of funding is very important for the sustainability of the project. The beneficiarys willingness and ability to pay usually constitute limiting factors on the tariff that can be charged (or recovered). The tariff ultimately determines the sustainability or otherwise of the project. A distinction must be made between the willingness to pay and ability to pay. Both can be evaluated separately. In any case, the ability to pay is a direct function of the wealth level or poverty level of the benefiting community. Recent World Bank studies indicate that over 70% of the Nigerian populace is poor and may not be able to afford modern, expensive water service delivery systems. Unless government initiates radical economic development programmes to increase the wealth of the generality of the people (or reduce their poverty level), this situation will persist for a long time to come (Ajayi 1996). Water supply projects owned and managed by the public sector do not generate revenue streams to sustain WSP in economic and financial terms. The internally generated revenue is a small fraction of the capital outlay and can therefore not pay for adequate service delivery, capacity expansion or introduction of services in newly developed areas. The government has been the dominant financier or guarantor of funds for development in the water supply sector. It is increasingly clear that the public sector cannot provide all the funds needed to service the water supply sector. It is clear that private sector participation is required to improve the efficiency and sustainability of the water supply sector. However it is also evident that even if the private sector provides entrepreneurial input and some funding, a subsidy will still be required to provide water to the poor segment of the society, since the government advocates water for all. The major problems in water service provision can therefore summed into two: how to source start-up finance (or capital investment) and cost recovery (including level of tariff and subsidy to be provided). There are three main scenarios for managing WSP; business as usual in which the government continues to own, manage and operate the water utility as before with its inherent problems of inefficiency, poor service record and low sustainability; adopt a demand-driven approach whereby government provides water to only those communities that can afford the high tariff; or to engage the private sector in meaningful reform programmes. The present initiative of LASG implies a preference for PSP. However there is a strong need for strengthening the existing linkage between the public and private sectors. The bridge between the public and private sectors is the Civil Society Organisations (CSOs), including Non-governmental organisations (NGOs), Community Service Organisations (CSOs) and Community Development Associations (CDAs).
recommendation can be made for both the public and private sectors to accord recognition and patronage to these organisations in order to strengthen the public-private sectors linkage and interactions for mutual benefit and overall social development. Can we equate the CSO with CS? In order words is the civil service organisation synonymous with the civil society itself? Put differently, do the CSOs adequately and effectively articulate CS concerns or are they just elitist groups as far removed from the private sector as most public organisations are? In whose interest are the CSOs working? Answers to these questions will undoubtedly vary depending on the performance of the individual CSO and the perception of either the public or private sectors. Regardless of the varied perceptions, the CSOs have a role to play in strengthening Public-Private Sectors Linkage. As an organised group, the CSO is better placed than private individuals to articulate and address issues of interest to both the public and the private sectors. The CSOs also need to be accepted by both the public and private sectors in order to function effectively in a mediating role between conflicting public and private interests. There is also a compelling need for the CSOs to appreciate the friction in the public-private sectors linkage and moderate such for the benefit of the populace who are the beneficiaries of the water supply programmes. Other roles envisaged for the CSOs are to mobilise the private sector to support public initiatives, monitor public expenditures, policies and programmes (the traditional watchdog role assumed by the CSOs). In addition, there is scope for education and training of the private sector on water supply issues including best practices. The CSOs can also assist the private sector in fund raising to participate meaningfully in joint public-private enterprises in the water supply sector. The CSOs should also periodically review performance in WSP and provide feedback to both the public and private on contending issues. It is suggested that the CSOs abandon advocacy either for public (government) policy and programmes as well as advocacy of private (people) social welfare needs, desires and strategies. The CSOs will be in a better position for acceptance by both the public and private sectors if by both sectors perceive them as impartial catalyst in facilitating interaction of the public and private sectors and linkage in WSP. Finally, it is suggested that the CSOs engage meaningfully in promoting the process of dialogue between the public and private sectors for the welfare of the civil society.
WSP was regarded in the past as a social service to be provided at all costs regardless of financial returns. Current philosophy regards water as a resource or economic good subject to market mechanisms for efficient allocation of resources. However, the nature of water requires some special considerations, since water really has no substitute and whose provision has historically been treated as a social right. Experience worldwide, with few exceptions, has shown that the private sector is capable of providing relatively more effective, efficient and economic water supply than the public sector, at a price that is driven by the profit motive. Water tariff is usually charged by the private sector to recoup investment, operating and maintenance costs and profit. The tariff arrived at by market forces may not be affordable to all segments of the society, hence the need to protect the interests of the poor segments of the society without jeopardising the sustainability of the water supply projects by providing a subsidy to bridge the gap between market determined tariff and socially acceptable charges for the provision of water services. Whether water is regarded as a social right or as an economic good, it is imperative that a sustainable mechanism is found for WSP to all segments of the population. There are two key variables governing the entity charged with WSP: proprietorship and entrepreneurship. PSP requires dilution of the sole public proprietorship and entrepreneurship. Regardless of the ownership or proprietorship of the utility, the public sector also has the responsibility of providing the enabling environment, in terms of laws and regulations, to guide the operations of the utility. Theoretically, there are five possible scenarios when considering the proprietorship and entrepreneurship of the utility. Four of the options involve sole ownership or sole proprietorship of the utility by either the public or private sector, while the fifth option involves some form of dilution of the ownership or entrepreneurship or joint public sector-private sector ownership or entrepreneurship. Each of the options has its advantages and disadvantages. There are challenges ahead, especially in motivating the public sector to participate in WSP as well as securing the acceptance of a sceptical populace to public sector-led initiatives involving PSP. There are really three strategies for funding WSP: outright grants, outright loans or a mix of grants and loans. The more commercial is the funding mix of grants and loans (that is, the higher the loan component), the higher is the tariff required to service the financial outlay and recover the costs of the project. Costs of the project may not be related to prices paid by the consumers. The mechanism of funding is very important for the sustainability of the project. The major problems in WSP are how to fund capital investment and cost recovery (including level of tariff and subsidy to be provided). The linkage between the public and private sectors is the CSOs (including NGOs, CSOs and CDAs). CSOs can bridge the dichotomy between the public and private sectors. However, the role of CSOs has neither been fully endorsed by the public nor their activities fully appreciated by the private sector, which remains unaware of the potentials of the CSOs to articulate public needs and promote social welfare issues. As an organised group, the CSO is better placed than private individuals to articulate and address issues of interest to both the public and the private sectors. It is recommended that the government recognise, encourage and facilitate the CSOs in the PSP process for WSP.
References
Ajayi O. 1996. Environmental Management in Katsina State: Private Sector Participation and Options for Cost Recovery, In Proceedings of the Workshop on Katsina First MultiState Water Supply Project - Environmental Sanitation and Hygiene Education, Ed. F.A. Sonuga and J.O. Ajayi, Liyafa Palace Hotel, Katsina, Nov. 13, pp. 71 - 79. Ajayi J.O., Sonuga, F.A., Aliboh, O.P., and Oloke, D.A. 2003 Sustainable Potable Water Supply to Nigerians through Conjunctive Development of Surface and Groundwater Resources, In Contributions of Geosciences and Mining to National Development, Ed. A.A. Elueze, pp. 9 - 17. Ariyo A. 2004. Water and Privatisation: The Policy Issues Discussion Note for the Forum on Water and Privatisation organised by the Heinrich Bll Foundation, Lagos Office, Nigeria, May 10, 6 pp. Coker O. 2004. Global Experiences and Local Policy in Lagos Paper presented at the Forum on Water and Privatisation organised by the Heinrich Bll Foundation, Lagos Office, Nigeria, May 10, 9 pp.