Project Summaries Water Supply and Sanitation 33

Part 1

investment; d) a fixed cost for operations; e) a several different financing sources under the
variable cost of operation per m3 of drinking water; State Development Plan, which sets guidelines for
and f) the monthly volume in cubic meters of properly managing resources available through
drinking water measured as it exits the plant.46 The different financing sources for water investment
plant started operations in June 2018.47 programs. As a result, the public authorities were
able to combine and leverage a combination of
Lessons Learned resources available at the federal and state levels
46
 ampos, Maria. 2013.
C This project shows how different financing options as well as from international financing institutions, to
“Prestación de servicios can be successfully blended in one project. optimize their application.
públicos municipales In this case, the project was able to mobilize
en asociación
públicoprivada: El caso
de la Planta Desaladora
en Ensenada, Baja 22. C
 hallenging Case: The Dar Es Salaam Water and Sewerage Authority (DAWASA),
California.” CCA. Dar es Salaam, Tanzania
Accessed May 25,
2019. http://www.cca.
org.mx/ps/funcionarios/
muniapp/descargas/
Documentos_
de_apoyo/
informaciontematica/
capp/Caso_
PlantaDesaladora_
Ensenada.pdf;

Proyectos Mexico.
2019. “Diseno,
Construccion,
Equipamiento,
Operacion,
Mantenimiento Y
Conservacion de una
Planta Desaladora Photo Credit48
en Ensenada, Baja government to finance the project. The African
California.” Proyecto Background Development Bank (AfDB) provided a loan of
Mexico. Accessed
May 25, 2019. https:// Dar es Salaam is Tanzania’s former capital and about USD 47 million, while the World Bank,
www.proyectosmexico. largest city. Before this project, the city’s water and the European Investment Bank, and Agence
gob.mx/proyecto_ sewerage infrastructure, built in the 1970s, was in Française de Développement (AFD) provided a
inversion/0839-
planta-desaladora-de- poor condition, even posing significant potential total of USD 98 million in financing. The World
ensenada/; health hazards. In 1997 the government established Bank also contributed another USD 61.5 million for
the Dar es Salaam Water and Sewerage Authority restructuring DAWASA.
Border Environment
Cooperation (DAWASA) to develop and operate the city’s water
Commission. 2012. infrastructure. However, it failed to provide much The project underwent six years of negotiations with
“Desalination Plant improvement to the city’s water and sewerage private companies and several bidding processes.
Ensenada, Baja
California”. Certified system. Leakage and illegal connections Initially, there were four private companies
Projects. Accessed contributed to around a 50 percent loss of the water interested in the project, namely Northumbrian
April 5, 2019. https:// produced. Equipment was outdated and the billing Water Group, Saur Internationale, Vivendi
becc.org/projects/
certified-projects/ and collection system was extremely inefficient. Environment (also known as Veolia Environment),
desalination-plant- Filters and sewage pumping stations were out of and Biwater Gauff Tanzania Limited (BGT).
ensenada-baja- operation, resulting in partial treatment of water However, three of the four companies pulled out
california.
47
NADB. n.d. “Investing and significant pollution of the coastline. due to concern over the high level of risk transferred
in the People & Revamping the entire system would require a to the operator. BGT (a joint venture between
Environment of the considerable amount of money. United Kingdom-based Biwater International and
U.S.- Mexico Border.”
NADB. Accessed April a German engineering firm, HP Gauff Ingenieure)
5, 2019. http://www. In 2002, the International Monetary Fund (IMF) and then became the sole bidder, though it never fully
nadb.org/Reports1/ the World Bank offered debt relief assistance to satisfied the qualification criteria. As a result, BGT
Press_Releases/
spanish/2018/110618. Tanzania under the condition that the Government won the bid with no-objection from the World Bank
pdf. of Tanzania privatize its SOEs, including DAWASA. as the transaction advisor.
48
Photo Credit: Roland The government agreed.
(https://commons.
wikimedia.org/wiki/ Following the award, BGT created an operating
File:Dar_es_Salaam_ Project Structure company called City Water Services Limited
aerial.jpg), „Dar es Following a recommendation by the IMF, the (CWS) in partnership with a local investor, Super
Salaam aerial“, https://
creativecommons.org/ government invested around USD 145 million to Doll Trailer Manufacture Company Limited (STM).
licenses/by-sa/2.0/ upgrade DAWASA before selling the company. BGT owned 51 percent (the minimum required
legalcode Multilateral donors provided loans to the Tanzanian by the winning bidder) of the shares in CWS and
 Project Summaries Water Supply and Sanitation 34
Part 1

African Development
49 

Bank. 2010. Dar es

STM owned 49 percent. Subsequently, CWS Lessons Learned
Salaam Water Supply operated under a lease contract with DAWASA to In August 2005, CWS brought the case to two
and Sanitation Project provide water supply and sewerage services in different international arbitration tribunals in
– Project Completion
Report. African
Dar es Salaam for ten years. DAWASA was also parallel, namely the ICSID Tribunal and UNCITRAL
Development Bank responsible for funding and implementing capital Tribunal. The former found that the Government of
Group. Accessed investments. The project was primarily financed Tanzania did violate some treaty obligations, but the
December 3, 2019.
https://www.afdb.org/
through external loans, with CWS providing USD breaches did not cause CWS any losses. Therefore,
fileadmin/uploads/afdb/ 8.5 million in equity. CWS was not awarded any compensation. The
Documents/Project-and- UNCITRAL Tribunal rejected CWS’ claims and
Operations/Tanzania_-_
PCR-Dar_es_Salaam_
Under the contract, CWS was responsible for: (i) instead awarded approximately USD 3.8 million in
Water_Supply_and_ increasing revenue (doubling monthly collections damages to DAWASA.
Sanitation_.pdf; within 12 months); (ii) identifying and regularizing
Biwater Gauff (Tanzania)
unregistered connections; (iii) introducing a new In June 2005, a public corporation called Dar
Ltd. v. United Republic billing system; (iv) renovating the city’s water and es Salaam Water and Sewerage Company
of Tanzania, ICSID sewerage infrastructure; and (v) reducing water (DAWASCO) replaced CWS. DAWASCO also
Case No. ARB/05/22.
Accessed December
loses from an estimated 70 percent to 44 percent faced the same challenges as CWS but, over the
3, 2019. https://www. in the first three years. next five years, operational performance improved.
iisd.org/itn/2018/10/18/ In 2018, DAWASA was merged with DAWASCO
biwater-v-tanzania/;
After it took over operations in August 2003, with the aim of providing better services to the
Nwokorie E.C. however, CWS faced numerous challenges. citizens of Dar es Salaam.49
2018. Public-Private These challenges included failures by CWS
Partnership Coordination:
Lessons from Tanzanian
shareholders to provide their agreed equity This project highlights the following:
Water Sector. In: contributions; below forecast average monthly • An appropriate allocation of risks is a key factor
Farazmand A. collections in 2004/05 (only 52 percent, less than in the design of a successful PPP. In this case,
Global Encyclopedia of
Public Administration,
that achieved by DAWASA in 2002/03); very low significant risks were transferred to the private
Public Policy, and new water meter installation rates (only 2,500 out operator, although the sole bidder never fully
Governance. Springer, of the 170,000 water meters required); met the qualification criteria. On taking control of
Cham. https://link.
springer.com/reference
and launch of a billing software system, which the operations, the private partner had difficulty
workentry/10.1007%2F proved inadequate. CWS also inherited many managing an already very precarious operating
978-3-319-31816-5_ disputed and unverifiable connections, including environment.
3548-1;
the army camps’ water connection. CWS had to • Both parties should conduct robust due diligence
Nyambura-Mwaura, disconnect the army camps’ water supply due before entering into a PPP. In this case, the
Helen. 2008. “How to to an unpaid bill of over TZS 200 million (USD private operator seemingly relied solely on the
water a parched city: a
Tanzanian tale”. Reuters.
172,000), leading to a backlash from the Tanzanian information set forth in the tender documents
Accessed December soldiers. CWS also retained approximately 1,400 regarding the status of the water infrastructure
3, 2019. https://www. DAWASA employees but had limited mechanisms that would be transferred from DAWASA. Had
reuters.com/article/us-
water-tanzania-idUSWAL
and incentives to change the company culture or it independently verified the data, it may have
74805620080319; improve their performance. learned beforehand that some of the information
in the tender documents was inaccurate and
Triche, Thelma. 2012.
A Case Study of Public-
These challenges crippled the finances of CWS. It adjusted its plans accordingly.
Private and Public-Public failed to pay a regular rental fee to DAWASA and • It is important to understand the operating
Partnerships in Water to deposit First Time Connection Tariffs into the context and adjust the PPP’s objectives to reflect
Supply and Sewerage
Services in Dar Es
account of that program. CWS also periodically the actual circumstances on the ground. In this
Salaam. Washington: withheld tariff collections from landlords to cover its case, the private operator had difficulty curtailing
World Bank Group. operating costs. By March 2005, its accumulated illegitimate water connections and seeking
http://documents.
worldbank.org/curated/
losses were nearing USD 12.3 million. redress when customers refused to pay water
en/919501468118750 bills, in part due to inadequate legal mechanisms
634/pdf/690320RE Subsequently, CWS tried to renegotiate the for enforcement. Nonetheless, the PPP
VISED00ion0in0Dar0
es0Salaam.pdf;
contract with the government, including through agreement set ambitious targets for regularizing
the involvement of a mediator, but the parties failed connections and increasing collections within
Triche, Thelma. 2013. to reach a consensus. In May 2005 DAWASA relatively short timeframes.
“Tanzanian Tales: Why
PPP Failed to Scale
delivered notice to terminate the contract, which
was opposed by CWS. This stalemate, coupled
thegpsc.org

a Mountain of Water
Problems”. Water World. with the declining public support for privatization
Accessed December
3, 2019. https://www.
and an upcoming election, prompted the Minister
waterworld.com/ of Water to intervene. Within the first 18 months
|

international/wastewater/ of the contract period, the Tanzanian government

The World Bank

article/16201846/
tanzanian-tales-why-
deported the expatriate managers of CWS and the
ppp-failed-to-scale- contract was subsequently terminated.
a-mountain-of-water-
problems.