Water and Sanitation in Africa Experience of A Private Operator

1. Water and Sanitation in AfricaExperience of A Private Operator Alain Mathys OECD – WATER AND SANITATION IN AFRICA Paris, December 2006

2. Suez Environment Mission

3. Suez Environment Profile SERVICE OFFERING • In the Water Sector: • Studies, master plans, urban development plans, modeling of underwater resources, project management. • Engineering, design and construction of water treatment plants • Operation and delegated management of services: collection, treatment and distribution of drinking water, network maintenance, collection and treatment of wastewater for municipal and industrial customers, process water, sludge recovery. • In the Waste Management Sector: • Collection, recovery, treatment and disposal • Urban cleaning • Decontamination and rehabilitation of industrial sites. • Sludge recovery

4. Private Participation in Water

5. Some SE International Contracts

6. Suez Environment and the Water for All Program • In developing countries Suez Environment provides water to 35 million people and sanitation services to 30 million, of which 8 million live below the poverty line • Water for All is Suez’ program aimed to provide, within the frameworks of its contracts, water and sanitation services to growing urban low income communities • These projects were implemented through partnerships involving local communities, NGOs, governments and donors • In these partnerships, Suez ensures efficient project development and sustainable operation and maintenance, providing quality water at an affordable price • In 2004 our Water for All Program was awarded a “World Business Award for the contribution to the Millennium Development Goals” by ICC and UNDP • Over the past twelve years, SUEZ Environment has worked in partnership with local authorities to bring drinking water to nearly 10 million people in the emerging countries, including 8 million people via private connections and 1.8 million via public standpipes. During that same period 4.5 million people have been connected to a sanitation networks.

7. Our Intervention Principles • Understand the local reality (urban characteristics, land tenure, availability of resources and services, community concerns, priorities, demand and willingness-to-pay, …) • Involve local authorities and organization in the planning process • Offer level of services and customer management procedures responding to community demand • Reduce costs (infrastructure and services) and prices (social tariff, subsidies) • Develop alliances with donors and development agencies • Create added-value for poor customers • Integrate service to low-income areas in the global economy of the contract

8. Low-Income MarketsDevelopment Impact and Expected Profitability High Moderate Development impact on community's economy Low Low Moderate High Expected profitability of serving low-income segment Source: The McKinsey Quarterly 2006/4

9. Suez Environment in South Africa Examples of successful cooperation through well-designed Public-Private Partnerships

10. Reform of Johannesburg Urban Services • IGoli 2002: an institutional, fiscal and financial reform • Transform water, sanitation and electricity departments into independent utilities • Reforms in the water sector to be supported by an experienced private operator • Significant challenges of the water sector • 73 informal settlements (550,000 inhabitants) • Planned low-income settlement (850,000 inhab. i.e. Soweto): full service that is not paid for • International tender launched in 2000 by Greater Johannesburg Metropolitan Council • Won by Suez Environment. Winning characteristics: • Participation of Black Empowerment Enterprises (27% shares) • Comprehensive strategy for low-income settlements

11. The Management Contract Build a Sustainable Water and Sanitation Utility • Improve Revenue Management • Develop Human Resources • Improve Customer Services • Improve Operation Efficiency • Improve Asset Management • 5-year contract • Remuneration based on performance

12. SE Main Achievements (1) Customer Services • Creation of a Customer Care Center • + 90% of calls answered in less than 30 seconds • 80% of water network repairs and sewers blockages completed within 48 hours • Drinking Water Quality • 500 monthly water samples (less than 150 previously) • Bacteriological compliance higher than 99% • Meter reading increased from 50% to 94%

13. SE Main Achievements (2) Asset Management • Inventory and assessment of existing infrastructure • Asset Management Software • Improvement of asset maintenance trough • Internal capacity building • Implementation of preventive maintenance program • Decrease of UFW from 42% to 35%

14. Improvement of Financial Situation Reduction of loss: (47 M euros to 9 M euros) Revenue increase: (196 M euros to 287 M euros)

15. Achievements linked toSustainable Development Effluent compliance Reduction of Power Consumption

16. Improvements in Low-Income Areas Operation Gcin'amanzi – Conserve Water (Soweto) • 35,000 properties so far (out of 170'000) benefited of free in-house plumbing repairs, old debt write-off and prepayment meters • Subsidized tariff and free 6 m3/month • 70% water resources saving (from av. 60 to 15 m3/month) • 1,200 people from the community employed • 25% total construction value stays within the community

17. Increased Coverage – Informal Settlements • Comprehensive assessment of water and sanitation in informal settlement and service standards • 14,000 VIP latrines built • Hundreds of standpipes implemented • Community education and training • Housing relocation and improvement Program under the responsibility of Housing Dept. did not deliver promises => limited results

18. The BoTT • 1994 : 14 million South Africans without access to safe drinking water, mainly in rural areas and former homelands • The challenge : Supply sustainable water services to disadvantaged rural communities (25 litres per capita per day within 200m from home) • How ? -> BoTT • Build (stakeholders, needs, feasibility, design & construction) • operate (short term full operational responsibility) • Train (Institutional & social, operations & consumers) • Transfer (once sustainable) • 2004 : 9m people having access to potable water, Suez Environment having contributed through BoTT for 2.3 M in Eastern Cape and Limpopo Provinces

19. The BoTT: Characteristics • Nature of contract : PPP with establishment costs and capex fully funded by Client (DWAF) • Final Client : Municipalities • Funding : EU + SA Government grants (100%) • Duration: 1997 – 2004 • Black Economy Empowerment • 40 % of equity • 40 % of procurement • Tender in 4 provinces • One-stop shop: Implementation by consortia formed of • Consultant engineers • Contractors • Operators • NGOs • Emerging companies

20. The BoTT: Reasons for Success • Ambitious National Government Policy (DWAF) • Grant funding & Donors constant follow-up (EU) • Flexible program management & spending capacity of private sector, providing “one-stop” service solutions • “Tri-sectoral” cooperation (Private sector; National & Local Government; NGOs) • Active involvement Local Government & Communities over full project life cycle • Social engineering, communities buy-in and local job creation • Presence in consortium of emerging BEE companies, NGOs and consultants

21. Some Lessons Governance • Strong commitments of National and Local Governments Financing • Grant funding (for capital expenditures and connections) • Tariff reforms (O&M cost recovery, targeted subsidies for the poor) Implementation • PPP focused on development impact and creating win-win situations • Effective implementation mechanisms (OBA, added-value for local companies/communities • Adaptation to local conditions and based on community demand and participation • Solutions must be pragmatic and avoid ideological traps

22. Trust and Partnership • Governments • Vision • Legal Stability Water For All • ESA, Donors • Funding • Monitoring • Operator • Expertise • Capex management • Communities • Demand, participation • Cost recovery

23. Water for all