CHALLENGES OF REFORMINIG PUBLIC ENTERPRISES: The CEO’S Experience Presentation to the Board and Senior Staff of Kisumu Water and Sewerage Company Ltd Dr. William T. Muhairwe Managing Director, NWSC-Uganda November rd November 2010, Kisumu Kenya

Outline …. 2  Introduction  What are the global water and sanitation challenges?  Specific Challenges for Reforming Pubic Enterprises  What next?  First Things First  Key lessons  Conclusion

Introduction 3  The provision of Water and Sanitation Services is of paramount importance as it provides the foundation for sustainable development.  Global trends show provision of water and sanitation services is still inadequate:  1.1 billion people have no access to safe water services, and 2.6 billion have no access to adequate sanitation services  The provision of water and sanitation services in the developing World has lagged behind that of the developed countries.

Introduction … 4  Indeed, the challenges facing the Water and Sanitation Industry in the developing countries are generic and homogenous in nature.  The cost of failing to properly address the water and sanitation gap is significantly higher than the cost of addressing it  The question is what are the prevailing water and sanitation challenges?

WSS Challenges: 1. The Financing Gap 5  Infrastructure needs in most developing countries are enormous.  There is scarcity of resources because;  Full cost recovery Tariffs in Developing economies is still a myth  Private sector financing is not readily available  Returns in the water sector are long term in nature  Government funding is over stretched  Donor funding ebbing  But even where financing is not a major problem, there are still gaps in the provision of water and sanitation services.

WSS Challenges: 2. Climate Change 6 Unfamiliar draught and excess rains  Intermittent supply leading to back siphoning- recontamination of piped water  Flooding leading to destruction of works and mains, recontamination of potable water Lowering of lake/river levels - affecting the Quantity & quality of water & leading to increased production costs Destruction of land cover - through human activities - Pollution and siltation. Destruction of wetlands - Natural Filtration system destroyed.  Even where there is abundant row water supply, there are still gaps in the supply of potable water

WSS Challenges: 3. Provision of Services to the Poor 7  Social dislocation resulting in high rate of urbanization and increase in urban poor settlements  Challenge of serving the poor due to the unplanned settlements & the question of who should pay?

WSS Challenges: 4. The Sanitation Challenge 8  Generally provision of sanitation services tends to lag behind that of Water services  This is attributed to a number of factors including;  High cost of piped water sewerage services.  The institutional fragmentation for provision of sanitation services with no clear responsibility  The proliferation of on-site sanitation facilities.  The rapid urbanization places a major challenge in providing sustainable sanitation

WSS Challenges: 5. Leadership and Management 9  The greatest of all these challenges is lack of competent, efficient, business-like and service-oriented institutions.  Most institutions are characterised by  Poor Governance: Corruption  Poor Leadership : lack of foresightedness & priorities  Operational inefficiencies.  Poor Organizational culture

Reforming Public Enterprises Challenges 10 What are public Enterprises?  A Public Enterprise is a business organisation wholly or partly owned by the state and controlled through a public authority.  Some public enterprises are placed under public ownership because, for social reasons, it is thought the service or product should be provided by a state monopoly.  Utilities e.g Water, gas, electricity etc, broadcasting, telecommunications and certain forms of transport are examples of this kind of public enterprise (Ref: Encyclopaedia Britannica, www. Britannica.com)

What is or has been the Problem? Poor Leadership. What is Leadership? – the process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task. (Alan Keith, 2010) What happens in Public Enterprises?  Emphasis is put on managing, controlling and interference  Visionary and focused leadership is non existent  Organizations have no clear and motivating visions and missions  Lack of leaders who can study and understand the existing performance situation, set vision and bring turn-around solutions

What is or has been the Problem? … Poor Management What is Management? - a process of getting activities completed efficiently and effectively with and through other people. (Gulick & Urwick, 1937)  Management Functions  Planning  Organising  Staffing  Directing  Co-ordinating  Reporting  Budgeting

What is or has been the Problem? … Managemet also involves Goal setting  Goal setting involves establishing specific, measurable and time- targeted objectives  "Goals provide a sense of direction and purpose"  Goal Setting should be SMARTER  Specific  Measurable  Agreed  Realistic  Time Bound  Ethical  Recorded

What is or has been the Problem? … Poor Accountability & Governance  Lack of accountability frameworks - No framework that clearly spell out each parties obligations to avoid overlapping of responsibilities  Poor governance and corrupt tendencies - everyone wants to be rich right from the time they are born  Technology slavery - perception that new technology is the solution to all organisation problems

What is or has been the Problem? … Attitudinal problems - living with the status quo (sit and do nothing syndrome) 6. External interference – Political Interference, global crisis external to the business 7. Inadequate financing – is the problem availability or leadership? The list is endless

What are the Implications ? 16  Financial crises for businesses – bankruptcy & deficits  Poor service delivery - rampant customer outcry  Management condemnation from the political and other oversight authorities  The sinking ship – restructuring and loss of jobs  Invitations/imposition of managerial ideologies, including those that are incompatible Again, the list is endless

What next ?? 17 What are the first thins you would do if you were appointed Board Chairperson, MD Kisumu Water, Manager Engineering Services, Manager Finance, Manager Corporate Services or even a Head Master of a Top Secondary School in Kenya or Director of a Referral Hospital??

First Things First - What next? 18 In Theory, Any Manager would do the following  1. SWOT analysis  2. Formulate a Vision  3. Formulate a Mission  4. Design Strategic Plans and Goals (Long-term and Short- term)  Corporate Plans (3-5 years)  Annual Financial Budgets  5. Formulate Operational Plans/Programmes (short-term and long-term

Types of Reforms One Man driven reforms  Needs a strong leader 2. Team led reforms  Needs committed workforce 3. Stakeholder buy-in reforms  Needs Board, Management, Government and Private Sector

NWSC Case: SWOT Analysis as a first step of the Transformation Process 20 NWSC SWOT Analysis as at 1998 Strengths:Sound infrastructure, abundant plant production capacity enabling legislative framework, well trained workforce, sound billing system, good corporate planning strategy, good financial budget planning policy. Weaknesses: Low staff productivity (36 staff/1000 connections),high UfW (60%), Low Collection Efficiency - 71%, huge arrears of about 14 months of billing, high number of unviable towns. Opportunities: Government support, relatively stable economy, donor support, abundant water resources, Threats: Huge Debt and pending debt Servicing obligations, VAT law.

NWSC Case: Visions & Mission Previous Visions of NWSC 1. To be the Pride of the Water Sector in Uganda (before 1998) 2. To be the Pride of the Water Sector in Africa ( ) Current Vision Statement 3. To be One of the Leading Water Utilities in the World Mission Statement To provide Efficient and Cost effective Water and Sewerage Services, applying Innovative Managerial Solutions to the Delight of our Customers 21

NWSC Case: Strategic & Operational Plans 22 Formulated both Long Term and Short Term Plans Policy level  Strategic level, change in Board & Management  First Corporate Plan  Annual Budgets Operational level  Operational framework through Change Management Programmes (100 Days, Service and Revenue enhancement project (SEREP), Area Performance Contracts (APC), Stretch out programme Internally Delegated Area Management Contracts (IDAMCS), One Minute Management Concept (OMM), Checkers system See our Website for details:

Key Lessons: Main Performance Drivers 23 => Autonomy ■ Devolution of power from centre to areas ■ Institution of Performance Contracts (APCs and IDAMCs) => Customer Focus => Team Work ■ Collective participation in the development and formulation of the programmes. ■ Work outs through the “stretch out programme” in which workers were free to air out any of their grievances and needs. => Monitoring and Evaluation Systems ■ Checkers un announced visits: both process ad outputs oriented =>Appraisal system ■ Strong incentive systems and equitable gain sharing plans ■ One Minute management system ■ Performance Contracts for all staff ■ Performance based pay ■ Penalties

Key Lessons: How do you Manage Change? 24  Ref Book: “How to be Brilliant; Change your ways in 90 days”-Michael Happell 1. Positive Action 2. Break out of Limiting Beliefs 3. Think Differently 4. Ability to Manage Stress 5. Massive Action

Key Lessons: How do you Manage Change (Positive Action) 25 “Attitudes that Attract Success”- Wayne Cordeiro Attract Success 1. Make your choice 2. Believe you can change 3. Train your eyes to see what is good 4. Practice, Practice & Practice 5. Never Give Up

NWSC Key Achievements 26 Performance Indicator Service Coverage48%74% Total Connections50,826246,459 New Connections per year3,31725,000 Metered Connections37, ,199 Staff per 1000 Connections366 Collection Efficiency60%98% NRW60%33.3% Proportion Metered Accounts65%99 % Annual Turnover (Billion Shs)21112 Profit (Before. Dep) (Billions Shs)8.0 (loss)25.4 (Surplus)

Key Lessons: NWSC Experience 27 Reforms are about creating harmony Customers Utility Nat/Local Govts. Private Sector Financiers Customers Utility Nat/Local Govts. Private Sector/ suppliers Today! Where to Go!

Key Lessons: NWSC Experience 28  Gradual, incremental approach to the reforms  A hardworking and committed Board of Directors with a good mix of skills is necessary  Committed, transparent, competent top leadership  A dynamic team of staff motivated by clear vision, mission and objectives & their involvement at all levels  Continuous self monitoring and evaluation of programmes  Firm decision making on key aspects of the reform  Adopting a “do it yourself policy”  Stakeholders involvement in the reform process & a comprehensive customer focus  Reward system for competing areas & use of benchmarking based on efficient utilities  Capacity building at all levels through research (MBAs, Masters, Ph.Ds) and seminars and workshops  Having “open door” policy to most operating data, for interested parties to make references e.g. use of web-sites and circulation of performance reports

Benefits of Successful Reform: Benefits with Peer Utilities 29 Through the External Services Unit, NWSC shares its experiences and initiatives with other utilities and institutions within and outside Africa. Services Offered: Advisory Services, e.g. Organizational behavior change, Contract design and incentive systems, water losses reduction initiatives Core Utility Services, in the field of water losses reduction, plant and distribution system maintenance Who have benefited from our Services?  Nairobi Water and Sewerage Company-Kenya  Nkana Water; Lusaka Water and Sewerage Co Ltd: Zambia  DAWASA/DAWASCO: Dar-es-Salaam: Tanzania  Karachi Water and Sewerage Co.: Pakistan  New Delhi Water Board and Several Water Municipality Water Boards in India  Ogun State- Nigeria  Ethiopia  Southern Sudan, Mozambique etc

Conclusion 30  Reforms are a reality. Every utility in East Africa must adapt itself to these challenges by implementing its own tailor made Vision, Mission and strategies.  There is always a difference one can create in terms of improving performance in a Public Enterprise, managed by the locals. You just need determination, commitment, courage and discipline. Always, remember the saying: “WE MUST EITHER FIND A WAY OR MAKE ONE”, HANNIBAL

THANK YOU FOR YOUR ATTENTION For more information & literature on the NWSC experience read: Making Public Enterprises Work, (By, Dr. Muhairwe Tsimwa William) available at