PRIVATE SECTOR INVOLVEMENT IN WATER SECTOR O & M 11 May 2010 By John Petzer

INDUSTRY ROLE PLAYERS SAICA CESA IMIESA SAFCEC SAICE

IDENTIFIED VARIOUS ROLES Short term service provider Long term service provider Regulatory and contractual function

SHORT TERM Capacity of available resources Probably no single organisation has sufficient capacity Private sector almost definitely has a role to provide stop gap

SHORT TERM (cont) Various possible models 1. OPTIONS FOR URBAN CENTRES O & M contracts / Management Contracts – Short term – 3-5 years Technical /Institutional/Financial Assistance Contracts – Normally minimum 5 years (e.g. M-A-P Water) 2. OPTIONS FOR RURAL WATER SERVICES Appointment of Support Services Agents – 3-5 years (e.g. CHDM & ANDM) Technical/Institutional/Financial Assistance Mechanical & Electrical Maintenance Contracts

LONG TERM More cost effective More difficult to establish More contractually complex

LONG TERM (cont) Various possible models 1. OPTIONS FOR URBAN CENTRES Lease Contracts (Affermage) – 10–15 years (e.g. Stutterheim, Richards Bay) Concession / BOT contracts – years with private funding – Infrastructure O & M 2. OPTIONS FOR RURAL WATER SERVICES Water Services Franchising – New approach utilising local small business entities O & M using Local CBO’s or SMME’s

RISKS OF PRIVATE SECTOR Cost – typically 5 – 10% profit, may be more efficient BUT depends where risk is allocated Infrastructure run down – depends on control Quality not achieved – depends on control Cherry picking e.g. only do large bulk, leave reticulation to WSA

BENEFITS OF PRIVATE SECTOR Competitive bidding – lowest cost (cost effective) Access to best practise and skills Private sector manages performance and risk WSA’s manage regulation and control

REGULATORY AND CONTRACTUAL ADVICE Contract preparation and management o Risk advice o Expertise in drawing up contracts o Researching contract types; controls etc o Define performance parameters o Contract management Business consulting o Provide financial expertise in setting up entities o Advice on best legal entities

CONCLUSIONS Extensive skills and manpower in private sector Short term and long term involvement is probably required Win-win solutions are possible