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Contributions from
the Column
Focus
Middle East: “Exchange of ideas”
Indian illusions about water abundance
Tanzanian model case: Tanga
Untold strengths of German agencies
03/2006
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The Tanga model
Water supply in African cities need not be unreliable, unhealthy and only accessible to few. The local utility in Tanga, Tanzania, provides almost 100 percent of the local population with safe drinking water from the tap. Sector reform, investment and a motivated management team have made that achievement possible. In close cooperation with the donor community, the national government is implementing the same strategy elsewhere.
[ By Jörg Hartmann ]
The performance of many urban water utilities in sub-Saharan Africa is unimpressive, to say the least. Typically, they deliver water to only two to seven connections per 100 residents, mostly in the central business districts and higher income areas. Water is often not fit for human consumption and not available 24 hours per day. Dissatisfaction with this level of services leads to low revenues. Many utilities would collapse without government subsidies and periodic rehabilitation and expansion schemes financed by donors.
For many years, Tanzanian towns were no exception. The central government tried to run every water supply system. It wanted to hand out “free water for all” or collect only symbolic flat rates, with predictably poor results. Even donors with long experience in the Tanzanian water sector, like Germany, were no longer willing to support such unsustainable investments.
Utility turnaround
In the mid-1990s, the Government of Tanzania, as part of a wider economic reform process, agreed to try a new approach: independent and self-financing urban water utilities termed Urban Water and Sewerage Authorities (UWSAs). One of the pilot towns was Tanga on the northern coast, where KfW had financed water infrastructure already – including, for instance, the Mabayani dam, a treatment plant, transmission mains into the city and reservoirs.
Under the new institutional framework, the German Ministry for Cooperation and Development (BMZ) offered to support an investment programme for Tanga’s water supply. Over the years, about €10 million were invested – on water production, leakage control, network extension, metering and capacity building. Measures included customer surveys and the introduction of new billing and accounting systems.
Sector reform, investment and a highly motivated management team have led to remarkable results. For some years now, Tanga UWSA has been delivering its 250,000 customers the best services of any urban water utility in Tanzania. It supplies 98% of households continuously with drinking water. Unaccounted-for water (which is produced, but lost on the way to the consumer) has been reduced to about 30%. This is still a high percentage by European standards, but a quite acceptable level for a town in Tanzania. The collection efficiency (percentage of the water bills being paid) has improved from 61% in 1997 to 94% in 2004. A standard indicator for water utility efficiency, the number of employees per 1,000 water and sewerage connections, dropped from 14 in 1997 to eight today. Total revenues increased three-fold over the same period and customers are reckoned have paid the utility a total of ¤1.7 million last year. While this does not yet suffice to cover the full costs, which would include the depreciation of assets, Tanga UWSA is calculating realistically and has a good chance of reaching full cost coverage in the near future.
In Tanga, public water provision reaches all segments of the population. The poor, most of whom live in peri-urban areas, can get water from 160 public taps or “water kiosks”. Nonetheless, many have opted for the convenience of a private connection, which they sometimes share with neighbours. In any case, safe water has become affordable. According to the Tanzanian Household Budget Survey 2000/2001, the average monthly consumption expenditure in Tanga was the equivalent of €10.7 per capita. Residents have to pay a monthly €0,32 for the daily consumption of 60 litres of water. That is a mere three percent of the average purchasing power. A small number of people in abject poverty are supplied with a basic amount of water for free.
Thanks to UWSA, the living conditions in Tanga have improved tremendously. Water related diseases have been reduced. Women and children spend less time fetching water. Earlier, households had to spend money on water of questionable quality supplied by private vendors, many of whom have gone out of business. As tap water is fit for drinking, there is no need to boil it first. Accordingly, there is less need for fuel. Investments in roof tanks, water filters or private wells have become unnecessary. Even a large cement factory now buys its water from the utility. Generally speaking, the reliable water supply has increased productivity at all levels, including businesses.
Setting an example
Tanga and the two other pilot towns of Moshi and Arusha were particularly successful cases. Their example helped to pave the way for a general decision in the late 1990s to extend the model of autonomous, commercially viable water utilities to all major towns in Tanzania. The only exception is Dar es Salaam, the metropolitan agglomeration, which is considered a special case with a recently failed attempt at private sector management. In other towns, however, similarly positive experiences were made as in Tanga. The model is now being extended to the next layer of smaller provincial towns.
Tanga shows what development cooperation can achieve, under conducive framework conditions, in terms of making urban water supply sustainable. The incentive of obtaining donor funds certainly contributed to the initial sector reforms in the mid-1990s. Afterwards the positive experience had a structural impact on the entire Tanzanian water sector. Germany and other donors, which, in Tanzania, are now called development partners, continued to support the urban sector reforms. They gradually extended the initial investment assistance to more towns, setting them on a path towards commercialisation and self-financing.
The government’s official objective is to increase the proportion of urban residents with access to clean and safe water from 73% in 2003 to 90% by 2010. Utilities such as Tanga UWSA have long passed that mark. They, however, will have to consolidate their achievements. Doing so will depend on further investment. It must be funded with revenues or by accessing the capital market.
Government and donor funding will focus on the less advanced towns. A joint funding mechanism is to be put in place this year as part of a sector wide approach (SWAP), designed in cooperation by the development partners and the national government. It will probably prove rather uncontroversial to draft such a programme, given the positive experiences already made.
Lessons learned
Before designing a sector wide approach, however, stock should be taken. What are the major lessons learned in Tanga and the six other towns, where the model has been tested?
Regarding the institutional structure, the introduction of the UWSAs as autonomous bodies, supervised by boards with tariff-setting powers, was an unqualified success. Their performance immediately started to improve. Many of them now function without operational subsidies. The Ministry of Water, that supervises the utilities, can grant them more managerial freedom.
However, some issues remain to be developed further. The management teams need clearly defined responsibilities – to their supervisory boards, the ministry, a future independent regulator and the municipal governments concerned. As public bodies, their sense of immediate public responsibility is often stronger than their focus on long-term commercial sustainability. Ownership of the utilities, and of the assets they are operating, is also not yet clear. Finally, incentives are still weak to go beyond covering operation and maintenance costs, because of the tradition of major investments being taken care of by the central government. As long as this expectation prevails, the utilities will quite rationally push for schemes with high investment, but low operational costs. For example, the utilities prefer long-distance, expensive gravity-fed transmission over more cost-effective short-distance alternatives that would depend on pumps.
Regarding investments, it was useful to decentralise project implementation and to treat the utilities as fully responsible investors. Doing both has brought much-needed confidence, skills and a sense of ownership to the local level. The capacities of local consultants, contractors and suppliers have also improved considerably. However, even in the most advanced cases, major expansion projects will still require outside support. It does not make sense to invest in full-scale in-house capacities for design, procurement and supervision, as these skills are only required every few years.
Commercial viability has stabilised in most towns as cost recovery rates improved thanks to universal metering, tariff increases and rising collection efficiencies. The ability and willingness of customers to pay has not become a major bottleneck, as was feared early on. Even government institutions (such as schools, hospitals, prisons, the police and the army) have a better record of honouring their water bills these days. But a number of towns still rely on government subsidies, especially where infrastructure is obsolete and boards, often dominated by public servants, are reluctant to increase tariffs. A high proportion of staff was trained under the old government-dominated model. Many of them are either not committed to the utilities’ new commercial orientation, fail to grasp the need for change or simply lack commercial training. Efforts to reduce costs sometimes seem half-hearted, especially where they would involve outsourcing and private-sector involvement.
Concerning poverty orientation, coverage rates and service levels for low-income areas have substantially increased. But most utilities, having been established with a very precarious financial situation, still regard it as their priority to consolidate services in the areas where they generate most revenues. The extension to peri-urban areas and an extensive operation of water kiosks is often considered a high-cost, low-revenue “luxury they cannot really afford”. Per unit tariffs at kiosks are often higher than for customers with house connections, because the kiosk operators have to be paid for their services. Only a few progressive tariff systems with a subsidised lifeline tariff have been introduced. On the contrary, some utilities have introduced minimum charges to cover the fixed costs per connection. Protecting customers from a lack of cost discipline and inappropriate tariff structures should be a priority for the new regulator EWURA, expected to become operational this year.
An additional problem mostly affects low-income peri-urban residents. It is the lack of attention to decentralised sanitation. The statutory responsibility of the utilities only extends to centralised sewerage systems. The public health authorities and local governments have few practical means to improve sanitation standards. The UWSAs can assist by extending sewerage networks (the Government’s target is to reach 30% of all households by 2010), requiring all customers with private water connections to connect to those networks where available, and to require those outside the networks to upgrade their sanitation facilities. To make this more acceptable to customers, some utilities conduct awareness campaigns, subsidise sewerage connections or septic tank improvements, and provide a reliable service for the periodic emptying of septic tanks.
Concerning capacity building at the newly established utilities, local long-term on-the-job training in technical and commercial operations has proved quite effective during the implementation of infrastructure projects. But the sustainability depends on continued management interest in improving the utility as well as on overcoming recruitment and retention problems. Short-term courses covering staff from many utilities may be useful as a complement, even if they do not address the immediate challenges encountered in day-to-day operations. More opportunities for exchanging best practices and performance benchmarking are certainly needed. Local institutions should gradually become capable of carrying out these tasks.
Consequences for development assistance
The Government of Tanzania demands that its development partners harmonise their assistance. As donors generally agree that the water sector is heading in the right direction, they are willing to align their assistance with government-led concepts and procedures. As mentioned earlier, a SWAP is being prepared which would include a joint funding arrangement for a sectoral investment programme.
Donors are coordinating their activities in the recently formed “Development Partners Group – Water”. The German participants are particularly engaged in promoting the continuation of the urban reform process. German experience in this context has also been recognised by the European Union, which has assigned €72 million for joint co-financing in three towns. In an example of “delegated cooperation”, KfW Entwicklungsbank (KfW development bank) is now administering the funds both of the European Development Fund and the German government. Among the German agencies, a joint sector programme is developing in which KfW funds investments, German Technical Cooperation (GTZ) advises the Ministry and the regulatory agency and German Development Service (DED) places advisors in water utilities and related posts, while InWEnt is contributing with a training programme for utility staff.
It is expected that one third of the population, or 16 million Tanzanians will be living in urban areas by 2015, twice as many as in 2002. Notwithstanding the challenge of rapid urbanisation, the examples of Tanga and other towns show that it is possible to reach the MDG target of halving the proportion of people without access to safe and clean water. The emphasis must now be on refining, adapting and up-scaling the Tanga model.
Dr. Jörg Hartmann
is country director for KfW Entwicklungsbank and chair of the “Development Partners Group – Water” in Tanzania.
joerg.hartmann@kfwtanzania.com
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