Water and Sanitation in AfricaWater and Sanitation in AfricaExperience of A Private OperatorExperience of A Private Operator

Water and Sanitation in AfricaWater and Sanitation in AfricaExperience of A Private OperatorExperience of A Private Operator

Alain Mathys

OECD – WATER AND SANITATION IN AFRICAParis, December 2006

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Suez Environment MissionSuez Environment MissionSuez Environment MissionSuez Environment Mission

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Suez Environment ProfileSuez Environment ProfileSuez Environment ProfileSuez Environment Profile

SERVICE OFFERINGIn the Water Sector:

Studies, master plans, urban development plans, modeling of underwater resources, project management.

Engineering, design and construction of water treatment plantsOperation 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 disposalUrban cleaningDecontamination and rehabilitation of industrial sites.Sludge recovery

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Private Participation in WaterPrivate Participation in WaterPrivate Participation in WaterPrivate Participation in Water

0

10

20

30

40

50

60

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

NU

MB

ER

OF C

ON

TR

ACTS A

WAR

DED

Suez Environment

Veolia

Thames / RWE

SAUR

Severn Trent

IWL-UU

Anglian

Biwater

Hyder

Azurix

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Some SE International ContractsSome SE International ContractsSome SE International ContractsSome SE International Contracts

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Macao

Mexico

Buenos Aires

Manille

Casablanca

La Paz

Djakarta

Amman

Santiago du Chili

Manaus

Johannesburg

Cancun

Chongquing

Tripoli (Liban)

Tanggu

Alger

Ongoing contracts

Concluded contracts

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Suez Environment and the Water for All Suez Environment and the Water for All ProgramProgramSuez Environment and the Water for All Suez Environment and the Water for All ProgramProgram

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.

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Our Intervention PrinciplesOur Intervention PrinciplesOur Intervention PrinciplesOur 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

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Low-Income MarketsLow-Income MarketsDevelopment Impact and Expected ProfitabilityDevelopment Impact and Expected ProfitabilityLow-Income MarketsLow-Income MarketsDevelopment Impact and Expected ProfitabilityDevelopment Impact and Expected Profitability

WaterElectricityHousing

Credit

Telecom

TobaccoAlcohol

Low Moderate High

Low

Moderate

High

Expected profitability of serving low-income segment

Develo

pm

en

t im

pact

on

com

mu

nit

y's

econ

om

y

Source: The McKinsey Quarterly 2006/4

Suez Environment in South AfricaSuez Environment in South AfricaExamples of successful cooperation through well-designedExamples of successful cooperation through well-designed

Public-Private PartnershipsPublic-Private Partnerships

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Reform of Johannesburg Urban ServicesReform of Johannesburg Urban ServicesReform of Johannesburg Urban ServicesReform of Johannesburg Urban Services

IGoli 2002: an institutional, fiscal and financial reformTransform water, sanitation and electricity departments into independent utilitiesReforms in the water sector to be supported by an experienced private operatorSignificant 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

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The Management ContractThe Management ContractThe Management ContractThe Management Contract

Build a Sustainable Water and Sanitation Utility

Improve Revenue ManagementDevelop Human ResourcesImprove Customer ServicesImprove Operation EfficiencyImprove Asset Management

5-year contractRemuneration based on performance

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SE Main Achievements (1)SE Main Achievements (1)SE Main Achievements (1)SE Main Achievements (1)

Customer ServicesCreation 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%

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SE Main Achievements (2)SE Main Achievements (2)SE Main Achievements (2)SE Main Achievements (2)

Asset ManagementInventory and assessment of existing infrastructureAsset Management SoftwareImprovement of asset maintenance trough

Internal capacity building Implementation of preventive maintenance program

Decrease of UFW from 42% to 35%

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Improvement of Financial SituationImprovement of Financial SituationImprovement of Financial SituationImprovement of Financial Situation

Revenue increase: (196 M euros to 287 M euros)

Reduction of loss:(47 M euros to 9 M euros)

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Achievements linked toAchievements linked toSustainable DevelopmentSustainable DevelopmentAchievements linked toAchievements linked toSustainable DevelopmentSustainable Development

Reduction of Power Consumption

Effluent compliance

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Improvements in Low-Income AreasImprovements in Low-Income AreasImprovements in Low-Income AreasImprovements 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

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Increased Coverage – Informal Increased Coverage – Informal SettlementsSettlementsIncreased Coverage – Informal Increased Coverage – Informal SettlementsSettlements

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

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The BoTTThe BoTTThe BoTTThe BoTT1994 : 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

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The BoTT: CharacteristicsThe BoTT: CharacteristicsThe BoTT: CharacteristicsThe BoTT: Characteristics

Nature of contract : PPP with establishment costs and capex fully funded by Client (DWAF) Final Client : MunicipalitiesFunding : EU + SA Government grants (100%)Duration: 1997 – 2004Black Economy Empowerment

40 % of equity 40 % of procurement

Tender in 4 provincesOne-stop shop: Implementation by consortia formed of

Consultant engineers Contractors Operators NGOs Emerging companies

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The BoTT: Reasons for SuccessThe BoTT: Reasons for SuccessThe BoTT: Reasons for SuccessThe 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

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Some LessonsSome LessonsSome LessonsSome Lessons

GovernanceStrong commitments of National and Local Governments

FinancingGrant funding (for capital expenditures and connections)

Tariff reforms (O&M cost recovery, targeted subsidies for the poor)

ImplementationPPP 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

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Trust and PartnershipTrust and PartnershipTrust and PartnershipTrust and PartnershipGovernments•Vision•Legal Stability

ESA, Donors•Funding•Monitoring

Operator•Expertise•Capex management

Communities•Demand, participation•Cost recovery

WaterFor All