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PRIVATE SECTOR INVOLVEMENTIN 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
– 25-30 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 managemento Risk adviceo Expertise in drawing up contractso Researching contract types; controls etco Define performance parameterso Contract management
• Business consultingo Provide financial expertise in setting up entitieso 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