Date: March 15, 2014, 6:13 pm


URBAN WATER MANAGEMENT IN GHANA AND CYCLE OF WRONG POLICY PRESCRIPTIONS– IMPROVING ON THE INSTITUTIONAL RESPONSIVENESS OF GWCL


The failure of the urban water sector PSP experiment in Ghana through a management contract caused the water utility to be reverted back to public management; the reversion was however akin to a hot coal placed in the hands of the public water utility – Ghana Water Company Limited (GWCL), as it is faced with huge possibilities of failing again so long as the fundamental issues of low investment and political interference in urban water supply in the country remain unresolved. This situation coupled with a recent policy announcement to introduce prepaid water to deal with the challenges of the sector, highlights the continues stream of policy solutions that falls short of the problems of the sector. This paper shows such disparities with examples of the AVRL management contract and the recent prepaid meter for water policy responses.


The Core Sector Issue of Urban Water Supply in Ghana
The fundamental problem in the water sector in Ghana relates to wrong measures often planned and implemented to address challenges of limited funding to the sector which is compounded also by weak managerial and administrative control by managers of the utility due to an organizational organogram and relationship which makes it possible for political heads to interfere with administrative duties.


This situation has dragged on for the past thirty years with no end in sight to the detriment of the unserved and the irregularly served sections of the urban population. In the case of the urban water sector reform in Ghana, the most recent mismatched implemented solution was a management contract pushed for by the World Bank, accepted by the Government of Ghana and implemented by Aqua Vitens Rand Limited a subsidiary of Vitens Evides International of the Netherlands. The real and underlying challenges were ignored with this move and a management solution was rather superimposed on the challenges. This intervention failed, in 2011 Aqua Vitens Rand Limited was sent packing out of Ghana following public pressure and results from a technical audit. In 2014 policy makers within the sector appear not to have overcome the fear in dealing with the real problems of the sector and are still beating about the main challenges. Their latest innovative policy intervention to address challenges of the sector is a plan to introduce prepaid meters for urban water supply.


Underneath The Problem
The task of water supply without any differentiation between urban and rural became that of the newly created Ghana Water and Sewage Corporation in 1965. The sector in the 1960s performed well with competitive wages and conditions for staff which attracted highly qualified staff. Come the late 1970s and early 1980s this situation was to change for Ghana and many developing countriesi. The surge in oil prices and decline in prices of exports of most developing countries; particularly in Africa left reverberations whose effects are still felt today. The situation drastically changed the balance of payment situation for countries like Ghana and sharply increased its debts to credit agenciesii. The risk of the inability of the Government of Ghana to honour its debts given the economic crises stared the World Bank in the face. The Bank’s response was the Economic Recovery Programme – a set of austerity prescriptions to rehabilitate and restore the financial ‘solvency’ of the country.


State owned enterprises like the Ghana Water and Sewage Corporation paid the price with the austerity measures that were imposed by the Bank. The measures took the form of a devaluation of the local currency, freezing of public-sector wages for a long period and placement of a cap on tariff incrementsiii. The combined and cumulative effect of these for years was the strangling of the utility. These observations are important because in other to address the inefficiencies of the public utility, one need to pay attention to the causal links in the problem chain in terms of ‘what caused what’. The currency devaluation increased the money value of expenses and imports e.g. of machine parts compared to what the utility had in its coffersiv. In addition to this, because of the wage freeze there was mass exodus of qualified employees from the public sectorv. Operational inefficiency and survival management became the direct result. A situation that the utility has been struggling with to date.


Urban Water Management Contract – Wrong Policy Response
The policy prescription offered in the early 1990s was to privatise the utility. With this solution framework no attempt was made to appreciate the fact that despite the wider negative economic impact on the utility some earlier attempts at reforms; including secondments of expatriates from other public utilities as well as use of consultants within the public structures were beginning to show some results and that the utility was improving on its finances for operations and even able to support rural consumptionvi. The only thorny issue then was, the utility could not make enough to cover cost of expansion and loan repayments. The World Bank tried to achieve this in Ghana through tariff financing as against expected investments through Government budgets to finance capital costs as pertains in other countries,. The Bank therefore pushed for privatisation or the popular public private partnerships which was a less contentious description.vii Within this framework the bank began pursuing a policy of full cost recovery for water consumption. The current policy tool to enforce this in Ghana is the Automatic Tariff Adjustment.


The determination to push through the privatization objective resulted in the implementation of a management contract in 2006 to 2011. The earlier target of a lease concession was not attained due to domestic opposition to the reforms in addition to how similar reforms had suffered badly elsewhere around the world. Despite the public opposition, the World Bank was still determined not to keep both the provider and producer functions in the state. The result of this determination despite the background to the real causes of the sector’s challenges was the management contract that resulted between the Ghana Water Company Limited and Aqua Vitens Rand Water Limited (AVRL) between 2006 and 2011.


Inconsistencies of the Wrong Policy Solution
As numerously observed in this paper, the underlying factors of the challenges of the Ghana Water Company limited relate to political interference and lack of investments to cover capital costs whose cause has been explained extensively above and which required about $1.25billionviii. To this challenge was presented a management contract of $120millionix for five years. The disparity between the problem and the offered solution was very clear from the beginning so infrastructural works for expansion and rehabilitation were not part of the remit of the contract. The idea then was to exploit the ‘inbuilt advantages’ of the private sector to turn the situation around. This was however within a dualist framework of black and white policy arguementation of both proponents and opponents of the water privatization policy. The ‘private sector good’ and ‘public sector bad’ public debates then ignored the dynamics contained in either form, being it public or private. This approach proved costly to the proponents of the urban water sector PSPs and water users.


Three fundamental mistakes were committed. First, incentives for performance in the PSP was redefined to mean only the carrot without the whip. The obligations of GWCL to AVRL were made clearer and detailed in the contract document that ensued however same clarity is not seen in obligations owed to GWCL. The bulk of liabilities were also on GWCL whilst efforts were made to curtail risks for AVRL. Also, the contract ensured a fixed fee for AVRL – an approach that the World Bank had admitted in 1996x as problematic for successful contracts. The fee was guaranteed with special contract clauses such as that; in any event whether penalties were charged or not, the amount payable to AVRL should not be below 80% and that in any event again liabilities of AVRL should not be above 20%. These were but only a few of such ‘incentives’ in the contract. With guaranteed returns, what again was there for AVRL to work for?


Second, the standard contract problem of information capture by agents showed up. A technical audit of the contract commissioned by GWCL and the World Bank showed that key information on indicators required from AVRL for the assessment of the contract were not available or under reported. For example, penalties were expected to be applied if standards were not adhered to in relation to poor quality of water if it occurs for three consecutive days. Despite this provision, dates and time were omitted in the report of AVRL so sanctions could not be appliedxi. Similar instances were observed in all the service standards, particularly, in relation to unavailable or inconclusive baselines.


Third, was another standard contract challenge of incomplete contract – the inability of parties to a contract to have an accurate picture of issues likely to crop up and provide for such. However from the review of the management contract, some of the issues that came up as not provided for were far from being unforeseeable. In that, an in depth risk analysis of the contract would have brought up such issues. For instance, what should the GWCL have done when AVRL failed to provide key information necessary for the assessment of the contract? These were not provided for. So whereas the GWCL could not apply any sanctions they could also not terminate the contract but to wait until the contract was over, and also wait for the agreement of the political leadership before the contract could be terminated.


The mobilization effort of civil society then ensured agreement from the political leadership. In June of 2011 the management contract was discontinued.


Aftermath and Current situation

The World Bank showed from its public comments then that it was not in favour of the discontinuation. The fact that the Bank will still be looking for opportunities to pursue its policy of water privatization and full cost recovery is therefore not in doubt. Earlier signs of this was seen in the difficulties that came to surround the transfer of operational functions to GWCL after the exit of AVRL. A new parallel public entity, the Ghana Urban Water Company Limited was formed to take over AVRL’s functions in what was described as an interim measure. The functions were in 2013 transferred to GWCL. The Bank followed this with a sustained advocacy and media harassment of the PURC over the latter’s laxity in the implementation of an Automatic Tariff Adjustment Policy (ATA). Today a prepaid policy for water is supposedly being pushed by GWCL with a profound silence from the Bank. For now one could only imagine what the combination of the ATA and the prepaid meters will be for the poor.


Water Prepaid Metering – Another Wrong Answer
The biggest operational challenge of the Ghana Water Company Limited presently relates to very high levels of non-revenue water. Non-revenue water consists of authorised unbilled metered consumption, authorised unbilled non-metered consumption, unauthorised consumption and metering inaccuracies. The rest are leakages in transmission mains, leakages on service connections before reaching meters of water users as well as leakages and overflows at GWCL’s storage tanks.


The 2010 technical audit report of the company is awash with the real reasons that account for the high levels of non-revenue water which the proposed prepaid metering do not address. The prepaid metering with its attendant huge threat to the human right to water only addresses the issue of revenue collection of billed metered consumption, an area which AVRL claimed to have improved. Indeed in 2011 AVRL reported that “with the majority of customers still receiving an irregular supply, it is quite an achievement to maintain collection levels above 90%”1. The prepaid metering targets revenue collection but does not address the core problems contributing to high water losses.


The prepaid solution is therefore far-fetched and a lazy rights-compromising approach which is being resisted by civil society though in an uncoordinated manner. Civil society has called on the managers of GWCL to roll up their sleeves and set out to work and not contemplate the idea of swiveling whilst based on the threat of thirst they push cost of the high levels of water losses onto citizens, who would have no chance with the vending machines.


Why we are against Pre-paid Metering
Prepaid metering is being resisted because the real aim behind it is to cruelly manage demand due to limited supply capacities and where those who are unable to afford are simply cut off to increase access to those with the economic means.


Instead of Prepaid Metering
It is suggested for the GWCL to focus on the real issues accounting for the high levels of non revenue water namely metering inaccuracies, increasing levels of authorised non-metered billings, unauthorised consumption as well as losses in production and transmission. The main challenges are unresolved because of limited investment to GWCL for rehabilitation and replacements. Citizens particularly the poor should not be made to pay for the seeming neglect and least prioritised needs of the GWCL in resource allocation.


The Government through the Ministry of Water Resources, Works and Housing should work to ensure that the needed investments for the rehabilitation or replacements of worn-out facilities are made available. Particularly for the repairs, replacements and calibrations of existing meters as well as installation of new ones where they do not exist.


In relation to the earlier point on contributions from civil society, citizens need to be mobilized and brought together to request for increased resource allocations to the GWCL and at the same time resist this policy, usually introduced to prepare the way for privatisation. Currently this objective is being pursued on the Ghana Essential Services Platform hosted by ISODEC. A more vigorous special purpose vehicle, the Citizens Water Forum given the dormant nature of the National Coalition Against Privatisation of Water is being discussed to mobilize the public to champion civil society alternatives for change in the sector.


Alternatives
From this experience what is important for efficiency relates to the right set and balance of incentive provisions by the Government to get GWCL to deliver. Here, incentive is not only limited to attractive provisions but also including deterrent provisions to get the most out of an agent. This was a major failing of the management contract. The contract was replete with so many attractive provisions in the name of ‘incentives’ which in the end took out the risk factor needed to spur on the agent. There might not be much difference between the delivery of public and private ownerships and control however public forms are more democratic and accountable than private forms of control. The collective – rich and poor have control over the public form whereas only a few control private forms. Because there is collective control, the collective could also have wider access to water under public forms as against what has been seen from the record of water sector PSPs so far, where efficiency meant retrenchment of workers and limited access to water.


Current Approach
Ghana, since the discontinuation of the AVRL contract is following the Ugandan model. The Ugandan model simply, is a public form of management with an activist or a proactive agency leader referred to as a champion.


The champion basically is an empowered agent of the state who is able to rightly apply sanctions and rewards in the operations of the utility for results. The point about empowerment implies an enabling environment without interference, provided the agent by his principals (political authorities). The champion himself needs to be incentivized with an enforced package of incentives. The political authorities then leave the scene for the agent until a predetermined time for periodic evaluation of the champion’s work. The champion through this means is believed would become unfettered by the usual political interferences in the water sector and will go for his targets. The weakness of this model is that, it is dependent on the efforts of politicians not to interfere and not institutions and regulations that dissuades such interference and which protect the champion.


Finding such a champion within the political reality of Ghana will indeed be herculean but worth pursuing. Political interference in GWCL such as find expression in staff appointments, staff discipline and procurements would require a structural solution that defines the relationship between the Sector Ministry and GWCL and which also reduces the vulnerabilities of Managing Directors of GWCL which makes them easy prey for political control.


To support the above measure, there is also the need in Ghana for a decentralization of operations accompanied with decision making powers to the regions to simplify the work of the national level champion. In this case regional champions could also be created. Similarly an enforced incentive package needs to also be arranged with these sub-agent-champions by the main champion. In which situation also the stage would have been set for competition amongst the regions for improved performance which could adequately be exploited by the national level champion.


Danger Signs Regarding Alternatives
The suggested solutions may look good, some will even put it as too idealistic. However, as is usually the case in the public policy arena, good ideas usually count for nothing unless they are anchored around the dominant forces within the arena and backed by the mobilized significant aggregate power and influence of those forces. Without any such effort through an effective stakeholder analysis and mobilization of civil society, ideas such as these within the public policy domain are only as good as they are on paper.


The above proposition assumes that politicians within the sector would be good naturedly and provide the utility’s champion with the needed enabling environment; and that the sector’s political authorities will also rightly apply incentive provisions on the agent at predetermined periods. This will be asking for Utopia.


Again as has been made known in this paper, the major sector challenge has to do with investments in the sector which is not forthcoming. Without this, the champion will not be effective. This situation needs to be changed by influencing the criteria for prioritization and application of state taxes for public works. The issues raised here are significant but not impossible challenges to overcome in improving public management and protecting public assets.


Pushing through alternatives to keep water public – What Civil Society Should Do
To realize the above suggestions, it is important for civil society including unions and citizens to acknowledge the common interest they share in having a democratic public management form of water supply governance and thereby build alliances and work to improve their power base.


The example of Ghana shows that the political class is neutral in the policy process and are only responsive to the most powerful in the scramble, as should be expected of any political class. They are responsive to interest groups with enough carrots to aid their quest for and sustenance of power; or those with the biggest whip to derail this ambition. Civil society can mobilize to create the biggest whip to win over the political class through activities that forge stronger relationship between NGOs, workers and citizens and which ultimately increases their power base.


This will be essential for the strengthening of the hand of the champion to be effective. A powerful alliance between civil society, unions and citizens will beat off the ever-present problem of interferences in the work of utilities by political authorities and provide cover for the agency champion to be effective. This same alliance is required to increase investments into the sector through a challenge to and redefinition of existing priorities and criteria for allocation of state taxes. The above are achievable with the recognition of the policy arena as one of an ongoing political struggle which requires for effective organization by participants, mobilization of resources and possessing the required stamina for the long haul. This is the frame work and understanding that should guide the work of civil society in the coming period and in the policy push and pulls.


Article By: Leonard Shang-Quartey
Policy Analyst
Integrated Social Development Center (ISODEC)


iWhitfield, L. (2006) \'The Politics of Urban Water Reform in Ghana 1\', Review of African Political Economy 33(109): 425-448.
iiIbid.
iiiThe World Bank (1994) \'Staff Appraisal Report, Ghana Community Water and Sanitation Project\', No. Report No. 12406-GH. Accra: The World Bank.


ivWhitfield, L. (2006) \'The Politics of Urban Water Reform in Ghana 1\', Review of African Political Economy 33(109): 425-448.


vNellis, J.R. (1986) Public Enterprises in Sub-Saharan Africa. World Bank Washington, DC.


viThe World Bank (1994) \'Staff Appraisal Report, Ghana Community Water and Sanitation Project\', No. Report No. 12406-GH. Accra: The World Bank.


viiSavas, E.S. and E.S. Savas (2000) Privatization and Public-Private Partnerships. Chatham House New York.


viiiIFF Mission (2002) \'Report of the International Fact-Finding Mission on Water Sector Reform in Ghana\'. Accra: Public Citizen USA.


ixGWCL/AVARL (2005) \'Management Contract for Ghana Urban Water\'. Accra: GWCL and AVRL.


xWorld Bank (1996) Bureaucrats in Business: The Economics and Politics of Government Ownership. World Bank Group.


xiFichtner, H.a.W. (2010) \'4th Year Management Contract - Technical Audit Report\'. Accra: GWCL/World Bank.



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