Building Municipal Capacity for Private Sector Participation

With DFID Knowledge and Research Programme Funding, GHK International (in association with IDD at the University of Birmingham and local consultants) has undertaken this research project to develop a clear picture of the capacity a municipality requires to facilitate pro-poor private sector participation in service delivery. Drawing on the experience of a range of municipalities in countries in the south, the work aims to provide guidance on the elements of pro-poor partnerships with the private sector, the mechanisms and institutional requirements for delivering pro-poor public private partnerships.

The case studies detailed below demonstrate the lessons learned by municipalities across the world which will inform and illustrate the tools to be developed through the research.

The full documents are available to be downloaded and limited hard copies are also available from GHK International on request.

Introduction

Over the last decade a number of multi and bilateral donor agencies have focused on public-private partnerships as a means to more effective and sustainable service delivery. Not least in part due to this advocacy, various governments in Latin America, West and Southern Africa and parts of Asia are absorbing the concept of public-private partnerships, and are formulating legislation and policy to mobilise human and financial resources outside the public sector. Action has been driven, mostly at the national level, by a need to respond to chronic service deficiencies and the financial implications of decentralisation. Yet the capacity of municipal government to absorb and implement PPP policy has not become a significant factor in the scope and programme of change. There are few examples of efforts supporting municipal government and fewer exhibiting a level of capacity building commensurate with the change envisaged.

The shift towards private sector participation in so-called public sector functions may be a significant change for private sector actors, but for the municipality it is part of a series of far more structural and procedural changes in the way services are to be delivered. In many countries, municipalities are only beginning to absorb demand-led and participatory approaches, in others they are grappling with the concept of multi-sectoral responses to poverty reduction. Seen in this context, a key opportunity and constraint of private sector involvement in service delivery is actually the capacity of municipal government to integrate policies and formulate public-private partnerships that are pro-poor.

With DFID Knowledge and Research Programme funding, GHK International (in association with IDD at the University of Birmingham and local consultants) are currently undertaking a research project entitled Building Municipal Capacity for Private Sector Participation. The purpose of this work is to develop a comprehensive picture of the capacity a municipality requires to facilitate pro-poor private sector participation in service delivery. Drawing on the experience of a range of municipalities in countries in the South, and through the development of a capacity building framework, the work aims to provide guidance on the elements of pro-poor partnerships with the private sector, the mechanisms and institutional requirements for delivering pro-poor private sector participation.

Research Framework and Fieldwork

Case studies, and a number of smaller focus studies, have been undertaken in municipalities in South Africa, Zimbabwe, Nepal, India, Argentina, Peru and Colombia. The studies cover a range of municipal experiences with the private sector - from concessions and joint ventures to management and service contracts. The scope of the work is limited to the water, sanitation and solid waste services as these are, for the most part, municipal functions affecting the quality of lives of the poor.

In each case study location, the research includes an analysis of:

• the external operating context of the municipality (the regulatory and policy frameworks, political and economic influences), the poverty context and existing infrastructure deficiencies;
• the key lessons of the partnership in terms of contractual arrangements, implementation processes and institutional relationships;
• the strategic and practical elements of pro-poor private sector participation and the change necessary to improve delivery to the poor; and
• the skills and organisational constraints to PSP and the capacity building required at municipal level to bring about sustainable and pro-poor partnerships.

Piloting of the research framework took place in 3 municipalities in Southern Africa. Amongst other lessons this exercise exposed that many municipalities have not considered the implications of their decision-making on low-income groups, and are hesitant to discuss, in explicit terms, private sector participation (PSP) in relation to the poor. The methodology was therefore adjusted to collect information gradually and enable municipal actors to communicate the opportunities, constraints and achievements of the overall partnership before focusing on factors affecting the poor. This gradual approach reflects the manner in which information on PSP has amassed at the international level.

Copies of the case studies can be downloaded at the PPP Case Studies section of the Global Learning Network

Key Issues

International analysts and promoters of large-scale public-private partnerships with international operators have only recently shifted from a concern to build any sort of PSP to private sector participation that is attuned to the needs of the poor. They are only beginning to develop the notion of a pro-poor partnership. To date, much of the published work has been developed by economists (very little by social disciplines) and focuses on financial opportunities and constraints. On the ground, few initiatives are drawing on the vast catalogue of lessons of poverty reduction and slum upgrading. An intrinsic output of the work is an examination of the scope of private sector participation in relation to the poor. This will disaggregate and develop the concept of pro-poor - incorporating broader poverty reduction approaches into the existing discussion on tariffs and subsidies, expansion mandates and regulations.

Many of the more established WatSan PPPs have been unable to meet objectives because they failed to involve the poor in decision-making and delivery. Learning from this experience, many small-scale initiatives are emerging which provide a central role for communities and NGOs, involve micro-enterprise and acknowledge the role of the informal sector. The research will explore the various roles that can be played by poor households and marginalised groups in the formulation of partnerships and delivery of services, and will focus on the ability and willingness of individuals and government, non-government, private and community organisations to act as partners.

This work also recognises that PSP in service delivery is only one dimension of urban management. It aims to locate private sector participation processes in the midst of a body of municipal functions and approaches. This offers a particular opportunity to consider sector linkages and the strategic approach to private sector participation in urban management.

Early lessons

One of the primary lessons learnt to date is that capacity becomes a relative as well as an absolute problem. It is not only a lack of skills and organisational capacity that is problematic, but the imbalance between actors. Structural differences in the capacity of some private and public partners, creates great hesitation on the part of municipal actors. This reinforces the lessons about thoroughness (and access to human and financial resources) in the contract formulation stage. If the contract is deficient, weak municipalities find themselves even more powerless and lose trust and confidence in the approach. Moreover, champions are needed in all participating organisations (municipalities, private operators and NGOs) to take pro-poor responses forward and, given the 10-30 year duration of many water and sanitation contracts, it is necessary to ensure that capacity building is ongoing and responsive to the inevitable change in capacity and interest amongst politicians and administrative staff.

Other capacity building lessons seem to be that:

• even where municipalities have the capacity to develop a partnership approach, they have difficulty formulating links between sector-based PSP and other poverty reduction initiatives;
• many initiatives which are addressing the needs of the poor are pilots and there is an urgent need to scale up pro-poor activities; and
• assumptions are being made about the capacity and willingness of NGOs to participate and lend their support to pro-poor initiatives. Many are not able or willing to do so.

Final outputs

The lessons of the case studies and other documented experience will be synthesised into a strategic framework that aims to structure the components of capacity building. This will be illustrated with a body of municipal experiences to ensure that concepts are given meaning at the local level, and that the lessons learnt by municipalities are shared and disseminated. This work will be compiled into a Sourcebook for training institutes and agencies responsible for capacity building, and outlined in a training video for municipal officials. The outputs will aim to answer the questions frequently asked by municipal officials:

• What is the scope and nature of the partnership arrangement?
• How are partnerships established?
• Who is involved in a pro-poor partnership?
• What human resource development and organisational change is required?

To obtain municipal feedback, the capacity building materials will be piloted in a municipality embarking on a partnership with the private sector. A review panel has also been established to provide guidance at key stages. In order to promote more co-ordination between PSP research initiatives, the members have been specifically selected for their involvement in other current PSP research or activities (e.g. UNDP/Yale, BPD, IHE, WEDC).

One of the primary vehicles for dissemination of this work is the UNDP Private Public Partnerships for the Urban Environment (PPPUE) programme. The materials will be piloted in a PPPUE focus country and it is intended that the programme will utilise the training materials in their future capacity building activities.

This research will be completed and published in April 2001 as: Municipalities and the Private Sector: A Sourcebook for Capacity Building. This research on private sector participation is the second in the Building Municipal Capacity series.

The first, published as Municipalities and Community Participation: A Sourcebook for Capacity Building, is now available in a new edition, published by Earthscan ISBN 1 85383 744 X

For further details please contact

Janelle Plummer,
GHK International,
526 Fulham Road,
SW6 5NR.
United Kingdom
Tel +44 (0) 20 7736 8212
Fax +44 (0) 20 7736 0784
Email: jplummer@mweb.co.za copied to plummerj@ghkint.com

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