E. Background For PPP Development In Windhoek, Namibia

Dr. Bjorn von Fenckenstein
City Council of Windhoek
Namibia

The Windhoek City Council is one of the leaders in municipal government throughout Africa. The Council enjoys a very high rating internationally, a major reason why Windhoek already has a number of important partnerships underway.

Windhoek, the national capital and seat of Namibia's central government, is a rapidly growing city. A 1946 census recorded 30,000 inhabitants, a number that increased to 130,000 by 1991 and 185,000 by 1995. Present estimates place Windhoek's population between 230,000 and 250,000 inhabitants, though the scale of migration is such that it is hard to be precise any more.

Approximately 35,000 residents (10% to 15% of the urban population) are considered "informal settlers" and live in sheds found mainly on the outskirts of town. Of these, 70% have access to potable water and 70% have water borne sewer systems - either through household connections or communal systems linked to their homes.

Windhoek's finances are quite healthy, with a budget of approximately 500 million Namibian dollars and a debt ratio that is healthier than all other cities in the region. Although more than two-thirds of the city government belongs to the same party that controls the national government, the city maintains its independence. The city is also financially independent and receives no subsidies or revenues from the central government. The only source of revenues is from rates and taxes, along with a small income from water and electricity sales. All other services are delivered at cost to consumers.

Because Namibia has an arid climate, water resource management is of the utmost importance. NamWater, a parastatal that assumed its role from the Namibian Water Authority, provides eighty per cent of Windhoek's water supply. Water is contained behind service dams and routed to the city via a canal system that carries some water over 500 kilometers. The remaining 20% of the water supply is provided by the city itself. Half of the city's contribution comes from existing boreholes, while the other half is derived from reclaimed water, Windhoek being one of the few cities in the world that reclaims wastewater and turns it into potable water. The share of potable water derived from reclaimed water will actually increase significantly by next year following a 36 million Namibian dollar expansion of reclamation works funded by the German Reconstruction Loan Corporation (KfW) and the European Investment Bank. Windhoek is currently seeking a private partner to maintain and operate the new plant as the first step towards commercialization or full privatisation.

Windhoek's electricity is produced by NAMPOWER, the state-owned utility. The City controls reticulation and sells energy services to the end consumer. Although there is a strong movement across Southern Africa to demonopolise the electricity supply and create a competitive market, the Windhoek City Council opposes the idea, largely because the municipal government uses electricity as a leveraging tool to force consumers to pay their taxes. If consumers do not pay, the city shuts off their electricity.

Legislative reforms are currently being prepared to enable future partnering efforts. Currently the City Council is technically not allowed to enter into PPPs. There is also a strong drive to decentralise certain functions (policing, emergency services, health care, education, and others) and devolve responsibility for them down to the municipal level. This was decided by the central government with the municipalities' consent, but over time it has become clear that the decentralization of services and responsibilities did not include a decentralization of revenue streams. As a result, the municipalities are left paying for services that they do not have the revenues to cover. The only revenue streams in Windhoek derive from rates and taxes (with a small income from water and electricity). There are no sales, income, or value-added taxes (VAT).

From the City Council's point of view, PPPs are a laudable and necessary approach. Not all functions and sectors are appropriate for entering into partnerships with the private sector, however, and some sectors and core functions must retain considerable public sector oversight. For instance, the public cannot rely on the private sector to be concerned about safeguarding the environment. In areas that will have an impact on Namibia's fragile ecosystems and natural resources, the public sector must continue to play an important role. Community needs also have to be taken into consideration, especially when increases in tariffs are being considered. Public sector officials will be sensitive to such measures, as they will have a direct impact on consumers. PPPs must not be seen strictly as an opportunity to improve a city's financial statements; they must also help local communities.

One example arose recently when KfW insisted on increasing water tariffs by 400% within half a year because up to that time water supply services had been heavily subsidised. The Council refused to accept these terms, citing legitimate reasons for why the subsidies had been put into place. In the end, KfW finally agreed to a phased increase over six years. In this case, public and political interests were best represented by the public sector.

In conclusion, it is evident that the needs of urban residents are beyond the means of municipal governments. PPPs, privatisation and commercialisation can all play a role in relieving some of the financial and managerial burdens. However, the method used will depend on the function. In addition, municipal governments will require a clearer understanding of the private sector partner. Will it be an NGO? A private company? Domestic? International?

The Windhoek City Council remains open-minded and will wait for a qualified resource agency to step forward and present ideas for partnerships.

F. Minutes From The Question & Answer Session

Following are two questions discussed following the presentations by the panel of municipal leaders.

Question: What role can or should subsidies play in the provision of essential urban services (drinking water, for example)?

Discussion: Views on the role of subsidies vary from city to city - and perhaps according to the political alignment of the parties in power. For instance, in Colombo subsidies are seen as an important way to provide services to the under-privileged who rely on communal stand posts. Households and industries that can afford to pay for fuller service pay a higher premium that helps to offset the costs of supplying poorer neighborhoods.

This view is not shared by the City Council of Windhoek, however, which sees subsidies as a very difficult political issue. (For more discussion of the role of subsidies and cross-subsidies, see the report of Working Group 1).

Question: What is the institutional capacity of municipal governments to develop, implement and regulate PPPs?

Discussion: There appears to be a spectrum of local capacities. In Maputo, government officials are actively requesting financial support to help build the governance capacity and negotiating skills. Although there are numerous opportunities to invite the private sector into partnerships on a number of municipal projects, there is very little experience to guide the way in forging relationships. The source of the problem is largely attributable to the fact that Maputo has only been autonomous for a few years now, so capacity building for governance is a major priority. For this reason the national university has been hired as a consultant to help Government officials prepare contracts.

Windhoek may represent the other end of the spectrum. Officials there have considered barring foreign consultants from participating in local development projects, and local government is confident that enough local knowledge exists to promote PPP projects.

In Colombo, officials have been participating in overseas training workshops and seminars to help increase managerial competencies. International financial institutions are already facilitating this kind of Professional Development.

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