D. The SSIP Model and Community-Based Providers of Water and Sanitation Services

Presentation by Madeleen Wegelin-Schuringa
IRC International Water and Sanitation Centre
The Netherlands

1) Background Of The Problem/Challenge

Sixty percent of urban residents in developing countries live in "slum" areas. A large percentage of this population lives in informal settlements and has to rely either on independent community-run taps for their drinking water supply or on so-called "spaghetti networks" that connect to the edge of a municipal grid system.

Table 1 describes the main categories of low-income urban areas, which are clearly not homogeneous. However, there are two major factors influencing the type of water supply service that will be available: location and settlement type. These factors determine the kind of infrastructure that is available. For instance, in the central city slum, where there is a connection to the main network, increasing congestion and rising population densities have already resulted in a deterioration of services. Poor communities in illegal areas within the official urban boundaries suffer from problems associated with unsuitable geographical locations (for example, marshes or hills), where it is difficult to construct the necessary infrastructure or to provide alternative solutions. It is precisely because these areas are so unsuitable for supporting settlement that they are available to recent migrants and other newcomers, most of whom have nowhere else to go.

Legal low-income households may have regular service provision, but because they are so far away from the mains their service has become irregular or altogether inadequate. The distance from water mains plays a major role in determining the kind of alternative arrangements that will arise and in the prices that will be charged.

Table 1 Main Categories of Low-income Urban Areas

Compounding the problems associated with a limited water supply system, environmental sanitation in these areas is also a serious concern. Lack of a sewage system or a functioning drainage network causes waste water to remain stagnant, while human waste disposal is severely affected by lack of space to construct latrines. Solid waste collection may be organized at community level, but secondary disposal out of the area is usually non- existent. This may result in latrines being constructed directly on top of solid waste streams (picture).

Even if a utility provides sewage, low-income areas are rarely connected. Most of the time the service providers will not develop on-plot sanitation, arguing that this is up to individual families. This relegates sanitation to ad hoc disposal arrangements. Residents of a particular neighborhood in Nairobi, for example, were unable to dig new pits to replace old ones that had reached full capacity. Since there are no pit emptying services available there, households dug into the pits during the rainy season to let them overflow. This kind of management obviously has very serious public health and environmental consequences (picture).

Utilities tend to continue to provide basic infrastructure services in the conventional way, based on based on long term sectoral master plan derived from anticipated land use development and adhering to international technical standards.

These conventional approaches do not always work for the following reasons:

• Government is unable to cover the whole population from existing tariffs and with existing management structures;
• Low tariffs preclude private investment;
• The public sector often focuses on providing the services itself rather than on effective approaches to complementary partnerships;
• Total available water is not always sufficient to cover the whole population, and low-income areas are typically the last served;
• There are no incentives to operate water/sanitation services in low-income urban areas;
• Services in illegal areas are often not permitted;
• Standards for connections are too high;
• Employees of the main operator do not communicate well with residents of low-income areas;
• Service levels and types are not based on demand, resulting in mismatches;
• The emphasis on facilities rather than on locally adapted services also results in mismatches;
• Payment systems are not adapted to local conditions and behavior.

As an alternative for the conventional approaches two types of existing modes of informal service delivery will be discussed. These can also be called public-private partnerships, but at a much smaller scale. The two alternatives are "Small scale independent service providers" (SSIP) and "community managed systems".

2) Small Scale Independent Service Providers (SSIP)?

IRC collaborated with the World Bank, Hydro Conseil of France and local partners in a research to deepen understanding of the relative importance of these providers, their operating environment and incentives as well as the relative prices of SSIPs when compared to the central/municipal service provider. The study looked at different types of businesses and their performance.

2.1 What kind of SSIPs exist?

According to the study, operators were classified into two main groups: primary operators, who provide the water and own the source; and secondary operators, who depend on the central utility (public or private) for their water resources. (Table 2)

Table 2: Types of SSIPs

The research was carried out in ten cities in Africa and Latin America. Among the results were several lessons that contradicted conventional wisdom on the role of small providers in natural monopolies (such as urban water supply systems):

• SSIPs cover the water supply needs of the majority of people living in low income areas in the cities studied (and employ between 70% and 90% of people working in the water sector in cities in West Africa);
• They offer a service that is more flexible and responsive to local needs;
• They tend to mobilize capital on the informal market;
• They enjoy high levels of cost recovery and deliver water that is very close in quality to the public utility;
• Costs for SSIP services are not much higher than utility services. What SSIP vendors charge is often nothing more than a non-subsidised rate. (Table 3).
• SSIPs thrive due to the inability of the monopolistic public enterprises to respond to the dynamics of market demand;
• SSIPs reinvest profits locally to improve services and operate other businesses.

Table 3 Costs for SSIP Services and Utility Services

2.2 What are the benefits and disadvantages for government working in partnership with SSIPs?

Benefits:

• Improved cost recovery and reduction in collection burden;
• Greater willingness to pay for services which are not provided by the government;
• Local management of systems is more reliable.

Disadvantages:

• Loss of power, status and influence for decision makers can cause political interference;
• Fewer opportunities to make some extra money through tendering procedures;
• Slower than the supply-driven approach and more difficult to standardize;
• Support services required are more complicated;
• It is difficult to satisfy both political and community demands.

2.3 What are the constraints facing SSIPs performance and integration?

• Lack of a collective voice, internal management and marketing skills, and information (technology, financing, and management);
• Dependency on municipality/utility for bulk water or final sewage disposal;
• Dependency on poor environmental practices to sustain businesses;
• Unfair competition from subsidised government services and (illegally) operated government services;
• Difficult access to public markets (illegality of service provision, lack of access to public treatment plants, inability to register or obtain licenses);
• Insecurity of the investments (extensions in illegal areas, seizure of assets, re-development within boundaries of their geographical market);
• Limited accessibility to the low-income areas due to poor infrastructure;
• Inadequate legal frameworks;
• Taxation system that favors the public utilities;
• Poor access to credit;
• Inability to penalize customers for non-payment.

2.4 What would improve the performance and integration of SSIPs?

In terms of policy:

• Formal recognition of SSIPs;
• Dissemination of favorable policies in place elsewhere;
• Development of competitive policies for SSIP participation (dedicated areas for SSIP participation, procedures for participation and regulatory framework, transparency/clarity on pricing, tariffs, and connection policies, for example).

In terms of the regulatory environment:

• Strengthening of the legal security of the SSIPs;
• Opening the market;
• Easing access for registration, licenses and trunk infrastructure;
• Building a regulatory capacity of local authorities focusing on SSIP operations.

In terms of financing:

• Information on existing financing sources and conditions;
• Linkages with financial intermediaries.

In terms of management support:

• Networking and formation of associations;
• Training in basic management skills;
• Information on available training;
• Marketing and outreach programmes (including hygiene awareness).

2.4 What not to do

Just as there are a series of constructive measures that could be implemented to enable better performance and integration of SSIPs, there are also some development traps. Policy makers should avoid the following:

• Imposing unproductive constraints;
• Imposing measures which enable monopoly situations;
• Promoting 'ideal' operators instead of 'real' operators;
• Attempting to formalize the informal sector framework;
• Imposing too much control from above.

3) Community Managed Systems

3.1 What are community managed systems?

To a large extent community managed systems overlap with SSIPs in terms of the structures of their services (see Table 4). The main differences lie in the types of advantages.

Table 4 Types of Community-based Services

3.2 What are the advantages of community managed systems?

• Level of service is based on demand and willingness to pay;
• Local knowledge is employed;
• Cost recovery/payment systems are adapted to local conditions;
• Local management capacity, ownership and profit stay in the community;
• Community confidence and cohesion can improve;
• Profit can be re-invested in other community development efforts;
• Residents are likely to have a stronger interest in environmental conditions.

3.3 What are the constraints to improving performance and integration of community managed systems?

The constraints facing community-based providers are also different from the constraints associated with developing SSIPs. Community managed systems have internal constraints because low-income communities have a hard time getting organised due to the diversity of their neighborhoods and the lack of common leadership. These conditions result in a lack of social cohesion. Summary of internal constraints:

• Establishing a fully representative (for example, gender, ethnic and economic representation) community-based organisation is very difficult;
• Local management skills are lacking;
• Communities tend to be transient or mobile so there is a high turnover of committee members;
• Roles and responsibilities of committee members are often unclear;
• Financial management and user fee collection are not always transparent;
• Local communication skills are under-developed;
• There is too much dependence on external support from agency staff;
• There is a lack of hygiene awareness.

The main external problem is that CBOs are dependent on the support of the municipal authority, which is not always geared towards working with low income communities. As a result, they often do not have the time, motivation or ability to work with communities. This applies to privatised water service operators as well. The major focus for organisations like IRC, therefore, is to build capacity within these departments in order to learn to work productively with the grassroots operators.

Summary of external constraints:

• Inadequate information on technology options, service levels and operations and management costs;
• Dependency on the municipality or the utility for water and removal of waste;
• Inadequate legal framework accepting community management and ownership of assets;
• Land tenure is insecure, hence investments are also insecure;
• Transaction requirements and registration are onerous (for example, bank minimum balances, transaction costs, and so forth)
• No legal status for registration and authority to act (buying and selling, contracting);
• No legal power to pursue non-compliance by community members;
• Access to credit is very limited;
• The lack of enforcing penalties for non-payment leads to mounting arrears;
• Communication channels between the community and the public utility are limited.

3.4 What are the areas for improving the performance and integration of community managed systems?

In terms of the legal and regulatory framework:

• Establishment of de-facto secure land tenure where legal recognition cannot easily be obtained;
• Adoption of regulations (service standards) to facilitate service provision in (illegal) areas;
• Facilitation procedures for communities to register as legal entities and facilitation of community management and ownership of assets;
• Facilitating hook-ups to municipal service networks;

In terms of financing:

• Providing information on existing financing sources and conditions;
• Facilitating linkages with financial intermediaries.

In terms of management support:

• Improving the amount of time available, and the motivation, ability and knowledge among agency staff to assist low-income communities;
• Including female agency staff to stimulate involvement of women in the community;
• Building communication skills among agency staff;
• Increasing transparency and clarity in communication channels between the agency and communities;
• Adopting transparency, accountability and clarity in metering and billing procedures;
• Improving health and hygiene awareness among agency staff;
• Increasing local involvement and participation in decision-making through all stages of planning and implementation;
• Providing training in basic management and technical skills within the community.

4) Key Lessons

• Stifling the operations of SSIPs in the name of protecting monopoly privilege or social ideals is counterproductive.
• SSIPs are likely to be a source of ideas, energy and possibly financing.
• Competition is a better way to ensure fair rates and efficient service than administrative supervision.
• For community management to succeed, users must be involved for the outset of the programme and through every stage.
• An organisation of users has to mange the scheme with local people being trained in management, maintenance and repair.
• This local organisation cannot survive in isolation but must be linked to a wider network of government or non-government services.

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