Lewis&Miller 1986 Public-Private Partnership in African Urban Development

7/23/2019 Lewis&Miller 1986 Public-Private Partnership in African Urban Development

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N \{

q

PURLIC PRIV TE

P RTNERSHIP

IN FRIC IJ

URB N

DEVELOPMENT

f aureen Lewis

led

ll er

January 4 986


2/47

PUBLIC PRIVATE P RTNERSHIP

IN FRIC N UR N DEVELOPMENT

by

Maureen A Lewis

Ted R Miller

January

24

1986

Prepared for

U S Agency

for Internat ional Development

Regional

Housing and Urban

Development

Office

East

and

Southern

Africa

The views and

in terpretat ions expressed in th is report

are

t ~ s

of the authors and should not

be in terpreted as

the

off i i l

posi t ion

of the ~ e n y for Internat ional

Development The

authors

thank Fred Hansen and

the

other US ID s t f f and

consultants who provided

much

of the det i l

on

country

experiments in A frica alone however a re re sp on si bl e

for

the

accuracy

of the information as presented here


3/47

T LE OF CONTENTS

INTRODU TION

Page

SUMMARy

3

WATER

N

WASTEWATER

URBAN

INFRASTRUCTURE SERVICES

4

PUBLIC TRANS IT

3

PROMOTION

OF

SERVICE

DELIVERY

PARTNERSHIPS

SOLI9 WASTE REMOVAL

GARBAGE

2

PROMOTION OF PRIVATE

ENTERPRISE

DEVELOPMENT

25

ON LUS ON


4/47

SU RY

Public

Serv ice Provision

x p e r i ~ n c e

in

Africa and t h r o u ~ h o u t

the

world shows that

involving the

p riva te sec to r in provision of urban

water,

sewerage, public t rans i t and refuse disposal services can reduce

subsidies and

increase

coverage. Private sector involvement in

pub lic s ervic e

provision

through operation and maintenance

contracts with

government

can improve service quali ty and

quanti ty in the four

public service

areas. Smaller scale

contracts for specific subact ivi t ies can be

equally

helpful.

Outright

responsibil i ty for

public

services by private firms

is

rare

even

in the

developed

world,

but

examples

exis t

in

Africa.

Indeed

some of the most successful

African

water

authori t ies

Ivory Coast

are

privately run under

government

oversight, and priva te con trac ts to operate and maintain public

fountains

in Kenya and the Ivory Coast have proven successful.

Similarly, some

of

the most rel iable and convenient t rans i t

systems are l arge ly pr iva te ly

operated

and pUblicly regulated

Liberia .

Elsewhere,

many of those at the lower end

of

the

income s cale o fte n buy water and t rans i t services

at

premium

prices from i l legal private providers.

Government

responsibil i ty

for public

service

prOV S on and

~

p riv ate s ec to r e ffic ie ncy and f lexibi l i ty

in

operation and

maintenance

provide

an

ideal

basis

for

a

pUblic-private

partnership

in water and t ransi t Lack of demand for sewerage

and refuse d isposa l

l imits

the abil i ty of private providers in

this

sector,

although contracting with private donkey-cart owners

to collect garbage

has

been shown

to

cut costs Sudan .

Priva te Ente rpri se Development

Economic growth is not

easy

in

sub-Saharan

Africa under

the

best of circumstances.

Profitable

oppor tunit ies of ten only

develop through patient pUblic and private

nurturing.

Government

can

stimulate

and in cre ase th e success o

private

investment in

economic growth by improving the development

climate,

increasing

the

availabil i ty

or reducing the

cost

of necessary

inputs,

and

providing

subsidies.

Ac ti vi ti es t ha t sometimes are appropr iu te inc lude: reform

of natio nal

macroeconomic pol ic ies , establishment

of

a

single

local

location

where u s i n e s ~ e s

can

apply

for

a l l necessary

approvals

and

licenses:

business visi tat ion

programs

and

needs

surveys : support of private capital

markets

and assistance to

small firms

in

accessing capital , banking of industr ial land: and


5/47

development of public

buildings

often with some

shared equipment

or

services

to house markets or n w enterprises .

Issues Facing

This

Conference

The

key issues

for

this Conference

to

discuss basad on the

experiences

of

the

coun tr ies p resen t

as well

as

ideas

that

have

been evolving about

public private

partnerships in

urban

development include:

ow to create

successful

public private

partnerships in urban services.

W:at are

the constraints

in A frican

countries

that

inhibi t

a

partnership

between

government

and

the

private

sector?

What

are the

legal cul tura l

bureaucra ti c o r o the r impediments? Are

these amenable

to change and i f so

how

What

private

s ecto r ro le s

are appropriate

in the delivery

of

water sewerage

public t ransi t

and

refuse

removal

services?

Given

national context and the

constra ints what k i n ~ of

experimentation

might

ass i s t

governments

to t t ~ i n the viabi l i ty and

advantages/disadvantages

of

private public partnerships?

Can

these

be attempted

on a

small scale

to

provide

policy guidance to decisionmakers?

ow

to improve the

climate

for promoting

private

enterprise development in African

c i t ies

What

are

the

roles that public

ins t i tut ions

should play in

private

development?

ow can subsidies

be

minimized

while

maintaining government

promotion of

private

investment? What

types of

subsidy

can

assis t p ri va te i nv es to rs

place a

minimal burden

on

government

and

provide

incentives thc c promote

eff ic ient

subsidy

use for the agreed purposes?


6/47

How can

the

effect iveness of goverrment

subsidies

be

traced

and

evaluated? Do

they resul t

in workable ventures? How

can success

be

assured?

What

steps are

needed to achieve

bet te r

allocation and use of capi ta l?

INTRODU TION

Throughout the world people are learning that neither

government

nor

the p riv ate s ec to r has enough money and sk i l l to

go

i t

alone in

urban d e v ~ l o p m e n t

The public

and p riv at e s ec to r

can

achieve

much more

as

partners .

The

b es t p a rt ne rs hi ps

intimately

involve

a l l those

interested

in urban

development central

g o v ~ r n m e n t

local governments f inancial

inst i tu t ions

la rg e c o rp or at io ns small b u s i n e ~ s e s and local

residents .

Public private

partnerships

offer

strong

advantages over a

largely public approach to both service delivery and e ~ o n o m i c

growth.

y

committing thei r

capi ta l and

management

reso urces to

a common goal

the

public

and

private sectors can more easi ly

assemble

the

cr i t ica l mass

of

resources

needed for success.

Conversely when the two sectors work

at cross purposes

they

waste

scarce

resources.

The m ajo rity of this paper

discusses

urban infrast ructure

service

delivery.

When

public services

are

unable

to keep up

with

rapid

population growth

the

private

sector

often steps

in

to f i l l the

gap.

This has occurred

in

much of

Africa

and much of

the

developing world despite concerted effor ts by centra l

governments. When private service enterprises

are

i l legal i t

makes them r isker but i t rarely stops the inform al sector from

operat ing.

Informal operations of necessity charge

higher

prices

to

cover

the i r higher r isks and are less

readily

held to

account for low qual i ty than formal e nt er pr is es a re . To the

extent

that

informal

providers

ca:l be formalized and held

accountable the publ ic and especial ly the urban poor

wil l

benef i t .

One

of

the

key

are as fo r d isc ussion

a t

this conference

is how

to

achieve

more

formal

private

involvement

in

infrast ructure

service

delivery

given the many vested in te res ts

both

public and private in the current systems.

P riv ate s ec to r

ac tiv ity is the centra l component of urban

development and economic

growth

yet many governments do not

create a fe r t i le environment for business growth and job

generation. They impose cost ly

regulations

cause unnecessa ry

delays

for

pr ivate

developments

and reserve some act ivi t ies for

paras ta ta ls

Hosti le development

climates

are a problem for

c i t ies in the

developed

countr ies at

leas t as

much

as they are

in


7/47

- 4 -

Africa.

Developed

and

developing

countr ie s a lso share

confusion

about

how

a

ci ty with l imited resources can best encourage

private enterprise

development

without jeopardizing

public

objectives .

A

second

key

area

f or d is cuss ion

a t

this

conference

is

how

to improve

the

climate for and

promote

private economic

development in African c i t ies

URB N INPR STRUC l URE

S RVI S

African

c i t ies are growing

very

quickly, often three to five

times as

fast

as

rural

areas .

Urban population in

sub-Saharan

Africa

is expected

to increase from 89 million to 262 million

between

1980 and 2000.

This

rapid

growth often will overwhelm

local capacity to expand infrastructure service del ivery.

Why a

Public-Private

Partnership

Soaring

demand for

infrastructure services

is forcing

African

governments

to

make some

hard choices, especial ly in

those countries where the

public

sector

t radi t ional ly

has

handled

a l l service delivery.

The

key prob lem is that capacity expansion

requires

major

investments

of

capi ta l and

skil led personnel , but

these re so urc es a lre ady are

s tr etc hed t hi n

in the pUblic

sector.

The

private sector potent ia l ly can help f i l l the

gap.

The l imited

experience

to date

with formal

pUblic-private

partnerships

for

i n f r s t ~ u t u r s ervi ce del ivery in A frica

suggests that

the

private

sector

is willing

and

~ e to help meet

infrastructure

service

demands.

Several

recen t ev alu atio ns o f

service provi sion in Africa support this conclusion

Cow3n

1984;

Hanke 1984; Marceau, 1985; and Roth

1985).

.

The

public and

p riv at e s ec to r

both have drawbacks as service

providers,

and

neither is

l ikely

to be

an id ea l p rovider on i t s

own. Only public

sector

providers generally

will

consider equity

or address needs that

benefi t

the

community

without contributing

to prof i tabi l i ty They also

will not overcharge

for

services

where

there

is

no

competition. On the

other hand,

private

service p rovid er s a re not

rest r ic ted

by c iv i l service regu la tions

and

bureaucra t ic administ ra tive structures . Priva te providers ,

especially in systems with competition,

also

have

the

greatest

in cen tiv es to

be

eff ic ient and keep down

costs . In

the United

States ,

for

example,

private

operating costs to

supply

water are

percent below

public

costs because of higher

labor

productivity

and more e f fi ci en t u ti li za ti on of capi ta l

Crain

and

Zardkoohi, 1978;

Morgan

1977). In

Africa,

the

commitment of

many

governments

to keeping ra te s sta ble , even

i f

costs

and

subsidies are r i s ing

further

discourages cost control.

Involving

the

p riv at e se cto r

in infrastructure service

provision, thus,

can

increase efficiency

and population

coverage


8/47

- 5 -

whi le reducing uni t costs

Hanke

1984 . Part icular ly

promlslng

possibi l i t ies

are the use of the p riv ate s ec to r

to

cover

expanding service

areas,

and contracting

out

of act ivi t ies

requiring specialized

ski l l s

Parastatal

organiza tions of ten can

improve

the

efficiency

of

their operation by adopting

market principles

and

competing

with

p riva te fi rms. This implies linking expenditures to revenues and

establishing production

incentives

for

management and

technicians.

Such

reforms can improve the

financial

health

of

these

governmental inst i tut ions

and reduce thei r reliance on

subsidies.

Legalizing

act ivi ty

of private i n i v i ~ u l s and firms

is

a

f i r s t

step

in privatization of public services. The public

sector then

can set standards

and

oversee

activity and possibly

pricing.

The combination provides

the

best of both

worlds: the

incentives

for

high value

from

the

privatp

sector

and

the

equity

and

access

demanded from government. However this

approach

requires

dropping

rest r ic t ions

on

the

p riv ate s ec to r and

regulating i t

effectively.

A

source

of reluctance in opening up public service

p rov isio n to

private

firms is

concern

oqer pricing policies.

Governments

have been sensi t ive to the needs of low income

households

and have priced

services accordingly.

If services go

private, ow will i t affect

lower

income families? Firs t

given

~ evidence

detailed

below in

water

and pUblic t ransi t low income

households are will ing and able to pay fo r se rvic es they deem

necessary, and will pay a premium to obtain them. especially in

water

and

transportation,

black markets

and

informal

service

providers thrive in low income areas in Africa because

cheaper

public s r v i ~ are unava il ab le or involve unacceptable time and

waiting costs. Furthermore,

free

services in any society

are

paid for by

taxpayers: i f

only the

upper

classes

are

receiving

water and sani tat ion services, the

poor

subsidize

thei r

consumption. The

inherent

inequit ies

in most public services

cal l for alternatives

th at w ill lower costs and extend

coverage. A public-private

partnership

will foster that

objective.

Roles

of Public and Private Sectors in Orban Development

The private sector usually al locates

resources

eff ic ient ly

and

produces a t

the lowest cost where

markets

exis t and

competition is f lour is hing. Where

market failure occurs,

government

often can

fix the

problem. For example, where a

natural monopoly exis ts that is where costs

will

be

higher

i f

more than one firm lis involved,

government

can

regulate

activity

in the

sector to keep prices own and maintain quali ty

standards. A good example is

that

i t is ineff icient for two


9/47

6

firms

to

put redundant

water pip es in a single

area.

Generally

services l ike telecommunications, water and wastewater pipe

networks, and elect r ical l ines also can benefit from economies of

sca le - - i t

is

cheaper

to

expand

a

network

than

to

build

a

small,

independent network--so

that dividing

up the market is determined

by

both efficiency

and cost .

Private

firms usually can provide services to private

individuals more eff ic ient ly than the

public

sector , largely

because

their

survival

depends

on meeting

the

needs

of

consumers. Flexibil i ty , cost savings, and

jUdicious

pricing are

essential to

survival

since competitive forces

drive

out firms

that

are

sloppy, unresponsive to demand or

greedy. Thus,

a

competitive

environment creates

strong

efficiency

incentives.

Where government has suppressed

competition through

legal

action and

the public

system

is not

serving some residents, a

black

market

often

f lourishes.

Examples

in

pUblic

t ransi t

Kenya, Sudan,

etc .

and wate r supply Senegal, Kenya Benin,

etc .

point to the

high demand and inadequate pub li c suppl ies

that support an

informal sector

response.

Best

documented

is

the

vast underground economy in Peru

that

has emerged as government

regUlation

and control have strangled activi ty

through

formal

channels Roth, 1984 .

Where the

public

se cto r w ill not or cannot meet public

s r v ~ needs,

or where cost considerat ions require al ternat ive

delivery,

public

oversight can ensure that government objectives

of fa i r pricing and equal coverage

are

met. Government can meet

i t s

objectives of equity through paral lel effor ts

in

taxation,

subsidies

from

the

bet ter

off

to

the

less

well

off , and

requirements imposed on design and

delivery

of services. For

example, government can subsidize the water sold to distr ibutors

serving lower income populations, and subsequently regulate

prices,

as

is

done

in

a number

of

Latin

American

countries.

Similarly,

surcharges on

p iped water

that only serves

middle

and

upper income households can finance the subsidi zed wat er .

Thus,

a number of al ternat ives involve the p ri va te s ec to r

while

s t i l l meeting public objectives. These

imply

a

public -pr iva te partnership . ow a

partnership

should be

structured

is

a

function of

the public

service

area and

condit ions

in

country, although the

nature

o the service

provided

and the commonality of conditions that exis t

various

sectors

of developing

countries

do

provide

some

guidelines.

The following

sections

deta i l the current

st ructure of

public

service p rov ision in water and sani tat ion,

public

t ransi t

and refuse collection. In each, the apparent

strengths

and

problems are

detai led, followed

discussions of the extent of


10/47

1 0

7

private

sector

a c t i v i t y constraints thereon,

and

ways a

pub li c -p r iva te partne rsh ip could be implemented to reduce the

problems.

WATER AND WASTEWATER

The

private s e c t o r s

role in

water and

sani ta t ion occurs

through d i r e c t

government

endorsement

of

private a c t i v i t y

through

contract and

leasing arrangements with governments,

and

by default where public a u t h o r i t i e s have been unable to supply

water

to some

residents.

The public

sec to r cu rr en tl y

supplies

water to urban res idents in

developing countries,

but often is

unable to

cover

many

lower

.income households. In

response the

private

providers ,

operat ing outside the law, supply

many

of

these

households. This

sect ion argues

that

publ ic-private

partnerships

in

water supply

wil l

benef it so ci et y, lower costs ,

and

raise

the

quali ty

of water

suppl ies .

Background

Developing Countries. In the

developing countr ies,

public

a u t h o r i t i e s have committed themselves

to

providing water to urban

dwel lers .

Sanitat ion,

although a necessary

complement

to water

supply,

has

been neglected due

to

low demand by

residents and the

high

costs

of i n s t a l l i n g a permanent pipe network and associated

treatment f a c i l i t i e s .

Table shows

how

much

of

Africa s water s u p ~ y needs

the

public

sector

has met.

Between

1970

and

1980,

the

proport ion

of

th e popula tion

covered

by

wate r supp ly services

in most African

countries rose

considerably.

Especial ly notable are

places

l ike

Lesotho

and

Senegal

where

th e per centa ge

covered doubled or

t r i p l e d even though the population grew rapidly.

Overall ,

coverage in

Africa

rose from under percent to almost 9

percent

of

the

populat ion.

Data from

1980

suggest that public water p r ~ V l o n in

Africa

is almost

exclusively

urban.

Urban coverage

ranges from

35

percent

in

Cameroon

to

90

percent or

more

in

Uganda

and

Burundi.

In

Africa , access i s most l i k e l y to

be

in the

form of

a

water

standpipe.

In contrast , in the e n t i r e develop ing wor ld ,

almost tw ice as

many

people have household

hookups as

have access

to s ta ndpip es . Africa as a whole also lags behind the r e s t of

the

developing

world in wate r supp ly coverage. Only

6 percent

of i t s urban

population

have access to safe

water.

Although Table 1 provides informat ion

on

the

estimated

proportion

of the urban

population

served

by

water services,

these figures

can

be

misleading.

Existence

of a

water pump

within a

given radius of

a

dwelling neglects the common


11/47

TABLE

1

l 'DCRRT 01'

SUB SAHARAN

POP1JLATIOR

VIm ~ J S S TO SAlE VArIm IB UKJWf AJlEAS

Percent

of

Urban

P o p ~ l a t i o n

of

Total

of Total

Population Population

With Safe With Safe

With House

With Total

Water Water Connection Stand- With Safe

(1970)

(1980) (1980) Water

Chad

27.0 26.6

43

Ethiopia

6.0

14.7

58

Somalia 15.0 31.4

58

Mali 9.8

20 17

37

Burundi 21.4

22 68 90

Rwanda

54.7

30

18

48

Burkina Faso

31.6

16

37

Zaire

17.9

11.0

43

Malawi 41.0

53 24

77

Mozambique

Sierra

Leone 12.6 12.0 20

30

S

Tanzania 42.2 13.0

88

Guinea

14.5

16

52

68

Central African

Rep.

19.4

40

Uganda

22.0 35.4

100

Benin

20.2

10

42

52

Niger 20.0

32.8

28

12

38

Madagascar

11.0

20.1

19

61

80

Sudan 46.0

49

'rogo

38.8 14

56

70

Ghana

47.0

26 46

72

Kenya

15.0

24.8

S9 26 85

Lesotho

3.0

14.1

24

13

37

Mauritania

61.0

83.9 20 60

80

Senegal

12.0

38.0

33 44 77

Angola

25.8

30

5S 85

Liberia

25.1

64

Zambia 37.0 46.1

86

Zimbabwe

Cameroon

26.6

3S

Congo, People s

Republic 27.0

18.0

40

Ivory Coast

23.0

50

Africa Average

toe Average

19.6

36.7

28.5

52.2

25.8

22.9

37.4

70.3

61.2

44.9

Source: Inder K Sud 1984 .


12/47

- 8 -

o cc ur re nc e o f broken o r otherwise inacces s ible

s e r v i c e .

S imilarly ,

household

connections do not guarantee

s ervice

o r

water q u a l i t y

s ince

i n s u f f i c i e n t water p ressu re, water

s hortages ,

system

leakages

through

i l legal

tap s,

and

d e t e r i o r a t i n g

i n f r a s t r u c t u r e

s everely a f f e c t the

operation

of the system fo r

an y individual household; and such breakdowns are

frequent

in

most

t o e s .

Public water

supply

is reasonably

eff ic ient in p arts

of

A frica.

Most

notably,

Botswana s

p a r a s t a t a l

Water Util i t ies

Corporation

i s

in

a

league with the b est water a u t h o r i t i e s in the

d ev el op in g w or ld , including those

in

Tunisia and

Singapore. This

c o rp o ra ti o n o p er at es with

minimal

pol i t ica l in terv en tio n .

I t

has

eff ic ient

decentralized management and

t a r i f f s t h a t

are

adjusted

as necessary

to maintain

ful l cos t

recovery Hewitt, 1985:

Raphaeli e t a l 1984)

In some c ou n tr ie s, c e n tr al government

p o l i c i e s

have led

l a r g e - s c a l e h irin g s of

workers

without

appropriate

ski l ls

s ee,

fo r example, USAID/Cairo, 1 9 8 5 ) . Without a strong train in g

program, t h i s approach r i s k s creating a s ta f f

t h a t

cannot

e f f e c t i v e l y operate

o r maintain

the

system. Indeed, s ta f f

q u a l i t y in pUblic

water

supply and

s an it at io n a u th o ri ti es

is a

m aj or c on ce rn of both tocs and the donor community Gonima 1 9 8 5 ;

USAIO/Cairo

1 98 5; R os en zw ei g,

Hewitt, 1985).

Problems

als o

a r i s e

when

the c e n t r a l government

must approve

f u r t h e r t a r i f f

in creases.

Although government

policy is

on e

of

ful l cos t

recovery in A frican

countries

l i k e Somalia and Zambia,

pol i t ica l

pressure

r a t h e r

than

fin an cial

needs

have

determined

government

action

in the p ast Hewitt,

1 9 8 5 ) .

Because

raisin g

the c o s t of

water

ca n be pol i t ica l ly damaging, governments

have

instead shifted the burden to taxpayers by subsidizing the water

supply

system.

Moreover, although

id en tify in g and

sanctioning

nonpayers is cr i t ica l

to

co st recovery o b j e c t i v e s , the

tran sg resso rs often

are government

m i n i s t r i e s which cannot

be

penalized.

Thus, water a u t h o r i t i e s

are impeded from both

s e t t i n g

rea l i s t ic

charges

and

c o l l e c t i n g

those t h a t are

imposed.

S an itatio n coverage in tocs lags well

behind w ater s up ply

coverage. Piped

wastewater

is

not

a

read ily affordable

s e r v i c e . Although the h ealth

hazards as s ociated with

accumulated

s tagnant water,

used

water

runoff,

and

fecal

accumulation

may

jus t i fy government-subsidized activi.ty, i n t e r e s t

in

inve sting

in

t h i s serv ice is minimal. P ri va te s ec to r

involvement

in

s a n i t a t i o n

n LOCs is

concentrated

in o n - s i t e methods such as p it

la t r ines

s ~ ~ t i c tanks , and c e sspools.

Developed Countries. The developed co u n tries are g en erally

dominated by publicly owned and operated

water

and s a n i t a t i o n

fac i l i t i es In the U .S., although

percent of community water

fac i l i t i es

are

i nv es to r- ow n ed , t he y

repres ent only about a


13/47

- 9 -

quarter

o f

t o t a l water supplied. All water a u t h o r i t i e s in

the

u.s. are

regulated

t but thef usua.lly managed a l ~ d operated by

a

private

f i ~ ~

In

the

wastewater

s e c t o r ,

some

municipal

water

authorit ies do an undocumented but modest amount o f c on tr ac ti ng

with private firms Bendick and Hatry, 1982: Hanke

1984).

In c o n t r a s t , private firms are

responsible for about

percent

of a ll water

consumed in France.

Historically,

French

municipalities hired firms to

construct, manage and operate

water

supply

systems under

long-term

contr acts

o r

b u i l t the

system t h e m s ~ l v e s and contracted out the operations and

maintenance.

The la t ter method is being used

increasingly

due to

the av ailab ili ty of

co ncession ary f in ancing

for municipal

capital

investment. The p ri va te s ec to r also

provides

sewerage

services

and water treatment

under

contract to munjcipalities.

Services typically

contracted

out

under

medium- o r long-term

contracts in

the

developed

world

include ~ e k

detection,

operation of a

water

treatment plant, meter reading,

customer

b i l l i n g ,

or data processing

Bendick and Hatry, 1982).

A

r e ~ n t

study in the u.s. noted two reasons of relevance to

LO s for involving the p ri va te s ec to r: public sector d i f f i c u l t y

in keeping

operating

costs down

for complex

faci l i t ies

and

shortages

of

qualified operators

and m an ag er s

given r e s t r i c t i ve

municipal salary

levels

Lorenz,

1982). Private

firms

ca n

a t t r a c t and r eta in s kil le d personnel b e t t e r , and

competition

among firms for government contracts

keeps costs

down. The

greater

complexity

of technologies in the

o.s.

may

i nc re as e th es e

diff icul t ies but the

sparse

evidence

available in

the LD s

suggests similar improvements with the involvement of private

firms. .

P u b li c -P r iv a te P a rt n er s hi p s Water Supply n

S anitation: Approaches fro Africa and Other LDCs.

P u bl ic - pr iv a te p a rt n er s hi p

governed by the pUblic s e c t o r s

the p u bl ic ly c o nt ro ll ed system.

activ ity , however, is not bound

g re at e xte nt ,

and private

water

Loes.

in

the

formal

sector is largely

p o l i c i e s , and the

efficiency

of

Informal p ri va te s ec to r

b y g ov er nm en t policies to any

vendors operate

i l l e ga l l y in many

Numerous

legal

arrangements have

demonstrated

the advantages

of public-private partnerships

in

th e p ro vis io n

of

water

supplies, and the best example is in

Africa.

The most private of

Loe

water a u t h o r i t i e s

is

t h a t

of the

Ivory Coast

where SOOE I

Societe de distribution d eau de la Cote d I v o i r e ) , a private

corporation

based on the French

model, operates

and maintains


14/47

I

- 10 -

Abidjan s

water

supply.

Just

over half

of

SODECI stock is

controlled

by a

combination of the government (3.25 )

and

Ivorian

nationals

(47.6i) .

SOOECI pipes

water

to

91,000 purchasers directly and

supplies far

more

through sales a t 4 public fountains.

The

founta in s include coin-operated

pumps

that SOOECI monitors

to

prevent vandalism

and

ensu re p rope r

and

timely maintenance.

Although impressive,

this sys ;em has not

kept

pace

with Abidjan s

rapid growth to 2 mil li on inhab it an ts (Dei,

1985) . In

response,

private

water vendors have proliferated.

They

obtain water at

public

fountains, from private

connections to the

SOOECI

syste.n,

or from i l legal

taps

into

the system

that

circumvent payment,

then se l l i t a t very high

profi t s .

In re sponse,

SODECI

plans

to

ins ta l l additional

foun tains to

capture

more

of

this

profi table

segment

of

the

water market.

The

competition

among

water

vendors

is leading

to

service

improvements and a higher quality

of

service that

would

not have occurred with

a

government monopoly.

The characterist ics of

the Ivory Coast s water

an d

sanitation system differ sharply from the

rest

of Africa

an d

most

of

the developing

world. Although

l ike almost every other

system, the

entire population is

not

covered, SODECI operates

at

a prof i t

(including

capital

costs)

and

has

impeccable operations

and maintenance records, minimal

water

loss , and ful l

cost

recovery (Dei 1985; Golladay, 1983;

Bendick

and

Hatry,

1982). As

a regulated monopoly,

SODECI

is able t o ~ r o v i a re l iable

high

quality

water

and sanitat ion

system.

Another successful

public-private water

system

is developing

in

Kenya.

There,

private

marketing of water

a t government kiosks

is

ensuring

continued operation and

maintenance. This

system

has

effect ively

met

the needs

of

low income

households. I t provides

subsidized water,

while

at the same time creating incentives

for

continued

pump operation.

In

most c i t ies in the developing world, water vendors

f i l l a

.gap in supplementing

the government s urban service,

whether

or

not

they are endorsed

by

the

government. Where

urban dwellers

have

no access to publicly

provided

water supplies

le t alone

safe suppl ie s) , p ri va te

purveyors

of water

using

trucks or

smaller

receptacles

haul water

for distr ibution

a t

ei ther central

locations

or to

individual

dwellings.

These

act ivi t ies

have

been

documented

in

Africa

in

Benin, Senegal, Somalia,

Kenya Nigeria,

Ivory Coast ,

and

Niger (Dei, 1985: Hewitt, 1985: Roth, 1985:

Winter,

1983).

The cost of trucked

water is

much

higher than

that of

piped water. Table 2 shows

the

cost of vended water for

the

African

countries for which there are

data. In

the Kenya and

Senegal samples , 9

percent

rel ied

on

water vendors for

thei r

water supplies,

and

in

Kenya

households spent over

percent

of

their cash

income on

water. Purchasing water

from

private


15/47

~ l L

2

aJIISUMDS PURCH SING nOlI V TBI 9BIIDOas*

Volu.e

Total

voluae

Percent

purchased f r

Average

consu.ed

dally

households vendor dall

Study

household pe r capita

served

by

per capita

Malle

population

size Sources

1

vendors

1

Dlourbel. Senegal

100 10

Open weil ,

piped 2

90 1

s t ea

vending

All

Katan.

refugee

16.000

5 River. piped 4

10 1

caap) SowaU.

syste

vending

Handera. Kenya

11.000

6

River. Irrigation

1

90

1

canal.

rainwater

collection.

piped

.yatea.

vending

Ganklda. NigerIa 10.000 16 River. open well. n a

15

n.a.

rainwater collection.

vending

Ibl .

Nigeria

5.000

6

Protected

vei l . open

8

40

5

well.

rainwater

collection.

vending

lIoundlaU.

15.000

10 Open well.

rainwater

50 6

Ivory Coast

collection.

piped

syste vending

Culdan RouondJI. 3,500 9

Open well,

r iver,

9

40

8

Kiger

rainwater collection,

vend

In s

Data were

collected

through questionnaire distribution to

Peace Corps

and

voluntary organizations

In

.*

Not available.

Source:

Zaroff

and Okun. 1984.


16/47

v en do rs , a lt ho ug h c o s t l y ,

is

unavoidable where n atu ral

or

public

a l t e r n a t i v e s do

not

exist

In addition

to

the w at er v en do rs , o t h e r means

of

working

with the p riv ate s ec to r have

been attempted.

Table 3

summarizes

the

kinds of

e x pe rimen ts u n de rtak en

in

Africa

and

elsewhere in

t he d ev elo pi ng w orl d,

and shows

the

role

of

public

a u t h o r i t i e s

and the

cos ts

to

customers

of

each

d eliv ery method. ew of these

experiments

have

been evaluated to

any g re at e xte nt,

although in

every c ase where p riv ate firms have been brought in to e i t h e r

supplement public water provision o r undertake some aspect of

management and operation, efficien cy has increased,

bringing

more

output

for less money Experiments in Bolivia Roth, 1985), the

Domiaicon Republic Roth, 1985), and India Golladay, 1983 l l

showed

sharp

improvements

in

the

q u ality

of

water

s e r v i c e .

I n t e r e s t i n g l y ,

p ri va te s ec to r

involvement in Chile and the

Dominican Republic has improved q u ality and speed of s ervice

exclus ively

since

p rices

are fixed Roth,

1985).

Options

f o r P u bl ic -P r iv at e

P artners hip

Some

of the most

promising e f f o r t s to

provide

more water for

low income households are Kenya s water

kiosks

and the Ivory

Coas t s coin-operated water standposts,

both

of which are

p r i v a t e l y operated

and

maintained. Another promising model, used

in Chile

and

the

Dominican Republic, is to

co n tract out water

delivery

fo r

portions

of a

c i t y s ized so

t h a t they ca n be

handled

e a s i l y by more

than

one competing p riv ate firm.

This

system

is

p a r t i c u l a r l y a pp lic ab le in those African

countries

where the

government ha s accepted that

i t

cannot

cover the

rapidly growing

urban

popula tion.

C on tr ac tin g o ut fo r

s p e c i f i c ct ivi t ies t h a t

are most dif f icul t

for

public

ent i t ies

to

accomplish,

such as

m et er read in g

and b i l l i n g and

c ol le ct io n s a ls o

is

worth

considering. Where such experiments have been

undertaken,

they

have

improved

ope r a tions

and

produced

solvent systems. The

e f f e c t of

g r e a t e r relian ce on p riv ate

firms

on coverage fo r lower

income individuals

is

unclear; however,

th e p oo rest

households

now generally are buying water from

the

informal s e c t o r

t

a

higher c ost than b e t t e r o ff families pa y fo r public water,

so

there is l i t t l e

to be

lost

by e xp er im en ti ng i n

t h i s

area.

Constraints to P riv a te Sector

A ctivity

The only

acceptable

form

of

p riv ate

water

marketing t h a t is

possible

without

specific

government

concurrence

i s

trucked

water. ny

other form requires

r i g h t s of

way and

o th er approvals

from

government

agencies sinc e

i t

e n t a i l s building

or

tapping a

pipe network. Thus, the p riv ate

secto r

has few options without

public endorsement.


17/47

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18/47

Fona

o f Water PrOllision Couttries

. INJlB

] iQJnt inued)

Olvernnent 8 Ible

LaDje-scale truckiBJ of

water.

Private veR:brs mtain

water fran private

sources,

plrify

an d

package

th

water

fo r sale.

(lbth,

1985;

Winter,

1981)

Water o.JOPeratives

tolhere th e

cooperative

usually builds

am

always owns the

pipe network

am

i s

respJrlSible fo r

OlVering cap i ta l operat ions,

am maintenance mstswi t tnu t

any

smsidy.

(lbth,

1985)

Water vendors at a metered

standpipe (kiosks) sel ls water

by

oontainers.

Hater

i s

sold

to a licensed verd>r

at

a

smsidized

rate. (lbth,

1985)

Cbin operated llleters at water

standposts.

StJI:plied am

maintained

by SX:S:I

SWoontract to a pdvate


19/47

Government

oversight

also can pose d i f f i c u l t i e s i f p o l i t i c l

ends

are to be met.

S h i f t s

in government

leaders

can m odify the

r o le and scope of pri va t e a c t i v i t y in

the

s e c t o r . Where

permanent inf r astr uctur e is put in p lace th er e is always a r isk

t h a t

government w i l l n at io na li ze o r otherwise jeopardize thp

investment. Similar ly

a pri va t e water

suppl i e r must

be

f r ee to

s e t

economically sound ra t e s and take

action

ag ain st l l

who

f i l

to

pa y

promptly.

rom

the

p r iv ate

s e c t o r s

viewpoint the

primary

drawback to involvement

in

w at er sup ply

provision

i s the

unpre di c t a bi l i t y of government policy and a c t i ons.

Summary

The mater ial reviewed here

t he e xp er ie nc e

of Oe

water

systems in general

suppor t s

sev er al conclusions:

~ l t e r vending i s Ol mlOn in developing

c ount ri e s which suggests t h a t charging

fo r

water

i s

not

a lie n o r c u l t u r a l l y

unacceptable.

emand

for

wastewater

ser v ices

i s

law

and i t i s

doubtful t h a t

households

are

willin g

to pa y fo r these

s e r v i c e s .

Surcharges ca n be imposed on

water usage to cover these c o s t s .

Incent i ves

are

c r i t i c l to

sound

management

of w t ~ supply

and

s a n i t a t i o n

s e r v i c e s . They

are typically

p a rt a f

the

str uctur e of p r iv ate firms but

are

ra re

in p u b licly ru n

systems.

The

pri va t e

s e c t o r s

role

in the

provision of water supply and sanitation

can

be

extensive

and

ca n

include:

undertaking

co n str u ctio n

management

administration

o r operat i ons

and maintenance o r components of an y of

t hes e. Oversight

of

pri va t e a c t i v i t y and

qua l i t y

control

of operations by public


is

e s s e n t i a l

to maintain

competition and ensure proper and f i r

operation.

Such

arrangements ca n

be

undertaken through

long-term

co ntra cts o r

l e a se s.

Public

e f f o r t s to sup ply w ate r can be

supplemented

by a

government-regulated

p a r a l l e l

system to

increase

the amount

of

water av ailab le and

to

introduce an

element

of competition in to t h i s

system.

Normally these

systems

involve


20/47

I

trucked water

but

private sales

outlets

with pipe

infrastructure should

be

encouraged

where

feasible

since they

are

eff ic ient easily

monitored

means

of

increasing the supply of water.

Even where

the pu blic

sector

decides to

control

and

operate

the

wate r sup ply

and

sanitation

system some

partnership with

the

p riv ate s ec to r is

possible

through

contracting

out

specific tasks such as

bil l ing

metering

maintenance of various

components or tracking

water

losses.

Water

supply is

an

ideal activity for

a

pUblic private

partnership.

Both

ent i t ies

have

comparative advantages that are

best applied in conjunction with the other.

PU LIC

TR NSIT

Privately operated

public t r nsi t systems

exis t

in

virtually

every ccuntry

whether

legal or

not.

Where

the

public

sector

has

decided to

become the

sole

source

of ~ u l i

t ransport

within

c i t ies private companies

frequently are

prohibited and

the

government buys up

existing operators. Because public t r ns i t

service

and

routing rarely

have matched demand an informal

private

sector

generally has established an

alternative

service

and

captured

a

signif icant part of the marke t.

This suggests

that

the private

sector

can

play an

important

par tner sh ip role

with

government.

This section discusses

the

quali ty and breadth

of private

public

and

public private t r ns i t operations in

African

c i t ies and concludes that the p riv ate s ec to r

is

a

cr i t ic l component

of

t ransport in

ci t ies

even where

government

has

established

a

public

monopoly.

Background

Developing Countries. since

the shif t

toward

government

dominance in urban public t ransport was well underway in the

developed countries

in the 1940s and 1950s when t r ns i t was

put

in

place

in much of

Africa

most countries elected

to

establ ish

publicly

operated systems. With few exceptions over

the course

of the next few decades the private sector

ei ther

legally or

i l leg l ly established

i t s

own

parallel system

to compensate for

the flaws

and

drawbacks

of

the pUblic system. These

complementary

efforts

provide

much

needed

services to

areas of

African

ci t ies

that

are

not

served

or are poorly

served by

public

s ec to r s er vi ce s.

Simultaneously

the

public

bus

networks

have

relied

increasingly

on central government subsidies.

In

every

Afr ican count ry government

is

involved

in

urban

t r ns i t

either


21/47

14

as direct provider

or as regulator

and overseer of

private

act iv i ty .

Developed Countries. In the

early

part of this century

urban

t ransi t

in most ci t ies of

the

developed world was

placed

in

the

hands

of private

bus and

s treetcar companies under

monopoly

franchises.

The j i tney

services operated

by

private

individuals

in

small

vehicles

commonly

found

in

developing

countries were prevented from

competing

along

fixed routes

with

the

franchised companies. s

the

growth in

private automobile

use af ter World War II

eroded

the

prof i tabi l i ty

of

the

private

t ransi t monopolies they were gradually

brought under

public

ownership and

operation. Public policies

aimed

a t

maintaining

extensive service coverage

and keeping

fares

down

led to

steady

growth

in

public

subsidy requirements to the point. where

revenues

now

typical ly cover less

than

half of

the

capital

and

operating

costs

of urban t rans i t

Research studies on these pUblic t ransi t systems have

concluded

that public ownership and operation

have

not

brought

the

scale

economies

and management

e ff ic ienci es t ha t

were

originally expected.

o

the contrary t ransi t costs have

increased

steadily in real terms

productivity

has declined and

services

have

failed to

respond to shif ts in demand away from

t rad it ional r ad ia l routes. Numerous demonstration

projects

have

shown

that returning t ransi t

services

to

the p ri va te s ec to r could

reduce

costs

and produce more

responsive

services. This

will

not

occur however i f

the

entire system is con tra ct ed out

to

a

single l arg e provider

where no

other

provider

is large

enough to

compete

fo r c on tra ct

renewal or i f

pieces

of the

system

are

contracted

out using

a

15- or 20-year contract

term.

Major in i t ia t ives are underway in the United States and

Great

Britain

to

replace

the

cur ren t r el iance

on

the

public

sector

for

urban t ransi t with creat ive public-pr iva te

partnerships that

include

competition

for

and

along routes.

These

effor ts often have

been

vigorously

opposed by public

employee unions trying to protect jobs wage levels and

benefi ts .

Characterist ics

and Problems of Public r n ~ i t

Almost

everywhere in

the

world

that

government owns and

operates

the t ransi t system def ic i t s

inefficiency and

poor

service quality are

the

norm The

almost

universal practice of

government

fare

set t ing

has c ~ e t e d

high def ic i ts ar t i f ic ia l ly

low prices limited

operating

revenues and l imited

supplies

which

together guarantee rising government subsidies.

Private

systems obviously

do not

operate with subsidies

and

cannot

rely

on government bail-outs i f they fa i l to meet their


22/47

-

15

-

costs . Furthermore,

since

the

capital costs of entry

are

small,

private

t rans i t

must meet the

needs of

consumers or

competitors

easily can replace them. Indeed, where government controls

the

price of private t ransi t as

is true in

Liberia,

Zimbabwe, and

the

Ivory

Coast, the private companies

compete

with the public

system on

the

basis

of

quality, speed, and

convenience. Despite

crit icism

of

the

informal

sector regarding thei r high accident

rates ,

questionable

operating pract ices,

and

unsafe

vehicles,

private

providers

f lourish.

This

pat tern,

for example,

is

evident

for

the Matatus in

Kenya,

the

Gbakas

in the Ivory Coast,

and

the

Bakassi in Sudan--the j i tneys operating in the respective

capi ta ls .

The

relat ive efficiency of

public and

private

t rans i t

operations

has

been exam1ned

in

a number

of countries.

The

factors used in the comparison include

labor

productivity,

cost

of

service, revenue generation,

and

to ta l

veh ic le mi le s.

Applica tion of these cr i te r ia to the public

and

private

bus

systems in

Abidjan,

Puerto Rico, Bangkok, Buenos

Aires,

Cairo,

and Calcu tt a revea l clear advantages for

private

systems Roth,

1985; Hanke,

1985).

The

quality

of public transport in Africa rarely has been

evaluated,

although

where i t has,

i t

is characterized by long

waits and overcrowded vehicles Sudan), and inappropriate bus

size

Zimbabwe . n

i ndep th as sessmen t o f

pUblic and

private

t ransi t systems

in

Kuala Lumpur, Malaysia by

Walters

1979)

~

measured the quali ty

of public

t ransi t

and found the

benefi ts of

public t ransi t were limited severely by long waits for bus

service.

The

heavily

subsidized

public

t rans i t systems

often

only

cover

major routes of the

ci ty ,

partly

due to

the

generally

large size of the

buses.

This

means

that

the

subsidized

services

are

more

l ikely

to serve middle income

residents

than

the

poor

w o

l ive in

harder-to-reach areas where

smaller

vehicles

are

moremanageable.

Hence, the needs of

the

lower income

residents

generally

are

met through private entrepreneurs and companies

operating at

unsubsidized prices comparable

to

or above

rates

charged

by

public providers.

Overall macroeconomic diff icul t ies have

added

to the

problems

of

public t rans i t operations. Spare

par ts ,

an essential

o m p o n ~ t of an operating

t ransi t

system,

are

hard to come by

where

foreign

exchange is

in short supply. Local production of

such items is

di f f icu l t

i f

not impossible.

Private

companies

often

manage

to obtain needed parts

through

the black market. In

Sudan,

for example, over half of the public bus

f leet is dormant

waiting for parts , but

the

parts shortage has made l i t t l e dent

in

th e supply

of

private vehicles.

The

poor maintenance

of

informal sector

vehicles where government does not in sp ect c ars

or buses, however,

has

con tr ibuted to acc id en ts and breakdowns

which impede

t ra f f ic Complaints of this

sort

in

Kenya and

the


23/47

: -

Sudan have produced a

negative

image

of the

informal

providers

but

have

not affected

t h e i r ut i l iza t ion

Long-term

planning to

accommodate urban

growth has

lagged

in

pUblic systems,

and

meeting current

demand has remained a

problem. Bus

capacity is

e i t h e r

too gre a t , so the

buses

ca n

serve

only

main

roadways, o r too small

so

t h a t

most

t r ips

are

less

e f f i c i e n t

than

they

could

be.

Routes

al s o

do

no t

always

meet the

needs of

the population although

Zimbabwe

for one,

has

attempted to design routes according to

residence and employment

p a t t e r n s ) : and s ervi ce i s in c hr oni c a l l y

sh o r t

supply, which

f u r th er

reduces the effect i venes s

of public

bu s

systems.

The

emergence

of inform al

t rans i t networks

at tests

to the inadequacy

of the Q ubl ic s ys te m,

and ha s

f i l led

an

important

gap.

P u b l ic - P r iv a t e P a r tn e r sh i p s in T ra n s it in

Africa

The

public t ransi t

arrangements in

a

number of A frican

count ri es are d etailed

in

Table 4. s

these

des cri pt i ons

in d icate,

the

range

of

publ i c,

pri va t e ,

and

publ i c-pri vat e

systems

i s

quite l a r g e . Arrangements include regulated p r iv ate

providers

Li beri a),

p r iv ate

franchises

o r

operating

agreements

with the government Zimbabwe Kenya

Ivory

C oa st ) ,

p a r a s t a t a l

operations Malawi, Zambia

Senegal),

pUblicly controlled and

p r iv ately operated sy st em s S ud an),

and purely

p r iv ate systems

where

w

were unable to l earn of

the

government s

role

Mauritius, Botswana, Somalia).

A c l e a r p atter n from the African

experiments

emerges

here:

only p r iv ate

t ransi t

systems are solvent: p r iv ate companies are

co n sisten tly effic ient: an d p r iv ate

providers

ta i lor the i r

operation

to the

needs of

t he p op ul at io n much more

than the

public

secto r

does. Competition from pri vat e entrepreneurs ha s

met

w it h l obb yi ng

from

p u ~ c

t rans i t


to

ba n

these

i nt e rl ope rs. However lack of adequate

tr an sp o r tatio n

s ervi ces

often has forced governments to allow

the

ope r a t i on of some

informal t ransi t

Kenya and Sudan have capped

the

number

of

l i cens es issued in

an

attempt to c ont r ol the growth of the

informal s ect or without e l i m i na t i ng i t

The best-documented

p r iv ate

s ect or e f f o r t

is

in

Li beri a.

This effor t provides

a c l a s s i c

example

of a

regul at ed,

competitive pri vat e t rans i t network

with minimal

government

i nt erference

and minimal publ i c competition.

I t

is

reportedly

highly

eff ic ient

and profi t a bl e even though i ts

r a t e s

are

se t

by

the

government.

There are cases too of t rans i t syst, t h a t have moved from

a

competitive pri vat e

a c t i v i t y to subsidized

s i ngl e-provi der

ac t ivi ty

e i t h e r

public o r p r i v a t e . Fo r example, in the Ivory

Coast, Abidjan

was ori gi na l l y

served

by a conglomeration of


24/47

1NUB 4

bIIp rimns of

tkban

Transit

SyBtenIs in St.b-5aharan Africa

Botswana

Ivory Coast

Kenya

Liberia

structure of

rban

Transit System

Bus, mini-bus,

taxis

are priva tely

owned.

Informal car

shar

in ] is

\ Ullla ll

somA,

Abidjan s bus

system, with

majority

goyernment ownersh ip

as

of

1974.

I l legal

CXIlmOIl

carriers


25/47

Malawi

Mauritius

Senegal (Berg, 1981J

Marceau, 1985

SaMlia

Sooan ( lbth ,

1985)

Structure

of

Urt>an Transit System

us

serv

ices

are

owned

and operated by

the

thited Transport Ltd.

Ul14 in wich the

CjOVernnent is a

shareholder.

SnaIl

private

minibuses

canpete with

IJIM

Bus

service

pew ided

by

several privately owned

cxmpanies. tb infotmal

system ex I s t s .

Perfatmance XJfJtract

between

the

CjOVerrment

m

th e

transportation

paras ta ta l . GJyernnent

fixes i t s remurce

a>ntr but Ion. }: vern-

ment

has reduced

the

fleet of the

coopera

t ive, Car Rapides of

Dikar,

a

privately

owned

m operated

systan.

All

transit

systems are

pdvately owned.

Nlilcly-owned

bus

ccmpany,

Capital

Tcanspol:t

bnpany,

suffers ftaft

chronic

spare parts shortages

(less than hal f th e 140

bus fleet

i s

in

operation a t any

one

t ime).

Licensed

Bakassi, informal

but

legal

carriers w o cause

t raff ic

disruptions

but

are a cri t ical element

of harroun's t nns i t

network.

'IMIB

4 t inued)

Slilsidy Status/

()Ja1 ity

af

5ervices

t t

available.

Solvent and

very

efficient

t t

available.

l b l e , reportedly

efficient

system.

HeavUy

Slt>si-lized

buses Cro\ded

con:Utions

am

1 1 J]

waits reduces

Jjal

ity

of

service.

Bakassi suffer

ftaft

p::lOr maintenance,

questionable

driv i J

practices and high

accident

rate.

Ridership

t t

available.

100' of pml1c

transport.

t t

available.

100'

of public

transport.

t t

available.


26/47

Structure

of

Urban

Transit

System

l be

Ulited Bus Canpany

Ltd., a 100\

Slbsidiary

of the

parastatal ZIH O

daninates pml i e

transport. Pr ivate

min i -buses l icensed and

regulated by the

governnent supplement

the publ ic sector

service.

Ihe

Harare Ulited

ann

ihus canpany

(uu:x:)

prov

ides

bus

service

thrOll]h

a 21-year

franchise

with the City

of

Harare.

Many of th e

franchioo agreements are

not adhered to and few

stipulations

regarding

qual

i ty are iOO

ieated in

the

agreement. '1be

infoa:mal sector includes

metered t x is shared

r ides ,

aRJ pt'ivate

ta x i s arrl canpetes on

the basis

o f speed and

oonvenience

l be

Urban Inst i tute .

' Mil:

(Q]ntinued}

SUlsidy Status/

( ) Ja1 ityof se rv ice

Publ

ic bus ccmpany is

heavily smsidized.

Quality

of

pt'ivate

vehicle se rv ice

appears

to

be quite

good.

5erv ic e was prof i table

an:) ccmpany financed

i ts

own

expansion

lUltil

DZ

dec ded

to have

the

Cabinet

awrove f ar e

adjustments.

lbe system

operates

with 3.3

employees per bus ,

poss ib ly the lowest in

Africa.

Ridership

tb t available.

moc

prov ides

41' of

all

t r ips.

Infoa:m

100

o

public

swsidi

Fares a

related

distanc

10B]er


27/47

private entrepreneurs. In

1960 a French

firm

was

awarded

a

IS-year c on trac t to

provide urban

tran spo rt serv ice s fo r the

ci ty .

The

resulting regulated monopoly, S TR (Societe

des

Transports ~ ~ i d j a n a i s has rel ied on

an

assortment of vehicle

sizes

and developed a

wide

network

of

routes. Despite SOTRA s

eff iciency

and technical monopoly, the Gbakas, 100 kg trucks

operated by

the informal sector, are

a growing service that

currently

carr ies

about

half

of

a l l

rush

hour

passengers

in

populous outlying neighborhoods l ike

Yopougon and Abobo The

Gbakas are more f lexible,

have

longer operat ing

hours,

and

penetrate more

deeply

into the lower income neighborhoods where

road conditions a re

poor.

They

effect ively complement

SOTRA s

service

(Dei, 1985).

In 1974, i t s l as t profi table

year, S TR convinced

the

lJoverrunent

to

ban

the

Gbakas because

of unfair competition.

Since then, t ransi t

subsidies

have

grown continuously

as

has

the

operation

of the now

i l legal Gbakas (Roth,

1985). In the future,

government may

consider

legalizing

and

regulating the

Gbakas

rather than

renewing SOTRA s contract.

A monopoly

similar to S TR

was

created in Senegal where the

parastatal franchise succeeded

in convincing

the government

to

outlaw the private cooperative, Car Rapides

of

Dakar. The

only

difference in Dakar is

that

the

government

sets i t s subsidy level

to

the

parastatal

in advance of

actual service

delivery,

which

promotes greater

levels of

efficiency

and

service.

Senegal s

experience

has

produced

s evera l u sefu l le ss on s. irs t effect ive

use

of

enterprise contracts requires

strong support at

the

highest levels

of

government: i nd iv idual min is te rs

and

senior civi l

servants

fear losing control

over

public

enterprises ,

inclUding

the

power to make fa i r ly routine

decisions.

Second,

company

contracts are

enthusiast ical ly endorsed

by company

managers, who

see

them

as

a means

of

obtaining: (1)

clear objectives

on

which

their

performance

can

be

judged; (2)

a

precise

defini t ion

of the role of

subsidies and

ta r i f f increases in

company

operations; and (3) a reduction

in the

diversi ty

of

company

objectives . Third,

the negotiation of company

contracts

should

be

supervised

by

neutral

government

staff

who

report

to

the

central

pol i t ical

authority_ Thus,

confl icts between companies and

government

authori t ies

can be

resolved

by

the

Pre siden t o r the

Prime

Minister .


28/47

M or eo ve r, o nc e

a company contract

is

negotiated these n eu tr al s taff

must

supervise i t s implementation and expose

f a i l u r e s

by

any of the p a r t i e s to fu l f i l l

t h e i r obligations under

the

c ont ra c t .

The e n te rp ri se c o nt ra ct allows

pol i t ical

choices

to

be made

in

ful l

awareness

of

t h e i r

c ost s:

excessive

emploYment or selling output below

costs

wi l l

be

le ss lik ely to p e r s i s t i f they

are discussed in

a forum

of

sen io r

gbvernment

off ic ia ls and management and

i f they

are s ubj ect

to co d if icatio n in a

co n tr actu al

re l a t i onshi p

T}e World Bank

1 9 8 1 .

In Zambia

the

government l icen ses

oversees pri va t e

minibus

s ervi ce t ha t functions

along

with the tr an sp o r tatio n

p a r a s t a t a l ,

the

United

Bus Company Ltd .. The p a r a l l e l

system

appears

to

have

provided

Quality

se rvi c e ,

although

the

public

company is heavily sUbsidized. Nonetheless the regulation

of

a

complementary

p ri va te s ec to r improves

o v er all t ransi t

qua l i t y

and

q u an tity . This model

needs to

be more

thoroughly

documented but

appears to

have promising

elements.

Informal

and

s m al le r o p er at or s appear to b e t t e r serve

low

income areas where people are

c l e a rl y

willin g and able to

pa y

for

t ra nsport a t i on. Moreover, given road condi t i ons , the smaller

p r iv ate

companies are

b e t t e r equipped

to

accommodate spe c i a l

r o u tes. Allowing these p r iv ate operators

gre a t e r

scope could

reduce def ici t s improve t ransi t

se rvi c e s,

ensure b e t t e r

tr an sp o r tatio n

access to

the

poor,

and

lower the

co st

of

t ransi t

since i l l e g a l black market s ervi ces are

provided

a t

a premium.

Ef f ectiv ely , what a

competitive

pUblic-private partnership

encourages

i s a lar g ely user-supported system, which should be

th e l on g-te rm

objective of t ransi t

systems.

Government cannot

afford

to heavily

subsidize t ransi t

i n d e f i n i t e l y ,

nor

ca n ri de rs

be constrained by public bus routes over the

long-term.

Since

competition ha s proven

e s s e n t i a l

to successful t ransi t systems,

e i t h e r

a

f ully p riv ate or competitive public

and

p r iv ate

systems

are

th e most sensible approaches.

C ons t rai nt s

to

Pri va t e Sector Activ ity

Constraints

on

p r iv ate

a c t i v i t y

include

thre e o th er

major

areas

in addition to

the prohibition

of

p ri va te o pe ra to rs .

irst the

ingrained

b e l i e f

t h a t

t ransi t services

are

a r ight to

be provided by government i s a diff icul t c onst ra i nt

to

overcome.

I t is

th e basis for th e B r i t i s h government s


29/47

-

-

t radi t ional dominance

of t r nsi t

This impediment has been

overcome effect ively

in

Sri Lanka where both a strong British

legacy and

soci l i s t

leanings sustained a

losing

public system

fo r years.

The

t r nsi t system

in Colombo was revamped

in

the

late 1970s

to

permit a growing p riva te s ec to r, with firm

government regulation

of safety, insurance,

and vehicle

inspection.

Transit

subsidies

have

fallen

and

service

has

improved (Roth, 1985).

Second,

the

need

to

service

both

profi table

and

unprofitable

routes t radit ionally has

been

used to justify

a subsidized

public

uetwork

to cover areas

that otherwise would

not receive

services. Given the evidence provided here

regarding

the

role

of

high-priced informal

t r nsi t networks in poor areas, i t is not

a t

l l c le ar that such a constraint exists . Moreover, government

regulation

often can ensure that ll areas are served in exchange

for other privileges, or

th at p ro fi ta bl e routes

subsidize the

l es s p ro fi tabl e sections of the

ci ty

Where they cannot, the

best

policy

may

be

to

contract

fo r se rv ice to unprofitable

routes,

thus

fixing

subsidy

levels

up

front.

Third,

regulation of

private

providers is

exceedingly

diff icul t in most developing countries,

although

i t

is

key

to

t r ff ic

flows. Oversight

of equipment

safety, fares, and

orderly

operation is

diff icul t

for

governments

in

developing countries,

as

is enforcement

of t r ff ic laws. Even in the

Philippines

where

pr ivate

jeepneys provide

public transportation under

government

regulation,

the system was

not

working

effectively because

the

government s authority was limited in pract ice. Under a

system

pioneered in Olongapo

City,

a city of 220,000, route associations

for part icular

areas

have assumed much of the responsibii i ty

for

monitoring

carr ier

e l ig ib i l i ty

(based

on posse ss ion of a drivers

l icense, a sa fe v eh ic le , and

required

insurance), preventing

entry

of

uncertified vehicles,

enforcing

t r f f ic

laws

governing

t r nsi t vehicles,

and preventing

fare gouging

Pak Poy and

Kneebone

1984) . Matatu associations

also have

proven

effective

t

controlling entr y, route s, stops and fares

in

Kenya although

they have not

been

effective in improving safety

or

insurance

coverage.

Ways to

create incentives for self-regulation

in this

regard, are a

wo

Lewis&Miller 1986 Public-Private Partnership in African Urban Development

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