Water and Sanitation in Africa Experience of A

Water and Sanitation in Africa Experience of A Private Operator Alain Mathys OECD – WATER AND SANITATION IN AFRICA Paris, December 2006

Suez Environment Mission 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 2 I

Suez Environment Profile SERVICE OFFERING In the Water Sector: Ø Studies, master plans, urban development plans, modeling of underwater resources, project management. Ø Engineering, design and construction of water treatment plants Ø Operation and delegated management of services: collection, treatment and distribution of drinking water, network maintenance, collection and treatment of wastewater for municipal and industrial customers, process water, sludge recovery. In the Waste Management Sector: Ø Collection, recovery, treatment and disposal Ø Urban cleaning Ø Decontamination and rehabilitation of industrial sites. Ø Sludge recovery 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 3 I

Private Participation in Water 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 4 I

Some SE International Contracts 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 5 I

Suez Environment and the Water for All Program In developing countries Suez Environment provides water to 35 million people and sanitation services to 30 million, of which 8 million live below the poverty line Water for All is Suez’ program aimed to provide, within the frameworks of its contracts, water and sanitation services to growing urban low income communities These projects were implemented through partnerships involving local communities, NGOs, governments and donors In these partnerships, Suez ensures efficient project development and sustainable operation and maintenance, providing quality water at an affordable price In 2004 our Water for All Program was awarded a “World Business Award for the contribution to the Millennium Development Goals” by ICC and UNDP Over the past twelve years, SUEZ Environment has worked in partnership with local authorities to bring drinking water to nearly 10 million people in the emerging countries, including 8 million people via private connections and 1. 8 million via public standpipes. During that same period 4. 5 million people have been connected to a sanitation networks. 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 6 I

Our Intervention Principles Understand the local reality (urban characteristics, land tenure, availability of resources and services, community concerns, priorities, demand willingnessto-pay, …) Involve local authorities and organization in the planning process Offer level of services and customer management procedures responding to community demand Reduce costs (infrastructure and services) and prices (social tariff, subsidies) Develop alliances with donors and development agencies Create added-value for poor customers Integrate service to low-income areas in the global economy of the contract 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 7 I

Development impact on community's economy Low-Income Markets Development Impact and Expected Profitability ØWater High ØElectricity ØCredit ØHousing ØTelecom Moderate ØTobacco ØAlcohol Low Moderate High Expected profitability of serving low-income segment Source: The Mc. Kinsey Quarterly 2006/4 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 8 I

Suez Environment in South Africa Examples of successful cooperation through well-designed Public-Private Partnerships

Reform of Johannesburg Urban Services IGoli 2002: an institutional, fiscal and financial reform Transform water, sanitation and electricity departments into independent utilities Reforms in the water sector to be supported by an experienced private operator Significant challenges of the water sector Ø 73 informal settlements (550, 000 inhabitants) Ø Planned low-income settlement (850, 000 inhab. i. e. Soweto): full service that is not paid for International tender launched in 2000 by Greater Johannesburg Metropolitan Council Won by Suez Environment. Winning characteristics: Ø Participation of Black Empowerment Enterprises (27% shares) Ø Comprehensive strategy for low-income settlements 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 10 I

The Management Contract Build a Sustainable Water and Sanitation Utility Improve Revenue Management Develop Human Resources Improve Customer Services Improve Operation Efficiency Improve Asset Management 5 -year contract Remuneration based on performance 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 11 I

SE Main Achievements (1) Customer Services Creation of a Customer Care Center Ø + 90% of calls answered in less than 30 seconds Ø 80% of water network repairs and sewers blockages completed within 48 hours Drinking Water Quality Ø 500 monthly water samples (less than 150 previously) Ø Bacteriological compliance higher than 99% Meter reading increased from 50% to 94% 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 12 I

SE Main Achievements (2) Asset Management Inventory and assessment of existing infrastructure Asset Management Software Improvement of asset maintenance trough Ø Internal capacity building Ø Implementation of preventive maintenance program Decrease of UFW from 42% to 35% 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 13 I

Improvement of Financial Situation Reduction of loss: (47 M euros to 9 M euros) Revenue increase: (196 M euros to 287 M euros) 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 14 I

Achievements linked to Sustainable Development Effluent compliance Reduction of Power Consumption 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 15 I

Improvements in Low-Income Areas Operation Gcin'amanzi – Conserve Water (Soweto) 35, 000 properties so far (out of 170'000) benefited of free in-house plumbing repairs, old debt write-off and prepayment meters Subsidized tariff and free 6 m 3/month 70% water resources saving (from av. 60 to 15 m 3/month) 1, 200 people from the community employed 25% total construction value stays within the community 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 16 I

Increased Coverage – Informal Settlements Comprehensive assessment of water and sanitation in informal settlement and service standards 14, 000 VIP latrines built Hundreds of standpipes implemented Community education and training Housing relocation and improvement Program under the responsibility of Housing Dept. did not deliver promises => limited results 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 17 I

The Bo. TT 1994 : 14 million South Africans without access to safe drinking water, mainly in rural areas and former homelands The challenge : Supply sustainable water services to disadvantaged rural communities (25 litres per capita per day within 200 m from home) How ? -> Bo. TT Ø Build (stakeholders, needs, feasibility, design & construction) Ø operate (short term full operational responsibility) Ø Train (Institutional & social, operations & consumers) Ø Transfer (once sustainable) 2004 : 9 m people having access to potable water, Suez Environment having contributed through Bo. TT for 2. 3 M in Eastern Cape and Limpopo Provinces 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 18 I

The Bo. TT: Characteristics Nature of contract : PPP with establishment costs and capex fully funded by Client (DWAF) Final Client : Municipalities Funding : EU + SA Government grants (100%) Duration: 1997 – 2004 Black Economy Empowerment Ø 40 % of equity Ø 40 % of procurement Tender in 4 provinces One-stop shop: Implementation by consortia formed of Ø Consultant engineers Ø Contractors Ø Operators Ø NGOs Ø Emerging companies 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 19 I

The Bo. TT: Reasons for Success Ambitious National Government Policy (DWAF) Grant funding & Donors constant follow-up (EU) Flexible program management & spending capacity of private sector, providing “one-stop” service solutions “Tri-sectoral” cooperation (Private sector; National & Local Government; NGOs) Active involvement Local Government & Communities over full project life cycle Social engineering, communities buy-in and local job creation Presence in consortium of emerging BEE companies, NGOs and consultants 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 20 I

Some Lessons Governance Strong commitments of National and Local Governments Financing Grant funding (for capital expenditures and connections) Tariff reforms (O&M cost recovery, targeted subsidies for the poor) Implementation PPP focused on development impact and creating win-win situations Effective implementation mechanisms (OBA, added-value for local companies/communities Adaptation to local conditions and based on community demand participation è Solutions must be pragmatic and avoid ideological traps 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 21 I

Trust and Partnership Governments • Vision • Legal Stability Water For All ESA, Donors • Funding • Monitoring Communities • Demand, participation • Cost recovery 01/12/2006 I OECD - WATER AND SANITATION IN AFRICA I 22 I Operator • Expertise • Capex management