The failure of the urban water sector PSP experiment in Ghana through a management contract caused the water utility to be reverted back to public management; the reversion was however akin to a hot coal placed in the hands of the public water utility – Ghana Water Company Limited (GWCL), as it is faced with huge possibilities of failing again so long as the fundamental issues of low investment and political interference in urban water supply in the country remain unresolved. This situation coupled with a recent policy announcement to introduce prepaid water to deal with the challenges of the sector, highlights the continues stream of policy solutions that falls short of the problems of the sector. This paper shows such disparities with examples of the AVRL management contract and the recent prepaid meter for water policy responses.

The Core Sector Issue of Urban Water Supply in Ghana

The fundamental problem in the water sector in Ghana relates to wrong measures often planned and implemented to address challenges of limited funding to the sector which is compounded also by weak managerial and administrative control by managers of the utility due to an organizational organogram and relationship which makes it possible for political heads to interfere with administrative duties.

This situation has dragged on for the past thirty years with no end in sight to the detriment of the unserved and the irregularly served sections of the urban population. In the case of the urban water sector reform in Ghana, the most recent mismatched implemented solution was a management contract pushed for by the World Bank, accepted by the Government of Ghana and implemented by Aqua Vitens Rand Limited a subsidiary of Vitens Evides International of the Netherlands. The real and underlying challenges were ignored with this move and a management solution was rather superimposed on the challenges. This intervention failed, in 2011 Aqua Vitens Rand Limited was sent packing out of Ghana following public pressure and results from a technical audit. In 2014 policy makers within the sector appear not to have overcome the fear in dealing with the real problems of the sector and are still beating about the main challenges. Their latest innovative policy intervention to address challenges of the sector is a plan to introduce prepaid meters for urban water supply.

Underneath The Problem

The task of water supply without any differentiation between urban and rural became that of the newly created Ghana Water and Sewage Corporation in 1965. The sector in the 1960s performed well with competitive wages and conditions for staff which attracted highly qualified staff. Come the late 1970s and early 1980s this situation was to change for Ghana and many developing countriesi. The surge in oil prices and decline in prices of exports of most developing countries; particularly in Africa left reverberations whose effects are still felt today. The situation drastically changed the balance of payment situation for countries like Ghana and sharply increased its debts to credit agenciesii. The risk of the inability of the Government of Ghana to honour its debts given the economic crises stared the World Bank in the face. The Bank’s response was the Economic Recovery Programme – a set of austerity prescriptions to rehabilitate and restore the financial ‘solvency’ of the country.

State owned enterprises like the Ghana Water and Sewage Corporation paid the price with the austerity measures that were imposed by the Bank. The measures took the form of a devaluation of the local currency, freezing of public-sector wages for a long period and placement of a cap on tariff incrementsiii.

The combined and cumulative effect of these for years was the strangling of the utility. These observations are important because in other to address the inefficiencies of the public utility, one need to pay attention to the causal links in the problem chain in terms of ‘what caused what’. The currency devaluation increased the money value of expenses and imports e.g. of machine parts compared to what the utility had in its coffersiv. In addition to this, because of the wage freeze there was mass exodus of qualified employees from the public sectorv. Operational inefficiency and survival management became the direct result. A situation that the utility has been struggling with to date.

Urban Water Management Contract – Wrong Policy Response

The policy prescription offered in the early 1990s was to privatise the utility. With this solution framework no attempt was made to appreciate the fact that despite the wider negative economic impact on the utility some earlier attempts at reforms; including secondments of expatriates from other public utilities as well as use of consultants within the public structures were beginning to show some results and that the utility was improving on its finances for operations and even able to support rural consumptionvi. The only thorny issue then was, the utility could not make enough to cover cost of expansion and loan repayments. The World Bank tried to achieve this in Ghana through tariff financing as against expected investments through Government budgets to finance capital costs as pertains in other countries,. The Bank therefore pushed for privatisation or the popular public private partnerships which was a less contentious description.vii Within this framework the bank began pursuing a policy of full cost recovery for water consumption. The current policy tool to enforce this in Ghana is the Automatic Tariff Adjustment.

The determination to push through the privatization objective resulted in the implementation of a management contract in 2006 to 2011. The earlier target of a lease concession was not attained due to domestic opposition to the reforms in addition to how similar reforms had suffered badly elsewhere around the world. Despite the public opposition, the World Bank was still determined not to keep both the provider and producer functions in the state. The result of this determination despite the background to the real causes of the sector’s challenges was the management contract that resulted between the Ghana Water Company Limited and Aqua Vitens Rand Water Limited (AVRL) between 2006 and 2011.

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