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The Process of Cost Recovery for Water in Namibia: Is there a role for the private sector in water supply
• Vaino P Shivute
• Chief Executive Officer
• Namibia Water Corporation
• Namibia
TABLE OF CONTENT
Introduction
Water Scarcity
Water Supply at Independence
Progress in Water Supply Sector
The Case for Cost Recovery
Is there a role for the Private Sector in
Water Supply?
Conclusion
INTRODUCTION
Water is:
Life
An economic good
A human right
A pre-condition for development
At the center of food-water-energy
nexus
Featuring on the top five global risks
WATER WITHIN THE SADC REGION
SADC Region has a number of river basins.
Rainfall from good to poor in member states.
Access to quality water vary within and
between countries.
There is need to increase investments in
water supply infrastructure.
Access to fund such infrastructure not easy.
To increase funding for water infrastructure,
cost recovery must be considered.
WATER SCARCITY
RAINFALL MAP OF NAMIBIA
WATER: HUMAN RIGHT VS COMMODITY
Some argue that water is a human right and
must be provided free of charge.
Govt. and NamWater taken to court by NGO’s
for not providing free water.
Position of Govt. & NamWater is that water is
a commodity to be paid for.
It cost money to supply water.
Govt./NamWater can’t afford free water.
Hence principle to pay for water.
WATER SUPPLY AT INDEPENDENCE
At Independence:
Only 45% of rural areas had access to
clean water.
Water subsidised heavily in both urban and
rural areas.
Govt. decided to roll out water supply
infrastructure to rural areas.
Govt. established the principle of payment
for water supplied.
PROGRESS IN WATER SUPPLY SECTOR
The census of 2011 showed that:
80% of population had access to clean
drinking water.
98% of urban population had access to
clean drinking water.
63% of Rural Population had access to
clean drinking water.
Water quality in Namibia is good.
Maintain principle to pay for water.
NAMWATER DAMS AND WATER
PURIFICATION PLANTS
EXTENT OF NW INFRASTRUCTURE
Boreholes 823
production 574
monitoring 249
Canals 422 km
Dams 19
Pipelines 4 210km (var. diam.)
Treatment plants 17
Reservoirs 377
FULL COST RECOVERY PRINCIPLES IN
NAMIBIA
Total ops. cost, plus taxation, plus asset
replacement reserves, excl. any profit.
Depreciation on dams (govt.) and mining
infrastr. (mines), not included in total cost.
Rural customers get lower tariff.
Cost of rural schemes funded by govt. & not
charged to customers but used to reduce
rural tariffs across board.
Tariffs will not be decreased.
PRINCIPLES OF FULL COST RECOVERY:
APPLICABLE TO LOCAL AUTHORITIES
NamWater sell water to Local Authorities.
Local Authorities (LA’s) sell water to
customers within their area of jurisdiction.
LA’s add a mark-up to cover for their capital
and operational costs.
Some LA’s struggle to collect from
customers.
Most LA’s lose high volumes of water they
buy from NW, increasing risk of failure to pay
their accounts.
JUSTIFICATION OF COST RECOVERY
NW commercialized at establishment but
received minimal infrastructure subsidies.
It cost money to supply water.
Cost recovery extend life of water infrastr.
It instill sense of responsibility in consumers.
Customers value water more if they pay for it.
Assist govt. in paying for water infrastructure.
Help with maintenance of infrastructure.
Experience: free water prone to wastage.
DRAWBACKS OF FULL COST RECOVERY
The poor cannot afford to pay.
NGO’s/CBO’s fight against full cost recovery.
Negative public perception against Utility.
Difficult to collect from rural communities.
High poverty levels against cost recovery.
Discourage new settlements on new land as
initial cost is very high.
Difficult to accommodate new developments
established on incremental basis.
COST OF WATER IN NAMIBIA
Cost of water in Namibia range from US$0.60
to US$1.1 bulk tariff at latest exchange rate of
N$15.2 for US$1.00.
Retail tariff of LA’s higher. Block tariffs, up to
US$4.00 as deterrent for wastage.
Since not all can pay for water, govt. agreed
to provide subsidy to poor Households.
Mechanism to subsidise still to be worked out
but will be targeted at poor households only.
COST OF WATER IN NAMIBIA: SUPPORT
PROVIDED BY GOVERNMENT SO FAR
Free raw water used by NW (In some
jurisdictions raw water is bought).
Most rural water infrastructure funded by
government.
All infrastructure of NW “donated” to new
company by government in return for equity.
Bulk tariffs subsidised across regions to
reduce tariffs in high cost areas.
Private sector may change all the above.
IS THERE ROLE FOR PRIVATE SECTOR
IN WATER SUPPLY IN NAMIBIA
NamWater Act (12 of 1997) silent on other
players in the supply of water.
Water Resources Management (WRM) (Act
11 of 2013), make provision for other players
with permission from Minister (discretion).
Regulator for water is currently cabinet.
WRM Act make provision for new regulator.
To allow other players, current regulation
regime will have to change.
IS THERE A ROLE FOR PRIVATE SECTOR
IN WATER SUPPLY IN NAMIBIA
If regulation is to be based on investments
made. This will increase cost further.
NW not allowed currently to recover all the
cost. Public too price sensitive.
Private sector known for its efficiency.
If allowed, it can improve efficiencies.
Such efficiencies may not reduce price
sufficiently to be acceptable to public.
IS THERE ROLE FOR PRIVATE SECTOR
IN WATER SUPPLY IN NAMIBIA
Govt. not amenable to divide country into
areas for other players to enter.
Sharing of infrastr. between areas a complication
Only player so far: AREVA. Permit given for
desalination plant to supply own mine.
Due to history, some towns supply own water
Lucrative areas under control of NW.
Govt. may not be keen to open up these
areas for competition.
IS THERE ROLE FOR PRIVATE SECTOR
IN WATER SUPPLY IN NAMIBIA
Low population, long distances & high
investment cost act as deterrent.
NW advantaged for having inherited infrastructure
Govt. subsidies kept tariffs low in Regions,
which private sector may not be able to do.
Challenge:
public perception that cost of water is high
Investment that will allow low tariffs to be charged
Current tariffs do not recover all costs.
Yet in the public eye, cost of water is too high.
CONCLUSION: COST OF WATER
Rainfall in Namibia low and variable.
All perennial rivers shared with neighbours.
Towns far from water which increases cost.
Investment cost high due to scarcity of water,
low population & long distances.
NW wish to recover all investment cost, but
not yet there. Only ops. cost is fully
recovered.
Public attitude on payment of water is hostile.
Govt. agreed to subsidise water for poor HH.
CONCLUSION: ROLE OF PRIVATE
SECTOR
NamWater has been pushing for full cost
recovery i.e. higher tariffs.
Resistance to grant NW higher tariffs due to
political sensitivities.
Private sector must be allowed to recover full
cost plus profit, if not they won’t invest.
Legislative framework make provision for
private sector, but political env. appear not
ready for private sector involvement.
THE END