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Here is the golden chance for PPPs in sanitation

Gentility of speech is at an end - it stinks, and whoso once inhales the stink can never forget it and can count himself lucky if he lives to remember it.”  These were the words used by the City Press newspaper to describe the stench emanating from the River Thames at the peak of the summer of 1858.  River Thames had been contaminated by industrial effluent and human waste and the smell emanating from it was so awful, that it was nicknamed the “Great Stink”.  The river was declared biologically dead as no living creature could survive in it and it became the epicentre of deadly disease outbreaks such as cholera.  The catastrophic situation prompted an immediate overhaul of London’s sewer system and happily, today, river Thames is considered one of the cleanest city rivers in the world, serving as home to many species of fish.

Poor sanitation has severely detrimental effects on public health, the economy and the environment. A study by the Water and Sanitation Program in the year 2012 established that on the economic front, Kenya loses approximately KShs. 27 billion annually due to premature deaths, productivity losses, healthcare costs and water pollution, amongst other ills attributable to poor sanitation.   With the renewed global focus on sustainability, we note that we have a long way to go on SDG goal number 6 which mentions adequate and equitable sanitation for all by 2030.

As far as the environment is concerned, one only needs to look around some parts of the country to see the burst sewers which are as a result of over-stretched sanitation infrastructure. The situation is frequently exacerbated in the rainy season when flood waters further stress the infrastructure.  Uncontrolled tapping of underground water resources could cause environmental degradation when many unregulated small private firms are providing water services.  The water provided by small suppliers may also be inadequately treated thus resulting in poor quality and even contaminated water being consumed by residents.  Unregulated and haphazard disposal of waste also contributes to pollution of air, rivers and oceans.

We have seen Nairobi rapidly transform into a vertical city due to the soaring land prices and an increased appetite for high rise flats and apartments.  Many of these high-rise developments have sprung up in areas that were previously scarcely populated and peppered with bungalows.  With limited investments into sanitation infrastructure, one wonders how the waste management infrastructure in those areas can cope, and for how long.  We dare say, it is high time we took stock of our water and waste management infrastructure, to avert a “Great Stink” of our own. 

We have not seen as much focus and investment in sanitation infrastructure as we have in other areas such as roads, ports and affordable housing.  A case can therefore be made for urgent focus and investment in clean water and sanitation management in the country.   

Investing in a sewer network that can cater for future generations and proper waste treatment facilities is a capital-intensive affair and collaboration between the public and private sector through public private partnerships (PPPs) may just be the saving grace.  The beauty of partnering with the private sector is that in addition to financial muscle, the private sector also brings with it expertise, innovation and technology. As it is, the private sector has been involved in numerous innovative projects around the world, deploying technology to convert human waste to energy, fertilizers, construction materials and even clean drinking water!  Great strides have also been made in terms of water desalination and recycling and access to such revolutionary technology would be a further advantage of the PPP model. 

The involvement of the private sector in water and sanitation can take a number of forms.  A management contract or lease arrangement can, for example, allow the private party to operate the existing assets of the water and sewerage companies.  Where the existing assets need to be expanded, then this can be accomplished through different PPP models that allow the private investors to build and operate-such infrastructure for a period of time, while at the same time managing the demand and payment risk associated with provision of services to institutions, businesses and households.  Considering that it is notoriously difficult to increase consumer tariffs for water and sanitation services, another option could be for a model under which investors sell bulk water and waste treatment services to the public authority which then manages the distribution of the services to the end consumers.

Joint ventures could also provide an avenue for such projects.  China, which according to some studies had 40% of the world’s water and sanitation PPPs as early as 2012, had a number of equity joint ventures (EJVs) with private investors.  In the EJV arrangements, the private investors were tasked with providing funding and know-how while the municipal governments would provide the existing water and sanitation assets.  The involvement of the public entity in the EJV hedged against political risk and made the operator more palatable to the community who may otherwise have been sceptical of private investors.  

The fact remains that significant investment in sanitation systems is required and someone has to pay for it.  Even the Great Stink was apparently resolved when the UK government borrowed £3 million which was to be repaid from a three-penny levy on all London households for the next 40 years.  In our context, PPPs present a viable way to finance sanitation infrastructure and fortunately, recent developments indicate that PPPs are a government priority.  First, the PPP Unit was recently elevated to a full Directorate within the National Treasury and a seasoned Director General appointed as its head.  Second is the proposed overhaul of the legal and regulatory framework governing PPPs through the Public Private Partnerships Bill, 2021, which aims to re-energise the PPP dream.

As sanitation cuts across various sectors such as health, water and environment, it will be necessary to streamline the institutional framework to ensure that there are no conflicting roles between the key institutions such as the Ministry of Water, Ministry of Health, Water Services Regulatory Board (WSREB), the National Environment Management Authority (NEMA) and county governments.  Capacity building is also required at county government level to ensure that they are equipped to initiate, negotiate and implement PPP contracts for water and sanitation.  If all this is put in place, we stand to reap big as a country as successful water PPPs can radically improve outcomes in other focus areas for the government including food security and a healthier population.

The article was also featured in the Business Daily on 10 August 2021 and can be accessed here.

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