Small Scale PPPs in Water and Waste Water Sector

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The World Association of PPP Units and Professionals (WAPPP), in collaboration with the United Nations Economic Commission for Europe (UNECE), is conducting a series of insightful preparatory sessions focused on small-scale Public-Private Partnerships (PPPs). These sessions aim to generate comprehensive guidelines on small-scale PPPs, set to be published later this year. These efforts are integral to scaling up PPP projects worldwide, thus significantly contributing to the achievement of the Sustainable Development Goals (SDGs). June 21st, WAPPP hosted it’s 11th Session on Small Scale PPPs in Water and Waste Water Sector. The session was moderated by Amanda Loeffen, HR2W CEO and Chair of the WAPPP Water Chapter. She was joined by Janita Ferentinos, Pedro Simone, Pilar Castrosin and Liliana Clara Alves.

The Importance of Small-Scale PPPs

Small-scale PPPs are essential for the attainment of the SDGs, addressing gaps that larger PPP projects may not cover. Currently, there are about 300 PPP projects annually, which is insufficient to meet the SDGs. Through the expansion of small-scale PPPs, we aspire to see thousands of PPP projects implemented each year globally. Achieving this ambitious goal requires the cooperation of governments, a shift in approach by national PPP units, and an emphasis on capacity building with local authorities.

Topics and Challenges Addressed in the Sessions

The preparatory sessions have covered a broad range of topics to ensure a comprehensive understanding and effective implementation of small-scale PPPs. The sessions have included:

  1. Defining Small-Scale PPPs: Establishing clear criteria and definitions for what constitutes a small-scale PPP.
  2. Identifying Hurdles: Discussing the challenges and obstacles that impede the successful implementation of small-scale PPPs.
  3. Testing Innovative Ideas: Exploring new and creative concepts that can be applied to overcome challenges and improve project outcomes.
  4. Legal and Financial Aspects: Understanding the legal frameworks and diverse financing mechanisms available for small-scale PPPs.
  5. Case Studies: Learning from real-world examples to understand the successes and failures of various projects, providing valuable lessons and insights.

Sector-Specific Focus: Water and Wastewater PPPs

The latest session, moderated by Amanda Loeffen, CEO of Human Right to Water and Chair of the Water Chapter at WAPPP, focused on water and wastewater PPPs. Water and sanitation are critical sectors, with over two billion people globally lacking access to clean and safe water, and even more without proper sanitation facilities. The session explored innovative financing approaches for water and wastewater projects, especially in low-income and rural areas.

Angola’s Experience with Management Contracts

Liliana Clara Alves shared Angola’s experience in using management contracts to enhance water and sanitation services. The presentation highlighted Angola’s efforts to improve water and sanitation services through management contracts aimed at capacity building and maintenance. The country faces significant challenges in meeting Agenda 2030 targets and maintaining operational infrastructure.

PPP contracts that were essential for the project:

  • Capacity Building: Comprehensive training plans were implemented to ensure staff were well-equipped to handle operational challenges and improve efficiency.
  • Performance Indicators: Key Performance Indicators (KPIs) were established, linked with incentives and penalties to ensure accountability and drive performance.
  • COVID-19 Challenges: Addressing setbacks caused by the pandemic and learning from its impact, showcasing the resilience and adaptability required in such projects.

Liliana highlighted the importance of detailed planning and the need for continuous monitoring and evaluation to ensure that the established KPIs are met. Tailored planning, strong market assessment, and robust procurement entity capabilities are essential. Independent KPI assessment and appropriate contract duration were also crucial for the project. The use of management contracts in Angola has shown significant progress, despite the challenges posed by COVID-19, indicating that this approach can be effective in enhancing water and sanitation services in similar contexts. The approach prepares the market for long-term PPPs, with early private sector engagement indicating potential for significant improvements in water and sanitation services.

Mozambique’s Innovative Clustering Approach

Pedro Simone, a Mozambican expert in water resources management, shared insights from his extensive career, including his current role as Chief of Party for USAID’s Transform WASH Mozambique initiative. Pedro’s presentation focused on clustering smaller utilities in the water and wastewater sector to improve economic efficiency.

Mozambique’s water sector is complex, with different entities responsible for various areas. Pedro Simone presented Mozambique’s efforts to cluster smaller utilities to achieve economies of scale. Key points included:

  • Blended Financing: Leveraging both public and private investments to enhance water supply coverage, demonstrating how collaboration between different sectors can lead to more significant impacts.
  • Financing Mechanism: Establishing a fund managed by a private entity to ensure efficient resource allocation and better engagement of private sector partners.

Pedro’s presentation illustrated how Mozambique’s innovative approach to clustering smaller utilities has the potential to significantly increase water supply coverage in small towns. By leveraging both public and private investments, Mozambique aims to address the substantial funding gap and improve water supply services in small towns, which currently face low coverage levels.

Tanzania’s Tailored Training Programs

Janita Ferentinos, has over 30 years of professional experience in East Africa. She’s developed extensive project management, stakeholder management, and capacity building skills, particularly in the PPP area, and as the longtime part-time supervisor at the Tanzania PPP Center, she recently supported PPP strategy envisioning a pipeline of small-scale PPPs and developed a tailored training program for local officials. Janita Ferentinos discussed Tanzania’s strategy of developing tailored training programs for local officials to support small-scale PPPs. This approach emphasizes:

  • Capacity Building: Equipping local authorities with the necessary skills to manage PPP projects effectively, ensuring that they are well-prepared to handle the complexities of such projects.
  • Pipeline Development: Creating a sustainable pipeline of small-scale PPP projects to ensure continuous progress and development in the sector.

The legal framework of Tanzania has been very clearly outlining what small-scale PPPs are and how the private sector is protected. They still will be able to enjoy all the viability gap funding. The legal framework was updated last year and it is very clear now on how the roles are divided, the approval processes are working, and the timeline. Janita highlighted the importance of building local capacity and the role of tailored training programs in ensuring the success of small-scale PPPs. By focusing on developing the skills of local officials, Tanzania aims to create a robust pipeline of projects that can drive significant improvements in water and sanitation services.

Latin America’s Comprehensive Approach to Small-Scale PPPs

Pilar Castrosin, an economist with seven years of experience, works at the Inter-American Development Bank (IDB) focusing on private participation in infrastructure projects. As a PPP Senior Associate at the IDB PPP Single Window, she specializes in developing regulatory and institutional frameworks for PPPs in Latin America and the Caribbean (LAC). Her presentation addressed water and sanitation challenges in LAC, emphasizing the disparities in urban and rural coverage and the region’s outdated governance structures.

Pilar highlighted several initiatives aimed at increasing private sector involvement. In Peru, the government established a regulation for unsolicited proposals, allowing private sector submissions to improve water and sanitation access. One notable example involved a $20 million investment focused on rural areas, illustrating how small-scale projects can attract private sector interest despite the high setup costs associated with PPPs. Another example was introduced in the Bahamas, a 10-year contract with a private company focused on reducing non-revenue water losses and improving utility efficiency. This partnership resulted in significant improvements, including increased income for the utility, reduced government subsidies, and decreased reliance on expensive desalination plants.

Pilar emphasized the potential of creating governance structures that facilitate high-scale initiatives involving multiple communities. She cited a successful example from Spain in solid waste management, suggesting a similar approach could be applied to water and wastewater treatment in LAC. This strategy could enhance the scalability and impact of PPP projects in the region.