Stakeholders call for privatisation of water supply

The Water and Sanitation Conference (WASIC) in Nairobi brought together stakeholders in the water sector and called for the privatisation of water supply and sanitation.

During the three-day conference government officials, private sector players, foreign missions and humanitarian organisations held discussions on water availability, safety, accessibility, drinkability, and access to sanitation.

"In the last one year over 4 million people were connected to water by ten projects, bringing national water coverage to 72 per cent, a 2.1 per cent increase over last year," said President William Ruto in a speech read by Water Cabinet Secretary Zachary Njeru.

“In the past year 17 towns have been connected to sewerage services, improving urban sewer coverage to 34 per cent. The area under irrigation increased by 7.2 per cent in the past year to over 700,000 acres through the National Expanded Irrigation program, community-based irrigation schemes, and other projects," Ruto said.

The President said the government’s target is to improve water coverage to 80 per cent, sanitation to 85 per cent, land under irrigation to over 900,000 acres, by 2027.

He regretted that inadequate resources were hampering the realisation of universal water access and sanitation in Kenya.

“Leveraging on private sector investments is a panacea to address the sector’s financing gaps,” he said.

The 2024 WASIC theme, "Accelerating Investments for Sustainable Access to Water and Sanitation for all," set the stage for the conference’s primary objective: to attract investors to water and sanitation sector with an emphasis on public-private partnerships (PPP) and blended financing mechanisms; which leverage commercial investment. Speaker after speaker hammered the point.

Danish ambassador to Kenya Stephan Schønemann offered the Danish model to achieving universal water supply and sanitation.

“We have water tariff – the price you pay for getting the water and the price you pay to get rid of it," the envoy said.

“The water tariff needs to ensure full cost recovery. This allows the utility to operate the infrastructure and invest in future development and improving services. The revenue needs to be collected. If the revenue stream runs dry - the taps run dry,” he added.

“Water has no competition, which should make water even more precious. But, as a public good, water is under-valued, underpriced, and under-invested.”

Bert Ubamadu, the Deputy Mission Director at USAID in charge of Kenya and East Africa, said Kenya faces a significant investment gap of over Sh2.2 trillion in the water and sanitation sector.

“This challenge presents an opportunity to innovate and collaborate by fostering robust investment opportunities and engaging in blended financing arrangements. Kenya can leverage public and private entities’ unique strengths to bridge this gap,” Ubamadu said.

The Water Sector Trust Fund (WSTF), a state corporation under the Ministry of Water, Sanitation and Irrigation, is at the forefront of the push for private financing.

“We have the key role of mobilising additional resources away from the exchequer,” said WSTF Chairperson Erick Rutto. “It is crucial that we leverage private finance, adopt models that encourage efficiency, increase bankability, and sustainability of infrastructure.”

WSTF, the chief convener of WASIC, said that water and sanitation sector will soon be financed through Capital Markets, and they are pursuing pathways towards having institutions listed in the Nairobi Securities Exchange.

"It would seem that whether the water and sanitation sector will be privatised is no longer a relevant question: the real question is ‘when? In fact, one could argue, it has already begun," said Dr Rutto.

He cited at least two programmes that WSTF has actualized through blended financing from commercial banks.

Under the programme 10 water utility companies were able to access pre-financing from commercial banks; loans which WSTF subsidised.

“We will continue with blended loan financing programs,” Rutto said.

Push for privatisation of water supply has attracted opposition from various quarters.

“Access to water is a human right; our Constitution recognises that. It is the government’s job to make sure that every Kenyan can access water," said Matilda Jebet, the Acting Secretary General of Water Services Workers Union (WaSWU).

“If you give it to the private sector, individuals whose sole interest in the matter is profits, will make water a commodity exclusively for the rich. The poor will suffer. The question is: why privatise a commodity whose access is a human right?" She posed.

“Water should not be privatized the same way police service or Kenya Defence Force cannot be privatised,” said Jebet.

On March 5, a day before WASIC kicked off at KICC, Jebet led the union to protest against the Water Act Amendment Bill 2023 – which seeks to streamline the regulatory framework for a more liberalised water sector – currently in at the Senate.

About a month ago, during a public participation on the Bill, some civil society players were of a similar opinion.

“When private interest override public interest we will come to a point where you would not have access to water unless you have money to pay for it,” Irene Asua, a member of Nairobi Justice Working Group, told the media.

“Water will become more expensive,” Violet Matiru, who participated in the debate, said.

“If this Bill sails through Parliament and becomes law, I as an activist, will go to court to challenge it,” another participant, Josphat Mutua, swore.

The president, in his speeche, has indicated that he wants the Bill passed and he would not hesitate to sign it into law.

“A conducive enabling legal regulatory and policy environment is a critical success factor in the realisation of adequate access to water and sanitation services,” he said.

Latest data shows that many households have no access to clean water.

In many urban areas households are subjected to water rationing while some families (especially poor neighbourhoods) can only access it through informal channels.

“They weaken water services then accuse us of inefficiency; in which case I still don’t think that is reason enough to privatise water supply,” Jebet said.

Karimi Warui, Head of Investment Banking at Renaissance Capital, said that the call for privatization of water supply is informed by certain realities.

“For instance, many of the utility companies are laden with so much debt, they are not efficiently providing water. They are struggling to ensure availability and accessibility,” Warui said.

Privatisation can happen in many ways, the Head of Investment Banking at Renaissance Capital said noting that companies could transfer or outsource some functions within water services chain.

Warui explained that the companies could privatise the distribution side of the business – from facility to tap: for example, operations and management services, to the private entity.

“It is also possible to transfer the entire asset together with its infrastructure and resources and even debt,” she says, “or enter into a PPP (public private partnership), which ensures that ownership will revert back to the government after the private entity have recouped their investments and profits.”

Warui said whether to privatise the water sector or not presents a catch-22 situation: “On one hand there is inefficiency and corruption. On the other water might be available but accessibility would be determined by one’s ability to pay, hence it ceases being a right.”

Marcel Schreurs, the Managing Director of Maji Milele, a private water service provider handling four schemes in Siaya and one in Homabay, said there is no way, for efficiency and sustainability in the water services sector, cost can be circumvented.

Speaking at WASIC, Schreurs said: “If we want service provision we need to finance it. There are three Ts. The first one is transfer (donor money). It can be nice but you won’t always have. The second one is Tax; the exchequer. Yet, government budgets are always restricted. The last T is Tariff – what consumers pay. This it is the most important T.”

WASIC provided the platform for the launch of the National Water and Sanitation Investment and Financing Plan (NAWASIP): a document that details the government’s pathway towards achieving universal access to water and sanitation, which includes investments from the private sector.

“In the next five years we plan to construct 100 dams through PPP; to harness private sector financing,” said the President.

The big question is; will privatization plans make water accessible to everyone regardless of their social status?