Examination of Witnesses (Questions 20
- 27)
THURSDAY 30 NOVEMBER 2006
MR WILL
DAY, MR
DAVID SATTERTHWAITE
AND MR
KEVIN WATKINS
Q20 Ann McKechin: That takes us onto
the point about specialisation because if you try to upgrade the
network and expand it technically you need to become more specialised
and you need more expert engagement in it. How can a plethora
of disjointed pilot projects or local community projects actually
be avoided? Is there a need for common standards at a national
level to be imposed and some degree of national investment and
underpinning to actually encourage a proper growth of the sector?
Mr Satterthwaite: That is a good
question. When you look at the innovation at community level there
is no point in having it if you see it as an autonomous movement.
There is no way that squatters are going to construct water treatment
plants. What you should see it as is communities negotiating with
local government for new ways of installing, maintaining and paying
for it. All the good community-driven water and sanitation provision
is around changing local government practice. As soon as local
government come into that partnership then you make sure that
the sewers are the right length, that the manholes are the right
size, the technical specifications. The genius of this NGO, Orangi
Pilot Project, in Pakistan was to make the cost of sewers a fifth
of the real cost following normal conventional specifications.
The key for community provision is demonstrating new ways of doing
things.
Q21 Ann McKechin: They needed to
know the conventional specifications and obviously someone from
their organisation needed to have some degree of fairly advanced
technical knowledge to be able to deliver that.
Mr Satterthwaite: Absolutely.
They probably have among the best water engineers in Asia in this
NGO. If NGOs are going to be useful in this they need to have
among the best water and sanitation engineers in the business.
What excites me about this is that this is what drives innovation
in local government. In a city or even a small town you need innovation
in local government.
Q22 Richard Burden: Could I pursue
with you a little bit more the line of questioning that Quentin
Davies was asking Kevin about the cycle of problems—particularly
as you see it in Kenya—of high connection charges and then
middlemen, the vendors, having to buy in bulk and then sell at
high prices. If I understood correctly you were saying that essentially
what you need to do there is subsidise connection charges where
you can and also ensure that the prices are lower to the middle
vendors so that they can sell on at a lower price. Do you agree
that those are the two things that need to be done? Also, which
is the priority?
Mr Satterthwaite: I will give
a slightly different slant on it. My old friend Sandy Cairncross,
Professor at the London School of Hygiene and Tropical Medicine,
one of the finest water engineers in this business, noticed in
Sudan, in Khartoum, that the price of water was so high when government
closed one borehole used by vendors. Of course what he realised
was that the price of water was so high because the vendors had
such difficulty in getting water. The solution was actually to
open more boreholes that vendors could use. Vendors usually operate
in a competitive market so often giving the vendors easier access
to water lowers prices. The other thing of course is that if you
are a vendor with a bicycle the distance between your clientele
and your water supply is critical. Again, if you make water available
to vendors all over a city their prices can come down dramatically.
Another way of doing it is that you guarantee every household
access to a well-maintained tap within 15 to 20 metres and then
you charge everyone who wants a house connection. In other words,
you are providing differential standards. This has been a considerable
success in many cities. It is much cheaper for a water company
to provide a tap every 15 or 20 metres and then a group of households
is responsible for collecting the money and paying for it. For
the water utility this is quite cheap. Then any of the households
in that lane that wants a connection direct to their home have
to pay the full cost. That is a way of reducing the price of extending
provision for everyone and increasing your cost recovery. With
sanitation it gets more difficult; sewers are expensive. If every
city had these Pakistan water engineers the problems would be
easier to solve, but they are not in most of the cities I am working
in. Water is easy; sanitation—at least high quality sanitation—is
much more difficult. One good example—it was one that WaterAid
and the World Development Movement have emphasised—is, in
Uganda, the local water utility has enormously improved its quality.
In a sense what it does is use private sector business practice
in a publicly owned agency. They have improved the quality of
the water, the reliability, they have extended to lots of people.
That is going great but they simply cannot generate the funding
for sanitation. Sanitation in cities is something that I think
all of us struggle about how you can finance it.
Chairman: Mr Day, we have a couple of
questions for you. Having looked at your submission I think it
is worth saying that we note what you say that your organisation
"believes that water is a right for all people and that its
provision should be democratically accountable at all times. Therefore,
WSUP does not advocate nor promote privatisation." I thought
it was worth putting that on record. There is a specific question
for you from James Duddridge.
Q23 James Duddridge: What evidence
is there to demonstrate that the WSUP partnership will be effective
in increasing the urban poor's access to water?
Mr Day: That is a very good question.
We are still looking for the evidence in the sense that we have
been established as a company for less than a year and we have
yet to turn on a tap. One of our concerns of course is that the
level of expectation of our success or otherwise far outstrips
at the moment anything we have to show for it. WSUP was born in
part of frustration—frustration on the part of all of its
member organisations—that provision for water and sanitation
was simply not being achieved. Our private sector members could
not make a business model work down there in those parts of those
cities. The last few years have been marked by the thundering
of hooves as water companies—not just British ones—move
away from developing country cities. Within those organisations
there was a sense that they were running away from precisely the
part of the world where their skills and competencies could be
usefully used but they could not make it work commercially. The
NGO members were looking at this growing urban population and
recognising that the scale of need was way beyond their capacity
and the only way they were going to reach it was in some way to
collaborate with people who were better used to operating on a
larger scale and to pool competencies. The result is this collaborative
venture. As to evidence that it might work, our conversations
so far in the small but growing number of communities where we
are working is that this is welcomed by communities who themselves
identify a need for water and sanitation as one of their primary
concerns and are delighted to be part of the conversation. I recognise
also that it is often their voice which is missing in the equation
in relationships with the local service provider or a local government
and I would like to think that the way in which we hope this approach
will work is that we will leave behind not pipes underground owned
by a company—I have yet to meet a finance director who wants
to own pipes underground in a developing economy—but leave
in the hands of a competent, appropriate local provider—which
could be the local municipality, it could be some other locally
designed organisation—an appropriate system which is able
to provide socially, environmentally and economically affordable
water. It may well be, as David has suggested, that the delivery
mechanism starts modest in the sense of what is locally affordable
and do-able and grows as those communities grow. That would be
the hope. The importance, I think, is that the competencies that
are brought to bear by WSUP around the table are as much to do
with catalysing projects, developing the situation rather than
actually physically wishing to go in, implement and then own and
run and manage a water system. That is not the competence that
we possess collectively or individually.
Q24 Chairman: You are a UK based-organisation
and your members are from the UK.
Mr Day: That is correct.
Q25 Chairman: Is it your intention
to maintain yourselves as a UK organisation?
Mr Day: I was just talking earlier
to David, we have a growing list of organisations from outside
the UK that have expressed an interest in participating in some
way so we are confronting that as a choice. I think our concern
is that we need first to develop enough of a track record from
experience to be able to hold our head up and say, "We think
this is an approach that is worth looking at". We have certainly
started conversations with companies and NGOs in other parts of
the world and our instinct is to actually encourage them to establish
a replica effectively or collaborations. I would love to think
that we could be competing to develop the best models to work
and deliver these services to poor people rather than getting
together to have a nice, big, warm group hug and all do it together.
I suspect there may be real advantage in developing more than
one organisation able to better understand and work with communities
locally. There is plenty to do. We have limited ourselves initially
to communities between 70,000 and 100,000 people. We have done
that because the world unfortunately is full and is filling up
with communities of that size. It is also significantly larger
than many NGOs would get to grips with; most NGOs traditionally
work in rural areas which is important. Cities are grimy and political
and grey and have often been avoided in the past. Also we do not
feel equipped to take on a Kibera of 800,000 to a million people
which of course would require significantly greater experience
I think than we currently possess collectively. Our individual
members—certainly our corporate sector members—are
used to dealing with project management on that scale but I think
as a collaboration we are still picking our way through our first
few months and I would like to think that we can expand our scope
of operations. Certainly the demand would suggest there is plenty
of work to do.
Q26 Richard Burden: There has been
some question about whether the commitment of your private members
charging for their services to WSUP is really sustainable in the
long term, bearing in mind a number of public utilities actually
charge less than cost in their tariff structures. Given what you
have just said, would I be right in thinking that you would say
that actually it probably is not sustainable but that is not really
what you are about anyway.
Mr Day: That is not why they are
there. You will have to ask them themselves but my hunch is that
they are there for a curious mixture of head and heart. The heart
bit is this frustration that suggests that they are not able to
deliver a service they are good at to people who most need it.
There is a frustration there and on that side of the equation
you have a sense that this is not a purely commercial operation.
In part, one of the advantages to their membership of WSUP is
that we are collectively able to reduce risk; we are able to reduce
the risk to their business engagement which traditionally they
had costed. One of the reasons private companies demand 25 or
30% to even get out of an aeroplane in some of the developing
countries, let alone go and work in a slum community, is that
they cost risk. If we can actually start by unpicking what that
risk constitutes by having the right people at the table—governments
working, United Nations supporting it—actually that risk
starts to come down and their requirement for such high levels
of return comes down with it. They may need to rebuild that number
up to make the internal case within their company, but as far
as we are concerned we are prepared and they are happy not to
receive more than a 10% mark up on certain aspects of their engagement.
The first phase—concept, feasibility and design—we
all do at cost; all our members do at cost and no more. If we
get engaged at any time in the implementation and the physical
putting of pipes underground then we have agreed with our private
sector members that they will be allowed to put into any tender
document we might put forward up to a 10% return. Our argument
is that we have collectively reduced their risks significantly
down to that sort of level. It is only when we think we can start
to reduce those levels of return that we can start to get a product
which is affordable and appropriate for poor people. Most business
models simply price poor people out of any delivery of service.
It is an attempt I think to recognise and deal with that risk
by driving that down. Will they stay in it for the long term?
It is very interesting. We have just had one of our members sold
to a new company; RWE Thames has been sold to an Australian bank
and it will be extremely interesting to see whether the new owners
look upon their engagement with WSUP as a positive or a negative.
We have yet to have that conversation with them but I am looking
forward to it.
Q27 Chairman: I would say that we
will follow with interest your enterprise's activity.
Mr Day: One of the genuine obstacles
to being able to do more with this approach is that the current
financing mechanisms for water—not uniquely DFID but globally—break
the process down into two halves. If you design a piece of work,
a piece of infrastructure, you are not allowed to implement it.
If you implement it you are not allowed to have designed it. There
is a break in the middle. We know that public infrastructure is
one of the most corrupted processes around. There is a clear sense
that public money needs to be carefully used, but the mechanisms
do not allow the beginning to end process—from that first
conversation with communities to turning on the tap—that
we think is absolutely fundamental and underpins our approach.
I think we would put in a plea for those who have money sitting
in bank accounts with water and sanitation marked on them to open
their minds to innovative ways of financing that process which
clearly recognises the importance of continuity throughout the
process. We need to find other ways of addressing the risk issue.
Of course I am a tax-payer too and I do not like to see money
wasted, but I am absolutely certain that, by financing it the
way in which we have, traditionally we have designed failure into
system after system after system and in urban and peri-urban poor
areas that is absolutely the case. The last 50 metres needs a
lot more time and care spent on it than is currently the case
and I would think there is a practical way in which we can get
over that with a bit of bright thinking about different ways of
financing. That would be my plea.
Chairman: That is helpful because you
have all made that point and that is obviously a question we need
to ask of DFID and the other support organisations we will be
talking to. Can I also say that we will be going through this
process over the next few months; we are going to visit Ethiopia
at the beginning of February. If you have any developments or
thoughts on input which you wish to put to us during that period
I hope you will stay in touch with us. Clearly we want to be as
up-to-date as we can be as and when we finally produce a report,
so please feel free to give us any additional information or comments
that you think would be helpful to our report; we will certainly
appreciate it. Thank you all very much for coming in.
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