PPPS IN THE WATER SECTOR: AN OPPORUTINITY FOR INCREASED PRIVATE SECTOR PARTICIPATION
1. INTRODUCTION
The Public Private Partnership (PPP) framework leverages the expertise, efficiency, and financial strength of the private sector into public and social infrastructure projects in a way that traditional procurement could not. In Kenya, the PPP model has flourished under a legal and regulatory framework that has been adopted in various sectors including the energy, transport, housing, health, and education sectors. The Public Private Partnerships Act of 2021 allows seventeen different types of PPP Arrangements, encompassing a wide range of possibilities that are profitable to the private sector and achieve the benefits required for the public sector.
Noticeably, the water sector, a key part of the nation’s economic and social infrastructure, has been absent from the PPP conversation. Insufficient funding, mismanagement of resources and poor governance of water services providers have held back water development in rural areas, impeded supply in urban areas and resulted in financial loss for state and county participants in the supply of water.[1] Recognizing this apparent need, the government has taken steps, including amending the legal framework, to curb these losses and reform the water sector, making it both attractive and profitable to private sector investors while aiming at enhancing the provision of water services to the public.
The Water Services Regulatory Board (WASREB), the water sector regulator in Kenya, has in the past noted that, while there is growth in the water sector, poor governance, high water losses, and inadequate investment planning and reporting are among the major factors that have continued to hamper growth in the sector.[2]
On 20th July, 2023, the Leader of Majority in the National Assembly published the Water (Amendment) Bill, 2023 (the Bill) whose principal object is the amendment of the Water Act, No. 43 of 2016 Laws of Kenya (the Principal Act). The Bill seeks to operationalise public private partnership in the water sector in Kenya.
To achieve this, the Bill seeks to broaden the mandates of the Water Works Development Agencies (WWDAs) and Water Storage Authority (the WSA), which are water agencies for the National Government under the Principal Act, by permitting them to enter into bulk water purchase agreements with investors in accordance with the Public Private Partnership Act of 2021 (the PPP Act).
2. CURRENT POSITION UNDER THE PRINCIPAL ACT
Section 30 of the Principal Act establishes the Water Storage Authority (the WSA) whose main function include to undertake on behalf of the national government, the development of national public water works for water resources storage and flood control and to undertake on behalf of the national government strategic water emergency interventions during drought.
Water Works Development Agencies (WWDAs) on the other hand are established by the Cabinet Secretary for Water, Sanitation and Irrigation pursuant to Section 65 of the Principal Act. The core function of the WWDAs is to undertake the development, maintenance and management of the national public water works within their area of jurisdiction.
3. PROPOSALS UNDER THE BILL
The proposed amendments under the Bill seem to open up the participation of the National Government in the water services provision sphere. Currently, the WWDAs only serve as water services providers on an interim basis and are required to hand over the operations and management of water works upon completion to a county water services provider (WSP). Under the Bill however, WWDAs shall be eligible for licensing, by WASREB, as WSPs thereby providing water and sewerage services to the public.
Particularly, the Bill seeks to expand the mandate of the WWDAs by allowing them to operate water works and provide water services by:
a) entering into a bulk water purchase agreement with an investor in accordance with the provisions of the PPP Act;
b) by entering into a bulk water purchase agreement with a water services provider; or
c) as a water services provider until such time as the water works development agency transfers responsibility for the operation and management of water works to a county government or water services provider in whose area of jurisdiction the water works is located.
The WSA, as well can now enter into a bulk water purchase agreement with investors under a PPP arrangement and also enter into a bulk water purchase agreement with a WWDA.
The structure of the Principal Act furthers the devolved nature of the water sector in Kenya between the two levels of Government. While the National Government owns and manages water resources, County Governments, and private sector players, are mandated with provision of water and sewerage services.
4. IMPLICATIONS OF THE PROPOSALS UNDER THE BILL
To recap, WASREB has in the past pointed out inadequate investment, including planning and reporting, as amongst the factors that limit accessibility to water services in Kenya. It therefore comes as a welcome addition that the Government is looking at partnering with the private sector to enhance funding in the sector and thereby promote provision of water services.
With increased participation of the national government in water services provision and the operationalisation of the PPP framework in the water sector as proposed under the Bill, there is bound to be an increased investor participation.
The amendments shall make it possible for investors, entering into PPP arrangements with WWDAs and the WSA, which are national government agencies, to receive guarantees from the National Government mostly through Government Support Measures. In the long run, should the Bill be enacted into law, the overall effect is that the bankability of water projects shall be enhanced.
Authors: Esther Omulele , Maxwell Maelo and Nyambura Waggema
[1] Challenges Faced by the Kenya Water Sector Management in Improving Water Supply Coverage, by Chemeril Chepyegon, Daisuke Kamiya, Journal of Water Resource and Protection > Vol.10 No.1, January 2018