Ghana Water Company re-invents itself

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The expiry of Ghana’s country-wide water management contract last year left many stakeholders bitter and disappointed. What are the future prospects for PSP in the country’s water sector?

The Ghanaian government’s new water vision is finally taking shape, almost eighteen months after the acrimonious ending of Aqua Vitens Rand Limited (AVRL)’s five-year contract to manage the country’s urban water sector.

In June 2011, the government decided not to renew AVRL’s contract after the private sector JV failed to meet its contractual obligations. Now, after an interim period, Ghana is planning to implement an improved version of the set-up it had prior to the management contract.

Public utility Ghana Water Company Limited (GWCL) will function as the country’s bulk water supplier and will also oversee the urban water sector (about 50% of Ghana’s population). Ghana Urban Water Limited, the utility temporarily set up to replace AVRL, will be wound up and amalgamated with GWCL from next February.

Senyo Amengor, Ghana Urban Water’s managing director, told GWI that the new incarnation of GWCL will incorporate some changes, including the introduction of performance contracts for the company’s managers. “We think these changes will bring more accountability and will drive performance,” he said. “Performance contracts have been done in other successful African utilities such as NWSC in Uganda, and we think we should try their ideas.”

Improving performance is something of a sore point for GWCL; this is what AVRL had been expected to do, but ultimately failed to achieve. From the mid- 1990s onwards, Ghana had been under pressure from the World Bank to introduce private sector participation in the water sector. Reforms initially included the possibility of a lease contract for urban water provision, but the idea had to be abandoned in the face of widespread opposition from civil society, and concerns that private companies would not be able to meet the sector’s investment needs. The government and the World Bank therefore decided to opt for a performance management contract instead.

One of AVRL’s priorities was to address non-revenue water (NRW), which stood at about 50% in 2005. AVRL’s target was to reduce it by 5% per year, but NRW remained unchanged at 50% by the end of the management contract in 2011. AVRL also failed to deliver on capacity utilisation (it actually decreased from 74% to 67% during AVRL’s tenure), and was considered to have made no improvement to service provision.

Based on the fact that AVRL largely failed to meet its contractual obligations – and amid widespread dissatisfaction from AVRL employees, customers and civil society – the government ultimately decided not to renew the contract.

Amengor concedes that both the population and the government had unrealistic expectations of what could be delivered through the contract. Due diligence should have been more thorough at the onset to avoid misunderstandings and improve the contract’s monitoring procedures, he argues. Ghana’s civil society is less diplomatic: the National Coalition Against Privatisation of Water is considering legal action against AVRL for non-compliance, and against the government for reneging on its obligation to uphold the contract.

Amengor told GWI that the decision to revert to a public utility model reflected the government’s belief that water is a social good and that the public sector should be responsible for its provision. Notwithstanding, he insists that the private sector still has a role to play in the provision of water services in Ghana: “The government has a PPP policy and there are guidelines about where we should involve private companies in water supply.” Two of Ghana’s most high-profile water projects were recently tendered on a 25-year BOT basis: a 60,000m3/d desalination plant in Nungua developed by Abengoa Water, and a 360,000 m3/d WTP in Asutsuare.

Amengor says that the priorities for GWCL will be to address NRW, 70% of which is attributable to theft and illegal connections, to upgrade the company’s ageing infrastructure, and expand it to meet growing water demand. A number of water supply projects are under construction, and by 2016, the company expects to have more than doubled its capacity to 600,000m3/d.