Sharing Utility Reform Lessons from Hawassa, Ethiopia
In support of urban water sector reform in Ethiopia, SUWASA recently held a knowledge-sharing workshop for water sector stakeholders in Ethiopia. The objective of this workshop was to share the experiences gained by the project in implementing utility reforms at the Hawassa Town Water Supply and Sewerage Services Enterprise (HTWSSSE).
The two-day workshop brought together senior- and middle-level managers from water utilities, relevant government ministries, and heads of departments and other stakeholders.
By sharing knowledge with other utilities from similar towns and government bodies who had been given the task of increasing access to water services, participants were able to debate topics of interest to them, including the need for legislation to enable utilities to interact with the private sector, and to increase accountability by means of performance-based contracting.
“Performance agreements are being seen as a model by the Ministry, and we would like to implement this with other utilities. That’s the direction the sector is officially going,” said Ms Girmawit Haile, the Director Water Resources Development Fund (WRDF), in her speech. She added that the lack of legal standing for implementing performance agreements didn’t prohibit better performance. Indeed, sector players were keen to implement utility reforms, including signing performance agreements.
The workshop highlighted three key elements and achievements of the SUWASA project in Ethiopia:
Increased financial sustainability
SUWASA supported the utility to develop and implement an improved tariff regime in line with Ethiopia’s Water Policy on creating autonomy for water-service providers, including the ability to charge full cost recovery tariffs. This regime covers operation and maintenance costs, and will gradually lead to the recovery of costs. A tariff study was conducted, and recommendations made on new tariff rates and a tariff structure. The goal was to provide for sufficient costs to be recovered to be able to subsidize the poorest consumers, and also to support investment costs needed to enable expansion to take place.
In order to promote the replication of this cost-recovery approach in the sector, training on tariff development was conducted for seven major secondary towns, nine Water Resource Development Bureaus, the MoWE and the WRDF. The HTWSSSE tariffs now cover 217% of O&M, generating funding for investment needed to keep pace with the population.
Other areas of intervention to support financial sustainability included: introduction of accrual accounting, revision of the billing system, and the introduction of a new salary scale.
Improved operational efficiency
The utility’s strategic business plan was updated to reflect the new tariff, a comprehensive investment plan, performance agreement, asset inventory, and the financial accounting system. The strategic plan is expected to serve as a roadmap for the operations of the Enterprise during the coming five years.
The project also supported the creation of a new department to handle sewerage within the utility and to manage fecal sludge. This transferred the responsibility from the municipality to the utility. HTWSSSE recruited core staff for the new unit (sewerage service case team) and developed sludge disposal rates.
New accountability mechanisms
Two performance-based agreements to promote accountability were developed, and although endorsement is not legally binding, the agreements have a transparent incentive system so that staff members know that hard work will be rewarded. The utility and the Regional Water Resources Development Bureau will sign the first performance agreement, while the Board and management of utility will sign the second – performance-based – agreement, which includes a set of more detailed indicators and targets.
Participants were unanimous that the experiences gained through this project provided a model for transforming the utilities of other secondary towns across Ethiopia. In conclusion, the Director urged Hawassa to be a model so that the Ministry can use as an example to promote changes in other towns. “It’s our desire that the sector can be efficient and credit worthy,” she said.