PPPLab Roundtable with water & sanitation experts

The Dutch water sector has strong expertise to offer that can contribute to achieve the Sustainable Development Goals through diverse sorts of partnerships. At the same time, current experiences also show that  commercial partners hesitate to come on board and that financial and other barriers remain to be tackled to upscale their initiatives. Are the instruments of the Dutch government the right ‘stepping stones’? Water experts share their views.

What makes Dutch water and sanitation partnerships tick and what are hurdles they face? This was the central question of the roundtable gathering with a diverse set of water and sanitation experts (from Deltares, IHE, NWP, SNV, VEI, Water Watch) on key issues and challenges for PPPs in the water sector, organised by the PPPLab on 12 June 2017. The organisations represented work in partnerships across Asia, South America and Africa, to help provide safe drinking water, better sanitation, efficient water use and improved river basin management and safe deltas. In this blog we present a few themes and impressions from this conversation.

An important dimension for water and sanitation partnerships is working effectively with the local public sectors and governments, the Public partners. According to the experts, MoUs and partnership contracts are needed, but mainly it is about building trust both formally and informally. It takes time and seed money to initiate and form a PPP, a process for which no blue print exits. Nurturing and building trust with partners should start from an early stage – and cannot be rushed because a financial opportunity comes up. Strong partnerships are the ones that exist before and beyond the specific PPP project and partnership formation may take  3 to 5 years to develop in the utility sector, for Integrated Water Resources Management 7 years seems more feasible .

Coping effectively with challenges is intrinsic to the water and sanitation sector’s way of working with the Public partners. In the sanitation sector, some utilities are serving only a small segment of the population, making them responsible for sanitation in the entire city isn’t straight forward, considering that financial viability for the small sewered part is already very challenging. In Kenya one had to deal with the challenge of political and institutional changes – after the introduction of the new counties, and possibly again after the 2017 elections. One has to effectively navigate complex structures (including a range of public entities) through liaising at various levels and finding local ‘champions’ or ‘facilitators’ to work with, as practiced in the water resources management sector. One also concludes that the engagement of the public sector does not always have to be at the operational level of the PPP, but can also be in governance/guidance.

Building effective collaboration with local governments and the wider public sectors can be a stepping stone for further scaling their projects;– many water and sanitation partnerships seek to influence the regulator to change the rules of the game in their sectors. As such, having the Dutch government on board not only in a position of financier but also actual partner can be helpful – government-to-government relations are still the backbone of many water and sanitation public private partnerships. Horizontal scaling, for example for services that produce a multiplier effect in the efficient water use sector through the use of big data. So what makes Dutch water and sanitation PPPs tick: nurturing and building effective partnerships in various contexts that can actually be self-sustaining in due time and preferably be scaled.

A key question remains: what is the best way to finance those PPPs? Experts suggested to look at more flexible and diverse ways to finance partnerships. While the Dutch are good in financial engineering of PPPs, we may sometimes be too optimistic of what can be done in difficult contexts for challenging sub-sectors with a single 4-5 year project. The current reflex in response to Dutch government instruments is to rush in forming partnerships with the goal to obtain the funding. Besides the spending pressure that follows once the subsidy is secured, obtaining the subsidy becomes the main goal rather than that the original PPP idea remains centre stage. One suggestion was  that these instruments should rather leverage investment-ready projects that are interesting for commercial financiers in due time. In some situations not spending ODA (Official Development Assistance), may have more impact than spending it, if  it would be possible to use it more creatively e.g. as a guarantee or revolving fund. In case of projects that concern non-revenue activities, for example in water resources management, the focus should be on nurturing self-sustaining initiatives in the longer term, rather than a short term business case.  After all, the financing needs to achieve the Water SDGs compared to current investment levels show a considerable gap. Though PPPs could be a bridge too far for some sub-sectors and/or country contexts, PPPs have an important role to play to bridge the SDG financing gap. And this gets little attention in PPP design so far.

The PPPLab will continue its PPP expert roundtable series with a next meeting on food security, to be scheduled in Summer 2017. If you want to stay up-to-date, please subscribe to the PPPLab Newsletter here.