Roles and institutional arrangements for economic regulation of urban water services in sub-Saharan Africa

This research focused on determining the roles and institutional arrangements for economic regulation of urban water services in Sub- Saharan Africa. Urban water service delivery mainly supplied by state owned utilities is constrained due to many factors one of which is related to insufficient or lack of a clear economic regulatory framework. The research used a multiple case study approach and systematically analysed the roles and institutional arrangements of economic regulation of urban water services in three countries of Ghana, Mozambique and Zambia. Based on literature as the source of information, the research developed the existing political and socio-economic environment in the different countries which can affect the design and determination of the roles and institutional arrangements for economic regulation. A further analysis was made of the perceptions on the roles and institutional arrangements of the regulatory framework in the Sub-Saharan African context through a questionnaire distributed beyond the three case countries. The study obtained primary data from focus group discussions, key informant interviews, official documents and observations. Lessons obtained through literature from regulatory institutions in other continents have also been included and these are Jamaica, Latvia, Jakarta in Indonesia, and England and Wales. The factors which can affect the roles and institutional arrangements of economic regulation of urban water services were divided into three groups as: including country governance, socioeconomic and sectoral factors. Country governance factors, which include political stability and fragility, are a key factor in the decision of whether to establish a regulatory agency. On the other hand, socio-economic factors influence the focus or areas which must not be ignored by economic regulation. The third type of factors which include the robustness of a policy framework, and performance levels of utilities, affect the effectiveness and efficiency of an economic regulator. Based on the evidence from the research, economic regulation in Sub-Saharan Africa should address five key roles, which are [i] approval of tariffs that will lead to service providers achieving commercial viability, [ii] "consumer protection" [iii] monitoring and enforcing performance standards, [iv] setting up of a knowledge bank on urban water services, and [v] ensuring that the poor gain sustained access to water services. There are a number of specific regulatory functions within each role. Sub-Saharan African countries are in a unique situation where the urban poor comprise as much as 60% of the urban population and so cannot be ignored in the design of a regulatory framework. The conclusion from this research is that in order to achieve the perceived benefits of economic regulation of urban water services in Sub-Saharan Africa, and subject to conducive and appropriate political and socio-economic environment, the more appropriate institutional arrangements is an autonomous regulatory agency. The autonomy of the regulatory agency will be enhanced if it has its own legal status, and is able to develop, manage and control its own budget financed from a regulatory fee charged on the regulated water providers. Governments should be willing to relinquish regulatory decision making powers to this non-political and non-governmental body. The reporting and appointing mechanisms for the board could also have an influence on the autonomy of the regulator. The research further concludes that economic regulation of urban water services is a necessary but perhaps not sufficient condition for efficient and effective delivery of urban water services. It is not a panacea to the enormous problems of urban water services but can play a very effective role. The research has further found that it is too early to determine the impact of utility regulation on the performance levels of utilities in those countries that have a clearly defined regulatory framework. Utility regulation is still in its infancy in Sub-Saharan Africa and its impact is therefore a subject for further research.