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2012 Napoleon Abiwu Private Sector CRANFIELD UNIVERSITY School of Applied Sciences Doctor of Philosophy Academic Year 2008 - 2012 Napoleon Abiwu Private sector involvement in urban water supply management, Ghana Supervisor: Dr Richard Franceys October 2013 This thesis is submitted in partial fulfilment of the requirements for the degree of PhD © Cranfield University 2013. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright owner. ABSTRACT The performance of public utilities in low-income countries with respect to service to all customers, and particularly lower-income urban consumers, is understood to be limited in many cases. The Government of Ghana chose to implement a private sector management contract in order to deliver significant change in service delivery and financial viability. The five year management contract with Aqua Vitens Rand Limited ran from 2006 to 2011 and was not renewed. This study investigates the public utility outcomes, both as a state owned corporation and a state owned limited liability Company, and compares those outcomes with the achievements of the private operator through a Management Contract. The latter two management models operated under the oversight of the newly formed economic regulator, the Public Utility Regulatory Commission in 1999 and any effect of that regulation is considered. The hypothesis of the study developed in 2008 was that “a management contract would not provide the necessary level of empowerment, incentives and commitment and access to resources for a private operator to adequately and efficiently perform even where there is an established economic regulator with a clear mandate”. The case study approach was employed for the study data was gathered on the operations, activities, regulation and management of the urban water utility through documentary review, key-informant interviews, household surveys, public hearing meetings and user observations. However, three major cities including Accra, Kumasi and Tamale were used for the household survey. These three cities were carefully picked out taking into account the political, economic, geographical, social and cultural significance that each of the them represents and commands in Ghana. Analysis of Variance (ANOVA) and Paired t-Tests were performed to compare the financial and operational/technical performances between GWSC and GWCL, GWSC and AVRL, and GWCL and AVRL in view of the fact that all observations were taken from the same or matched subjects. In addition, post-hoc tests were conducted after performing ANOVA tests using Tukey’s HSD tests to determine which of the groups in i the sample differ. And finally, results of the study were analysed and interpreted using secondary data from the literature review. The study found that, both operationally and financially, there were no significant improvements during the period of the private operator compared with that of Ghana Water and Sewerage Corporation and Ghana Water Company Limited in areas such as water production, customer metering, non-revenue water, billing efficiency, bill collection efficiency, days receivables, liquidity, operating, profitability and labour productivity ratios, water tariff, creditworthiness and level of investment. Not only that, but also, the study revealed that the two previous reorganisations failed to make any significant difference. Averagely, the private operator reduced non-revenue water from 51.62% to 49.22% over the 5-year period. Overall, all three regimes exhibited high levels of inefficiency and ineffectiveness in reducing non-revenue water. Political patronage, nepotism, cronyism, tribalism and corruption have eaten deep into the fabrics of the public water utility resulting in a high labour productivity. Finally, the anticipated capital required for investment could not be accessed, a responsibility that remained with government, and the capability of the contractor did not appear to be strong enough to overcome the resulting challenges. In a single urban water supply system of Ghana, the research investigated and compared performances of three different regimes of management models over a 27- year span and also assessed the suitability of the form of private participation and net improvement the management contract brought to the urban population. The study showed that the two previous reorganisations or management models failed to make any significant difference and thus provide a unique contribution to academic knowledge and understanding. It shows that the success or failure of the urban water utility of Ghana is independent of the management models employed in view of the fact that all management models employed under all three regimes showed no significant differences. Instead, its success may be residing in other factors including competence of system managers, political will of governments, good institutional culture, level of investments, quality of management contractor, leadership style and finally the attitude of consumers towards such reforms as in the case of Uganda. ii Overall, it appears that further research into the role of the private sector and the capabilities, or otherwise, of the particular approach of management contracts is not required. Nonetheless, the underlying challenge of delivering potable water to all urban consumers in an efficient and sustainable manner remains. How this can be financed, facilitated, encouraged and achieved is clearly an area deserving of further research. Finally, further research is required to determine the extent to which managerial performance and the local environment of a water utility influence non- revenue water. Keywords: Urban water supply; public private partnership; Ghana iii DEDICATION I dedicate this work to my lovely wife Selorm Gifty Bansah and my three great children Nayra Komla Abiwu, Nunya Komla Abiwu and Nunana Kwaku Abiwu ACKNOWLEDGEMENTS Foremost, I would like to express my sincerest gratitude to the Almighty God for seeing me through those turbulent years to the end. I acknowledge with gratitude the funding from the Ghana Educational Trust Fund (GETFund) which made this study possible. My special thanks goes to Dr. Richard Franceys, my Supervisor whose expertise, skills, vast knowledge, patience, encouragement and support (i.e. both morally and financially) has brought me this far. I am most grateful, Dr. Franceys. To all thesis committee members, I say thank you especially, Professor Richard Carter for your suggestions and support. My sincere thanks also goes to my Pastor, Christina Emmanuel for her immense support for me. I am grateful. To my wonderful and lovely wife, Mrs Selorm Gifty Abiwu and my three wonderful children Nayra Komla Abiwu, Nunya Komla Abiwu and Nunana Korku Abiwu, I acknowledge the enormous support and love you gave me during those trying moments. I say, thank you very much. Again, I would like to extend my profound gratitude to my parents who showed me the way to school in the 1970s. To all my siblings, I say a big thank you to you all. It wouldn’t have been possible to undertake this study without my friends’ assistance, encouragement and support. To all these friends, I say a big thank you for your support, assistance and encouragement. Nonetheless, special mention must be made of Hon. Francis Komla Ganyaglo, Madam Peace Agbezuge, Dr. Samuel. Y. Bosomtwe, Dr Clifford A. Braimah, Mr. Anthony Mawutor Atsu, Mr Charles Ashaley, Dr. Mrs Edith Ejikeme-Ugwu, Mr. Ejikeme-Ugwu Bertram, Mr Sackey and Mr. Paul Tintani. Also, David, Mawuli, Kodzo and Francis (i.e. the late), I thank you all for helping me to administer my questionnaires in Tamale, Kumasi and Accra. v Last but not the least, I would also like to express my appreciation to all staff and consumers of AVRL, now GWCL who were ready and able to share their open and honest opinions with him. I acknowledge the support received in editing the final thesis document and preparing the final Chapter following my illness and long absence from Cranfield University. vi TABLE OF CONTENTS ABSTRACT ......................................................................................................... i DEDICATION ..................................................................................................... v ACKNOWLEDGEMENTS................................................................................... v LIST OF FIGURES ............................................................................................ vii LIST OF TABLES ............................................................................................. viii 1 Background of the study .................................................................................. 1 1.1 Introduction ............................................................................................... 1 1.1.1 The challenges in the urban water supply sector in Ghana ........... 2 1.2 Justification for the research ..................................................................... 7 1.3 Research aim, hypothesis and objectives ................................................. 8 2 Literature Review .......................................................................................... 10 2.1 Introduction ............................................................................................. 10 2.2 A brief historical background of Ghana ................................................... 10 2.2.1 The political economy of Ghana ....................................................... 12 2.3 The
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