Water Privatisation in Kenya

Global Issue Paper No. 8

25. Juni 2008

By Wambua Sammy

Published by the Heinrich Böll Foundation 2004


Whereas the Kenya government seeks to move away from direct provision of water services in favour of ceding control to autonomous water service providers, this policy shift is fraught with ambiguities that may not augur well for the consumers, especially the poor.

The Water Act 2000 broadly sets out the legal implementation framework for implementing this policy but is weak on clearly elaborating and outlining government policy on privatisation in the water sector.

The Act recognises the role of independent water service providers and identifies the Water Services Regulatory Board (WSRB) as the statutory organ established to regulate their functions principally through developing guidelines on applicable tariffs for the provision of water services. At the level of local Authorities in Kenya, the impetus appears to be more towards commercialisation under which efficiency in service delivery can be attained whilst ensuring that respective Local Authorities retain a measure of control. It is now a common trend for Local Authorities to form municipal companies run on strict commercial lines under “agency contracts” from the parent Local Authority.

The emphasis by local authorities is towards ensuring that under the framework of commercialisation, companies formed to provide water plough back the bulk of their earnings into improving service delivery while allowing local authorities to retain part earnings to cover costs
such as personnel expenses.

This is primarily geared towards ring-fencing water revenues from diversion to non-water areas. However, this policy while helping ensure a better and more efficient management of water resources, cannot ensure large-scale commercialisation of water services. Local Authorities would need to invest substantially in improving the infrastructure to cover substantial numbers of consumers who are critical to the viability of commercialisation.

Different stakeholders have suggested various views on how this can be achieved. For instance, the Kenya Basic Rights Campaign – a coalition of civil society groups campaigning for access to basic rights like water– maintains that municipal water companies can expand their share holding through sale of equity to other parties which would guarantee access to resources to improve on service delivery.

There have been suggestions that foreign firms involved in provision of water services could also play a role. However, there is caution and fear that such companies could end up pocketing a disproportionately large chunk of water revenues for providing non-capital intensive services such as billing and revenue collection which Local Authorities, through municipal companies, could manage with a more efficient management. Even though this may necessitate such foreign firms injecting substantial investment on water projects, their entry would require clear reflection on the implications to Local Authorities.

This study documents that water companies formed by various municipal authorities can deliver economically viable services given a clear institutional and operational framework. Articulating such a framework is therefore an important starting point.

Still, there is need for serious consideration of governance issues in the management of the water sector and towards defining of a sound regulatory mechanism which does not compromise service delivery, the ecology and national sovereignty.

The example of both Nyeri and Eldoret – two Kenyan towns that have commercialised water services – demonstrates an important window of opportunity for Local Authorities which presents important lessons for other key Local Authorities such as Nairobi. The workings of municipal companies involved in water provision provides opportunity for improving efficient service orientation. The engagement and involvement of foreign firms should therefore be based on a clear assessment of value addition that this would have over and above municipal companies. To inform the Kenyan water debate, the study examines difficulties encountered in water privatisation in Ghana and advises on the need for caution and reflection to avoid the pitfall of increasing costs which burdens the poor without adequate safeguards.

The experiences of Germany, South Africa and Nigeria are also examined to provide a contextual review on challenges and opportunities. Ultimately, it must be recognised that countries like Kenya must contend with pressure and prescriptions from a host of actors under both bilateral and multilateral arrangements in re-organising the water sector. This necessitates greater vigilance and clarity in taking decisions on the management of water resources.