The Turnaround Account: Reforming the National Water and Sewerage Corporation

Address at THE OECD GLOBAL FORUM ON

ENVIRONMENT, Paris_France

Prof Dr. William T. Muhairwe

Managing Director, NWSC-Uganda

26th October-2011

Outline

Overview of NWSC

In Perspective: Typical Public Enterprises in

Uganda

Triggers for Change as at 1998

What was done: The NWSC Experience & Reforms

Role of Stakeholders

Challenges Encountered

How do you overcome Challenges: Key Success

Factors

Achievements

Looking ahead: Vision & Mission

NWSC Key Lessons for Turning around a Public

Utility

2

Overview of NWSC 3

Background to NWSC

NWSC is a Ugandan Parastatal set

up in 1972

Mandate to provide WSS in Large

Urban Centers on a Commercial

and viable Basis -23 major towns

Serves a population of about 4

million people

Note Rural Towns are covered by a

Directorate under the Ministry of

Water and Environment.

In Perspective: Typical Public

Enterprises in Uganda 4

Public Enterprises

Poor Leadership

Non–performers

Plagued by inefficiencies

Failure to expand services

Strapped for resources

Solution

Privatize utilities: Indeed rush to sell off companies witnessed

Sell off to foreign international companies

International companies have the required resources and expertise to turn around performance of utilities

Kampala had two management contracts with IPO’s

Triggers for Change in NWSC as at 1998

5

NWSC Situation in 1998

Quote World Bank at that time: Over the last 10 years, the GOU in partnership with the World Bank and Other Donors have made significant investments (over US $ 100 million) in the Urban Water and Sewerage sector. These investments have contributed immensely in rehabilitating the existing infrastructure under the NWSC management. Unfortunately, these investments have not been matched with the necessary efficient commercial and financial management capacity that can ensure the delivery of sustainable services in the medium to long-term”.

Large inefficient work force with conflicting

roles: Staff Productivity 36/1000 connections

Poor organizational culture -Corrupt Field

Staff

High UFW 50 -60% Monthly Deficit - $300,000

Poor Customer Care High operating Expenses (adm, medical,

transport

Low Collection Efficiency (60-70%) High Debt Burden 100 million $

Huge level of Debtors of about 14 months Poor organizational culture i.e. late coming

etc

Typical of Watsan Utilities in Developing Countries

NWSC Situation as at 1998 … 6

The Corporation therefore came under

pressure from both the Development Partners

and the Government to improve efficiency and

effectiveness in service delivery

What was done: NWSC Experience &

Reforms 7

Formulated both Long Term and

Short Term Plans

At Strategic Level Change in Board and Management

3 year Performance Contract

entered into with Government. (set

out obligations of both parties)

3 year Corporate Plan outlining

Strategic Goals adopted

Continuation with PSP in Kampala

and outsourcing of non core activities

in general

What was done: NWSC Experience &

Reforms 8

Plethora of Short Term Performance improvement Programmes at the

Operational level

►Setting priorities - 100- Days programme

►Customer focus & stakeholder engagement - SEREP

►Organisational culture change - Stretch-out & One Minute Management

►Increased managerial autonomy/decentralization/empowerment – APC & IDAMCs

►Adopting private sector like management principles of commercialisation and use of

Incentives, outsourcing non core activities & competition to drive performance

►Developed MIS - improved communication, operations and feedback systems

►Increased accountability and effective performance management – M&E systems ,

checkers system (Mathew 24/42-45)

►Capacity building of staff and extensive research in collaboration with key institutions

►Networking and benchmarking with peers for best practices – External Services

What was done: NWSC Experience &

Reforms 9

Tariff Reforms

► Reduced the Connection fees

► Eliminated Minimum Charges

► Introduced a simplified connection policy for both

water and sewerage connections funded through a surcharge in the Tariff. (i.e.

principle of some for more and not more for some)

►i.e. consumers do not pay for materials, labour charges within a distance of

50 meters from the mains

►Adopted Annual Indexation Policy to protect Tariff from

Exogenous factors , Inflation, Exchange rate, price of electricity.

T1 = T0 (AΔi + BΔfiΔfx+ CΔk )

What was done: NWSC Experience &

Reforms 10

Commercial Reforms: Adopted

“Slogan Customer is King and Reason we exist”

►Raving Fans (offering services + 1)

►Improvements in the payment system through the E Water payment

systems.

►Hand held meter reading systems (On spot billing)

►Prepaid meters for the urban poor areas

► 24/7 Customer call centre

►Quick response to Customer Complaints

Role of Stakeholders in the

Turnaround 11

The turnaround account of NWSC was enabled by various stakeholders. These include;

Government

▬ Legal Frameworks

▬ Performance Contract

▬ Financial & Technical Support

Development Partners/ Donors

▬ Financial for Hardware Infrastructure Development

▬ Policy advocacy

▬ Software issues like Capacity building

The Public/People – Media, Customers etc-- A Master’s Voice

The Staff/ Workers

NWSC´s response to the Debt Burden

Negotiated with Government restructuring of total debt

of Shs 153 billion which was converted to equity.

Restructuring was aimed at:

Enabling the Corporation access market Finance for critical and

commercially viable projects.

Enabling the Corporation build a history of profitability and credit

worthiness with a healthy balance sheet.

Enabling the Corporation finance from its internal resources key

investments all aimed at expanding production and service

coverage.

Corporation undertook a Credit Rating to further

enhance its credit worthiness: Achieved Rating of SA.

Long Term A, Short Term A1-

Strong cash flows.

Diversified financing of Investment, 3Ts

Challenges Encountered

13

Resistance to Change by some members of management and

staff

Government Bureaucracies and Red tape

Development Partners who under looked internal efforts and

sought to give “correct answers” hence delaying the turnaround

process

An un co-operative media

Huge Government Debtors- Government not honouring bills

Corrupt staff- especially in the field

A host of Technical challenges related to high NRW, frequent

bursts & leaks, theft of materials, poor customer care, business

as usual attitude, poor financial management

A huge inefficient staff with inadequate capacity

How do you overcome Challenges:

Key success factors 14

Involve staff in the reform process: (Addresses Most Operational

Problems)

Grant Autonomy

Competition amongst areas

Adopt Team Work

Motivate Staff (Thank You) very effective motivator

Strong incentive systems and equitable gain sharing plans

Performance Contracts for all staff, and Performance based pay

Checkers system of monitoring staff

Involve and keep stakeholders informed about the processes at all

stages, and benefits. (example media covers Launch of

programmes).

Align donor focus to your own aspirations.

Customer Focus of all your activities

Signed a Memorandum of Understanding with Government in

regard to water rates payment.

NWSC Key Achievements 15

Performance Indicator 1998 2011

Service Coverage 48% 75%

Total Connections 50,826 272,406

New Connections per year 3,317 25,623

Metered Connections 37,217 271,734

Staff per 1000 Connections 36 6

Collection Efficiency 60% 96%

NRW 60% 32.8%

Proportion Metered Accounts 65% 99.8 %

Annual Turnover (million USD) 11 50

Profit (Before. Dep) (Millions

USD)

4.0 (loss) 11.0 (Surplus)

Nominal Versus Real tariff 1994 -

2011

16

0

500

1000

1500

2000

2500

Ush

s/m

3

Years

Nominal Versus Real tariff 1994 - 2011

Nominal Average Tariff

Real average Tariff

Real Tariff

Stabilized

over time

Real average

tariff stabilized

at about 800

shs per cubic

meter of

water

produced.

Nominal tariff

increased.

New Connections Growth 1999 -

2011

17

New

connections

have

dramatically

increased

from a low of

3,000/annum

to average

25,000 per

annum. 0

5,000

10,000

15,000

20,000

25,000

30,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Nu

mb

ers

Total New connections

Total New connections

Looking Ahead: Vision & Mission

18

Current Vision Statement (2006 to date)

To be One of the Leading Water Utilities in the World

Mission Statement

To provide Efficient and Cost effective Water and Sewerage Services, applying Innovative Managerial Solutions to the

Delight of our Customers

Key Lessons: How do you Manage

Change?

19

1. Positive Action

2. Break out of Limiting Beliefs

3. Think Differently

4. Ability to Manage Stress

5. Massive Action

6. Break The Rules

Source: “How to be Brilliant; Change

your ways in 90 days”-Michael

Happell

Key Lessons: NWSC Experience 20

Reforms are about creating harmony

Nat/Local Govts.

Private Sector

Financiers

Customers

Utility Nat/Local Govts.

Private Sector/ suppliers

Today! Where to Go!

Key Lessons: How do you Manage

Change (Attitudes that Attract Success)

21

Attitudes that Attract Success: At times we just have to change our

attitudes

“Try than fail to try”

1. Make your choice. Mathew 5:3,5,7-9. Blessed are the gentle, for they shall inherit the earth.

2. Believe you can change: Mathew 9:29. According to your faith ,will it be

done to you.

3. Train your eyes to see what is good. Proverbs 11:27. He who diligently seeks good seeks favour, but he who

searches for trouble, that is what he will get

4. Practice, Practice & Practice : Hebrews 5:14 Because of Practice, you can

discern good from evil

5. Never ,Never ,Never Give Up. Winston Churchill

Source: Wayne Cordeiro /Muhairwe

Key Lessons: NWSC Experience

22

Gradual, incremental approach to the reforms

A hardworking and committed Board of Directors with a good mix of skills is necessary

Committed, transparent, competent top leadership

A dynamic team of staff motivated by clear vision, mission and objectives & their involvement at all levels

Continuous self monitoring and evaluation of programmes

Firm decision making on key aspects of the reform

Adopting a “do it yourself policy”

Stakeholders involvement in the reform process & a comprehensive customer focus

Reward system for competing areas & use of benchmarking based on efficient utilities

Capacity building at all levels through research (MBAs, Masters, Ph.Ds) and seminars and workshops

Having “open door” policy to most operating data, for interested parties to make references e.g. use of web-sites and circulation of performance reports

Conclusion 23

Reforms are a reality. Every utility must adapt itself to these challenges by implementing its own tailor made Vision, Mission and strategies.

There is always a difference one can create in terms of improving performance in a Public Enterprise, managed by the locals. You just need determination, commitment , courage and discipline.

“Be the change you want to see in the World”

Mahatma Gandhi

24 24

Title: Making Public Enterprises Work

From Despair to Promise: A Turn Around Account

Author: William T Muhairwe

Co-Published by: IWA Publishing & Fountain Publishers

For more information http://www.iwapublishing.com