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DAM-L French water deal to cost Kenyans $25M/LS (fwd)
>From The East African (Kenya)
Monday, August 7, 2000
French Water Deal to Cost Kenyans $25m
By PETER MUNAITA
THE EASTAFRICAN
NAIROBI CITY water consumers will have to dig deeper into their pockets to
pay Ksh1.9 billion ($25.3 million) in 10 years following the proposed
management transfer of water billing and revenue collection from the
Nairobi City Council to Sereuca Space of France.
Sereuca Space, in a joint venture with Generale de Eaux and Tandiran, will
not invest a single cent in new water reservoirs or distribution systems
during the 10 years that the contract will be in force. Instead, the
company will spend an undisclosed amount on installing a new billing system
at City Hall and, for that, reap 14.9 per cent of the Ksh12.7 billion ($169
million) collected over the period. The amount to be paid to Sereuca Space
will be Ksh1.9 billion over the 10 years.
Consumers will pay the money under a graduated tariff structure with
takers of up to 10 cubic metres being charged Ksh12 ($0.16) per cubic metre
while users of up to 30 cubic metres will pay Ksh18 ($0.24) per cubic
metre. Those who consume up to 60 cubic metres will be liable to pay
Ksh27.5 ($0.37) per metre, with large consumers (above 60 cubic metres)
paying Ksh34.50 (0.46) per cubic metre.
The charges represent at least a 40 per cent increase over the current
tariffs although most of the bills are estimates due to lack of water
meters, which cost about Ksh2,000 ($27) per household. The city is
currently under a biting water rationing schedule attributed to drought,
which has drained the reservoirs that supply water to Nairobi's population
of about three million people.
Nairobi deputy mayor, Mr Joe Aketch, has opposed the deal, saying it will
lead to a loss of 3,500 jobs in exchange for 45 staff, four of them
expatriate, who Sereuca proposes to employ. The salaries of the expatriates
appear utopian by Kenyan standards, with the average total pay rising from
Ksh124.5 million ($1.7 million) in the second year of the contract to
Ksh293 million ($3.9 million) at the end of the contract. The deal has also
polarised opinion within the council, explaining why it was not implemented
in April as initially planned. It was not clear whether the deal has been
sanctioned by the Ministry of Local Government and Treasury due to the huge
expenditure implications.
Analysts question the wisdom of giving away a department that accounts for
three quarters of the council's revenue to a private firm which will not
add any value either to the city's water distribution system or supply. The
Nairobi City Council's water and sewerage department is supposed to
reimburse the cost of the computer system and hardware to the contract at
the end of the 10-year arrangement, with no provision for depreciation.
Observers now contend that the sums to be earned by Sereuca, a subsidiary
of Vivendi of France, which won a $55 million tender for Kenya's second
mobile phone provider, are exorbitant. Vivendi will provide cellular
telephone services in Kenya in conjunction with the Sameer Group. They
argue that the City Council should have opted for the commercialisation of
the department.
Analysts have long argued that the water department could meet its
financial obligations, including loan repayments, and pay handsome
dividends to the council if run commercially.
They have proposed that consultants be appointed to develop a
commercialisation strategy including a transitional management plan before
the strategy is implemented. Instead, the city council has preferred to
contract its billing and collection section to Sereuca for 10 years, a
duration which shuts out any proposal for an appropriate commercialisation
strategy.
There are also concerns that the single sourcing process used to give out
the contract to Sereuca undermined the prospects of the council getting a
competitive quotation, although it insists that it invited four other
companies to bid. Its failure to identify the other contestants has clouded
the entire process, with experts calling for an open tendering system
conforming to World Bank guidelines.
The contract also raises critical issues since water distribution will
still be under the Nairobi City Council. Although the council has a capital
plan to cover distribution, no proposal has been made on how the council is
to fund such a programme.
Observers say this failure will adversely impact on the contractor's
performance, to the extent that the proposed increase in billing from 50
per cent of consumed water to 80 per cent in three years may not be
realised.
Collections are projected to rise from 58 per cent to 95 per cent in three
years.
Although Sereuca systems could check against fraudulent billing, which
costs the council Ksh192 million ($2.6 million) a year, the sums payable to
the contractor will still leave the council with no savings at the end of
the contract.
Councillors want the contract cancelled and subjected to proper
professional analysis and re-tendering.