Decentralization and poverty reduction strategies
It is important to note that cost recovery is one of many tools for effective water sector reform, the impacts of which might not be effective unless it is part of broader reform efforts to address poverty (see South Africa example-box High recovery, low return). In many developing countries, decentralization strategies - transferring administrative and financial responsibility for governance to the lowest possible level - are increasingly adopted as part of broader reform that includes poverty reduction strategies.
| High recovery, low return In South Africa (as noted by the Mvula Trust's newsletter article, "Cost Recovery at all Costs" by Martin Rall) some communities that have implemented cost recovery have noted a decline in water consumption, even while financial cost recovery rates are high. Thus, while consumers pay for a clean, piped water supply, they use very little, and have turned instead to other, poor-quality sources that are either free or at a lesser cost for the majority of their water use. The negative public health impacts experienced in South Africa and elsewhere must be considered prior to implementing cost recovery. Otherwise, the rationale for cost recovery - to improve service levels and sustainable water systems for improved quality of life and poverty reduction - is lost. |
Water reform strategies tend to parallel broader efforts, with central governments increasingly decentralising responsibilities for the water sector to the local level. This means that responsibility for service provision is devolved to a local level, while the central government maintains an oversight role with regards to policy making and regulation, as well as providing some funding. Localized decision-making bodies thus continue to gain authority for determining their own water resources development. The changes need to be consistent with poverty reduction strategies to avoid the benefits of reform accruing to those who are in less need of assistance.
For example, increasing coverage for middle-income households that are able to pay, but neglecting the poorest of the poor may have a negative impact on poverty reduction. That is because the poor are increasingly dependent on water resellers and pay on average over ten times more per litre of water than the wealthy, for a lesser quality (see the example from Netwas' Newsletter in the bow below).
| It is expensive to be poor According to an article written by Patrick Webb and Maria Iskandarani (entitled, "The Poor Pay Much More for Water and Use Much Less, Often Contaminated", in Netwas' Newsletter, Water and Sanitation Update, 2001 (not available online) in Lima, Peru, a poor family on average pays over twenty times what a middle class family pays, even though the poor family uses (on average) one-sixth as much water as the middle class family that has a network connection. The cost of connecting poor, peri-urban areas to a networked system is prohibitive to the poor, because these costs are generally required in a lump-sum. Hence, cost recovery strategies that address the issues of connection fees may be a viable option to improving service delivery to the poorest. |
Increasing investments and recovering the costs associated with managing water supply and sanitation systems must be recognized as essential to increase coverage and to maintain and improve existing services. However, an increase in investments or revenues will only be as effective as the management structure behind it.
In the context of decentralization, and the presumed building of local and municipal capacity to support it, some of the management options these local-level bodies have to reform and strengthen the public sector for service provision include developing alternative plans such as outsourcing service provision to community-based organizations, NGOs and the private sector.
This decentralized approach to water resources and services complements the drive and rationale for cost recovery. As local communities in rural and peri-urban areas take responsibility for their water and sanitation systems, and are no longer shielded by the bureaucracy of central planning, they have a better opportunity to identify the real local needs, the costs of providing a good quality service, and the best ways to recover the costs incurred.
