Despite the argument that service partnerships are a part of broader management activity, in practice, municipalities will still have to create partnerships on a sector-by-sector basis, and so many are interested to know how to go about the sequencing of partnerships within the municipality. For instance, should certain services be reorganised before others? Which service should come first? What dictates the order? Should contentious services be left until stakeholders are more accustomed to the idea? Are lessons from one service partnership transferable to another?
Many contextual factors have determined municipal decision-making to date and case study experience does not suggest that there is an obvious pattern. Analysis does, however, suggest some simple pointers for municipal consideration. These include the following:
• Politicians develop confidence when they see partnerships work Experience in one or two services can give political decision-makers the drive and resolve to promote further private sector involvement in other sectors. The success of small initiatives with service contracts, management contracts and corporatisation (see Box 4.5 on Gweru) can move the partnership agenda forwards significantly. In Gweru, councillors gradually realised that they were being supported because voters could see improvements in service, and the councillors could boast that these were being achieved at a lower cost. Administrators were convinced by the financial gains and reduced risk.
• There is a steep learning curve associated with PPPs Municipal management teams develop organisational capacity and noticeable skills simply by having been through a process of developing partnerships. This capacity brings substantial benefit to service partnerships organised thereafter. Skills and confidence are vital to the early stages of project formulation. In particular, the appointment of consultants, the processes of tendering and negotiation, and the finalisation of contracts are all transferable skills.
• Attitudinal barriers are removed as partnerships develop Developing positive attitudes towards the private sector among municipal and civil society stakeholders takes time. The gradual process of involving the private sector in a number of services in Gweru proved that receptive attitudes could be developed quite quickly once assumptions were addressed and the fear of corrupt practices alleviated. Accountability and transparency were central to achieving a 'change-friendly' environment.
• The nature of the service - whether it is a basic or non-basic service - affects the decision-making process Many municipalities will opt for smaller, non-critical service partnerships first, but if the national policy encourages municipalities to resolve basic services such as water supply they may opt to develop partnerships immediately in a basic, network service. The diverse characteristics of network and non-network services are thus another aspect for consideration. Network services will be of interest to large international operators, whereas non-network services such as solid waste and some sanitation services may attract local and national investment. Many municipal officials have expressed their fear of the international private sector, and prefer to work with national businessmen before embarking on more ambitious processes with more skilled partners.
• The scope of the service may affect the timing of private sector involvement Smaller functions may not create fewer labour problems, but are critical steps towards more ambitious arrangements, testing reactions and building capacity. Evidence suggests that they may be basic services, such as on-site sanitation, which can be 'unbundled' into a discrete service package.
All of these issues - the reform process, the multisectoral function and the learning organisation - are central to understanding where partnerships and partnership development are 'located' in urban governance and management.
Box 4.5 Building Experience in Private Sector Participation Gweru, Zimbabwe | |
The process of involving the private sector in municipal functions in Gweru originated in 1995, with a national capacity building programme for local government managers to expose them to and familiarise them with the benefits of commercialising a range of municipal functions. This initiative was a direct result of the national economic reform programme led by the World Bank, and while the emphasis lay on commercialisation, it clearly included the possibility of delegating management to the private sector. This paved the way for local authority functions to be privatised. All 22 local authority managers in the country were then asked to propose commercialisation options within their own municipalities. | |
By September 1996, the Gweru Town Clerk notified the national government of Gweru's intention to move forwards with the commercialisation/privatisation of 20 municipal functions. These included water and sanitation services. Not least because of the previous capacity building efforts, the council welcomed the proposals made by the Town Clerk. It is interesting to note that the process of introducing the private sector in Gweru focused on effective urban management. It was not applied to just one sector, but was seen as a new approach to the management of the city. The urban management decision was to commercialise as many services as were appropriate and possible. | |
The second important characteristic of the Gweru process at this stage was that there was no fixed agenda or adherence to one option. Of the first three functions that were commercialised (distilleries, theatres and security services), each was approached in a very different manner. The distillery operations were reorganised into a commercial enterprise, wholly owned by the council; a lease arrangement was established for the theatre; and security services are managed through annual service contracts. Thus the drive towards the commercialisation of municipal functions was a key part of the development of healthy municipal finances, and one of the notable characteristics of town management prior to any private sector participation in water and sanitation services. | |
The experience of three of these sectors is described below. | |
Theatre (lease contract) Prior to the management contract, the city theatre had been run by the Housing and Community Services Department of the Gweru City Council (GCC), with approximately eight staff. It had an annual loss of approximately US$20,000 at 1995 prices. In 1996 the GCC approached the Gweru Theatre Guild to take over the management for a 10-year period. The theatre assets remain with the council, and the guild pays the council an annual fee of ZD 12,000. The guild is responsible for fee collection, and retains all the profits. Since commercialisation, theatre services for the community have improved and the council receives a small leasing fee rather than a significant loss. | |
Security/enforcement services (service contract) A cost-benefit analysis carried out in 1996 showed that the private sector could deliver security services at a lower cost and more effectively than the municipality. As a result, the GCC tenders security services on an annual basis to local companies. The chief security officer monitors performance. Indicators of improved effectiveness include: a decrease in the number of break-ins at municipal buildings, an increase in the number of arrests; and fines for violating municipal by-laws. The GCC continues to provide some security services to ensure the ongoing employment of security guards, but it has placed a moratorium on staff recruitment and intends to create service contracts for all similar services in the future. | |
Liquor undertaking (corporatisation) The Gweru liquor undertakings were commercialised in 1997. They now form a registered company that is wholly owned by the council, but is autonomous and has an independent board of directors. Before corporatisation, liquor undertakings made a substantial loss that drew unnecessarily on council resources. In 1996, the estimated net loss was US$490,000. This was turned around when it was taken over by skilled private sector managers. In 1999, the annual profit was approximately US$200,000; in 2000, profit was estimated to be in the order of US$750,000. Dividends are now paid to the council. | |
The experience and success of these initiatives created an environment in which the GCC felt that it was able to embark on a more ambitious move towards private sector involvement in the water and sanitation sector. The Town Clerk stresses that all the officials and politicians experienced a steep and helpful learning curve through these first initiatives, and that by 'extending the barriers' in other sectors the council gained invaluable experience in stakeholder consultation. The Gweru case provides an illustration of a municipality that gradually and deliberately developed a process of involving private sector actors in a range of sectors, in a variety of ways. Each initiative is freestanding, but forms a part of an overall strategy. In terms of outcome the degrees of success vary, but all sectors, with the exception of solid waste, have experienced large-scale improvements in efficiency and service. | |
Source: Plummer and Nhemachena, 2001 | |