While many service projects over recent decades assumed that the poor could not afford to pay for their services, this notion has now been replaced with a widespread belief that the poor can pay, do pay, are willing to pay, and sometimes pay quite dearly for services. As a result, partnerships are being developed based on the understanding that 'the poor' have the capacity to pay for formal, regular service provision. While this would appear to be the case for some poor households, it is important for service arrangements to reflect a more precise understanding - to recognise the different capacities of poor people, and to acknowledge the different practices and priorities that exist within low-income communities.
Poverty assessments repeatedly show that some poor groups are prepared to pay high prices for their water, even if it is of low quality, simply because the supply (and payment methods for that supply) is flexible. Altering service consumption is often a primary aspect of livelihood strategies and an important means of survival during a crisis. One of the key risks for the poor as they enter the realm of formal water and sanitation provision is the loss of flexibility that informal (although sometimes substandard) services offer them. Informal vendors allow the poor to opt in and out of a service in a way that the formal networked systems - public or private - do not.
The belief that the poor can afford and are willing to pay for services also needs greater examination. In many cases their 'willingness' reflects their need and their lack of choice. For a household surviving on US$50-100 per month, there is an opportunity cost associated with paying for services. Such people may pay for water at the cost, for instance, of schooling or health care. Municipalities need to improve understanding of household expenditure.
We also know that some poor households do not pay, obtaining water for free through illegal connections or from relatives. We know that the poor frequently change the pattern of their consumption as part of their livelihood strategies. Affordability and willingness-to-pay studies promoted in partnership toolkits are a crucial stage of the partnership development - but, as mentioned in Chapter 5, information collection should be carried out in the context of a broader livelihood analysis. A qualitative and quantitative poverty assessment will expose, inter alia, how much the poor currently pay for service provision. It will also reveal the following.
• The source of the service (e.g., an SSIP, a communal supply managed by the community), and the service alternatives currently available to poor households (such as illegal connections, sharing with neighbours, dependency on relatives).
• The frequency of payment (including seasonal variations in service use and payments), the flexibility of payment conditions (including the penalties and enforcement mechanisms), and the options available in a time of crisis (e.g., buying drinking water, using natural sources for washing).
• The percentage of household income spent on each service and the opportunity cost of that expenditure (e.g., women reducing food intake, girls not attending school); what would they spend their money on otherwise?
• How many of the poor can be categorised as being 'able to pay', how this is to be defined, the trends among different poor groups, the differences between willingness to pay and having no choice but to pay, and the links between affordability and other characteristics.
• The factors affecting service affordability (seasonal unemployment, flooding, sickness, marriage).
There is much debate over the effectiveness and sustainability of subsidies as a means to assist the poor (this debate is addressed in the financial options and arrangements discussion later in this chapter). The core issue is how, within the limits of political acceptability, to develop financial arrangements that support those who cannot afford a survival level of service without undermining the 'user pays' principle, without creating an unsustainable system and without providing unintended benefits to non-poor users. A second issue is that a subsidy for a particular service is only one component of municipal welfare expenditure. It is important for decision-makers to realise that there is an opportunity cost for subsidies in one sector, and it is likely that a subsidy in one sector will mean that another service or activity will not be funded. Who prioritises one subsidy over another? Such is the case with the subsidy applied in Stutterheim (see Box 7.17). Rather than effective tariff structuring, the municipality has allocated a national grant to subsidise the tariff - a grant that could otherwise be used for economic development activities with the unemployed.
Alternative methods of implementation can also assist in making services affordable. Labour-based approaches can reduce costs and provide opportunities for the poor to earn income or reduce costs (digging trenches, for instance). In relation to network services, this may relate to individual households, to enable them to obtain a household connection; or it may be organised at a neighbourhood or community level with larger groups, to facilitate works on secondary sewers, for instance. In El Alto (illustrated in Box 7.6), the operator facilitated community involvement at both levels in the construction of a simple condominial sewerage system.
Box 7.7 Alternative Payment Mechanisms | |||||||||||||||||||||||||||||||||||||||||||||||||||
Barrio Nelson Mandela, located in the extreme east of Cartagena, is probably the poorest peri-urban settlement in the municipality. It arose following a series of land invasions in the early 1990s, primarily by displaced persons fleeing from the civil war, and it was formally recognised in December 1993. By mid-2000 it had an official population of over 30,000 (5500 households) grouped in 24 sectors. Unofficial estimates put the population at around 50,000. Barrio Nelson Mandela is not legally incorporated within the municipal administration, but has a special status outside the administrative system of comunas. According to the 1997 urban planning legislation that created the Plan de Ordenamiento Territorial (POT), the responsibility of municipalities to provide water and sanitation is confined to the legally defined 'urban area' within the municipality. By placing Barrio Nelson Mandela outside that area, the municipality was effectively denying its responsibility for service provision to the settlement. This means that, in practice, some responsibility for water and sanitation in Barrio Nelson Mandela lies with the departmental government and not the municipality. Because of this legal impediment, AGUACAR, the private operator (see Box 7.12), argues that it cannot invest in Barrio Nelson Mandela, as it still falls outside the urban sanitation area to which it must extend coverage under the terms of the 1995 contract. For that reason, one of the main demands of residents is for Barrio Nelson Mandela to be relocated within the urban area, by granting it the status of a new comuna. Similarly, community organisations in the settlement are not recognised as fully fledged community organisations, because these may only exist in the legally defined urban sanitation area of the municipality. Instead, residents have established their own communal housing committees (Juntas de Viviendas Comunitarias), but these do not have the same clout as community organisations in negotiations with the municipality. Until recently, Barrio Nelson Mandela residents obtained water mainly by illegal connections but also from water tankers supplied on an infrequent basis by AGUACAR. A maze of irregular plastic pipework criss-crosses the community, which is built on the side of a steep hill. This has led to sharp conflicts between residents over responsibility for cut-offs, diversions and problems of low pressure. During 1999, AGUACAR held discussions with community leaders in search of an interim solution to the water needs of the residents until the vexed issue of the legal status of Barrio Nelson Mandela could be resolved. However, AGUACAR decided it would begin to supply water legally to the settlement, but in a collective fashion, thereby avoiding the legal technicality that forbade individual connections in an area outside the urban sanitation area. From the viewpoint of the private partner, this had the short-term benefit of recouping part if not all of the revenue that was previously lost through illegal connections. It also had the long-term benefit of encouraging a 'payment culture' among residents, as a stepping stone towards the eventual introduction of individual household connections. From the viewpoint of residents it had the advantage of ensuring a more regular water supply. It was also hoped that it would put an end to the perennial problem of extensive leakages at the top of the hill where water was tapped from the mains supply and associated very low pressure for residents at the bottom of the hill. This occurred because the illegal connections had been made with small diameter pipe that could not resist high pressure. The legalisation of these connections now meant that residents were willing to invest in replacing this narrow diameter pipework with a secondary network of larger diameter pipework. The non-traditional system of collective payment for water was introduced in January 2000. Water supplied to the settlement is now measured by 10 separate macro-meters, each of which corresponds to the location of the previous illegal connections to the mains pipe. The coverage of each macro-meter ranges from a low of 120 households to a high of 1188 households. In each case the households are billed collectively. The leaders of the respective community organisations are responsible for collecting payment of a standard monthly contribution by each household. This amount is calculated by simply dividing the collective bill by the number of households. In the first half of 2000, households were typically paying a monthly average of around US$1.2 for 7-8 cubic metres, somewhere in the order of 2-3% of the prevailing monthly household income of around US$40. The system of collective payment by use of macro-meters has some potential disadvantages. First, there are commercial establishments in Barrio Nelson Mandela (e.g., a private health centre) that consume large amounts of water. But under the communal billing system, they pay the same as a private household Second, there is considerable resale of water, which continues to date because of low pressure in outlying parts of the settlement. Under the communal billing system, residents who re-sell water are charged the same as those who do not, even though their consumption and capacity to pay are much higher. Third, some householders simply refuse to contribute to the communal bill. In the Edén sector, 6 households out of a total of 75 had refused to pay the communal charge ever since it was introduced at the beginning of 2000. Nelson Mandela - communal billing data
Note: Calculations based on primary data supplied by AGUACAR (Feb/March-June 2000); US$1 = 2000 Colombian pesos The increased financial burden that this causes to the majority of households who do pay may prove to be a source of conflict in the future. Finally, there is the danger that community leaders become viewed by residents as 'tax collectors' on behalf of AGUACAR and thereby lose their own legitimacy. El Pozón, one of the 14 districts (comunas) within the municipality of Cartagena, has an estimated population of 38,000 and is the fastest growing area of the city. Within El Pozón there are an estimated 42 barrios, of which 27 are officially recognised by the municipality. All barrios within El Pozón are classed as Level 1 - the category with the highest level of unsatisfied basic needs in the system for determining tariffs for basic services. There is virtually no industry in the whole of El Pozón. The pipe network in El Pozón is inadequate, of narrow diameter and of poor quality. Many connections are illegal. As a result, the supply arrives intermittently (four days per week and 12 hours per day at the most). Most residents of El Pozón still buy their water from private water vendors. These vendors are often residents who live on the tarred road where there is a connection to the pipe network. Although technically illegal, AGUACAR tolerates the resale of water. Vendors resell water in five-gallon (20-litre) plastic containers known as canecas. The cost varies from 50-250 pesos per caneca, depending on two factors: distance from the distribution point and the availability of alternative supply. There are two principal alternative sources of supply. First, there is an intermittent but unreliable supply of free water from tankers belonging to AGUACAR. Second, during the rainy season, residents store rainwater for domestic use. The fluctuation in the sale price of water is extremely sensitive to variations in these two alternative sources of supply. During the dry season, and when AGUACAR tankers do not appear for a long time, it is not uncommon for residents to queue from 4am in order to buy water from private vendors. Household expenditure on water is US$7.50 per month. According to provisional calculations by AGUACAR, residents in Level 1 comunas such as El Pozón can expect to pay 6000 pesos (US$3) per month for water when connected to the piped network, a potential monthly saving of around 60%. As part of the World Bank loan, AGUACAR will undertake a major US$2.5 million investment programme to radically improve water supply to El Pozón. Prior to the design of the project, AGUACAR carried out a consultation with the citizens of El Pozón. First, meetings were held with members of the neighbourhood committees (Juntas de Acción Comunal, JACs). Second, there was a sample survey covering 1031 respondents, carried out by a local NGO. The over-riding conclusion of the consultation was to highlight the importance of devising appropriate mechanisms for payment of bills - mechanisms that would take into consideration the prevailing culture of daily management of the household budget. Efforts are being made to reduce the financial burden of the connection charge and monthly payments in El Pozón. The standard household connection charge to the water network (including cost of the meter) is estimated at 213,000 pesos (US$106). The current plan is to spread the burden of payment as follows: a down-payment of US$15, followed by 36 monthly instalments of US$2.50 (at 1.2% interest). These payments would be added to the monthly water bill. However, it is feared that even this instalment system would be beyond the financial capacity of the poorest citizens in El Pozón and another possibility being mooted is a reduced connection charge of 150,000 pesos (US$75). To overcome the lack of a 'payment culture' in El Pozón, AGUACAR is also considering the replacement of the standard monthly billing system with a weekly billing system using mobile collection teams. | |||||||||||||||||||||||||||||||||||||||||||||||||||
Sources: Nickson, 2001a; Foster, 1998 | |||||||||||||||||||||||||||||||||||||||||||||||||||