The informality of many small-scale providers presents a significant concern for municipalities that decide to either work with these existing suppliers or to integrate their competencies into a new partnership arrangement. The nature and characteristics of small-scale independent providers (SSIPs) and informal service providers, and their potential roles in future service delivery partnerships, have been discussed in Chapter 6. Yet the complexities and constraints of engaging them in a partnership may seem insurmountable, even with a significant degree of attitudinal change.
In principle, SSIPs can be contracted through the same mechanisms as the formal private sector and many have service (or management) contracts and franchise contracts with municipalities. But in order for a micro- or small-scale provider to be paid by a municipality, it will be necessary for it to have a legal agreement or contract - and in order to enter into a legal agreement the municipality will need to know the contractors/operator has the correct legal status. This will normally require it to register as a business (see illustrative material in Boxes 6.8, 6.9 and 10.10).
Registration can be difficult, or it can be simplified by the development of supporting initiatives that encourage the process and assist individuals and small-scale entrepreneurs. Normally the bureaucracy can overwhelm and block entry for otherwise willing entrepreneurs. It is likely, for instance, that registration will require:
• a fee to be paid - this can act as a constraint unless credit mechanisms are established to facilitate payment;
• some form of legal assistance - the documentation itself may be overly daunting for an illiterate or semi-literate tanker driver; and
• some form of accounting/financial management assistance - to manage reporting and taxation matters.
While registration is probably required to ensure the municipality (or other contracting party) is acting legally, it also enables more effective monitoring and compliance with:
• environmental regulations (e.g., water quality, dumping, hazardous waste, pollution control);
• labour laws (e.g., work conditions, health and safety or child labour); and
• taxation (e.g., income tax, vehicle tax).
A number of studies in relation to water, sanitation and solid waste informal sector providers detail the problems, lessons and potential solutions of municipalities engaging with the informal and small-scale private sector.16 Municipalities are encouraged to familiarise themselves with this information to the same degree as the information on formal private sector transactions.