The Principles of Legitimacy and Legality

To be credible, partnerships with the international and large-scale private sector need support from key stakeholders and a firm legal basis. This creates a safe environment for investors, and a sound basis upon which the delivery of services can take place. However, as we have discussed in Chapter 3, partnerships involving the private sector frequently face political, ideological and historical objections, and some stakeholders will want basic service delivery to remain a public sector function. Employees within the municipality may feel threatened by private sector participation, believing that their jobs are at stake. Consumers too may fear that private control over services will lead to tariff hikes, and reduce their access to decisions about services. The poor are particularly vulnerable, because private operators often receive better returns on services that have a safe revenue stream and higher profit margins.

Furthermore, if the process of awarding contracts is in question, losing bidders may oppose the procurement of the winning bidder's services, and this could engage the municipality in protracted and expensive legal battles. If the legal basis of a partnership is in question, the accountability of the parties will be tenuous, compromising certainty that the contract obligations will be met.

The key to addressing these challenges lies in effective process management and due legal process. First, stakeholder participation is essential, as it enables the different parties to air their views, raise their concerns and feel that they are part of the process. Special arrangements may be necessary to ensure that poor communities are well informed, and are able to influence decisions about various aspects of the partnership, such as service levels or tariff levels. Second, the municipality should be clear about what it wants to achieve through private sector participation, as this would enable it to engage with stakeholders, either to convince them or at least to ensure a working arrangement that would avoid any stakeholders fundamentally opposing the partnership in ways that make it unworkable. Third, it pays to be as open as possible. Policy frameworks should be clearly articulated, information made accessible to all, and procedures for procurement should be open, fair and credible. Finally, the legal basis of the contract must be beyond doubt. This means that the municipality must be duly empowered to enter into such a contract, the statutory framework must provide for such municipal contracts, the rights and obligations of the participating partners and any regulators must be clear, and the legal basis must provide certainty for the partnership.

The more transparent the process, the more accountable the council, the more extensive the inputs and open the debates, and the firmer the legal basis, the better the prospects that private sector participation will become a legitimate option. All the stakeholders may not be equally enthusiastic, and some may continue to believe that direct municipal service provision would have been preferable. But if they know that the processes of debate were open, the negotiations and procurements fair, and the contracts credible, they are more likely to accept the actions taken.6