NATIONAL WATER SUPPLY AND SANITATION COUNCIL. Urban and Peri-Urban Water Supply and Sanitation Sector Report 2013

Transcription

1 NATIONAL WATER SUPPLY AND SANITATION COUNCIL Urban and Peri-Urban Water Supply and Sanitation Sector Report 2013

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3 T a b l e o f C o n t e n t s Abbreviations and Acronyms... ii Foreword... v Executive Summary... vi 1 Summary of Performance for CUs for the Year National Urban Water Supply & Sanitation Coverage Operating Conditions of CUs Overview of Sector Performance CU Performance Ranking Rewarding CEO s Performance Comments on Performance for each CU Providing WSS Services in Newly Created Districts Service Provision to the Low Income Areas The Devolution Trust Fund (DTF) Support to the CUs Impact on the Ground Future Outlook The National Water Supply and Sanitation Council (NWASCO) Introduction Implementation of Third Strategic Plan Monitoring Service Providers Sanitation Surcharge Tariff Approvals Regulatory Enhancement Pricing for Water Supply and Sanitation Progress on Meeting Service Level Agreements and Adherence to Service Level Guarantees Comparative Performance of Commercial Utilities Performance of Private Schemes Conclusion...73 i

4 Abbreviations and Acronyms AGM Annual General Meeting LGWSC Lukanga Water and Sewerage Company CEO Chief Executive Officer LPWSC Luapula Water and Sewerage Company ChWSC Chambeshi Water and Sewerage Company LWSC Lusaka Water and Sewerage Company CU Commercial Utility MCA Millennium Challenge Account DANIDA Royal Danish Embassy MDGs Millennium Development Goals DBSA Development Bank of Southern Africa MMEWD Ministry of Mines, Energy and Water Development DTF Devolution Trust Fund MLGH Ministry of Local Government and Housing ESAWAS Eastern and Southern Africa Water and Sanitation MWSC Mulonga Water and Sewerage Company EWSC Eastern Water and Sewerage Company NRW Non Revenue Water GF GIZ KfW KWSC LA General Fund Deutsche Gesellschaft für Internationale Zusammenarbeit Kreditanstalt für Wiederaufbau Kafubu Water and Sewerage Company Local Authority NUWSSP NWASCO NWSC NWWSC National Urban Water Supply and Sanitation Programme National Water Supply and Sanitation Council Nkana Water and Sewerage Company North-Western Water and Sewerage Company ii

5 O&M Operation and Maintenance WSS Water Supply and Sanitation PEF Performance Enhancement Fund WWG Water Watch Group PS Private Schemes WWSC Western Water and Sewerage Company PTI Part-time Inspectors ZPPA Zambia Public Procurement Authority RBI Regulation by Incentives SI Service Indicator SLA Service Level Agreement SLG Service Level Guarantee SWSC Southern Water and Sewerage Company SUWASA Sustainable Water and Sanitation in Africa WASAZA Water and Sanitation Association of Zambia WDM Water Demand Management WSC Water and Sewerage Company iii

6 National Water Supply and Sanitation Council 164 Mulombwa Close, Fairview P.O. Box 34358, Lusaka- ZAMBIA Tel: (+260) / Fax: (+260) Toll free for Complaints: mails@nwasco.org.zm Printing supported by: All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without prior permission of the copyright owner. 2014, NWASCO

7 U r b a n a n d P e r i - U r b a n W a t e r S u p p l y a n d S a n i t a t i o n S e c t o r R e p o r t F o r e w o r d The 13th edition of the Peri Urban and Urban Sector Report came with a lot of zeal as it was preceded by the review of the benchmarking system of the National Water Supply and Sanitation Council (NWASCO). In building on the achievements of 13 years of regulatory service, during the reporting year, we made a resolve to heighten our benchmarking system by introducing new indicators and refining some of the existing ones. The result of this is a more rigorous system that will encourage Commercial Utilities to work even harder, more elaborate information for decision making and continued consumer engagement and protection through relentless information dissemination was a great year for NWASCO as we invested in research and development to revise our guidelines and develop new ones. Among the new guidelines developed was the Anti Corruption and Integrity guideline aimed at curbing corruption in the sector. The Corporate Governance and Tariff Guidelines were revised to help promote good governance in the sector and improve the analysis of tariff adjustment applications respectively. The implementation of these guidelines will go a long way in ensuring affordable, sufficient safe, clean water and adequate sanitation. Our resolve to rebrand entails increased visibility and relevance to the consumer, particularly the underserved, through an easily recognisable brand. This is based on the premise that regulation is at its most effective when consumers give feedback on the services they receive in order to compel improvements in service delivery. The new brand is anchored on ensuring the delivery of better services through consumer feedback and the balancing of the needs of both consumers and providers. I must acknowledge that all Commercial Utilities strived for high performance and therefore, the competition was stiff for the first position. With investment interventions in Kafubu, Eastern and Nkana Water and Sewerage companies and the efforts from Lusaka and Luapula, Water and Sewerage companies, scooping the first position will be anyone s game in the near future. The creation of new districts brings with it an opportunity to accelerate service provision and/or upgrade the level of service to piped water and sewerage facilities. The role of the Devolution Trust Fund in this regard cannot be overemphasised as most of these districts are characterised by low income households. CU managements need to be steadfast and focused on continuous improvement to ensure consumers get value for money. With the strides achieved in urban water supply and sanitation service provision, NWASCO shall endeavour to venture into new avenues such as collection of information on the level and quality of service provision in rural areas. Finally we pledge to redouble our efforts with vigour to steer the water sector to the heights desirable for all which is universal access to water supply and sanitation services. Kelvin Chitumbo Director-NWASCO v

8 U r b a n a n d P e r i - U r b a n W a t e r S u p p l y a n d S a n i t a t i o n S e c t o r R e p o r t Executive Summary This report is mainly intended to highlight the performance of the water supply and sanitation providers namely the Commercial Utility companies and the Private Schemes during the period 1st January to 31st December It is worth noting that the reporting period has now been changed from 1st April to 31st March to a calendar year, (January-December). The report has nine chapters: Chapter one is a summary of the performance of the water supply and sanitation sub-sector, details of which are given in chapter seven which is the main chapter of the report. Chapter two focuses on implementation of various aspects of sector policy. In this edition, provision of water supply and sanitation services to the newly created districts has been discussed. Chapter three and Four are dedicated to the operations of the Devolution Trust Fund and the National Water Supply and Sanitation Council respectively. The topical subject for this report is Pricing for Water Supply and Sanitation Services, outlined in chapter five. Chapter six gives an analysis of the CUs compliance to Service level Guarantees and Agreements. The operations of Private schemes are elaborated in chapter eight. Chapter nine give a summary all the salient issues in the report as well as an indication of the future outlook. Performance assessment is based on nine indicators namely Water Quality, Collection efficiency, Metering Ratio, Hours of Supply, O&M cost coverage by collection, Non Revenue Water, Staff efficiency, Water and Sanitation Coverage. It is delighting to state that positive trends were noted in all indicators save for Non Revenue Water, Collection Efficiency and O&M cost coverage. The year also saw increased funding to water supply and sanitation sub sector compared to the previous years. However, this is far from meeting the enormous investment needs of this sector. As a regulator, we remained committed to discharging our duties. vi

9 1 SUMMARY OF PERFORMANCE FOR COMMERCIAL UTILITIES FOR THE YEAR 2013

10 Summary of Performance for CUs for the Year 2013 WSS Sector Report 2013 This Chapter summarises the performance of Commercial Utilities (CUs) for the period 1st January to 31st December The detailed analysis is presented in Chapter Seven. The indicators in this report are based on the Minimum Service Levels (MSL) which are part of the license conditions. Additional indicators have been included to provide the reader with a broader understanding of the CUs performance. 1.1 NATIONAL URBAN WATER SUPPLY AND SANITATION COVERAGE Commercial Utilities are the main providers of water and sanitation services in urban areas. Currently there are about 5.97million people living in the CUs service areas of which 1% are serviced by seven Private Schemes. Private Schemes are companies that offer water supply and sanitation services mainly to their employees as a fringe benefit. Table 1 depicts the National Urban Water Supply and Sanitation Coverage which is a combination of coverage for the CUs and the private schemes. Coverage for the CUs alone is shown in Chapter 7 while that for the Private Schemes is depicted in Chapter 8. During the reporting period, 194,231 more people were served with potable water supply while 201,396 persons accessed sanitation services. Table 1: National Urban Water Supply and Sanitation Coverage Total Urban Population 5,760,541 5,965,575 Total Urban Population Served with 4,812,279 5,006,510 Water Total Urban Population Served with 3,302,408 3,503,804 Sewerage National Urban Water Coverage 83.5% 83.9% National Urban Sanitation Coverage 57.3% 58.7% Service lines can span many kilometres in order to reach people 2

11 WSS Sector Report 2013 Summary of Performance for CUs for the Year Operating Conditions of Commercial Utilities A general overview of the operating environment of the CUs in terms of geographic coverage, economic activity in the area of operation, state of infrastructure and external support are illustrated in Table 2 and Section 1.6. The performance of each CU should be understood within the context of its operating environment. Table 2: Operating Conditions of Commercial Utilities Commercial Utility Abbreviation Start of Operations No. of Connections No. of Towns Serviced No. of Staff External Support * Lusaka WSC LWSC , World Bank Nkana WSC NWSC , AfDB Kafubu WSC KWSC , JICA Mulonga WSC MWSC , Lukanga WSC LGWSC , Southern WSC SWSC , Chambeshi WSC CHWSC , North Western WSC NWWSC , Eastern WSC EWSC , Germany Western WSC WWSC , DANIDA Luapula WSC LPWSC , DANIDA * Support considered for the reporting period only. DTF funded projects are elaborated in Chapter 3. 3

12 Summary of Performance for CUs for the Year 2013 WSS Sector Report OVERVIEW OF SECTOR PERFORMANCE The performance of CUs in nine key performance indicators is summarised in Table 3. Table 3: Overview of Sector Performance Non Revenue Water [%] T r e n d Water Quality [% compliance to number of samples] # T r e n d Metering Ratio [%] T r e n d Water Service Coverage [%] T r e n d Sanitation Coverage [%] T r e n d Hours of supply T r e n d Staff Cost in relation to Billing and Collection* T r e n d Collection efficiency [%] T r e n d O+M Cost coverage by collection [%] T r e n d LWSC NWSC KWSC MWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC Av. 48(w) 94 (s) 67 (w) 82.7(w) 57 (w) 17 (s) 0.54 (w) 88(w) 108 (w) Worse than the relevant average and benchmark not achieved (1 point) (w) weighted average Better than the relevant average but benchmark not achieved (3 points) (s) simple average At least acceptable benchmark achieved (5 points) # The water quality compliance indicator calculation incorporates the compliance to standards and the required number of samples * See page 67 (or section 7.2.4) 4

13 WSS Sector Report 2013 Summary of Performance for CUs for the Year Sector Achievements and Challenges 1.4 CU PERFORMANCE RANKING Achievements: The notable achievements during the period under review were: Increase in water supply and sanitation services coverage Increased metering ratio Improvement in water quality compliance CUs are ranked according to indicators and respective weightings shown in Table 4. A higher weighting reflects how critical the indicator is to the quality of service and financial viability of the CU. The ranking is arrived at as follows: Below relevant average and benchmark not achieved -1 mark Better than relevant average but benchmark not achieved -3 marks Acceptable benchmark achieved 5 marks These are multiplied by indicator weightings and the CU s performance score for each indicator in Table 3. The resulting scores for each indicator are then aggregated. However, the computation for NRW is treated differently. Because a negative trend is desired, the performance score was subtracted from 100 and the result multiplied by the mark and the weight. Metering remains key to good service delivery Challenges/Concerns: The sector challenges included the following: Drying of dam reservoirs and low yields from boreholes due to climate variability and anthropogenic activities Frequent breakdown of machinery due to dilapidated state of infrastructure and/or lack of maintenance Frequent power outages High water losses Table 4: Performance Indicators and their Weighting Factors Indicator Weighting 1 Water Quality 20 points 2 Collection Efficiency 20 points 3 Metering Ratio 15 points 4 Hours of Supply 15 points 5 O+M Cost Coverage by Collection 15 points 6 Non Revenue Water 10 points 7 Staff Efficiency 10 points 8 Water Coverage 05 points 9 Sanitation Coverage 05 points Note: Where no benchmark is defined, the relevant sector average is used. 5

14 Summary of Performance for CUs for the Year 2013 WSS Sector Report 2013 In order to provide readers with the performance trends, the rankings for the current and previous three years have been reflected in Table 5. It must be noted that a CU moving down in the ranking does not necessarily mean that it performed worse than the previous period but rather that it was outperformed. Table 5: Ranking of CUs CU Ranking Ranking Ranking Ranking / / /11 NWWSC LWSC SWSC EWSC MWSC NWSC WWSC LPWSC LGWSC KWSC CHWSC Once again, North Western WSC has emerged best CU amidst very tight competition. The giant Lusaka WSC made remarkable improvement jumping from 6th to 2nd position dislodging EWSC hence scooping the Most Improved CU award! Congratulations! LPWSC moved from 10th to 8th position, while MWSC and LGWSC were pushed to 5th and 9th position respectively from 3rd and 5th positions Recognitions of CUs for Exemplary Performance CUs are recognised for exemplary performance in specific areas and indicators. Depending on the indicator being considered, recognition is based on the magnitude of improvement toward the benchmark or the best in the category. Table 6: Recognitions for Exemplary Performance Area of Criteria recognition Significance of improvement in all indicators Most improved collectively Best in Servicing Peri-Urban Areas Best Submitted Data Non Revenue Water Water Quality Metering Ratio Water Service Coverage Sanitation Service Coverage by Network Hours of Supply Performance in implementing projects and general management of Kiosk operations Completeness and accuracy of data submitted in the NWASCO Information System and least queries raised for verification The best in managing NRW The Best in achieving the water quality compliance requirements and meeting the benchmark The most improved in increasing metering of customers The most improved in increasing coverage and above sector average The most improved in increasing coverage and above sector average The best average hours of supply. CU Lusaka WSC Eastern WSC Nkana WSC North Western WSC Southern WSC Luapula WSC Lusaka WSC Nkana WSC North Western WSC Staff Efficiency The best staff efficiency Mulonga WSC Collection Efficiency The most improved in collection efficiency and above the benchmark Western WSC O&M Cost Coverage by Collection The most improved in covering costs and above the benchmark Nkana WSC 6

15 WSS Sector Report 2013 Summary of Performance for CUs for the Year rewarding CEO s Performance Chief Executive Officers play a critical role in driving the company vision, mission and objectives. In order to motivate the CEO s to take responsibility for the performance of their companies, a CEO s Award is given. The Award focuses on the CEO s of the utility companies that performed best over the reporting period or, for those still in the job, up until December 31st, The performance assessment for the CEO award is based on the following criteria The ability of the CEO to: Mr. George Ndongwe MD, Lusaka WSC Build a high performing management team, Give the company strategic direction and implementing a clear plan of creating value for the company Ensure implementation of both short and long term company objectives. Further, the CU CEOs nominate the top three fellow CEOs in order of hierarchy, based on their view of the contribution made by the nominated CEO in advancing the companies they represent. The 2013 CEO of the year award went, yet again, to Mr. George Ndongwe of Lusaka Water and Sewerage Company. He was followed by Mr. Wencyslouv Makondo of Lukanga Water and Sewerage Company. The third position was taken by Mrs. Diana Makwaba of Nkana Water and Sewerage Company. Mr. Wencyslouv Makondo MD, Lukanga WSC Ms. Diana Makwaba MD, Nkana WSC 7

16 Summary of Performance for CUs for the Year 2013 WSS Sector Report COMMENTS on performance FOR EACH CU The conditions under which Utilities operate, which may impact on their performance and therefore, should be taken into consideration when analysing their performance are highlighted hereunder together with the comments on performance. Comments Improved metering ratio; Increased sanitation coverage; Need to do more to improve water supply to low income areas such as Chamboli and Wusakile; and Need to concert more efforts towards increasing the collection efficiency. LUSAKA WSC Operating Environment Services the Capital City, Lusaka and four other districts (Luangwa, Chongwe, Chirundu Kafue and Chilanga) in Lusaka Province; High economic activity; Largest customer base with potential for further growth; The bulk of infrastructure needs major rehabilitation and expansion; and Good complement of highly qualified staff. Comments Increased the metering ratio; Increased connections by over 6,000; Need to improve billing accuracy; and Need to improve hours of supply in chronically affected areas such as Avondale, Chunga, parts of Matero East and Chelstone. NKANA WSC Operating Environment Operates in three predominantly mining towns on the Copperbelt Province namely Kitwe, Kalulushi and Chambishi; Major raw water sources susceptible to industrial pollution; High economic activity; and The bulk of infrastructure needs major rehabilitation and expansion. KAFUBU WSC Operating Environment Operates in three towns ( Ndola, Masaiti and Luanshya) on the Copperbelt Province with medium to low economic activity; Poor quality of the raw water in the Southern part of Ndola; and Much of the infrastructure is dilapidated and inadequate to meet current demands. Comments Made efforts to improve supply to the Southern part of Ndola; Need to continue improving collection efficiency; Need to reduce the cost for casual labour which was about 22% of personnel costs; Need to improve billing efficiency; and Need to expedite complaints handling and resolution. MULONGA WSC Operating Environment Operates in three predominantly mining towns on the Copperbelt Province ( Chingola, Chililabombwe and Mufulira); Major raw water sources susceptible to industrial pollution; High economic activity; and The majority of infrastructure needs rehabilitation and expansion. 8

17 WSS Sector Report 2013 Summary of Performance for CUs for the Year 2013 Comments Improved water supply coverage; Need to find a lasting solution to improving water quality challenges in Chingola and high turbidity levels across the CU; and Need to improve complaints handling and resolution. Lukanga WSC Operating Environment Operates in seven towns in the Central Province namely Kabwe, Mumbwa, Serenje, Mkushi, Kapiri Mposhi, Chibombo and Chisamba. Low economic activity; New infrastructure at the water in-take, treatment facilities, reservoirs and main water lines in all towns; and Dilapidated sewer infrastructure. Comments Reduced water losses; Need to improve metering ratio; Need to improve hours of supply in Mumbwa and parts of Mkushi; and Need to improve water supply and sanitation coverage. Southern WSC Operating Environment Has the highest number of service towns/centres(16) Has medium to low economic activity and Fairly good but inadequate infrastructure Comments Improved water quality compliance and met the benchmark; Need to improve hours of supply in parts of Choma such as Shampande; Need to improve metering ratio; Need to contain costs. Chambeshi WSC Operating Environment Operates in 12 towns ( Kasama, Mpika, Chinsali, Nakonde, Isoka, Mbala, Mpulungu, Luwingu, Mporokoso, Kaputa, Mungwi and Chilubi) in the Northern and Muchinga Provinces that are spread over a wide geographical area; Extremely low economic activity; Dilapidated and inadequate infrastructure requires complete overhaul; High complement of unskilled staff and unable to attract and retain qualified staff and Unreliable and poor power supply. Comments Improved collections and contained costs Remained under Statutory Management; and Urgently need to stabilise the CU North Western WSC Operating Environment Operates in seven towns in North-Western Province namely Solwezi, Kasempa, Mwinilunga, Zambezi, Kabompo, Chavuma and Munfumbwe with the largest town being a predominantly mining area; Medium to low economic activity with potential for growth; Fairly good state of infrastucture but needs expansion; High complement of skilled staff but faces challenges in retaining them; and Small customer base but with one of the highest tariff in the country. 9

18 Summary of Performance for CUs for the Year 2013 WSS Sector Report 2013 Comments Improved water supply and sanitation coverage; Reduced water losses; Collection efficiency dropped significantly hence affected cost coverage; Need to continue increasing customer base and; Institute measures to improve liquidity Western WSC Operating Environment Operates in six towns in the Western province (Kaoma, Mongu, Kalabo, Senanga, Lukulu and Sesheke). Low economic activity; Dilapidated and inadequate infrastructure requires complete overhaul but being addressed for two towns ( Kaoma and Mongu) with the support of the Royal Danish Government; Small customer base; and Unreliable and poor power supply. Comments Improved metering ratio; Improved collection efficiency; Need to improve hours of supply in Mongu and Kaoma; Need to establish a proper customer base owing to the high number of inactive accounts. Eastern WSC Operating Environment Operates in eight towns( Nyimba, Chipata, Petauke, Chama, Katete, Chadiza, Maambwe and Lundazi ) in the Eastern Province. New infrastructure in four of the eight towns with support of the German Government; Seasonal, medium to low economic activity dependent on farming periods; and Unreliable and poor power supply. Comments Improved cost coverage by collection; Instituted a project to improve sanitation services in Kapata area in Chipata town; Need to improve hours of supply in Chimwemwe in Chipata town and Katete town. Need to improve sanitation coverage Luapula WSC Operating Environment Operates in five towns in Luapula Province namely Mansa, Samfya, Nchelenge, Kawambwa and Mwense; Extremely low economic activity; Dilapidated and inadequate infrastructure requires complete overhaul but being partially addressed by DANIDA in two towns of Mansa and Nchelenge; Very low customer base and Unreliable and poor power supply. Comments Improved metering ratio; Increased number of water connections by over 1,000; Increased billing; Need to continue to increase the customer base; and Need to direct efforts towards increasing hours of supply 10

19 2 PROVIDING WATER SUPPLY AND SANITATION SERVICES IN NEWLY CREATED DISTRICTS

20 Providing Water Supply and Sanitation Services in Newly Created Districts WSS Sector Report INTRODUCTION The Provincial and District Boundaries Act Cap 286 provides that the Republican President may divide Zambia into such Provinces and divide the Provinces into such Districts as may be convenient for the purpose of administration. The Local Government Act Cap 281 provides for the Minister to establish a Council for any District for the purposes of local government. The creation of a district entails provision of improved amenities such as piped water and sewerage facilities, hospitals and roads. Among the functions of the Council is the responsibility for water supply and sanitation service provision. With commercialisation completed, this is now the responsibility of the Commercial Utilities with the Councils currently being the sole shareholders. Rural areas (that have now been declared Districts) have largely been marginalised in terms of development. Until 2011, Zambia was divided into 9 provinces and 72 districts. The then ruling party, Movement for Multiparty Democracy (MMD) created Mafinga District in 2011 to become the 73 rd District. The change in Government in September 2011 saw the Patriotic Front (PF) Party assume power with a strong emphasis on decentralising Government operations for efficient and effective delivery of services to the people. The Government has since created Muchinga Province to become the 10th province and further created 29 more districts across the country to bring the total to 102 Districts as at 31st December AREAS UNDER COMMERCIAL UTILITIES AFTER CHANGES Apart from the creation of districts, other changes effected by Government include realigning of districts, dividing of Northern Province into two and change of provincial headquarters of Southern Province from Livingstone to Choma. Table 7 depicts the current and expected new arrangement in terms of geographic coverage of areas under the CUs. 2.3 ALLOCATION OF RESOURCES TO NEW DISTRICTS The provision of water supply and sanitation services in the new districts requires huge investments as Government will have to put up piped systems for the people living in these areas. This will increase access to water and sanitation services in the country. The Government has budgeted for the cost to kick start various water and sanitation projects in some of the new districts for year 2014 as depicted in Table 7. Piped systems will require huge investments 12

21 WSS Sector Report 2013 Providing Water Supply and Sanitation Services in Newly Created Districts Table 7: Areas Under Commercial Utilities after Changes and Budgetary Allocations to New Districts Commercial Utility Previous No. of Districts No. of New Districts New Districts and Budgetary Allocations Lusaka WSC 4 7 Nkana WSC 3 3 None Chilanga (K9,020,494), Rufunsa (K8,821,123.63) and Chirundu (K6,825,233.03)-- realigned from Southern to Lusaka Province Kafubu WSC 3 4 Mpongwe (which was already a district but not covered under Kafubu WSC s license) Mulonga WSC 3 3 None Lukanga WSC 6 11 Southern WSC Chisamba (K10,971,795.26), Luano (K8,085,923.90), Chitambo (K8,255,646), Shibuyunji (9,438,174.24), Ngabwe(Nil) and Itezhi-Tezhi realigned from Southern to Central Province Chikankata (K11,225,494.80), Zimba (K10,167,722.65) and Pemba (K9,963,807.69) -already part of SWSC license Chirundu & Itezi-Tezhi detached Chambeshi WSC Mafinga, Nsama (K7,306,977.30), Shiwang ndu (K8,005,463) and Chama realigned from Eastern to Muchinga province North Western WSC 7 9 Manyinga (K6,853,144.03) Eastern WSC 8 9 Western WSC 7 16 Luapula WSC 7 11 Total Sinda (K11,866,523.88) and Vubwi (K14,197,172.52) Chama removed and realigned to Muchinga province Mulobezi (K6,923,317.93), Nkeyema (K8,645,424.60), Sikongo (K7,703,037.03), Nalolo (K7,581,188.13), Limulunga (K8,627,698.16), Mitete (K6,705,599.94), Luampa (K8,645,424.60), Sioma (K6,733,775.21) and Mwandi (K6,923,317.93) Lunga (K5,902,661.15), Chembe (K9,423,537.74), Chipili (K7,398,557.09) Mwansabombwe (K7,656,525.47) Source: Ministry of Local Government and Housing 13

22 Providing Water Supply and Sanitation Services in Newly Created Districts WSS Sector Report 2013 Northern Province was divided into two to create Muchinga Province, covering six districts as shown in Figure 1. The formation of Muchinga Province identified the need to create another Commercial Utility which process is underway. Figure 1: Separation between Muchinga and Northern Province and their respective districts 2.4 WAY FORWARD In order to provide sustainable water supply and sanitation services, there is need to: Conduct a comprehensive technical analysis to identify the requirements including sustainable detailed designs for appropriate water supply and sanitation facilities; Conduct a comprehensive financial viability analysis to establish cost estimates of providing WSS services; Carry out stakeholder consultation on the proposed interventions and plans; and Carry out a situation analysis of the pre-requisites of WSS service delivery such as power supply and roads that might hinder the process. Existing and new Councils would have to pass resolutions to be incorporated in CUs operating in their respective areas to allow the CUs take ownership of the various intended projects. Once the resolutions are passed, applications should be made to NWASCO to amend the respective operating licenses to reflect the changes. Comprehensive technical and financial analyses should also be conducted as part of the process to detach Muchinga province from Chambeshi Water and Sewerage Company and create a new utility for Muchinga Province. 14

23 3 SERVICE PROVISION TO THE LOW INCOME AREAS

24 Service Provision to Low Income Areas WSS Sector Report THE DEVOLUTION TRUST FUND (DTF) The Devolution Trust Fund (DTF) was established in 2001 by the National Water Supply and Sanitation Council (NWASCO) and operates as a basket fund with a mandate to assist Commercial Utilities (CUs) to improve WSS services especially to low-income areas. The Water Supply and Sanitation (WSS) Act No. 28 of 1997 provided the foundation on which the DTF was established. The DTF became operational in 2003 upon issuance of Statutory Instruments No. 65 of 2001 and its mandate was further enhanced through statutory Instrument No. 50 of General Fund - Water Seven (7) projects namely Petauke under Eastern WSC, Chamboli under Nkana WSC, Chabanyama, under Mulonga WSC Kabompo and Solwezi under North western WSC, Masaiti under Kafubu WSC, and Makululu under Lukanga WSC were completed within the reporting period bringing the total number of completed projects to sixty-one (61) to date. The projects involved laying of distribution lines construction of kiosks and provision of metered household connections SUPPORT TO THE CUS The DTF has been supporting CUs with both financial and technical assistance on project implementation and management through two financing windows namely General Fund (GF) and Performance Enhancement Fund (PEF). The GF projects are aimed at increasing access to safe and adequate water supply and appropriate sanitation for the low income urban residents while the objective of the PEF projects is to contribute to the operational efficiency and viability of the CUs. To date, seventy-seven (77) water supply improvement four (4) Sanitation and thirteen (13) Performance Enhancement Fund projects have been financed at a value of K63,318,872, K15, 590, 986 and K21,204,115 respectively. Specific details are outlined here following: Network line layed 16

25 WSS Sector Report 2013 Service Provision to Low Income Areas Performance Enhancement Fund (PEF) One project namely Ndeke Metering in Kitwe under Nkana WSC was completed in the reporting period at a cost of ZMW 2,147,613. A Study for energy efficiency management at Kafubu WSC was concluded in the period under review which culminated into the development of a proposal that is envisaged to be financed in Toilets constructed in low-income areas General Fund - Sanitation The two projects, of the four under the first Sanitation Call that were pending completion, from the previous reporting period were completed by November These were Libuyu in Livingstone under Southern WSC and Kansuswa in Mufulira under Mulonga WSC. In the period under review, a second call for proposals was issued and seven CUs were invited to participate in this call. The seven participating CUs submitted seventeen (17) project areas under their respective jurisdictions for consideration. These areas were reduced to 6 after comprehensive baseline surveys and field appraisals which were conducted and are planned for further development and implementation in inch bulk meter installed 3.3 IMPACT ON THE GROUND The 10 projects that were completed in the reporting period translated into additional infrastructure for the CUs of 41 water Kiosks, 7,552 domestic customer meters, 50.8 kms of water supply network and 50m3 water storage capacity. This brought the cumulative total outputs to date to 468 water Kiosks, 39,625 domestic customer meters, kms of water supply network and 708m3 of reservoir capacity. 17

26 Service Provision to Low Income Areas WSS Sector Report 2013 Additionally, two sanitation projects namely Kandundu and Libuyu were completed in the year. A sewerage network of 5.8kms, new pump station, 9 biogas settlers and 390 toilets consisting of 260 prefabricated designs, were constructed in Libuyu Township. The Project also provided for an industrial generator to back up power supply. Kandundu sanitation project involved construction of 3.2kms of sewerage network, 5 biogas settlers, a lager Anaerobic Baffled Reactor (ABR) for treatment of waste water and a Plant Gravel Filter (PGF) for further filtration of the treated waste. These two sanitation projects were additional to Kariba sanitation project that was completed in FUTURE OUTLOOK The DTF shall continue engaging with the stakeholders to clarify the positioning of the organisation in light of the National Urban Water Supply and Sanitation Programme under the MLGH. The declining funds into the basket would impact the DTF negatively as this could result in some projects not being financed. Additionally, the operations of the DTF would significantly be reduced owing to minimal administrative budget provision. Further, attainment of goals set out in the Strategic Plan would not be possible. The water projects provided access to an additional 108,333 persons bringing the total number of beneficiaries to 949,789 persons in Zambia s low income urban areas as shown in Table 8. A further 15,500 people benefitted from improvement of sanitation out of the four sanitation projects. Table 8: Progress in Meeting Water Supply Targets Mobilised as at 31 st December 2013 (K 000) Expenditure as at 31 st December 2013 (K 000) Funding 193, ,950 Population covered as at 31 st December 2013 Cumulative Target (Dec 2014) Cumulative Target (Dec 2015) Population 949,789 1,099,789 2,8 million Access to clean and safe water supply achieved for over 900,000 people 18

27 4 THE NATIONAL WATER SUPPLY AND SANITATION COUNCIL (NWASCO)

28 NWASCO WSS Sector Report INTRODUCTION The National Water Supply and Sanitation Council (NWASCO), which begun its operations in 2000, is a regulator created for the purpose of ensuring efficient and sustainable Wcater Supply and Sanitation services through the enforcement of the Water Supply and Sanitation Act No. 28 of The regulator s critical role is to balance consumer interests by safeguarding them against exploitation whilst ensuring that commercial utilities are viable institutions. Some of the activities undertaken in the year are outlined below. 4.2 IMPLEMENTATION OF THE THIRD STRATEGIC PLAN NWASCO began implementation of the first year of its Strategic Plan activities for the period 2013 to The Strategic Plan outlines four major objectives with sub-goals. Some activities done under the four objectives were as follows: To improve information dissemination and engagement OBJECTIVE 1 of the public Development of a rebranding and communication strategy to increase the visibility of the regulator to the public Workshop with Police Officers in Lusaka to create awareness in WSS legislation Revision of timeframes for complaints handling and resolution for both NWASCO and providers to strengthen consumer complaints handling procedures OBJECTIVE 2 Strengthen and enhance enforcement of regulation Commencement of the development of regulations to amplify provisions in the WSS Act. This is being done together with the revision of the WSS Act itself. Revision of guidelines to enhance them by incorporating new sectoral developments and worldwide good practices Revision of the tariff setting model to improve efficiency of tariff adjustments Recruitment of more Part-time inspectors to enhance enforcement on the ground. OBJECTIVE 3 To enhance performance in WSS service delivery Four knowledge sharing forums were held to promote knowledge in various aspects of CU operations dentification of other areas in WSS that may need licensing Compilation and dissemination of good practices on various WSS aspects to CUs Development of strategies for continuity of DTF. To improve operations and sustainability for NWASCO OBJECTIVE 4 and providers Development of an ethical charter for the sector The revision of the Regulation by Incentives concept to recognise improvements in performance by CUs Training of NWASCO staff in specific regulatory areas to enhance core competence in regulation. 20

29 WSS Sector Report 2013 NWASCO 4.3 MONITORING SERVICE PROVIDERS Inspections NWASCO employs a number of strategies to monitor the compliance of the CUs to the provisions of the Water Supply and Sanitation Act No. 28 of In addition to the use of WWGs and customer feedback, inspections are the main means through which NWASCO monitors Utilities and verifies various performance reports submitted by Utilities. The availability and quality of water resources was one of the major challenges that affected the provision of water in the reporting period. More dams dried than in the previous year and this was attributed to both natural and human activities such as bad farming practices, lack of maintenance of dams to mention a few. This not only affected the quantity of water available to the utilities for abstraction but also the quality leading to increased costs of treatment and in many areas, poor quality of the treated water because of inadequate and inefficient treatment plants. NWASCO inspected all the 11 CUs and 7 Private Schemes during the reporting period. Some of the highlights of these inspections were that for Chambeshi WSC whose operating license was suspended in 2012 for continued noncompliance to license conditions and now under the statutory managership of North Western WSC, was found to be undertaking structural changes aimed at enabling the utility operate more efficiently. Other notable changes in the utility were that the process of putting in place systems and procedures which were lacking and largely contributed to the inefficiencies in the company was concluded. Some of the major problem areas for the reporting period were as follows: In the Northern Province, the construction of township roads left a number of properties without water supply because pipes were damaged during the construction works. LWSC experienced un-preceded water rationing mainly due to power outages particularly in Lusaka and Kafue Districts. This was made worse by the delayed onset of the rains and water burst pipes. The areas mostly affected areas included Mutendere, PHI, Kalingalinga, George and Lilanda. A number of other parts of the country were also affected by unstable power supply. For private schemes, NWASCO continued to monitor the quality of water, sanitation services and hours of supply. Most private schemes during the reporting period showed commitment to improving the quality of the service they provided by intensifying on quality assurance through complying with the requirements of the water quality monitoring guidelines. In the period, the handover process of the responsibility of providing water supply and sanitation services in Maamba District from Maamba Collieries Mine to Southern WSC reached an advanced stage. With the growing population owing to the steadily improving economic activities, the Mine could not cope with the increased demand for water and sanitation services and thus arose the need to handover the provision of these services to the CU of the province, Southern WSC. Another district under the private schemes that saw an improvement in service provision during the reporting period was Itezhi-Tezhi (serviced by ZESCO) after the completion of the construction of various water and sanitation infrastructure including a treatment plant which works were part of the hydropower station project. In addition, the government of the Republic of Zambia through Lukanga WSC started a project to rehabilitate and extend pipelines. 21

30 NWASCO WSS Sector Report Status on the suspended license for ChWSC Chambeshi WSC, which had its license suspended on 17th December 2012 for non compliance to license conditions leading to deteriorating service delivery, continued to operate under the Statutory Manager, North Western WSC. During this period, systems and procedures were put in place but in order to allow time for the Statutory Manager to stabilise the CU and the period for the statutory manager was extended for another six months. 4.4 SANITATION SURCHARGE In 2007, NWASCO introduced a sanitation surcharge which is calculated as a proportion of the monthly water bill (up to 3%) of each customer apart from those served by public water points. NWASCO continued to monitor and ensure that the sanitation surcharge funds were ring-fenced and utilised for approved sanitation projects. So far, all the CUs implementing the sanitation surcharge namely; Lusaka WSC, Mulonga WSC and Nkana WSC have utilised some of the funds raised for sanitation projects, see Table 9. Table 9: Utilisation of Sanitation Surcharge Fund No. Commercial Utility Collected (K million) Expenditure (K million) Project Areas 1 Lusaka WSC Kalingalinga, Kaunda Square, Matero-Maiteneke, Kanyama 2 Nkana WSC 7 5 Kitwe, Chambishi, Wusakile, Counterpart funding for AfDB projects 3 Mulonga WSC Plan to extend service to Riverside in Chingola Sewage ponds constructed 4.5 TARIFF APPROVALS It is NWASCO s mandate to approve water and sanitation tariff adjustments. Comprehensive tariff applications are approved for a minimum period of one year and a maximum of three years. To implement multi-year approved tariffs, a CU must seek a no objection from NWASCO annually subject to meeting at least 75% of prior- given tariff conditions. Tariffs are approved after an analysis of the proposed cost structure to remove unjustified costs. Tables 10a and 10b show the level of tariff adjustment applied for by the CUs and the percentage approved by NWASCO for the indicated tariff period. The immediate objective of the tariff approval is to cover Operation and Maintenance (O&M) costs first with progression towards full costs recovery (that is including depreciation, finance costs and specific provisions). Using the new tariff model, NWASCO as per its mandate to approve water supply and sanitation tariffs, analysed tariff adjustment application from CUs. Six comprehensive tariff adjustment applications were approved by the Council. Comprehensive tariff applications for CUs are approved for a minimum period of one year and maximum period of three years to match CUs business planning cycle. Tariff adjustments of averaging 13% were awarded to the 6 CUs. 22

31 WSS Sector Report 2013 NWASCO Approval of tariff adjustment is accompanied by a number of conditions that the CUs are expected to meet to ensure improved service delivery. Among the conditions given to the Commercial Utilities to be met in 2014, some of the common ones included the following; Adherance to Service Level Guarantee throughout the tariff period Improved water quality compliance to 95% throughout the tariff period attached to the 2014 Ensure that meter charge and sanitation surcharge is ring-fenced throughout the tariff period Ensure that no meter remains stuck for more than three months Table 10a: Approved Tariffs- Comprehensive Comprehensive Tariff Applications CU Average % Applied for Average % Approved Major Specfic Tariff Conditions for 2014 Comments Lusaka WSC 13% 10% Increase number of connections by 5000 by 31st August 2014 Ring-fence the fixed meter charge and the sanitation surcharge throughout the tariff period. Expected to meet O&M cost coverage of 124% Nkana WSC 15% 15% Retain the 2013 tarifs on the entire Kalulushi town: Wusakile, Chamboli, Ndeke and Makobo Townsships of Kitwe and Chambishi Towns respectively until supply meets the SLG. Increase Domestic metered connections by 5000 by 31st August Expected to meet O&M cost coverage of 106% Kafubu WSC 13% 13% Extend service to at least 500 customers in Hillcrest, and Kasenshi infill and Mutombolya in Luanshya by 30th August 2014 Achieve 100% metering for bulk meters and 80% for customer meters by 30th June Expected to meet O&M cost coverage of 106% Mulonga WSC 14% 15% Improve service hours in Chabanyama, Lulamba and Twatasha in Chingola to the SLG by 30th April Achieve 100% metering for bulk meters and 80% for customer meters by 31st August Expected to meet O&M cost coverage of 107% North Western WSC 17% 12% Reactivate all inactive sewer connections in Zambezi and extend to 100 new connections. Ring fence 20% of sewerage billing throughout the tariff period. Expected to meet O&M cost coverage of 95% Luapula WSC 90% 50% Increase number of connections by 700 by 31st August 2014 Improve service hours for Kawambwa from 3 to 9 hours by 31st August Expected to meet O&M cost coverage of 63% 23

32 NWASCO WSS Sector Report 2013 In a case where a multi-year tariff approval is awarded, the CU has to seek a No Objection to implement approved tariffs for subsequent years from NWASCO. During the reporting period No Objection to implement approved tariffs for 2014 for five Commercial Utilities was granted. Table 10b: Approved Tariffs- No Objection Applications for No Objection CU Average % Applied for Average % Approved Major Specfic Tariff Conditions for 2014 Comments Southern WSC 14% 10% Lukanga WSC 15% 10% Improve metering to at least 85% Maintain water quality compliance above 95% throughout the tariff period. Increase number of connections by at least 1000 by 31st August 2014 Fully meet the 2014 Service Level Agreement. Expected to meet O&M cost coverage of 111% Expected to meet O&M cost coverage of 101% Eastern WSC 6% 8% Increase number of connections by 700 by 31st August 2014 Maintain average collection efficiency of at least 85% throughout the tariff period. Expected to meet O&M cost coverage of 85% Western WSC 30% 20% Reactivate 900 customer accounts by 31st August 2014 Improve metering to at least 500 by 31st August Expected to meet O&M cost coverage of 98% Chambeshi WSC 30% 18% Ring-fence the fixed meter charge throughout the tariff period and procure at least 100 meters per quarter. Increase O&M cost coverage to an average of at least 85% throughout the tariff period. Expected to meet O&M cost coverage of 116%. The tariff aims to cover the costs for operation and maintenance first 24

33 WSS Sector Report 2013 NWASCO 4.6 REGULATORY ENHANCEMENT Enhancement of Regulatory Tools The Water Supply and Sanitation Act No. 28 of 1997 in section 4 (2) (d) mandates NWASCO to develop sector guidelines for the development and management of water supply and sanitation services. In 2013, NWASCO completed the development of one guideline on Anti-Corruption and Integrity and the revision of two guidelines Tariff Setting and Corporate Governance. Seven guidelines are pending consultations with key stakeholders. These are new guidelines for Pre-Paid Metering, Ring-fencing, Risk Management, Non-Revenue Water and Sanitation and revised guidelines for Business Plan Writing and Water Quality Tariff Setting and Cost of Service Models In the continued quest for effectiveness and efficiency within operations of both NWASCO and Commercial Utilities, the development of the new Tariff Setting Model was completed and implemented. The six CUs that applied for tariff adjustments in 2013 utilised the new model. In tandem with the revised of the tariff model, NWASCO developed a cost of service model that will assist both NWASCO and the CUs to have a sound basis for determining costs. The two models will be used jointly in future tariff analyses to ensure more reliable outputs Zambia Water Forum and Exhibition The Zambia Water Forum and Exhibition (ZAWAFE) was held on the 4th and 5th November 2013, under the theme Coping with challenges of water supply and sanitation access in Zambia. This was the third successive forum which attracted scholars, students, industry leaders, Private sector, NGOs, Government leaders, Cooperating partners, Water Providers and consumers. A total of 264 delegates participated in the two days forum while 18 institutions exhibited water and sanitation products and services. Delegates at ZAWAFE unanimously recommended that more efforts should go towards improving sanitation coverage especially in the Peri Urban areas NWASCO Knowledge Centre The Knowledge Centre has been operating since 2011 and is located at NWASCO. The Centre has been spearheading knowledge and efficiency management activities in four CUs namely Lukanga, North Western, Eastern and Western WSCs. In 2013, a Network Location Programme was introduced to assist the CUs in locating and capturing network for the purpose of developing and/or updating water network maps. This will aide improved management of the network and water losses. With support from GIZ, the Knowledge Centre procured Network Locating Tools which were provided to the four CUs and conducted training on the use of the equipment Increasing Awareness and Engagement of Consumers In order to meet the objective of improved information dissemination and engagement of the public, NWASCO embarked on a re- branding exercise which culminated into a branding strategy outlining activities aimed at raising public awareness of NWASCO. Other activities aimed at educating the consumers on regulatory activities included a Media campaign through a column in the Post Newspaper highlighting issues on consumer protection, rights and responsibilities and performance of the water supply and sanitation sector. The Water Voice which is a quarterly publication was produced aimed at 25

34 NWASCO WSS Sector Report 2013 communicating with the consumers and getting feedback on the quality of services provided by CUs. NWASCO increased its presence on social media by providing a platform for consumers to interact and provide feedback on the WSS services. The NWASCO facebook page and Twitter handle propagated messages aimed at informing, educating and influencing best practices on water and sanitation. These awareness activities resulted in increased consumer feedback on the quality of services and expedited complaints resolution Water Watch Groups Water Watch Groups continued to reinforce NWASCO s presence on the ground by monitoring the service provided by utilities and resolving secondary complaints. The groups undertook sensitization activities in their respective towns promoting the Service Level Guarantees (SLGs) which mandate water providers to guarantee the services provided and state exactly the level of service entitled to consumers. There are currently 11 WWGs established and operational in Lusaka, Kabwe, Kapiri Mposhi, Ndola, Kitwe, Kalulushi, Solwezi, Kasama, Mpika, Livingstone and Mongu. NWASCO received a total of 82 Complaints during the year and were all resolved. The majority of the complaints were received from Lusaka WSC (39). Others were from Kafubu WSC (16) and Mulonga WSC(8). The complaints ranged from disputed billing, erratic supply, non availability of water supply, leakages, blocked drainages, sewage overflows and unjustified disconnections CU Boards The Boards of Directors for the CUs were appointed in May 2013 after operating without the boards since November NWASCO working with the Ministry of Local Government and Housing undertook an induction programme which incorporated training on corporate Governance Good Practices Conference GIZ through the multi-country programme WAVEplus has been supporting water sector institutions in Kenya, Tanzania, Uganda and Zambia for the past five years (and more recently, South Sudan) with Human Capacity Development (HCD) measures with the aim of increasing effectiveness and efficiency of these institutions which are mainly water and sanitation service providers, regulators and training institutions, thereby with the hope of contributing to improved service delivery and the performance of the water sectors in the respective countries. The five countries have benefited from the WAVEplus programme from various training programmes focusing on key areas such as non-revenue water, customer care services, energy efficiency, benchmarking. A WAVEplus programme conference was organised by GIZ in October 2013 in Tanzania with the aim of assessing the impact of these training programmes and also for documenting, presenting and discussing collected good practices from participating countries for the purpose of learning Sustainable Water and Sanitation in Africa Projects Sustainable Water and Sanitation in Africa (SUWASA) - a USAID programme provided support to NWASCO from August 2012 to October The project included the development of improved cost of service data, assessment and recommendation of an appropriate tariff setting methodology, and a model to be used to assess adjustment applications. Further, SUWASA also worked with NWASCO and the CUs to revise the Corporate Governance Guidelines. 26

35 5 PRICING FOR WATER SUPPLY AND SANITATION

36 Pricing for Water Supply and Sanitation WSS Sector Report 2013 Adjustment of tariffs in the water sector is an important undertaking ultimately aimed at moving towards sustainable cost recovery of service provision as enshrined in the 1994 National Water Policy (revised in 2010).The National Water Supply and Sanitation Council (NWASCO) approves tariff adjustments every year tied to performance and conditionalities which in the long run should enable water and sanitation service providers cover their full costs. 5.1 WATER TARIFF GUIDELINES The Water Supply and Sanitation Act No. 28 of 1997 explicitly confers the right to NWASCO to develop guidelines for the setting of tariffs for the provision of water and sanitation services (Section 4 (2) (d) (iv)). Water supply services are not rendered in a competitive market environment but they take place principally as a natural monopoly (only one supplier per region). This implies that Service Providers would be inclined to charge high monopoly prices (above competitive prices) and lack an incentive to become more efficient if left to themselves. In this monopolistic environment, it is the task of the regulator to set tariffs which; cover the necessary costs for sustainable service provision; protect the consumers from unfair charges and ensure that a certain minimum quantity of water is affordable to all including the very poor. Each Service Provider has to submit a tariff proposal to NWASCO if an adjustment of the tariff is planned. Based on an analysis of cost of providing the service, performance and efficiency of a provider in service provision, new tariff adjustment is approved by the Regulator. At the moment there are wide variations in service standards and charged tariffs across the country depending on the level of economic activity for each licenced area. The Regulator closely monitors service standards and associated costs for delivering the services with the aim of eradicating inefficiency. 5.2 NWASCO S OBJECTIVES REGARDING THE WATER AND SANITATION TARIFFS When setting the tariffs, the aim is to achieve a reasonably fair balance among the objectives as listed below: Financial Sustainability of Utilities-Providing sufficient revenues to cover the justified costs obligations for sustainable WSS service provision; Distributive Justice and Affordability of WSS services-ensuring a minimum quantity of water is affordable particularly to low income consumers; Consumer Protection, Economic Efficiency and Fair Pricing- Protecting the consumers from paying for inefficiencies of service providers and protecting the environment and Ensuring that the tariff adjustment process is transparent, simple to understand and predictable. 28

37 WSS Sector Report 2013 Pricing for Water Supply and Sanitation 5.3 TARIFFS FOR WATER In order to achieve cross subsidization (to cater for the poor) and for water conservation purposes, NWASCO has adopted a rising block tariff system with at least three blocks for domestic consumers, (Chart 1) such as shown in the following example: EXAMPLE! Tariff rates per cubic metre: 1st block of 0 to 6 m 3 = 2.60 Kwacha/m 3 2nd block 6 to 15 m 3 = 3.40 Kwacha/m 3 3rd block 15 to x m 3 = 4.20 Kwacha/m 3 or graphically: Chart 1: Rising Block Tariff Rates per Cubic Metre of Water The cubic meters of the first block of 6 cubic meters (but not more than 10 cubic metres) represent the lifeline consumption and are billed at a social tariff rate. Providers must focus on metering all customers to ensure that they all pay for actual consumption and not flat tariffs which may be pegged on lower consumption. The rising block tariff is also applicable to commercial and institutional consumers. 5.4 TARIFFS AT KIOSKS AND STANDPIPES Where a household connection may currently be too costly for the consumer, a water kiosk or stand pipe may be provided, where the water price per cubic metre should not be higher than the social block tariff. Customers should note that the rising block tariff is not applicable for kiosks and stand pipes. The Devolution Trust Fund (DTF) was set up by NWASCO as a basket fund to support providers to extend and accelerate access to clean water to urban poor populations. The DTF therefore, assists providers with construction of facilities such as water kiosks. 5.5 TARIFFS FOR SEWERAGE The tariff for sewerage services is normally calculated as a percentage of the water consumption. Where a customer has own water supply such as a borehole but has a sewerage connection, the charge for sewerage services will be based on consumption of a like customer i.e. a customer with similar characteristics Household consumption in cubic metre Other Fees Other fees applicable to the customer may include the following: Fixed Meter charge - is charged per water bill and is meant for meter 29

38 Pricing for Water Supply and Sanitation WSS Sector Report 2013 maintenance and replacement. The cumulative amount collected over the useful life of the meter i.e. 5 to 10 years, should at least amount to the cost of the meter to enable meter replacement. Connection fee - levied only once when a customer is applying for a new connection. For domestic customers, it may be spread over a period of time to enhance affordability. Reconnection fee - levied whenever a disconnected customer due to non-payment of bill is seeking reconnection. It should reflect only the average cost of carrying out a disconnection and reconnection. Meter testing fee - charged when a customer requests for meter testing outside the routine testing scheduled by the utility and is only applicable if the meter is not faulty. Meter replacement fee - levied when an installed meter has to be replaced due to loss or damage caused by the customer. This does not apply for the first meter installation. No customer should be charged the cost of the first meter. The Provider is supposed to recover the cost of the meter through the fixed meter charge that the customer is required to pay on a monthly basis. Security deposit a refundable deposit that a new customer makes which is equivalent to a sum of three monthly bills. This deposit is refundable as soon as the customer leaves the property. Sanitation surcharge - in order to accumulate funds for investments in rehabilitation or new installation of sewage infrastructure the utility may apply for a sanitation surcharge to be levied separately. This is a small charge pegged at less than 5% of the water bill. The money collected is not used for operations by the providers but is used to fund projects to improve sanitation coverage in the Country. The Regulator audits the utilization of the funds collected. Community Consultative Meetings Negotiations with big consumers Submission of proposal to NWASCO 1Week Clarifications if any 5.6 CONCLUSION Start of process Communication of results to CU Analysis by NWASCO Presentation of proposal by CU Screening by NWASCO 1Week 4Weeks Within 1Week send information to clarify issues or make adjustments Give date within 1 Week Discussion of results with CUs Decision by NWASCO Council Possibility of Appeal 14 days after decision Consumers are urged to actively participate in tariff consultative meetings which providers arrange and announce in public media for their voice to be heard before they send their tariff applications to NWASCO. The consultative meetings must take place between May- July before the submission date of 30th September. 30

39 6 progress on meeting service level agreements and adherence to service level guarantees

40 Progress on Meeting SLA/Gs WSS Sector Report INTRODUCTION In order to ensure that the water and sanitation service providers give a progressively better service to their customers, NWASCO has formulated Minimum Service Level (MSL) guidelines. MSLs are simply standards which define the acceptable minimum level of service which providers must achieve over a specified timeframe. The guidelines come in two parts with eleven measurable indicators; Service Level Guarantees (SLGs) that compel utilities to provide certain agreed level of service to their customers at any given time; and Service Level Agreements (SLAs) that set out stepwise interventions that a utility will undertake to attain the desirable sector benchmarks of service provision. As a license condition issued under the WSS Act No. 28 of 1997, all water and sanitation service providers are required to formulate and maintain SLGs and SLAs which NWASCO monitors. All the eleven service indicators have timeframes (measured from commencement of operations of a particular CU) within which they are to be attained and it is thus important to determine the progress made by the CUs towards attaining the acceptable benchmarks. The Service Level Indicators (SIs) and how they are measured are shown in Table 11. Table 11: Service Level Indicators (SI) Service Indicator Measurement SI 1 Coverage of the Service Area % of population served with drinking water. SI 2 SI 3 SI 4 SI 5 SI 6 SI 7 SI 8 SI 9 SI 10 SI 11 Drinking Water Quality Service Hours Billing for Services Client Contacts Interruption of Water Supply and Bockage of Sewer Pressure in the Network and Minimum Flow Rate at the Customer Point for Water Supply Unjustified Disconnections Sewer Flooding Quality of Discharged Sewer Support to Public Institutions to Curb Wastage and Settle Bills Promptly No. of tests carried out and test results within the national standards for drinking water. Water supply hours per day and hours to attend to customers per week. Billing, meter reading sequences, conditions for payment of bills by the customer. Complaints from clients, the response time on any other contacts with customers. Unannounced interruption of supply or sewer evacuation due to maintenance and repair work Minimum flow rate of 7 litres/min required at customer connection No. of unjustified disconnections and the compensation to be paid by the provider to the customer The number of times sewer floods a connection per year < 5 In terms of BOD 5, COD, Nitrates, Phosphorous, etc Activities put in place by the water providers 32

41 WSS Sector Report 2013 Progress on meeting SLA/Gs 6.2 Progress made in achieving Service Level Agreements and Adherence to Guarantees Service Level Agreements are signed for specific towns under each CU. Every town has its own target for the three year period that enables the CU progress towards the acceptable benchmark. The analysis therefore considers achievement of individual targets such that failure in one town may translate into overall non-achievement of the Service Indicator (SI). Key: Achieved x Not achieved SI 1 Service Coverage Proportion of population serviced with water CUs are required to display the guaranteed service coverage figures at all pay points. The table below however only shows water coverage and not sanitation coverage. nwsc mwsc KWSC LWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC SLG x x x SLA x x x x The demand for new connections continued to be high and a number of CUs responded positively by being able to make connections. The CUs were able to do this because of the numerous rehabilitation and extension projects undertaken. For example, NWWSC with funding from Government through the MLGH and the Land Development Funds (LDF) as well as through the Devolution Trust Fund did a lot of network extension. The investment requirements for the sector however still remain huge. For CHWSC, coverage for both water and sanitation dropped mostly through damages caused to pipes during township roads construction works. However, projects are underway in most districts of the CU to rehabilitate infrastructure and extend services. For LgWSC, the contributing factor to the delayed completion of projects was as a result of procurement procedures and project scope alterations by the CU; hence could not meet the targets for coverage. LWSC and WWSC could not meet their targets due to limited resources and delayed completion of projects. Water line damaged during road construction works 33

42 Progress on Meeting SLA/Gs WSS Sector Report 2013 SI 2 Drinking water quality Assessment through number of tests conducted and compliance to standard Due to its impact on the health of consumers, CUs are required to guarantee their customers an overall compliance of 95%. nwsc mwsc KWSC LWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC SLG x x x x SLA x x x x MWSC and LGWSC failed to meet both the SLAs and SLGs because most Residual Chlorine results were above the maximum acceptable limits. KWSC had challenges related to the quality of raw water and the poor state of the distribution network which allowed inflow of foreign matter and re-contaminated the water. For CHWSC, their failure to meet this service indicator was mostly due to the inadequate treatment of water. SI 3 Service Hours- water supply hours per day and hours to attend to customers per week This service indicator depicts the average duration of water supply at the customer connection and is specific to an area. CUs are therefore required to display at all pay points the guaranteed hours of supply for the particular area. In addition, CUs are also expected to have offices accessible to customers for a minimum number of hours per week. nwsc mwsc KWSC LWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC SLG x x x x SLA x x x x x x Unstable power supply to a number of parts of the country meant that the CUs were not able to supply water as per their respective guaranteed hours. The worst affected CUs included CHWSC and LPWSC. Drying dams in CHWSC, SWSC and delayed projects under NWSC affected the meeting of targets. Drying dams affect hours of water supply 34

43 WSS Sector Report 2013 Progress on meeting SLA/Gs SI 4 Billing for Services Billing, meter reading sequences, conditions for payment of bills by the customer, metering ratio The billing for services indicator specifies the frequency at which CUs should read customer meters and distribute bills, the conditions related to payments of bills by customers and the number of customers with water meters. nwsc mwsc KWSC LWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC SLG x x x x SLA x x x x x All CUs except LWSC, met their billing related targets while for metering ratio, six CUs met both their SLA and SLG targets. LWSC and LpWSC made remarkable increase in metering ratio in all their towns. However, LWSC could not meet the target for the SLA but achieved 100% metering in Luangwa and Chongwe Districts and the metering exercise remained ongoing by close of the reporting year in their remaining towns. MWSC, LGWSC, SWSC and CHWSC did not meet the target because of low metering ratios. Numerous billing errors were noted for LWSC especially after the CU changed its billing format. Increasing the metering ratio can be affected by the need to replace defective meters. SI 5 Client Contacts - Complaints from clients, the response time on any other contacts with customers This service indicator specifies the timeframes CUs are expected to take to respond to customer complaints or any other contacts with customers. nwsc mwsc KWSC LWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC SLG x x x SLA x x x LGWSC, CHWSC and WWSC did not meet this indicator because of delays in connecting paid up customers. For WWSC, this was coupled with delays in the procurement of required materials. 35

44 Progress on Meeting SLA/Gs WSS Sector Report 2013 SI 6 Interruption of Water Supply & Blockage of Sewer - Unannounced interruption of supply or sewer evacuation The service indicator reflects the proportion of the population in the CUs service area that is subjected to interruptions in water supply or blockage of sewer as a result of maintenance or repair works for a specified duration. nwsc mwsc KWSC LWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC SLG x SLA x CHWSC continued not to notify its customers during prolonged interruptions in most districts. All other Utilities did endeavour to adequately inform their customers during planned shut downs unless otherwise caused by unexpected power supply disturbances. Supply can be interrupted for repair works SI 7 Pressure & Flow in the Network for Water Minimum flow rate of 7 litres/min required at customer connection Pressure and flow in the network for water service indicator specifies the maximum acceptable proportion (<5%) of connections in a service area with water flow rate of less than 7 litres per minute. nwsc mwsc KWSC LWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC SLG SLA All CUs did fairly well in ensuring that flow rates for water in the network were adequate in most parts of their service areas. 36

45 WSS Sector Report 2013 Progress on meeting SLA/Gs SI 8 Unjustified Disconnections No. of unjustified disconnections and the compensation paid by the provider to the customer The Unjustified Disconnections service indicator specifies the maximum acceptable proportion of the total connections for a CU that should be subjected to unjustifiable disconnections which is less than 0.2% of the customer base. nwsc mwsc KWSC LWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC SLG SLA Unjustified disconnections from water supply or sanitation services border on infringement of the customers rights. Customers are however at liberty to report such unfair treatment by any CU after which, if the customer was indeed unfairly treated, compensation must be given. In the reporting period, few of such cases were reported. SI 9 Sewage Flooding The number of times sewage floods a connection per year < 5 The Sewage Flooding service indicator specifies the maximum acceptable proportion of connections that can be flooded with sewage in a year which is less than 0.5% of the total connections. nwsc mwsc KWSC LWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC SLG SLA Poor consumer habits contribute to blockages occuring 37

46 Progress on Meeting SLA/Gs WSS Sector Report 2013 SI 10 Quality of Discharged Sewage In terms of BOD 5, COD, Nitrates, phosphorus, and others. This service indicator specifies the acceptable number of tests required to be done and the quality of the sewage in terms of BOD5, COD, Nitrates, phosphorus etc. discharged by CUs into the environment from their sewage treatment plants. Most effluents from mechanised sewage plants did not meet the quality standard under LWSC, KWSC, NWSC and MWSC while effluents from most of the sewage ponds met the standards. Meeting the acceptable quality for sewage effluent remains a challenge 6.3 CONCLUSION SLGs and SLAs are among the tools that NWASCO uses to compel CUs to provide good quality water supply and sanitation services to their customers. A number of CUs were able to extend their services to new areas because of the capital projects they were undertaking. CUs depended largely on government and other cooperating partners to be able to extend their services to new areas. In the reporting year, the investment needs for the sector were not met (see Table 24) resulting in coverage not increasing at the desired rate. Alhough there were positive scores in most service indicators, there is still need for concerted effort by CUs to do better especially in customer care. Because the SLGs and/ or SLAs form part of the tariff and license conditions, NWASCO continued to strictly monitor CUs on their compliance to SLGs or SLAs and issued out directives to those that did not comply. 38

47 7 COMPARATIVE PERFORMANCE OF commercial utilities (CUs)

48 Comparative Performance of CUs WSS Sector Report OVERVIEW This Chapter illustrates the comparative performance of CUs during the period 1st January 2013 to 31st December Since inception, NWASCO has been reporting performance of the utilities for the period 1st April to 31st March. However, with effect from this report, the reporting period has been adjusted to 1st January - 31st December in line with Government s planning period. CUs operate as monopolies in their respective areas thus the use of comparative performance is necessary to induce competition; determine the progress made in the sector and allow the various stakeholders to plan appropriate interventions. Performance is measured against the sector benchmarks and averages. Each CU is thus motivated to improve its previous performance, as well as, outperform others. Consumers can also use the comparative data to appreciate the performance and challenges of their respective providers. Performance is measured in the following five broad categories of indicators: Operational; Financial; Staff Efficiency; Service Level; and Corporate Governance and Management. The Regulator expects continued improvements in provider performance Total Population in Service Areas of the CUs Each CU is licensed to operate in a specific area. The total population in the CU serviced areas for the reporting period was estimated at 5.97 million. This may differ from that reported by the Central Statistical Office (CSO) because of the difference in the delineation of rural and urban areas. Some of the CU licensed operating areas (urban and peri-urban) overlap with what is defined as rural by CSO. For example, CSO classifies Mambwe in Eastern Province, Masaiti on the Copperbelt Province and Chilubi in Northern Province almost entirely rural districts yet these are part of the CUs serviced areas. Out of a total estimated urban population of about 5.97 million, about 1% resides in areas serviced by Private Schemes which are business entities that provide WSS services as a fringe benefit to their employees. 40

49 WSS Sector Report 2013 Comparative Performance of CUs Clustering of Commercial Utilities CUs are clustered based on the water production volumes, number of connections and population in the licensed areas as shown in Table 12. Clustering allows the performance of the CUs to be compared in the context of their sizes. CUs with more than 40,000 connections and water production above 50million m3 per year are placed in Cluster 1. CUs with connections between 15,000 and 40,000 and water production between 15million to 50million m3 per year are in cluster 2. CUs with connections less than 15,000 and production less than 15million m3 per year are in cluster 3. As the CUs grow in size, the limits set for the cluster could change. Table 12: Clustering of CUs Cluster CU Total Population in Service Area No. of connections Water Production (million m 3 ) LWSC 2,113,152 85, NWSC 718,237 51, KWSC 673,692 54, MWSC 468,579 48, LGWSC 399,593 20, SWSC 375,707 38, CHWSC 312,971 15, NWWSC 248,640 10, EWSC 265,058 14, WWSC 193,861 11, LPWSC 196,085 4, TOTAL 11 CUs 5,965, , PERFORMANCE ANALYSIS OPERATIONAL INDICATORS The effectiveness and efficiency of a CU in providing water and sanitation services is assessed using operational indicators. These include water and sanitation coverage, Non-Revenue Water (NRW) and metering ratio. The primary data used in calculating operational indicators include number of connections, population and water production figures Total Connections The total number of domestic connections increased by 15,865 while the non-domestic connections increased by 2,474 from the previous reporting period, bringing the overall increase in connections to 18,339. Table 13: Total Connections CU Total Domestic 2013 Total Non- Domestic 2013 Total connections 2013 Total connections 2012 LWSC 79,954 5,878 85,832 79,475 NWSC 48,964 2,904 51,868 49,658 KWSC 52,875 2,031 54,906 53,671 MWSC 46,944 1,697 48,641 45,491 LGWSC 19,165 1,161 20,326 19,331 SWSC 35,884 2,389 38,273 36,642 CHWSC 13,777 2,053 15,830 15,097 NWWSC 9,507 1,002 10,509 9,598 WWSC 8,776 2,484 11,260 10,654 EWSC 13,027 1,297 14,324 13,461 LPWSC 4, ,762 3,634 TOTAL 333,365 23, , ,712 41

50 Comparative Performance of CUs WSS Sector Report Water Supply Coverage The ratio of urban population with access to safe and reliable water Benchmark for service coverage (water supply and sanitation) 100% 80% 60% 40% 20% 94.9% 86.5% 86.7% Very Good 100% Good >90% Acceptable % Unacceptable <80% Chart 2: Water Supply Coverage 94.7% 69.2% 89.2% 70.9% 82.8% 49.1% 83.6% 19.9% 82.7% 82.1% CUs met the acceptable coverage benchmark of 80% as shown in Chart 2. The notable increase in NWWSC was mainly due to the completion of DTF projects which included the construction of a total of 7 kiosks and over 900 household connections in Solwezi and Kabombo. LPWSC increased household connections by over a 1,000. However, in absolute terms LWSC made most number of domestic connections with an increase of 4,739. The drop in CHWSC and WWSC was mainly as a result of township road construction works which inadvertently damaged distribution lines hence cutting off some households. For some CUs, part of their service area is covered by Private Schemes or Water Trusts: For LWSC, the coverage in Chart 2 includes 65,438 people serviced by Water Trusts in nine peri-urban areas. In addition to the coverage in Chart 2, 3,508 people under LWSC are serviced by two Private Schemes. In SWSC, 65,437 people are serviced by four Private Schemes. In LGWSC, about 5,723 people are serviced by KCM-Nampundwe. In NWWSC, Kasanshi and Lumwana mines service around 500 and 6,000 people respectively. 0% %Average in 2012 %Average in 2013 Water coverage is the population serviced by domestic connections only through individual household connections, kiosks, public stand posts and shared taps. The sector average increased slightly from 82.1% to 82.6% as evidenced by increase in the number of connections (Table 13). Seven Kiosks funded by DTF to increase access to water supply 42

51 WSS Sector Report 2013 Comparative Performance of CUs It is important to note that due to fluctuations in population figures, the coverage in percentage terms may not give an appreciation of the actual increase in people serviced. Therefore, the absolute figures in terms of total population served with water per CU are shown in Table 14. An additional 211,513 people were serviced in the reporting period. Table 14: Population Served with Water CU Total Population 2012 Population Served 2012 Proportion of Population Serviced by Household Connections 2012 Proportion of Population Serviced by public stand posts & Kiosks 2012 Total Population 2013 Population Served 2013 Proportion of Population Serviced by Household Connections 2013 Proportion of Population Serviced by public stand posts & Kiosks 2013 LWSC 2,026,185 1,727, % 57.3% 2,113,152 1,827, % 61.1% NWSC 694, , % 29.8% 718, , % 33.2% KWSC 662, , % 14.3% 673, , % 14.4% MWSC 464, , % 20.0% 468, , % 18.3% LGWSC 389, , % 61.0% 399, , % 55.9% SWSC 363, , % 28.8% 375, , % 28.4% CHWSC 300, , % 69.0% 312, , % 60.8% NWWSC 243, , % 68.1% 248, , % 65.4% WWSC 183, , % 39.3% 193,861 95, % 26.8% EWSC 246, , % 51.2% 265, , % 55.4% LPWSC 185,215 29, % 0.0% 196,085 38, % 0.0% TOTAL 5,760,541 4,729, % 43.1% 5,965,575 4,931, % 44.1% Over 50% of the population serviced for LWSC, LGWSC, CHWSC, NWWSC and EWSC are served through public stand posts and kiosks. However, overall, about 56% of the population is served by household connections. The ideal situation would be to have the majority of the population served by household connections. 43

52 Comparative Performance of CUs WSS Sector Report Sanitation Coverage The ratio of urban population with access to adequate sanitation Sanitation coverage consists of the population serviced by offsite (centralised system) and septic tanks only. Other onsite facilities such as pit latrines are not considered acceptable for urban sanitation. 100% 80% 71% 65% 64% Chart 3: Sanitation Coverage 81% MWSC was still the only CU above the acceptable benchmark of 80% coverage as shown in Chart 3. The increase for LWSC was due to the capturing of more septic tanks. The coverage dropped for CHWSC, WWSC and EWSC. For CHWSC, the drop was mainly due to road construction works that damaged the network in Isoka, Chinsali, Mpika and Kasama. Similarly for WWSC road construction works also damaged the network in Mongu. For EWSC, the population serviced increased in absolute terms as shown in Table 15, however, the increase in connections was at a slower rate than the growth in population hence the decline. 60% 57% 40% 20% 28% 45% 31% 21% 40% 43.3% 56% 14% 0% %Average in 2012 %Average in 2013 The sector average barely increased in the last three years, progressing by only 1% per year. There was low extension of the sewer network as most of the efforts were directed towards rehabilitating run down infrastructure. Furthermore, the high investment cost in new sanitation facilities continued to be a limiting factor. Sanitation options provided to schools 44

53 WSS Sector Report 2013 Comparative Performance of CUs Table 15: Population Serviced with Sanitation CU Total Population 2012 Population Serviced 2012 Proportion of Population on Sewer Network 2012 Proportion of Population served by Septic Tanks 2012 Total Population 2013 Population Serviced 2013 Proportion of Population on Sewer Network 2013 Proportion of Population served by Septic Tanks 2013 LWSC 2,026,185 1,400, % 76.4% 2,113,152 1,505, % 84.8% NWSC 694, , % 4.2% 718, , % 4.2% KWSC 662, , % 5.7% 673, , % 12.5% MWSC 464, , % 0.1% 468, , % 3.6% LGWSC 389, , % 35.5% 399, , % 45.9% SWSC 363, , % 50.5% 375, , % 52.0% CHWSC 300,933 74, % 88.9% 312,971 64, % 99.2% NWWSC 243,526 67, % 93.9% 248,640 78, % 90.1% WWSC 183,446 76, % 93.8% 193,861 77, % 89.5% EWSC 246, , % 88.3% 265, , % 88.4% LPWSC 185,215 25, % 84.7% 196,085 27, % 98.7% TOTAL 5,760,541 3,237, % 47.8% 5,965,575 3,429, % 49.4% Mechanised sewage treatment plant 45

54 Comparative Performance of CUs WSS Sector Report Water Production Chart 4 reflects the volume of water treated and distributed into a network. Water production figures are looked at in relation to the water losses depicted in Chart 5. CUs should aim at reducing NRW first before considering increasing production. With good operational efficiency, an increase in water production should only be necessitated by an increase in customer base and/ or improved hours of supply. Production reduced by 12.6million m 3 largely due to increased power service interruptions, drying of dams and low yields from boreholes. CHWSC experienced numerous power outages and the drying of the Nakonde Dam. MWSC replaced two rising mains in Chililabombwe and Mufulira which necessitated pumping shutdowns. For SWSC, the reduction in production was due to the collapsing of the dam in Kalomo from February to May 2013 and drying up of Gwembe and Zimba Dams Non-Revenue Water (NRW) Non-Revenue Water (NRW) is the difference between the quantity of treated water distributed in the network and the quantity of water billed. NRW consists of technical (leakages) and commercial losses (illegal connections, unbilled customers, wastage on un-metered customers premises). In the absence of metering, the volumes could be unreliable estimates. Good <20% Benchmark for NRW Acceptable % Unacceptable >25% Chart 5: Non- Revenue Water (NRW) 70% 60% 61% 67% 64% 64% 60% million m Chart 4: Water Production 50% 40% 42% 30% % 10% % % 42% 39% 28% 40% 48% 42% Average 2012 Average

55 WSS Sector Report 2013 Comparative Performance of CUs NRW worsened from an average of 42% to 48% notably in CHWSC, LPWSC, NWSC and KWSC as shown is Chart 5. The billed volume for CHWSC dropped due to the loss of customers coupled with physical losses following the damage to portions of the water network in a few towns during road construction works. LPWSC installed bulk and domestic meters which assisted with more accurate measurement and also led to the discovery of a severely leaking distribution line in Kawambwa which needed an overhaul. NWSC modified the assumption for calculating the billed volume for fixed customers to align it with the approved tariffs which were much lower than their previous assumptions. KWSC had to do extensive flushing of the system in Ndola after the project works to clear mud. The CU also experienced numerous bursts in the townships from increased pressure after replacement of the Nakaputa main line in Ndola. It is worth noting that at a certain level of NRW, it becomes difficult to significantly reduce the figure and may be uneconomical. NWWSC continued to be the closest to the acceptable benchmark of 25%. It is worth noting that at a certain level of NRW, it becomes difficult to significantly reduce the figure and may be uneconomical. This may be the case for NWWSC which though trending towards the acceptable benchmark has had no significant change in the past three years Lost Revenues due to NRW in 2013 Any loss of revenue in business is unacceptable. However, in the water sector a benchmark of 25% has been set as acceptable loss. To appreciate the magnitude of water losses, the NRW figures were translated into monetary terms, as shown in Table 16. This should serve as an incentive for each CU to come up with strategies of realising some of this revenue. Table 16: Estimated Revenue Lost due to NRW in 2013 CU Metering Ratio Total Billing (ZMW) NRW (in %) NRW (ZMW) 2013 NRW (ZMW) 2012 LWSC 70% 213,037,398 42% 152,378, ,840,737 NWSC 61% 96,032,198 60% 143,419,875 54,967,510 KWSC 68% 74,964,279 61% 117,591,330 70,768,730 MWSC 61% 103,210,745 39% 67,132,521 58,124,336 LGWSC 67% 20,176,820 42% 14,476,787 15,834,147 SWSC 63% 36,546,656 39% 23,525,542 25,028,979 CHWSC 34% 8,312,019 67% 16,569,166 5,776,783 NWWSC 100% 18,441,537 28% 7,278,877 5,626,758 WWSC 76% 9,281,509 40% 6,175,115 4,947,668 EWSC 100% 15,623,561 40% 10,425,533 8,581,704 LPWSC 95% 3,109,545 64% 5,437,385 3,683,339 TOTAL 598,736, ,410, ,180,691 The margin of revenue lost increased to K165 million from the previous period. This was a drastic jump in monetary loss from the reduction of K24 million in the previous period. The substantial loss was owing to the high NRW particularly for NWSC and KWSC. At the benchmark of 25% NRW, the total billing would have been K872 million. If NRW is not reduced to the acceptable benchmark, the magnitude of loss becomes even greater as the business expands. 47

56 Comparative Performance of CUs WSS Sector Report Production and Consumption in litre per capita per day Chart 6 and 7 show the average amounts of water produced and consumed per person per day, respectively. An analysis of the two charts reveals the degree to which CUs are able to meet the required water consumption standards. According to World Health Organisation (WHO) guidelines, 50litres is the acceptable minimum water consumption required per person per day for basic hygienic considerations. However, this is a bare minimum and poses health risks. Except in EWSC, NWWSC and CHWSC, the average consumption in all CUs was above the minimum recommended amount of 50l/c/d Chart 6: Consumption: Litre/Capita/Day Where production per capita is much higher than the consumption per capita, the difference can be because of industrial/ commercial activities (KWSC) and/or high non-revenue water (LPWSC) Average 2012 Average 2013 In WWSC, the high production per l/c/d could be attributed to other consumers drawing water from connected unmetered customers. 450 Chart 7: Per Capita Production The low production and consumption per l/c/d for EWSC and NWWSC could be attributed to their high metering and low sewerage coverage which may result in low water usage. When metered, customers generally become more cautious with water usage. Where sewerage coverage by network is low, people use onsite facilities which use little or no water. CHWSC suspended billing for a number of customers due to no supply coupled with reduced hours of supply in some areas resulting in the lower consumption per l/c/d Average 2012 Average production per person served (l/c/d) 2013 production per person served (l/c/d) 48

57 WSS Sector Report 2013 Comparative Performance of CUs Metering Ratio Metered connections compared to the total connections Chart 8 shows the metering ratio which is the proportion of the metered connections compared to the total connections. Metering is required in order to measure the amount of water consumed as well as charge consumers according to their consumption. It is an important tool for controlling NRW. Chart 8: Metering Ratio of 100%. LPWSC and WWSC made considerable effort to meter customers with support from DANIDA. LWSC installed over 10,000 prepaid meters in all towns in their service area. NWSC installed over 16,000 meters with funding from the AfDB project and their own resources. It must be noted that the slow increase in the metering ratio is affected by the need to replace defective meters as opposed to metering new and existing customers. 100% 100% 100% 95% 80% 60% 70% 61% 68% 61% 67% 63% 66% 67% 63% 40% 34% 20% 0% Average 2012 Average 2013 The average metering ratio continued to improve from the 2012 period and reached 67%. In absolute terms, a total of 25,539 new meters were installed in the period. NWWSC and EWSC maintained the benchmark metering ratio Meters procured to enhance service delivery 49

58 Comparative Performance of CUs WSS Sector Report SERVICE LEVEL INDICATORS These portray the quality of service a company is rendering to its customers. Three major ones include water quality, hours of supply and resolution of customer complaints Water quality Water quality is very important due to the health impact it has on the consumers. The compliance level takes into account the number of samples conducted and the percentage of results meeting the water quality standard. Therefore, it is important to note that a low compliance might imply deficiency in the required number of tests and/or non adherence to quality standards. The two types of parameters considered are bacteriological (total and faecal coliforms) and physiochemical (Chlorine residue, ph, turbidity and colour). Chlorine residue test is given prominence under physiochemical because of its relation to the bacteriological aspect of water. Seven CUs met the sector benchmark of for water quality as shown in Table 17. WWSC and EWSC received support from Aquaya, a USA based NGO to procure testing equipment and training of water quality staff. KWSC and MWSC have polluted raw water source that pose a challenge to adequately treat the water. CHWSC experienced challenges in complying with water quality due to non-availability of adequate testing equipment and qualified manpower in the districts. Further, the treatment facilities were inadequate to effectively treat the water in some districts. LGWSC had residue chlorine above the maximum acceptable limit in some districts due to suspected outbreak of typhoid in Kabwe during the rainy season the use of inappropriate dosing equipment and the inherent iron in the water in Serenje. Compliance to water quality standards is stringent 50

59 WSS Sector Report 2013 Comparative Performance of CUs Table 17: Water Quality Analysis Benchmark for Water Quality Acceptable 95% CU Chlorine Residual Quality Compliance Bacteriological Physiochemical Overall Water Quality Compliance 2013 Overall Water Quality Compliance 2012 CHWSC 87% 81% 87% 85% 81% EWSC 98% 100% 100% 97% 95% KWSC 89% 91% 100% 93% 95% LGWSC 85% 99% 99% 94% 96% LWSC 88% 99% 97% 95% 91% MWSC 85% 99% 93% 93% 93% NWSC 94% 99% 90% 95% 95% Remarks Inadequate treatment resulting in high turbidity and bacteriological failures. Improved mainly because of training of water quality staff by Aquaya. Still needs to improve in record keeping for Chipata, Katete and Nyimba. The replacement of the Nakaputa falling main resulted in increased pressure in the network which led to numerous leakages in the township and consequently deteriorated the quality of water from post contamination. Very poor raw water quality continued to affect the Southern Zone of Ndola. Residual Chlorine tests failed because the results were above the maximum acceptable limits. Though still below the acceptable standard, residual chlorine compliance improved. High turbidity was observed in all towns while most residual chlorine test results were the maximum acceptable limit. Maintained consistent water quality compliance. However, high turbidity levels were observed in most networks. NWWSC 99% 98% 98% 98% 99% Maintained consistent water quality compliance. SWSC 98% 98% 98% 98% 90% Improved in disinfection of water. WWSC 95% 99% 99% 96% 94% Improved mainly because of training of water quality staff by Aquaya. LPWSC 94% 97% 93% 95% 98% Inadequate treatment resulting in high turbidity. 51

60 Comparative Performance of CUs WSS Sector Report Hours of Supply Chart 9 shows the range of supply hours by the CUs per day. Benchmark for hours of supply (Cluster 1 & 2) Benchmark for hours of supply (Cluster 3) Good hours Acceptable hours Unacceptable <18 hours Good >18 hours Acceptable hours Unacceptable <16 hours The least number of hours were supplied to areas such as Avondale (Lusaka City) under LWSC; Wusakile (Kitwe town) under NWSC; Upper Ndeke (Ndola town) under KWSC; Twatasha (Chingola town) under MWSC; Upper Itala (Mkushi town) under LGWSC; the entire Pemba town under SWSC; the majority of Mpulungu town under CHWSC; Location (Solwezi town) under NWWSC; the majority of Kaoma town under WWSC; the majority of Katete town under EWSC and Kawambwa town under LPWSC. The average number of hours supplied per day remained generally unchanged for most CUs except for LGWSC, SWSC and CHWSC which dropped. Chart 9: Hours of Supply Interruption of service CHWSC experienced interruption of service for the entire Nakonde town for about 5 days due to the drying up of the Nakonde dam to an extent that the CU could not pump any water. The CU mobilised a bowser to ration water to the over 48,000 persons affected. Other interruptions were experienced for more than 48hours in Isoka, Luwingu, Mpika and Kasama due to, among other reasons, breakdowns, ripping off of the network from road works and erratic power supply. NWSC experienced service disruptions in Kalulushi and Garneton due to 5 pollution at the raw water source Mwambashi Dam- for over 3 months. Affected customers were served through bowsers in Garneton while the 0 Kalulushi residents were severely rationed from an alternative source in Kitwe. Chamboli and Wusakile Township continued to experience erratic water supply due to insufficient water in the system. Min Supply Hours Max Supply Hours Av Av KWSC experienced prolonged severe rationing in the southern part of Ndola during the rehabilitation of Kafubu waterworks and replacement of the 52

61 WSS Sector Report 2013 Comparative Performance of CUs Nakaputa main line in Ndola. SWSC experienced interruption in Kalomo for about one week due to the collapse of the B-Williams dam in February 2013 during the rainy season. Chingola under MWSC experienced supply interruption for about one week due to maintenance works at the treatment plant within the Konkola Copper Mines (KCM) premises. LWSC experienced unprecedented water rationing due to power outages particularly in Lusaka and Kafue towns. This was aggravated by the delayed onset of the rains. Chongwe town was heavily rationed due to the drying up of the dam which was the only source of water for the district. Affected customers were supplied with water by bowser for close to three weeks. Under LGWSC, Kapiri Mposhi had no water for a prolonged period due to very low levels from the water sources. Serenje rationed water for most of the fourth quarter due to the drying up of the raw water source. Mumbwa did not have water for more than three days due to a pump failure. NWWSC was forced to pump intermittently, due to the high value of turbidity as a result of road construction works and farming activities that contaminated the river in Solwezi. Under LPWSC, Kawambwa experienced erratic supply due to pump breakdown and power outages. WWSC reported interruption of water supply for more than 4 days in November due to power outages caused by a failed transformer. The areas that were mainly affected were Mongu district and Namushakende centre. EWSC experienced erratic water supply in Chipata district for about three months due to poor/no power supply and low water levels in dam 1, due to delayed onset of the rains. In Katete water was rationed from 8 to below 6 hours per day due to low yields from the boreholes. Water network ripped off during road construction works. Cutting off users. 53

62 Comparative Performance of CUs WSS Sector Report Customer Complaints Complaints are critical in measuring customer satisfaction. Customers have the right to complain when they are not receiving the service guaranteed by the provider. Providers are required to keep a record of customer complaints and resolve them within a stipulated timeframe. Customer awareness plays a very important role in ensuring that complaints are reported and resolved. A reduction in the number of complaints could indicate improvement in service and/or that customers are losing confidence in providers not attending to their complaints. Table 18: Customer Complaints were related to metering. Total Total Total Total Complaints Complaints Customer Customer Complaints Complaints per 100 per 100 LPWSC had the highest number of complaints per 100 CU Complaints Complaints Resolved % Resolution Connections Connections connections owing to the high number of complaints reported in relation to its customer base. LGWSC and SWSC must be LWSC 13,522 19,870 18,876 95% lauded for resolving all their complaints. NWSC 8,941 5,549 2,945 53% KWSC 5,066 8,701 7,293 84% 9 16 MWSC 12,522 25,863 16,879 65% LGWSC 7,138 6,451 6, % SWSC 8,125 7,823 7, % CHWSC 3,904 5,900 3,792 64% NWWSC 1,007 1,794 1,425 79% WWSC 2,842 1,899 1,821 96% EWSC 4,272 4,308 3,163 73% LPWSC 2,043 3,627 3,096 85% TOTAL 69,382 91,785 73,561 80% The number of complaints recorded increased by 22,403 from the previous period as shown in Table 18, with overall complaint resolution at 80% compared to 89% last year. Most of the complaints for all CUs were related to issues of interruption of water supply, poor water quality and billing errors. NWSC resolved the least number of complaints due to ongoing works that would assist in resolving the reported complaints once completed. MWSC had the highest number of complaints reported, almost double from the previous period. The majority of complaints for both NWSC (2,318) and MWSC (13,484) were related to sanitation services. The majority of complaints recorded by LWSC (9,004) Customers can resort to akward solutions to resolve complaints 54

63 WSS Sector Report 2013 Comparative Performance of CUs FINANCIAL INDICATORS These ascertain viability and sustainability of CUs by analysing revenues and costs Billing and Revenue Billing for water and sewerage services is shown in Table 19. This is the revenue that the CUs get for providing water supply and sanitation services and excludes any other adhoc charges such as reconnection fees and meter charges. Table 19: Billing for Water and Sewerage CU Total Billing Water and Sewer (ZMW) 2012 Total Billing Water and Sewer (ZMW) 2013 LWSC 179,551, ,037, NWSC 85,724, ,032, KWSC 75,999, ,964, MWSC 88,381, ,210, LGWSC 17,100, ,176, SWSC 31,615, ,546, CHWSC 8,312, ,312, NWWSC 12,964, ,441, WWSC 7,032, ,281, EWSC 12,911, ,747, LPWSC 2,396, ,109, Total 521,991, ,860, Collection Efficiency The collection efficiency is the proportion collected of billed amounts (shown in Table 19). The calculation considers collections and billing for water supply and sewerage only. Other charges are not included. Benchmark for Collection Efficiency 140% 120% 100% 80% 60% 40% 20% 0% 98% 69% 63% 87% 80% Very Good >95% Good 90-95% Acceptable % Unacceptable <85% Chart 10: Collection Efficiency 97% 78% 97% 99% 92% 91% 88% 88% Average 2012 Average 2013 The average collection efficiency remained at 88% as shown in Chart 10. Only four CUs (Nkana, Kafubu, Lukanga and Chambeshi WSC) were below the acceptable benchmark of 85%. KWSC made efforts to collect from the Government and domestic customers though they were still below benchmark. 55

64 Comparative Performance of CUs WSS Sector Report 2013 Because the figure for collection efficiency gets distorted when outstanding amounts and/or advance payments made are treated as part of the current collections; Chart 11 gives a more accurate picture of the collection efficiency by calculating it over a three-year period to eliminate distortions. 120% 100% 80% 60% 40% 20% 0% 93% Chart 11: Collection Efficiency over three years ( ) 72% 59% 91% 81% 96% 105% 91% 95% 93% 83% Only NWSC, KWSC and LGWSC were below the benchmark of 85% over the three year period. All the CUs were owed a lot of money by their customers as shown in Table 20. The biggest component of the receivables were that of Government institutions which owed more than 50%. Although the total receivables had reduced by an overall 6% between 2012 and 2013, there is serious need by all CUs to devise better collection strategies to reduce the growth in receivables. To address this problem, LWSC and MWSC have embarked on installing prepaid meters to ensure that payment is made up front. Other CUs such as NWSC, SWSC and LGWSC are planning to install prepaid meters. The failure by CUs to collect their revenue has led to cash flow problems resulting in growth in trade payables culminating into the failure by CUs to pay their dues to ZRA, NAPSA, ZESCO and other statutory bodies. Suppliers of Chemicals and other inputs are also owed a lot of money. CUs need to ensure that revenue collections are enhanced to ensure that finances are available to cover payables. Table 20: Trade Receivables and Payables CU Trade Recievables (ZMW) 2012 Trade Payables (ZMW) 2012 Trade Recievables (ZMW) 2013 Trade Payables (ZMW) 2013 LWSC 80,769, ,114, ,093, ,940, NWSC 91,368, ,390, ,620, ,965, KWSC 139,065, ,937, ,564, ,284, MWSC 43,276, ,788, ,897, ,941, LGWSC 15,161, ,752, ,191, ,214, SWSC 10,474, ,025, ,905, ,210, CHWSC 7,899, ,460, ,698, ,383, NWWSC 28,845, ,254, ,395, ,900, WWSC 9,330, ,673, ,734, ,520, EWSC 7,944, ,504, ,753, ,392, LPWSC 946, ,978, ,191, ,903, Total 435,082, ,880, ,047, ,657,

65 WSS Sector Report 2013 Comparative Performance of CUs Average Tariff and Unit Operation Cost Water and sewerage tariffs are raised periodically to move the CUs towards full cost recovery through user charges in line with the National Water Policy. 6 Chart 12: Unit Operation Cost and Average Tariff NWASCO approves all tariff adjustments and has the responsibility of ensuring that only justified costs are passed on to the customer. Thus, the justified 5 operational costs of providing water and sanitation services have a direct bearing on the price of water. For financial viability, the average tariff (billing/m3) should be equal to or higher than the unit operation cost. The unit operation cost depicted in the Chart 12 is higher than the actual unit operation cost for water only due to the difficulty in isolating sewerage related costs. The unit operation cost includes the cost related to sewerage whereas the average tariff does not incorporate the revenue from the sewerage service. For CUs not 100% metered, the 1 average tariff is calculated by converting an assessed consumption of water using the rising block tariff. 0 LWSC, KWSC, MWSC, LGWSC and SWSC should have been able to cover their O&M costs at the average tariff. Unit Operation Cost 2012 Unit Operation Cost 2013 Average Tariff 2012 Average Tariff 2013 Sector Average tariff Sector avearge O&M cost Chemicals are a key component of operating costs 57

66 Comparative Performance of CUs WSS Sector Report 2013 Table 21 shows computation of a water bill for a metered domestic customer using the rising block tariff at different consumption volumes. This does not include fixed meter charge (range ZMW5 to ZMW8) or sewer charges (range 20% to 30% of water bill). Tariffs differ because of the varying cost structures attributed to differences in the operating environments of CUs. However, it must be noted that the tariff per cubic meter within the 0-6m3 band is kept at or less than the unit cost of service delivery as a lifeline consumption although this is compensated in the higher bands of consumption. Table 21: Computation of Rising Block Tariffs for Domestic Customer Water Bill CU Water Bill of 6 m 3 (Low consumption) (in ZMW) Water Bill of 30 m 3 (Medium consumption) (in ZMW) Water Bill of 60 m 3 (High consumption) (in ZMW) Water Bill of 6 m 3 (Low consumption) (in ZMW) Water Bill of 30 m 3 (Medium consumption) (in ZMW) Water Bill of 60 m 3 (High consumption) (in ZMW) LWSC NWSC KWSC MWSC LGWSC SWSC CHWSC NWWSC WWSC EWSC LPWSC Average The reduction in the bill for 30m3 and 60m3 for NWSC was due to the CU s decision to widen the bands from the second band onwards. SWSC and EWSC had average increases of about 25% and 40% respectively. 58

67 WSS Sector Report 2013 Comparative Performance of CUs Cost Analysis Operation and Maintenance Costs Cost containment is very critical in service provision. The major operation costs (personnel, chemical and energy) have an impact on the efficiency of a CU. Other costs include maintenance, administrative costs and other direct costs such as operational consumables, services by sub contractors and vehicle running. Operational costs are analysed during tariff adjustments in order to prevent unjustified costs being passed on to the consumers. Table 22 and Chart 13 are used to analyse the cost of operation. Table 22: Cost of Operation and Maintenance Personnel Cost (in ZMW) Chemicals Cost (in ZMW) Energy Cost (in ZMW) Other Cost (in ZMW) Total Cost (in ZMW) CU % change % change % change % change % change LWSC 91,403, ,591, % 2,585,617 1,858,225-28% 17,612,040 23,715,482 35% 32,843,811 42,566,155 30% 144,445, ,731,316 18% NWSC 32,180,263 34,137, % 5,832,425 6,154,859 6% 11,993,514 11,812,997-2% 13,288,481 14,404,556 8% 63,294,682 66,509,606 5% KWSC 23,287,019 29,467, % 2,308,809 3,284,653 42% 12,532,566 11,098,714-11% 6,309,747 7,968,842 26% 44,438,141 51,820,189 17% MWSC 27,586,139 30,893, % 4,618,849 5,308,040 15% 11,363,879 9,885,860-13% 18,454,984 28,262,660 53% 62,023,850 74,350,371 20% LGWSC 10,049,015 11,292, % 668, ,361-12% 3,654,253 3,691,759 1% 3,719,321 4,863,887 31% 18,091,376 20,437,449 13% SWSC 11,894,521 15,257, % 1,405,105 2,205,103 57% 5,284,401 5,121,914-3% 4,660,639 6,449,738 38% 23,244,667 29,034,154 25% CHWSC 4,881,066 6,434, % 295, ,035 3% 1,226,684 1,096,847-11% 2,779,787 2,235,480-20% 9,183,114 10,070,616 10% NWWSC 7,428,487 8,877, % 150, ,731 9% 614, ,062 1% 3,818,579 3,583,882-6% 12,012,526 13,247,215 10% WWSC 5,701,748 7,938, % 172, ,183-8% 1,183,281 1,200,807 1% 1,832,449 1,948,723 6% 8,889,642 11,247,299 27% EWSC 8,255,730 11,452, % 336, ,957 3% 998,478 1,082,420 8% 5,907,759 4,970,558-16% 15,498,561 17,851,188 15% LPWSC 2,732,333 4,581, % 99, ,202 87% 615, ,541 9% 723,858 1,293,406 79% 4,171,809 6,733,997 61% Red- negative trend, Green- positive trend ( major shifts only) 59

68 Comparative Performance of CUs WSS Sector Report 2013 CUs operate under varying socio-economic conditions hence the differences in their cost structures. That notwithstanding, the proportion of the various cost elements to the overall costs and the trends are of essence. For certain cost categories such as chemicals, a reduction may not necessarily be desirable as this may mean a compromise in the quality of water rather than cost containment. Energy costs include electricity and fuel. Personnel Costs LPWSC effected salary adjustments and improved conditions of service during the period. This was the first adjustment since the formation of the CU in KWSC effected high salary increases for unionised and non-unionised workers paid gratuities and the cost for casual labour increased by about 40%. SWSC increased salaries and improved conditions of service for all staff. CHWSC had an increase in other personnel related costs incurred as a result of being under Statutory Management. EWSC increased the number of unionised staff by 19. WWSC paid out long service bonus and increased salaries for staff. Chemical Costs The increase for KWSC was due to an increase in the volumes produced after the completion of the JICA project and the introduction of gas prechlorination at Kafubu dam. For LPWSC the increase was mainly attributed to the introduction of the use of aluminium sulphate in Mansa for the improvised sedimentation tanks. LWSC reduced due to efficient utilisation of chemicals due to newly installed equipment. Energy Costs LWSC increased energy costs due to an addition of seven boreholes commissioned in Lusaka and Chilanga. KWSC has been running an energy efficiency programme supported by DTF which yielded positive results. The reduction for MWSC was mostly attributed to ZESCO power failures in all the divisions and breakdowns of machinery at some plants for most of the first quarter of Other Costs LPWSC increased maintenance, administrative costs and operational consumables. SWSC had an increase in other administrative costs. LWSC increased costs of operational consumables, vehicle running, repairs to administration buildings and licenses. The increase for MWSC was as a result of an increase in repair and maintenance costs due numerous pipe bursts and leakages. The cost for license for LGWSC increased significantly. CHWSC had a reduction in repairs and maintenance, vehicle running and local business travel costs. EWSC had a major reduction in operational consumables for water. 100% 80% 60% 40% 20% 0% Chart 13: O&M Cost Breakdown 2013 Personnel Costs Cost of Chemicals Cost of Energy Other Costs It is desirable that the proportion of costs attributed to personnel is not more than 40% of the total O&M costs. Only MWSC and NWSC were close at 42% and 48% respectively. WWSC had the highest proportion at 71%. 60

69 WSS Sector Report 2013 Comparative Performance of CUs Operation and Maintenance Cost Coverage by Collection This indicates the extent to which the level of collection is able to cover all the operational costs. Benchmark for coverage of O&M Cost Good >150% Acceptable % Unacceptable <100% The analysis in Chart 14 does not include income from other fees (such as penalties, meter charges, surcharges), Government and Cooperating Partners. 160% 140% 120% 100% 80% 60% 40% 20% 0% Chart 14: O&M Cost Covered by Collection 123% 121% 122% 106% 100% 91% 79% 82% 76% 64% 113% 108% 42% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 105% Chart 15: Full Cost Coverage by Collection. 89% 70% 77% 70% 98% 52% 85% 71% 62% 42% 92% 89% Average 2012 Average Average 2012 Average 2013 The sector average for operational cost coverage by collection dropped slightly to 110%. Generally the O&M costs increased while the collection efficiency remained the same. Only LWSC, MWSC, SWSC, NWSC and NWWSC were at or above 100% O&M cost coverage by collection. The sharp drop in the cost coverage for LPWSC was due to significant increase in personnel costs. 61

70 Comparative Performance of CUs WSS Sector Report Operation and Maintenance Cost Coverage at 85% Chart 16 shows the cost coverage assuming an acceptable benchmark collection efficiency of 85% of the billed amount. CHWSC, LPWSC, EWSC and WWSC were below the benchmark. NWSC and KWSC would have covered their costs at 85% benchmark for collection efficiency Operational and Maintenance Cost Coverage by Total Revenue Charts 17 and 18 depict the financial performance of the CUs. Total revenue includes billed amounts, other income such as other fees, interest, subsidies and recurrent (income) grants. Chart 17: O&M Cost Coverage by Total Revenue Chart 16: O&M Cost Coverage at 85% Collection. 180% 160% 140% 120% 100% 80% 123% 123% 107% 118% 84% 107% 70% 93% 70% 74% 109% 107% 160% 140% 120% 100% 80% 60% 147% 138% 140% 141% 117% 108% 108% 109% 89% 135% 126% 108% 83% 60% 40% 39% 40% 20% 20% 0% 0% Average 2012 Average Average 2012 Average 2013 Apart from LPWSC and WWSC the rest of the CUs were above 100% O&M costs by total revenue. 62

71 WSS Sector Report 2013 Comparative Performance of CUs Chart 18 shows the total cost coverage by total revenue. The total costs include depreciation and finance charges and the revenues include billed amounts, other income such as other fees (meters charges, connection/ reconnection and security deposits), interest, subsidies and recurrent (income) grants. 160% 140% 120% 100% 80% 60% 40% 20% 0% Chart 18: Total Cost Covered by Total Revenue 99% 102% 125% 103% 96% 113% 87% 87% 78% 102% 88% 100% 83% Financial Ratio Analysis In addition to other ratios presented in this report such as collection ratio and cost coverage ratios, this section presents additional Profitability, Liquidity and Activity Ratios to provide more information on whether each CU is applying its assets in an efficient and profitable manner. Three major Ratios appropriate to WSS sector are analysed as follows: Liquidity Ratios The Current Ratio Which is the ratio of current assets to current liabilities: it indicates a company s ability to satisfy its current liabilities with its current assets Current ratio = Current assets/ current liabilities Profitability Ratios The Net profit Margin Which is the ratio of net Income to Turnover and indicates how much of each Kwacha of Turnover is left over after all expenses. Net Profit Margin = Net Income/ Turnover Activity Ratios The Fixed Asset Turnover Which is the ratio of Turnover to fixed assets, the ratio indicates the ability of the company s management to put the fixed assets to work to generate sales. Fixed Asset Turnover= Turnover/Fixed assets Average 2012 Average 2013 Only NWSC, KWSC, MWSC and SWSC covered their full costs with the total revenue. 63

72 Comparative Performance of CUs WSS Sector Report 2013 Table 23: Financial Ratios Current Ratio Net Profit Margin Fixed Asset Turnover CU LWSC % -1.00% NWSC % 2.60% KWSC % 20.00% MWSC % 3.30% LGWSC % -1.40% SWSC % 25.40% CHWSC % -7.60% NWWSC % % WWSC % % EWSC % -4.40% LPWSC % % - - For Current Ratio, a ratio of 1 to 3 is acceptable for the water sector and indicates that a Company is able to meet its financial obligations partially or in full as they fall due. From the ratios calculated in Table 23, it is evident that almost all the CUs have to work hard to ensure that their current ratio improves. The Net Profit Margin for each CU shows that all CUs apart from Nkana, Kafubu, Mulonga and Southern WSCs recorded negative Net Profit Margins indicating that they made losses. A positive ratio would indicate that there were more than enough finances to cover all expenses for the period under review. CUs need to devise cost cutting strategies and improve turnover to improve the ratio. Some CUs such as LPWSC, WWSC, EWSC and KWSC were yet to finalise the valuation process of the assets that were handed over by the Shareholders at formation resulting in under/over statements of fixed assets. LGWSC and NWSC recorded a huge increase in their fixed assets for the year under review due to capitalisation of new assets from the water supply improvements projects undertaken in the two service areas. CUs are expected to ensure that all their fixed assets are adequately used to increase their turnover. A high Fixed Asset Turnover ratio indicates that a Company is putting its assets to work to generate sales. All CUs generally need to work hard to ensure that fixed assets are not just idle but are being used to generate more sales Investment and Capital Expenditure A total K250 million was allocated to the WSS sector in the 2013 budget for maintenance and upgrading of the water and sewerage infrastructure in urban and peri- urban areas through water and sanitation utility companies, out of which only K68 million (27%) was disbursed. Table 24: Annual Investment requirements and disbursements 2012 K' Billion 2013 K' Billion National Budget Total Budget for WSS WSS as a % of National Budget 1.5% 2.7% GRZ contribution Total Urban WSS Investment Requirements Derived from: 2012 Yellow Books, Budget Speeches 2012 and 2013, National Urban Water Supply and Sanitation Programme 64

73 WSS Sector Report 2013 Comparative Performance of CUs STAFF EFFICIENCY INDICATORS These measure the output of personnel in relation to various aspects of operations such as billing, connections and personnel costs Human Resource Development Chart 19 shows the qualifications of personnel in the sector. 100% 80% 60% 40% 20% 0% Chart 19: Personnel Qualifications Basic Education Certificate level Degree/Dip. Level The total number of staff in the sector increased from 2,898 to 3,011. LGWSC and NWSC had the highest increase in the number of staff by 20 and 28 respectively. The proportion of staff that had basic education reduced from 40% in the previous period to 35%. The proportion of staff that were degree and diploma holders remained at 22%. Certificate holders made up 43% Staff per 1,000 Connections This indicates the number of employees servicing 1,000 connections. The computation does not yet include sewer connections. However, it includes all staff on one-year contracts. Staff efficiency can be measured as staff per 1000 connections (Chart 20). CUs must endeavour to keep the staff per 1,000 connections within the acceptable benchmark to be efficient. Benchmark for staff per 1,000 water connections (Cluster 1) Benchmark for staff per 1,000 water connections (Cluster 2 and 3) Good 5 Acceptable 6-8 Unacceptable >8 Good 9 Acceptable Unacceptable >14 MWSC, NWWSC, WWSC and LPWSC improved in the number of staff per 1,000 connections. Only EWSC had declining staff efficiency. In Cluster One, only LWSC did not meet the benchmark. However, all CUs in Cluster Two and Three met the acceptable benchmark. The combined staff efficiency for water and sanitation is derived from total number of staff divided by the total number of water and sewer connections assuming that same time is spent on a water and sewer connection. The CUs in Cluster One had better staff efficiency because of their large sewerage networks as shown in Chart

74 Comparative Performance of CUs WSS Sector Report Chart 20: Staff per 1,000 Water Connections Billing and Average Personnel Cost per Staff per Month Billing per staff per month is the billing attributable to one member of staff per month. On one hand, a higher figure indicates better staff efficiency. On the other hand, average personnel cost per staff per month reflects the cost attributed to each staff. Charts 22 and 23 must therefore be analysed together. Chart 22: Billing/Staff/Month Chart 21: Staff per 1,000 Water and Sewer Connections Ideally, the billing per staff per month must be higher than the average personnel cost per staff per month meaning that what the CU pays each staff must be lower than what the revenue that staff is bringing into the company. The desirable trend in the sector is for billing to cover at least three times the personnel costs in order to cover other cost categories. For CHWSC, the reduction was due to the increase in the number of staff while for KWSC there was an increase in the number of staff and a slight reduction in billing. 66

75 WSS Sector Report 2013 Comparative Performance of CUs Chart 23: Average Personnel Cost/ Staff /Month NWSC and MWSC covered thrice their personnel costs from billing Av./staff/month 2012 Av./staff/month 2013 Average 2012 Average 2013 Table 25: CU Observations on Staff Efficiency No. of Staff Staff/1000 water connections Av. Personnel Cost/Staff/ Month ZMW Billing/ Staff /Month ZMW Collection/ Staff /Month ZMW Staff Cost in relation to Billing and Collection LWSC ,103 21,185 20, NWSC ,902 22,230 15, KWSC ,973 20,283 12, MWSC ,252 24,228 21, LGWSC ,613 8,242 6, SWSC ,853 9,229 8, CHWSC ,736 3,534 2, NWWSC ,787 11,080 10, WWSC ,854 6,845 6, EWSC ,674 9,105 7, LPWSC ,818 4,627 4, As depicted in Table 25,all the CUs need to improve the revenue base and collections. LWSC, NWSC, NWWSC, MWSC and LGWSC improved the coverage of personnel costs from billing by between 9% and 33%. An indicator for Staff Cost in relation to billing and collection has been introduced and calculated as 0.6 x (Average Personnel cost per staff per month/collections per staff per month) +0.4 x (Average Personnel cost per staff per month/billing per staff per month). The desirable target for the sector is to have a combined weighted average of 0.4 or 40%. The average for the sector was

76 Comparative Performance of CUs WSS Sector Report CORPORATE GOVERNANCE and Management INDICATORS Adherence to good corporate governance enhances performance of the CU. It is the role of the Board and management to steer the utility in the strategic direction of the company and thus achieve its objectives. In order to assess the performance of the Board and Management, it is important to focus on corporate decisions and expenditure on the Boards of Directors. The Boards of Directors (BoDs) for all CUs were appointed by the Minister of Local Government and Housing in May This was after the CUs had operated without BoDs from November It is therefore worth noting that most of the BoDs only begun sitting in the third quarter of 2013, thus, some corporate documents may not have been approved before this time. Board Meetings Board Meetings should be held once a quarter and costs maintained within 1% of the total O&M for big CUs ( Cluster 1) and 1.5% for the smaller ones (Cluster 2 and 3). WWSC, MWSC and LPWSC held more than the acceptable number of meetings despite the Boards being instituted during the latter half of the year. Nevertheless, all CUs were within the acceptable limits for board expenses except for Luapula and Western WSC. Status of Implementation of Strategic Plan It is the role of the Board of Directors to ensure that the CUs achieve the targets set out in their strategic plans. Hence monitoring of the implementation of the strategic plan should be done regularly. Most CUs were on course with implementation of their strategic plans Performance of the Boards The performance of the Boards was based on the number of Board meetings held, the key decisions made during the meeting and budgetary control as shown in Table 27. Budgetary Control Budgetary control is one of the key functions of the Board. A budget variance of ±10% is acceptable. Only Kafubu and Western had negative budget variance beyond the acceptable limits. The rest of the CU had positive variance which was also outside the acceptable limit of 10%. There is need for the Boards to ensure strict budget adherence so as to avoid eroding the tariff. Good Corporate Governance principles must be upheld in the sector 68

77 WSS Sector Report 2013 Table 26: Corporate Governance Indicators CU Strategic plan Approved Corporate Documents Approved Budget Annual report with audited accounts Investment plan Attendance Full Board Meetings Meetings held Meetings planned Total Board expenditure as a % of O&M costs Budget variance against approved Major Decisions of the Board LWSC 100% % 12.0% Approved a number of company policies, Audited accounts for 2012 and budget for 2014 NWSC 99% % 13.0% Approval of Strategic plan, Audited accounts for 2012 and budget for 2014 KWSC x 100% % -82% Approved company structure and budget for 2014 MWSC 94% % 38.2% Appointed Board committees and approved corporate documents such as audited accounts and budget LgWSC 100% % 20.0% Approved company structure, Audited accounts for 2012 and budget for 2014 SWSC 100% % -0.2% Recruited Managing Director CHWSC x x x 99% % 25.0% Approval of the annual plans & budget, approval of appointment of new external auditors to redo audit for 2011, declared water supply in Mpika as a disaster NWWSC 100% % 33.9% Approved corporate documents WWSC x 99% % -23% EWSC 99% % 12.0% LPWSC x x 100% % 42.0% Comparative Performance of CUs Approved Accounts for 2011 and 2012 and 2014 budget Approved 2014 budget and a number of policies Approved various company policies(budget, HIV/AIDS, Financial etc), renewed contract for MD, approved organisation structure 69

78 Comparative Performance of CUs WSS Sector Report Quality of Submitted Information As part of the license conditions, all service providers are required to submit an annual report timely and with accurate data via an information system developed by NWASCO. All the CUs submitted their reports in time except for NWWSC and CHWSC. This was despite the change in the reporting period but with a deadline to submit being a month after the period under review. Table 27: Quality of Submitted Information Quality of submitted information in the NWASCO Information System Utility The Annual Remark Report Lusaka WSC Fair Timely. Minor clarifications required. Nkana WSC Good Timely. Kafubu WSC Good Timely. Mulonga WSC Good Timely. Lukanga WSC Good Timely. Southern WSC Good Timely. Chambeshi WSC Poor Late. Major clarifications required. North Western WSC Good Late. Western WSC Fair Timely. Minor clarifications required. Eastern WSC Fair Timely. Luapula WSC Good Timely. Submitted data is verified during inspections in the field Note: All submitted data is checked for accuracy and completeness. Where data is found to be otherwise, verifications are done with the CU, as well as with data collected during inspections. The data presented in this report are therefore complete and accurate. 70

79 8 PERFORMANCE OF private schemes

80 Comparative Performance of Private Schemes WSS Sector Report Introduction The Private Schemes are companies that provide WSS services primarily to their employees. The WSS services are run as an auxiliary function but not on a commercial basis. There are currently seven licensed private schemes: Lafarge Cement Kaleya Small Holding KCM-Nampundwe Maamba Collieries ZESCO Zambia Sugar Kafue Sugar It should be noted that ZESCO operates three Schemes at Kafue Gorge (Lusaka Province), Itezhi Tezhi (Central Province) and Victoria Falls (Southern Province). The process of handing over operations of Maamba Collieries Scheme to SWSC was completed with a Memorandum of Understanding signed between the two parties in November The regulatory performance requirements for Private Schemes are minimal, relating mainly to service level issues of coverage, hours of supply and water quality. Table 28: Performance of Private Schemes Private Scheme 8.2 Coverage Population in Service Area The overall coverage for Private Schemes serviced areas was about 97%. All Schemes apart from Maamba Collieries had 100% water service coverage. 8.3 Hours of Supply Coverage % The average hours of supply were still at 24 hours for all Private Schemes except Maamba Collieries and ZESCO that had 10 hours and 20 hours respectively. 8.4 Water Quality Compliance Hours of Supply 2012 Hours of Supply 2013 Water Quality Compliance 2012 Water Quality Compliance 2013 Lafarge Cement 3, % 96% Kaleya Small Holders 3, % 97% KCM - Nampundwe 5, % 99% ZESCO 20, % 95% Maamba Collieries Limited 26, % 95.9% Zambia Sugar Plc 17, % 85% Kafue Sugar Total 77,334 All the private Schemes met the benchmark for water quality except for Kafue Sugar and Zambia Sugar Plc. Kafue Sugar has since put in place measures to monitor the quality of water supplied. Zambia Sugar Plc had challenges in meeting the required numbers and quality standards for residual chlorine and bacteriological tests. 72

81 9 CONCLUSION

82 Conclusion WSS Sector Report 2013 It is without doubt that the WSS sector has recorded progressive trends over the past 10 years. NWASCO continued to improve regulatory instruments to ensure quality, affordable and sustainable WSS service delivery to the urban dwellers of Zambia. More indicators were added and some of the existing ones refined to better portray the performance of the sector and expose the challenges that are inherent in the CUs. The creation of new districts has created an opportunity for accelerating service delivery in the rural parts of Zambia in a quest to ensure WSS service delivery to all, as stipulated in the vision Commercial Utilities made strides in changing the face of WSS service delivery as was evident in the improvements noted for most performance indicators. However, more emphasis is needed on sanitation service provision to ensure that it catches up with the provision of water. Adherence to the Service Level Guarantees and Agreements also generally improved amidst challenges of power outages and unavailability of adequate water resources in some parts of the country. It is envisaged that the information contained in this report will be used by various stakeholders to make informed decisions on actions to be taken to avert the sector challenges thereby facilitating an enabling environment for sustainable service delivery and improved quality of WSS service to all Zambians. 74