By Alexander Danilenko (Editor: Adapted from the World Bank blogs)
February 25, 2020, marked the conclusion of the 20th Congress and Exhibition of the Africa Water Association (AfWA 20). The meeting was hosted by the well-regarded Uganda National Water and Sewerage Corporation (NWSC) and brought together 3,000 professionals, engineers, designers and agencies providing water and sewerage services in the region.
During financial year 2019/20, NWSC made significant progress in expanding its coverage. By the end of 2019, it was operating in nearly 280 towns and providing water to 8 million people out of a total population of 40 million. An additional 200,000 people were provided with access to water, and another 20,000 were connected to the sewerage system. Construction of the Kampala wastewater treatment plant (WWTP) – expected to serve 450,000 residents – was also nearly complete. NWSC was also doing well financially, with high levels of cost recovery and collection rates reducing water bills and receiving plaudits from international donors.
And then, in mid-March, the world changed. As the scale of the threat posed by the coronavirus (COVID-19) became starker, Uganda entered a “new normal.” The country quickly established a quarantine and observation center at the Entebbe airport and began testing passengers upon arrival. When it became clear that the spread couldn’t be stopped by other means, the President mandated a two-week countrywide quarantine on March 28. In his speech, however, the President instructed utilities to continue operating, and the Ministry of Water and Environment issued an order prohibiting disconnections and encouraging service provision for each citizen and business.
The quarantine orders in Uganda were particularly strict. No cars were allowed on the road, except for emergencies, apart from police and army vehicles. Motorcyclists – known in Uganda as “boda-boda” – were completely prohibited from riding between 2 pm and 7 am, and no passengers were allowed. The country effectively came to a standstill.
On March 30, the government issued guidelines declaring electricity and water as essential services. The NWSC continued its operations, with 3,500 staff carrying out their daily duties despite a constrained environment. The corporation continued to produce and deliver reliable water and sanitation services daily. However, consumption dropped with the closing of businesses, schools and state institutions. Industrial/commercial consumption fell by 70%, whereas parastatals, local authorities and foreign missions dropped consumption by a staggering 90%.
But water still had to be provided. Disconnecting and optimizing water supply because of non-consuming customers was not possible. Water was produced and delivered, but not consumed in regular volumes. The total consumption reduced from a regular 2.2 million cubic meters per day by an amount of around 900,000 – a nearly 41 percent decrease.
Reduced demand and consumption mean less revenue. Billed revenue dropped disproportionally, by close to 50%. NWSC non-domestic tariffs are about 120% to domestic ones, yet domestic consumption accounts for 40% of billed income. This cross-subsidy allowed some financial relief to residential users and allows NWSC to provide highly subsidized water to public standposts. Every cubic meter billed to domestic consumers is being sold below the cost of production and delivery by just US$0.10. But total monthly losses for the billed revenue were hitting US$100,000.
The overall revenue bundle truly is a balancing act for NWSC, and this balance was destroyed by reduced demand from non-residential users. Costs, however, were increasing, as staff needed vital equipment like safety masks and disinfectants. But the quarantine posed another significant issue. Kampala and large towns are surrounded by numerous informal settlements, and prior to the pandemic, water was provided by small vendors and boda-bodas in 20-liter jerrycans.
This method of delivery became impossible from late March onward, so beginning in early April, NWSC began supplying nearly 200,000 people in water-stressed/dry areas using emergency water tanks installed near the target population, with the tanks filled by use of water bowsers and/or through water rationing. Where the tanks are not connected to the NWSC network, consumers are able to fetch water from them at UGX 50 per 20-liter jerry can.
NWSC continues to build temporary water reservoirs while also extending its mains to desperate informal residents. Nearly US$300,000 has already been spent on this program, and another US$800,000 will be spent before July 1, according to Amayo Johnson, NWSC’s Deputy Managing Director of Technical Services.
Another issue from the past that needs to be resolved is the services provided to frontline health workers – while many of the hospitals and quarantine centers were connected to the NWSC network, they did not consume water from it and instead relied on their own boreholes. Now, NWSC provides them with uninterrupted water supply in line with directives from the government not to disconnect services during the pandemic. It’s also studying options for how best to connect the remaining health facilities.
Although these services are vital, they have a huge impact on NWSC cash-flow. Because disconnecting consumers for missed payments is prohibited, payment requirements for prepaid tokens at standpipes have been relaxed while services have been expanded. Thus, there is far more money outgoing than incoming. Payments in May 2020 were only 7% compared to those collected in May 2019.
Despite the many pandemic-induced complications, NWSC has already started preparing its recovery program. This includes assessing the accounts receivable and restructuring its payment obligations to the electricity company and suppliers of chemicals and disposables. NWSC will continue its investment plans, including those financed by the World Bank. It will also conduct a customer review to ascertain retention rates, weigh new costs, and help rebalance tariffs with demand and the post-COVID customer structure, as well as revenues with costs. It will also carry out a series of technical assessments.
NWSC is continuing its life-supporting operations and has the support of the authorities and users of its services. But that is not enough. The Uganda COVID-19 Economic Crisis and Recovery Development Policy Financing project, expected to be approved soon, will hopefully inject the necessary liquidity into the company and allow it to restart its recovery program.
A list of first responders – hospitals and quarantine centers that will benefit from the project – has been publicly disclosed. The project will compensate water and electricity providers for continued supply of these services, including vulnerable customers, during emergency situations. It will also cover the accounts receivable of water providers accumulated during the emergency, including uncollected revenue from users and services provided to vulnerable customers. There will be also a financial provision to cover increased costs of operations related to reduced operations, cost of spare parts, chemicals, and small works during the quarantine. As a result, first responders will be connected to the water network and provided sanitation services, NWSC will be able to continue its operation, serving all, including the most vulnerable and the poor.
Despite the numerous challenges, NWSC remains a vital company and invaluable World Bank partner, and we are looking forward to seeing its continued progress at the next AfWA Congress.