“Government, please pay your water bills!”

Published on: 20/01/2020

Discussions on meeting SDG 6 typically focus on the financing gap and how to improve water utility performance and creditworthiness. Yet, there is one issue I have never heard any speaker discuss publicly: Too often, governments don’t pay their own water bills to utilities. 

When customers don’t pay their water bills, utilities typically send warnings and then disconnect the water supply if these are ignored. This process is set out in a utility’s credit control policy. But when the customer is a military compound or a parliamentary office building, the utility often chooses not to disconnect the water supply, even when payments are long overdue and repeated requests are ignored. Lotte Feuerstein from the Water Integrity Network described how armed soldiers “visited” the managers of a Kenyan water utility after their compound had been disconnected. Unsurprisingly, utility managers fear losing their jobs if they direct public attention towards government institutions’ unpaid water bills. 

Water utilities providing services in capital cities are more prone to this problem. As Christopher Gasson from Global Water Intelligence (GWI) explained to me, the profitability of the Rabat water concession was always lower than the Casablanca concession largely due to the higher number of government buildings in Morocco’s capital city. 

When a utility is starved of resources it cannot improve services for its customers, nor can it expand the network to the underserved. Moreover, governments who do not pay their own bills are unlikely to lead reforms necessary to improve utility performance. 

On the positive side, getting government institutions to pay their water bills in full is a notable feature of many successful utility turnarounds. Effective utility CEOs have taken such actions in Phnom Penh, Cambodia, at National Water and Sewerage Corporation (NWSC) in Uganda, and in Durban, South Africa. These success stories suggest that getting government to pay its water bills could be an important step in improving the performance of a utility and narrowing the financing gap for SDG 6. 

Many stakeholders have a shared interest in addressing this issue and, jointly, can make a difference. What can be done? 

• Utilities could report more clearly on the problem in the way that the Water Utilities Corporation in Botswana has done in its Annual Financial Statements. Reporting separately by customer category on billing, cash collection, and debtor age increases transparency and provides more data and evidence to the public. Technology can be part of the solution, too. A utility can install prepayment meters, which automatically disconnect customers when the prepaid credit runs out. Thereby, utilities can shift from advance provision to advance payment. Lusaka Water in Zambia and Lilongwe Water Board in Malawi have used this approach to good effect. 
• Water utility regulators could include an indicator on government debt in their utility reporting requirements and report on this in the regulators’ annual sector performance reports. The Zambian regulator, NWASCO, has proven this can be done. The National Treasury could report on outstanding government debts to utilities and parliament could require the national line department to report on this. Both of these practices are in place in South Africa. 
• Financiers of water infrastructure could insist that governments make timely and full payment of their water bills. In practice, financiers often do include such a requirement as part of the loan covenant with government. However, enforcement is tricky, especially once the grant or concessionary loan has been disbursed. 
• Citizens are a powerful pressure group to hold governments accountable because they are most directly affected by cash-starved utilities that deliver poor services. Where households and other non-government users fare better at paying their bills than public institutions, the slogan could be: “We pay our bills, so should you!” 

Do you know of any good examples of successful strategies to tackle public institutions’ unpaid water bills?

Here is an opportunity to share your experience or opinion publicly: IRC, GIZ, Water Integrity Network, End Water Poverty, and local civil society organisations are planning to host a session titled “Governments, please pay your water bills!” at the 2020 Stockholm World Water Week. Please contact Lotte Feuerstein at LFeuerstein[at]win-s.org for details.