Example: Affermage Water Supply Contract in Senegal: Affermage contracts generally place responsibility for operation and maintenance of the water supply network with the private sector, with minimal specific investment requirements.
However, through longer-term contracts and contractual mechanisms, the operator can be incentivised to invest in the network.
In Senegal, increases in operational efficiency and large-scale network expansion were achieved through:
• Contractual innovations aiming to increase private operators’ incentives to perform efficiently
• Requirements to finance network rehabilitation with cash flow
In the first case, targets were introduced for collecting payment for bills and for reduction in “non-revenue” (unaccounted for) water, with associated financial penalties for non-performance.
In the second, by requiring the operators to put money back into the water supply network, they were provided with incentives to improve operational efficiency and flexibility in the way in which they could achieve this. (World Bank, 2010)
References/Further Reading
World Bank/PPIAF (2006) Approaches to Private Participation in Water Services, A Toolkit
Good Governance in Restructuring Water Supply: A Handbook, University of British Columbia.
Foster et. al (ed), World Bank (2010) Africa’s Infrastructure, a Time for Transformation,
PPI in poor countries, J Leigland, Gridlines Note No. 51, PPIAF (Feb 2010)
DMS Practice Guide 2: Construction procurement strategy.