rural-urban dynamics_report.pdf - Khazar University

GLOBAL MONITORING REPORT 2013 URBANIZATION AND THE MDGS 145
BOX 3.5
Expanding access to services: A tale of two sectors
FIGURE B3.4.1
in Africa
Uganda
Swaziland
South Africa
Nigeria
Mozambique
Mauretania
Kenya
Gambia
Gabon
Botswana
Angola
Source: Global Water Intelligence 2008.
Water services versus mobile phones
0 20 40 60 80 100
% of penetration
Mobile phones (Q3 2007)
Utility water service
For the most clear-cut demonstration of the role of
prices and price formation processes, consider access
to water versus access to phone services in Sub-
Saharan Africa: just about everywhere in Sub-Saharan
Africa, access to mobile phones is greater than
access to modern water systems (figure B3.4.1). Official
policy statements have been full of promises to
enhance access to water for decades, yet similar statements
have not been made regarding access to cell
phones. Hence, official policy stance does not seem
the key factor.
Maybe de facto administrative capability is more
important. Both water and phones need some level
of regulation. Yet the regulation of modern phone
systems is conceptually more challenging than the
regulation of water systems. In all systems, regulation
needs to set prices that cover costs. Costs and an
allowed rate of return need to be calculated. So it is
for water systems that typically have monopoly providers
in any given area. The mobile phone sector has
both competitive and noncompetitive segments that
require regulation. Multiple players pose challenges
to regulating interconnection; as a result, telecommunications
regulation should be more demanding than
water regulation. However, many African countries
have been able to provide a regulatory environment
that enables penetration of mobile phone usage, even
in challenging environments like the Democratic
Republic of Congo, whereas they have not been able
to achieve the same for water. Hence “capacity” to
regulate does not seem to be the deciding factor either.
So what can explain the divergent patterns of
access? A striking difference between the two sectors
is the level of prices relative to cost. In the water
sector, prices typically barely cover operating costs
and tend to be about 30 percent of total cost. In the
mobile telephone sector, prices tend to exceed cost.
Unsurprisingly, both public and private system operators,
who can charge and collect prices that exceed
costs, have an incentive to expand systems and can do
so. Providers who receive less than full cost have neither
the incentive nor the financial ability to expand
access.
Source: Klein 2012.
than doubled over 1990–2001 (World Bank
2004). With almost 90 percent of households
having a metered connection, household
consumption was nearly halved. And that,
in turn, reduced the need to develop major
new infrastructure. Even with fee increases,
water remains fairly affordable in Colombia.
The fee structure allows the government to
cross-subsidize: richer households and industrial
users pay for the poorest consumers. As
a result, the average poor household spends
less than 5 percent of its income on water.
Ugandan policy makers have started
thinking about the rules that need to be in
place to expand access to basic services.
Water reform in 1998 focused on creating the
right incentives for more efficient service provision,
attributing responsibility to local service
managers and increasing their accountability.
Since 2000, the national government