A Sourcebook - UN-Water

vider from the political directorate. 23 Similarly, in the port city of Puerto Cortés, Honduras, the municipality
sold part of its shares of APC to user-owned cooperatives, like the cooperative of port workers.
Over the years, the municipality sold more shares; sixty-two percent of shares are owned by five cooperatives.
The cooperatives collectively have 11,000 individual members—all customers of the APC. This
arrangement have improved the APC’s accountability to customers and its performance (tariffs increased,
metering was extended, collection improved, and illegal connections and leaks reduced). 24
Shared ownership of the company has worked well in many other places, including cities in Colombia,
Poland and the Czech Republic.
In Brazil, the São Paulo State Government holds just over half of the shares of SABESP, the Sao Paulo
utility, with the remaining 49.7 percent in the hands of private stockholders. Despite being majoritygovernment
owned, the utility is listed on the New York Stock Exchange, providing a powerful set of
corporate governance rules the utility and the government must respect. 25
Alternatively, aggregation of utilities into larger geographical areas can introduce multiple minority
owners. An aggregated entity, by its nature, is either a statutory body or a government owned company.
Its corporate oversight board comprises of representatives from multiple municipalities. The
Board will balance the needs of the various member municipalities. The ability of any single municipality
to unilaterally influence the activities of the utility is limited. 26
Develop co-operatives
Giving citizens ownership of the utility, by turning it into cooperative can create a democratic local
governance structure for the water sector, even when such structures do not exist generally. An effective
cooperative governance structure means that the water provider management is answerable
to representatives of customers, as the example of Santa Cruz in Bolivia shows (see Box 10.6).
Cooperatives have often worked best for simple systems and small service areas. In such areas, consumers
can be more directly represented on the provider board, and the board does not need to be
large or have a high degree of technical capacity to effectively operate the system. Co-operative
performance may be improved through partnerships with more experienced or technically-skilled
counterparts. An arrangement that has been successfully trialed in many low-income areas is to outsource
a portion of the providers’ operations to a community-run group, which manages services in a
specific locality (see Box 10.7). For larger, more complex providers co-operative ownership models are
at greater risk from lack of board competence or cohesion.
Introduce private participation
Having the utility owned or operated by a private party is the surest way to ensure its autonomy. However,
the very strength of the autonomy of a private operator necessitates equally strong regulatory or
contractual arrangements to ensure the provider’s accountability. A survey of over 1,200 water and
electricity utilities found strong evidence that private participation is effective in improving utility per-
23
Ghariani, F. (2004). “Public Modes of Engagement Project: SONEDE Case Study”. UNESCO-IHE-Delft.
24
Muller, M., Simpson, R. and van Ginneken, M. (2008). Ways to Improve Water Services by Making Utilities More
Accountable to their Users: A Review. Water Sector Board Working Note 15. World Bank.
25
Van Ginneken, M. and Kingdom, W. (2008). Key Topics in Public Utility Reform. Water Sector Board Working
Notes No.17. World Bank.
26
Baietti, A., Kingdom, W. and van Ginneken, M. (2006). “Characteristics of Well Performing Water Utilities”. Water
Supply and Sanitation Working Notes No. 9. World Bank.
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