Public-Private Partnerships and the risk of corruption in the water sector

Report Published: March 2020

Corruption in the water sector has negative social, environmental and financial impacts. It violates people's rights by limiting their access to goods and services to meet their most basic needs; in extreme cases, corruption kills (Ambraseys & Bilham, 2011). Corruption distorts the objectives of public policies, undermining confidence in the collective capacity to protect the environment and valuable water resources. Building integrity as a major element of governance systems including across water infrastructure financing enables institutions to limit and prevent corruption and manage resources efficiently (UNDP/SIWI, 2016a). This can help attract much-needed investment into the water infrastructure sector by drawing on the resources of the private sector.

Lessons Learned

When examining the relationship between integrity and PPPs it is clear that there are potential opportunities with the use of PPPs, but there are also significant risks. The public authority tasked with oversight of the PPP needs to have sufficient capacity to monitor and regulate all aspects of its implementation, ensuring that maximum value for money is being obtained for the tariffs being collected. In the absence of such a regulatory function being performed by the public authority there is the real risk that the operational and financial terms of the PPP will favour the private company at the expense of the population being served.

The quality of the process, from project initiation, throughout the life cycle, including the long-term operation, is critical. Continuous and robust mechanisms for external evaluation and audit, combined with accountability mechanisms to the citizens constitute key elements to reduce the corruption risks and maximize the potential benefits of PPPs.

Summary

Corruption in the water sector has negative social, environmental and financial impacts. Building integrity as a major element of governance systems enables institutions to limit and prevent corruption and manage resources efficiently, as well as helping to attract much-needed investment into the water infrastructure sector. In this new SIWI report the authors explore opportunities to improve transparency and integrity across the water infrastructure financing project cycle with a focus on the role of public private partnerships.

The Africa-EU Water Partnership Project (AEWPP) is a joint undertaking by the European Union, the African Ministers Council on Water (AMCOW) and the Government of Sweden through Sida that aims to enhance the financial viability of water infrastructure projects in Africa by making more public and private capital accessible for water-related infrastructure projects and encouraging and supporting African governments to invest in water governance through capacity building. AEWPP is financed by the European Commission and project implementation is assigned to the Stockholm International Water Institute (SIWI).

This paper has been authored by Pilar Avello with contributions from Elizabeth A. Yaari, James Leten,

Alejandro Jimenez and Anton Earle from SIWI and Camilo Cetina, Executive Principal from CAF – Development Bank of Latin America.