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Governance challenges in Tunisia’s water sector

This chapter examines the main governance challenges relating to private sector participation (PSP) in the water and sanitation sector in Tunisia. It focuses on five pillars. First, it presents an overview of the various institutions active in the water and sanitation sector and in the PSP field. The second section summarises the country's experience with PSP in the water and sanitation sector, and indicates areas where such participation could be considered in the future. The third section contains a description of the political, legislative and regulatory framework for the water and sanitation sector and for PSP in Tunisia. The fourth section discusses the financial sustainability of the sector. Finally, the last section analyses the mechanisms for transparency and accountability, as well as user involvement.

Institutional roles and capacities

The institutional framework, both for the water sector and for private sector participation, is in transition

Figure 1.1. Institutional framework for PSP in Tunisia’s water sector

Source'. Prepared by the authors on the basis of data in Annex 1.A1.

Since the creation of a national corporation in 1947, the water and sanitation sector has been highly centralised in Tunisia (Touzi et al., 2010). The institutional organisation for the sector is structured around the Ministry of Agriculture for water policy; the Ministry of Equipment, Territorial Planning and Sustainable Development for sanitation policy; and two historic public operators, Societe Nationale d’Exploitation et de Distribution des Eaux (SONEDE), responsible for water services since 1968, and the Office National de l’Assainissement (ONAS), in charge of sanitation services since 1974 (see Annex 1.A1). The other public entities with responsibilities in the water and sanitation sector, including PPP, are the Ministry of Economy and Finance, with the General Directorate for Public-Private Partnership (together with the Controle General des Finances, CGF) and the Secretariat for Development and International Cooperation, the Prime Minister’s Office, and the Ministry of Public Health. The subnational levels of administration, such as the gouvernorats and the elected local authorities such as the municipalities, have little responsibility either in terms of setting sector policies or regulating or delivering services (see Annex 1.A1 for a mapping of competent institutions and their principal functions in the sector).

However, a possible move to some form of decentralisation is currently under discussion in Tunisia, and this could have implications for the water sector. Given the sharp disparities among regions in terms of water resources (especially between the North and the South), levels of demand, population size, and quality and continuity of service, the question of whether some of these functions could be better handled at the local level has arisen in recent policy discussions. A move to decentralisation could certainly help to improve the attention paid to users in the delivery of services, and could enhance the autonomy of local governments as well as the management of PPP projects (EBRD, 2011b). The recent adoption of a chapter on local authorities in the Tunisian Constitution (articles 128-139) has laid the markers for a decentralisation process that will lead to a better distribution of responsibilities and resources among the different levels of government, namely the central government, the regions, the departments and the municipalities. It will guarantee the administrative and financial autonomy of the local authorities on the basis of the subsidiarity principle, which also encourages citizen participation. Yet, as the Constitution stipulates, the creation or transfer of responsibilities from the central authority to the local governments must in each case be accompanied by a commensurate transfer of resources. Thus, the management of water services in Tunisia, in the context of the ongoing reform, could provide an example of participatory democracy, based on the principles of open governance in order to ensure the broadest possible participation by citizens and civil society in the preparation of projects (including PPP projects) and their execution. Similarly, the comprehensive review of the legal framework for the water and sanitation sector provides an opportunity to discuss the scope of decentralisation and the level at which responsibilities should be assigned (for example, the gouvernorats or the municipalities).

At the national level, Tunisia’s renewed interest in PSP, and in PPP in particular, has been accompanied by the introduction of a new institutional architecture that is not specific to the water sector. The Prime Minister’s Office is leading the effort to adopt a legislative and institutional framework for PPP in Tunisia. It is still a work in progress. The main body responsible for co-ordinating PPP and concessions is the Concessions Unit (USC) established in November 2013. It is expected that the USC's principal duty will be to help the public authorities in preparing, tendering and monitoring concessions, and in particular to prepare guidelines and models, while strengthening the capacities of public officials and encouraging concession projects. The USC could be seen as the predecessor of the future PPP Unit, called for in the draft PPP law of 2013. However, the USC has only an advisory role, and this could compromise its influence on the tendering of projects. The Ministry of Finance also contains the General Directorate for Public- Private Partnership (DGPPP), the main role of which is to prepare legislation relating to the tax, accounting, financial and competition aspects of PPP and to monitor the preparation and negotiation of PPP projects (Ministry of Economy and Finance, undated). The role of the DGPPP will be defined in more detail with promulgation of the future PPP law.

Implementation of a PSP programme will require a review of the traditional tasks of the Tunisian administration and operators, as well as the development of new competencies. Generally speaking, there is a need to develop capacities for project preparation, contract award, performance monitoring and dispute settlement, and this is particularly true in the water sector, where there has been little experience to date with PSP. The areas that need reinforcement include the collection of information and the monitoring of service delivery using performance indicators. There is still a question as to which authority should be responsible for producing and disseminating this information. Planning capacities, particularly for investment, must also be reinforced. Weisenberger (2011) estimated that 47 of the 128 wastewater treatment plants were under- or overdimensioned. In 2012, the ONAS reported that 25 wastewater treatment plants were hydraulically saturated throughout the year, and 14 purification plants (STEP) were periodically overloaded, either during the summer or during seasonal spikes in industrial activity because they had exceeded their life expectancy (their minimum age is 15 years) and their extension and rehabilitation were either programmed or under study (ONAS, 2013). Institution of the PPP programme also presupposes measures to ensure a shared understanding of what PPPs are all about and what they imply in terms of administration. Senior government officials (including the Prime Minister) have supported the PPP programme, but it remains to rally support at all levels of government in order to guarantee a common approach. Lastly, consideration needs to be given to the type of tools and government services best suited to building the necessary capacities.

It is still an open question as to whether the PPP capacities in place at the national level will complement existing capacities in the water sector. The legislation should be clarified with respect to the allocation of responsibilities among the institutional sectors for PPP functions such as project planning, project needs assessment, assessment of value for money in tendering, etc. As well, the tools for horizontal co-ordination, especially between the oversight ministries and the ministries responsible for PPPs, should be clarified. With respect to the Zaarat desalination project, it was planned to institute an inter-ministerial steering committee to evaluate and improve the documents and reports prepared by the engineering consultant of SONEDE responsible for monitoring the project (African Development Bank, 2009). That committee was to include a member from each of the following ministries: Ministry of Agriculture and Water Resources (MARH), Ministry of Equipment, Territorial Planning and Sustainable Development, Ministry of Economy and Finance, Secretariat of Development and International Cooperation, Secretariat for State Properties (MDEAF) and the Directorate General of Planning (DGP) in the Prime Minister's office. The idea was to facilitate co-ordination among the different public authorities, and it could constitute an interesting pilot experiment for future PSP ventures.

Public services are organised around two big operators, whose business model has reached its limits

Service delivery in Tunisia is organised around two big national operators, ONAS and SONEDE, and they have played key roles in ensuring the quality of coverage in the country. SONEDE was created by Law 68-22 of 2 July 1968 as a public enterprise, and ONAS was created by Law 73/74 of 3 August 1974 (amended by Law 93/41 of 19 April 1993). While SONEDE is theoretically responsible for the production, treatment and distribution of drinking water across the country, these activities are still limited in rural areas. In 2012, SONEDE was serving 49.7% of the rural population, and the General Directorate of Rural Engineering (within the Ministry of Agriculture), through the local irrigation agriculture groups (GDA) was serving most of the remainder, or 43.7% of the rural population (SONEDE, 2013a).1 SONEDE is responsible for operating and maintaining the water treatment stations as well as the water distribution and transportation networks as far as the final users. ONAS collects and treats wastewater and runs the sanitation network and installations. ONAS has no activities in rural areas, apart from one pilot project.

The national operators, and SONEDE in particular (World Bank, 2009), have performed well in the past, in both operational and financial terms, but since the beginning of the century their performance has deteriorated. In 2012, for example, there were water service interruptions in at least six gouvernorats. This situation is due in part to economic circumstances2 and it applies to all Tunisian public enterprises because of the particular situation prevailing in the country since the revolution. However, there is a real risk of a more permanent deterioration in the water and sanitation systems, as evident in the recent worsening of SONEDE's performance indicators. For example, the rate of real (physical) losses3 as a percentage of total water output rose from 17.7% in 2008 to 21.1% in 2012 (SONEDE, 2009; 2013a). Another revealing indicator, the number of leaks, more than doubled between 2008 and 2012 (31 leaks per 1000 inhabitants in 2008 versus 65 in 2012) (SONEDE, 2009; 2013a).

The bottlenecks holding back the efficiency and performance of the two operators can be traced to many factors, including the shortcomings of the financial and organisational model and the sector's traditional operating modalities. The two operators were instituted as autonomous public enterprises by the legislation creating them. Article 1 of Law 68-22 of 2 July 1968, in particular, gave SONEDE the status of “industrial and commercial-type public enterprise of a non-administrative character endowed with financial autonomy”. Yet that financial autonomy has been progressively compromised. For example, the legislation requires approval by the Ministry of Agriculture before SONEDE can incur any debt, effectively giving the government administrative control over SONEDE's activities. Decree 2002-2197 of 7 October 2002 specifies the exercise of supervisory control over public enterprises, including SONEDE and ONAS, as follows: monitoring of the management and operations of these enterprises to ensure consistency with general government guidelines; approval of programme contracts and monitoring of their execution; approval of budgets and monitoring of their execution; approval of financial statements for public enterprises that do not have a general assembly of shareholders; approval of pay scales and salary increases awarded to agents of public enterprises; approval of arbitration agreements and transactions settling disputes. Consequently, all recruitment of staff requires ministerial approval (Water and Sanitation Programme, Africa Region, 2008) and operators cannot hire external consultants without the Ministry's approval (World Bank, 2009), a situation that can potentially lead to bottlenecks. Executive staff are appointed by the political level.

Capacity shortages in the rural water and sanitation sector

SONEDE's activities are supplemented by around 1 400 GDAs, responsible for operating rural water supply systems.4 SONEDE serves 100% of urban zones and 49.7% of rural zones (SONEDE, 2013a). The General Directorate of Rural Engineering and Water Supply (DGGREE), within the Ministry of Agriculture, sees to the construction of infrastructure, the management and operation of which it then delegates to the GDAs (Touzi et al., 2010). The GDAs are staffed by volunteers, and not all are capable of providing the quality of service expected by users. For example, while the GDAs can handle small-scale systems, they are less efficient when it comes to more complex supply systems. According to Gabbouj (2011),5 only 20% of the GDAs are performing satisfactorily, while the remainder are ranked as average to weak. Although these boards have been in existence since 1999,6 there is as yet no platform in place that would allow the GDAs to share their experience and practices in water and sanitation management and thereby strengthen their capacities. An attempt to this end is now under way in the irrigation sector, and it may yield some lessons. In addition, rural residents are increasingly demanding individual connections and a quality of service comparable to what SONEDE is offering in the cities, and there is now pressure to extend the SONEDE network in the countryside (SONEDE, 2013b). Yet SONEDE has little incentive to extend its drinking water network in rural areas because of the attendant high costs and low revenues (the price charged by SONEDE in rural areas fall short of real operating costs) (SONEDE, 2013b).

There is no entity responsible for rural sanitation services, and this leaves an institutional void for this subsector. Law 74-73 creating the National Sanitation Office (approved on 3 August 19747 and amended by Law 93-41 and 19 April 1993) confers upon ONAS the task of supervising sanitation “within all communal boundaries and in tourism and industrial development zones” (Article 7, Law 93-41), but the interpretation of the text remains ambiguous. In practice, ONAS is responsible only for collective sanitation, of which there is little in rural areas, and there is no public agency to oversee individual sanitation solutions (SONEDE, 2013b). ONAS has produced a strategic study for rural sanitation, and pilot projects have been financed by the World Bank (PISEAU I). The GDAs manage some shared communal installations and they connect households to the sanitation system, but these activities are limited and pursued in an ad hoc manner (Weisenberger, 2011). Some communes manage sanitation facilities, but this practice is arbitrary and haphazard.

The authorities have launched some initiatives, jointly with donors, to assess the strengths and weaknesses of the GDAs, to strengthen their capacities and to make them more professional. One of those initiatives involves the hiring of technical directors, often young graduates looking for employment, to run the GDA, and picking up the tab for half their salary. The German development bank (KfW) has conducted a study evaluating the legal status of the GDAs and ways of strengthening their autonomy in order to develop their capacities, and this led to development of a strategy for putting the GDAs on a permanent footing. The Ministry of Agriculture is planning to subcontract the drinking water feeder systems to private individuals or small enterprises, and this could encourage PSP in rural areas. An institutional study is also underway to clarify the problems in rural areas and to ensure the sustainability of the systems in place.8 It includes a field survey to identify the operating and exploitation problems of SONEDE and the GDAs and to understand their expectations and their technical and financial capacities to guarantee water service.

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