Development Aspects Impressum Editors

Macroeconomic context, investment policy and poverty

Throughout the period in question, the macroeconomic context did not contribute to the development of services. Recurrent crises, high economic volatility, a lack of economic growth, inflation, financial problems in the public sector and their impact on the social situation of the population were all conditions that had a negative ef- fect both on the behaviour of political authorities and on the population’s ability to solve the problem by its own means.

During the public provision of services, repeated rises in inflation meant that, on many occasions, the state used utility tariffs as nominal price anchors, which af- fected the self-generation of resources. Furthermore, the financial crisis of the state meant that it could not contribute through treasury funds or borrowing. Quite the opposite in fact: as public enterprises (and OSN in particular) were used as a source of external financing, this not only compromised the financial situation of such companies to an even greater extent, but also removed the transparency of their financial accounts. In the case of OSN, this lack of resources was reflected in a low level of maintenance expenses and the delay of works intended to improve levels of quality and coverage.
During the period of private-sector service provision, especially in the first few years, several factors combined to produce significant improvements in the man- agement and results of service delivery. However, a fresh macroeconomic crisis gave rise to new complications in addition to the existing problems of the contract.
In order to overcome the limitations of the macroeconomic context and the policy on investment, the drinking water supply and sanitation sector would have to be made into a real priority (rather than simply declared a priority) within public policy, along with national and provincial legislation to validate the targets to be achieved by the sector. In the past, high-level political and economic authorities could be said to have ignored the impact of their decisions on the sector, and sec- toral authorities arguably failed to assess those impacts and were not firm enough to draw attention to the consequences, which required a certain level of independ-

ent judgement. This lesson should be taken into account for changing attitudes in the future.

Obviously, this attitude will not be sufficient if it remains a formality. It is vital for the relevant actions to be backed up by a participatory process with a high level of civil society involvement. This is viable to the extent that there is significant dissemination and awareness-raising for the public and social organizations about how important drinking water supply and sewerage services are in terms of qual- ity of life and a country’s economic and social development. If this was validated by the community concerned, the authorities would have to meet the unsatisfied demand. In other words, if and when targeted surveys are carried out in areas of poverty and indigence, and drinking water supply and sewerage services are cited in the top three problems to be solved, they are more likely to be considered as a priority by the authorities and in the public budget.
The effects of poverty and “ability to pay” on service performance are closely linked to the aspects described above. However, one specific way of tackling the problem is through targeted subsidy mechanisms for low-income groups, both to facilitate or guarantee access and to provide help with payment of bills. It would be preferable for the subsidy to be financed with resources from the central govern- ment’s budget, although the second option could be to use a cross-subsidy award- ed in a targeted way by selecting beneficiaries using a specially designed survey.

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