Innovative Solution

franchising partnerships, water, sanitation, micro-business, mentor, South Africa, schools

policy

Technical

Financial

A partnership concept is proposed, using principles adapted from those of franchising, for the operation and maintenance of infrastructure.

• A franchise’s success is based upon replication of successful previous experience, clear lines of responsibility and incentive, efficient logistics and trained workers.
• Partnerships, each between an experienced services operator (the franchisor) and a micro-entrepreneur, can in many instances collaborate with public sector institutions (e.g. municipalities, schools) in the operation and maintenance of water and sanitation infrastructure that they own.
• By harnessing franchising principles, owners’ existing budgets would be used more effectively, and quality and reliability of service delivery would improve.

The essence of the suggested franchising-like partnerships is:

• Selection of existing or potential local entrepreneurial individuals, helping them set up emergent enterprises, and training their staff in basic skills;
• thereafter their ongoing on-the-job supervision, mentorship and quality control by the franchisors;
• creation, by the franchisor, of a pool of higher-level expertise upon which the emergent enterprises can draw, and the creation of a two-way obligation — an obligation to call for assistance from the pool, and an obligation to respond rapidly to that call.

Franchising partnerships in water services sector:

Elements of the water and wastewater services value chain with potential for franchising-like partnerships include: pressure management, meter reading, routine maintenance of ablution blocks, demand management, plumbing services, operation of abstraction points, and operation of treatment works.  Some of these have been modelled.

Performance standards would be laid down by the infrastructure owner.  The franchisor would ensure quality and reliable performance by its franchisees (relieving the owner of the need to do this).

It is being piloted in a programme for the routine maintenance of the sanitation facilities at 400 schools in the Eastern Cape of South Africa.  In the short term, this will be extended to a further 1000 schools, and also to sanitation facilities (household and communal) in nearby municipalities.

Currently being developed by the CSIR and Amanz’abantu Services, with assistance from Irish Aid and the Water Research Commission (WRC).  The CSIR, WRC, Amanz’abantu and other funders will initiate, and will be strategic in implementation — and should ensure follow-up.

A set of 7 reports was published in 2010 – comprehensively covering aspects such as: resume of analyses of the reasons for current successes and failures in operation and maintenance; overview of franchising (its principles, its applications, its successes and failures in providing goods and services other than in water and sanitation); adaptation of franchising to water services; legal and institutional issues; modelling of selected elements of the value chain; conclusions.

With financial support from Irish Aid, a pilot has been launched in the Eastern Cape province of South Africa.  The franchisor (Amanz’abantu Services) has trained and is mentoring a number of franchisees, who are undertaking routine maintenance of sanitation facilities at 400 schools.

The Dutch Embassy expressed interest in funding the research and development of this partnership concept applied to operation and maintenance of municipal sanitation facilities.  CSIR is currently negotiating with municipalities.

The key question is how to improve the too-often substandard operation and maintenance of water and sanitation facilities.

Which, much research has shown (by CSIR, WRC, National Department of Water Affairs, South African Institution of Civil Engineering, and innumerable others), can most of the time be ascribed to (primarily) weak incentive structures and lines of responsibility, (secondly) inadequate skills, together with little or no skilled mentorship, and (a distant third) inadequate budgets.

The proposed solution directly addresses the primary and second problems — especially the primary.

Thus it addresses the target “properly maintain appropriate sanitary toilets”.

The solution is innovative in that it adapts franchising principles, generally so successful in providing consumer goods and services, to maintenance (and operation) of water and sanitation infrastructure.

Key outputs in the short term will be documentation of research findings on the pilot or pilots.  In the longer term, it is trusted that owners of infrastructure, citizen groups, potential franchisors and potential franchisees will each take the lessons appropriate to them, and that the model will be replicated in other areas.  Also that pilots will be commenced for more and more elements of the value chain.

Preliminary results: the schools pilot has already yielded a wealth of information on how to improve future performance, and where the challenges lie.  In short, from a technical point of view, and also from a microenterprise and job creation and skills transfer point of view, it works very well.  Most of the problems encountered arise from inefficiency of the owner.

The most certain indicator of “progress and success” would be replication of the model in other areas, incorporating more and more elements of the value chain.

Secondary indicators would include:
• improved quality and reliability of the infrastructure service (as measured by improved compliance with government performance requirements);
• improved health, that can be ascribed to quality and reliability of the infrastructure service, of households and especially schoolchildren;
• improved skills levels, of staff of owners of infrastructure and of franchisees;
• increased numbers of microenterprises active in this field;
• improved financial viability of franchisees and franchisors.

Two types of institutions would be most interested in this solution.  

(1)  On the one hand, owners of infrastructure (e.g. municipalities, but also public sector institutions responsible for schools, clinics, and so on), who could turn to franchising-like collaborative partnerships for assistance with operation and/or maintenance tasks:
• that the municipality (for example) has the skills to undertake, but it would prefer to outsource portion of its responsibilities — provided that quality and reliability can be assured — so that it can address other priorities with the resources that it has; and/or
• that the municipality has the skills to undertake, but it acknowledges that local emergent small enterprises, employing local people, could not only provide an as good if not better service, but that going this route would create jobs and build skills in the immediate locality of service delivery; or
• that the municipality does not have all of the skills to undertake, and it is as a result currently delivering poor service.

(The above list should also serve to address the question about “context … [in which] this solution could / would work best and why”.)

(2)  On the other hand, those who could see opportunities in being the franchisors and franchisees.
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As to minimum investment necessary: this would depend entirely upon the context.  Such as how large is the task (e.g. how much infrastructure), how complex is it to operate and maintain, how competent is the owner of the infrastructure, how competent (and how easily trainable) are potential franchisors and franchisees, does the (public sector) owner of the infrastructure have the political will to outsource operation and maintenance — and so on and so on.

As an example of the financial requirement of the franchisee: The schools pilot in the Eastern Cape involves low levels of technology (but high levels of quality and safety).  The initial capital needed (for purchase of equipment, vehicle, and three months working capital) for each franchisee is of the order of $30,000.  Large enterprises, more sophisticated tasks, and so on, would obviously need greater resources.
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What inspired this solution?  Two thought processes juxtaposed in parallel did:
• extensive work that we (CSIR) had done into the condition of sanitation (and water) infrastructure, and into the reasons for that condition;
• close physical proximity in many towns of good quality of service in one sector and bad quality in another sector — viz being able to get “clean” petrol (gasoline) from a petrol pump, but not being able to get clean water from a nearby tap — and realising that the primary reason for this difference lies in the different institutional and incentive structures.

As noted above, under “Implementation potential”, the franchising partnership route would not necessarily be the optimum solution.  Nonetheless all public sector institutions responsible for water and sanitation services delivery need to be aware of the advantages of going the partnership route when appropriate to their needs.

The concept is only beginning to be known even in South Africa.  The most significant step towards securing firstly strong interest and secondly commitment on the part of municipalities has been the launch of the schools pilot.  Municipalities have noticed its success, and several have as a consequence become amenable to suggestions that further pilot projects be run on their infrastructure.

Other steps towards securing commitments have included lobbying, presentations at conferences and workshops, and successfully soliciting funding for research and development.

Successful pilots, with the R&D funded by the Dutch, will further raise levels of interest.

Jay Bhagwan
Water Research Commission
Private Bag X03
Gezina 0031
SOUTH AFRICA
+27-12-330-9042
mobile +27-83-290-7232
jayb@wrc.org.za

Dr Kevin Wall
CSIR Built Environment
P.O. Box 395
Pretoria 0001
SOUTH AFRICA
Mobile +27-82-459-3618
27-12-841-2040
kwall@csir.co.za

Kevin Wall, Jay Bhagwan and Oliver Ive: “Piloting franchising O&M partnerships: connecting unrelated concepts, to create something innovative”. WEDC International Conference, Loughborough, UK, July 2011.