Modes of finance in the water services provision and the influence on its efficiency in Mombasa county, Kenya

The research is based on financing mechanisms and the efficiency of water service provision within Mombasa County. The specific emphasis is on Mombasa Water Supply and Sanitation Company. The objective of this research is to establish how loans, grants, subsidies and tariffs utilization affect management and organizational arrangements in the water utility and how this decision consequently affect the efficiency of water utility. The literature reviews global trends in financing water through multilateral loans and other forms of debt, grants, subsidies’ typologies and tariff formulation structures, mainly focusing on the general information regarding these mechanisms as applied internationally and locally in Kenya. Part of the research addresses the relationship between effect and impact as well as various forms of decentralization of public services with specific focus on unbundling of public goods with review of theory behind unbundling as well as focus in the water sector. On efficiency which is the other variable the research covers Governance, Commercial, Financial, Technical, Customer service and Human resource efficiencies. Each of these indicators is reviewed independently based on certain aspects developed by the International Water Association as the best matrix for evaluating utility efficiency at different functional levels. The findings of the report are contained in chapter four and includes among other aspects, visual images including graphs and discussion regarding, projects funded by loans and grants, each with detailed analysis of funding amounts and target projects as well as goals, the progress made to date and analysis on the trends of the impact of the funding. Tariffs and subsidies are also analysed as applied in Mombasa County and their effects on the utilities performance as well as their trends over the last six years. There is also detailed analysis on statistical records on Mowassco’s financial statements including Net profits, Non-Revenue Water, Billing and Collection efficiency, trends of electromagnetic meters and their impact on revenue as well as consumption records for each of the six business units. The research concludes that while loans have been utilized in rehabilitating networks, grants on capacity building and tariffs on mainly cost recovery and subsidies on supply to low income areas, each of the methods has had its positive and negative impacts. Loans has mostly improved and stabilized water supply volumes, grants have improved policy and equipping within the company but failed in ensuring impact is felt on the ground while tariffs have contributed to continuity of service to the residents but also overburdened residents. Subsidies in return have failed as the policy used to manage them is poorly implemented and has been hijacked by water kiosk cartels making it hard for the utility to perform its mandate leading to over pricing and in appropriate location of service centres. The conclusion consists of the overall average utility efficiency calculation done based on mean obtained by getting the average of the ranking (1-5), of questionnaire response questions per indicator as rated by utility senior and junior managers as well as consultants with previous assignments in the water utility and converting this to a percentage to get mean efficiency (%) for each indicator. The overall average utility efficiency was then found by getting the average of the sum of all efficiencies of the six indicators. The average score for the utility was found to be 57% while the average Non-Revenue Water which is a global utility efficiency indicator for the past one year was found to be 50%, hence some close assessment on efficiency. The chapter then concludes by giving an assessment on the influence on efficiency of the utility as a result of the financing mechanisms.