Collusion of staff with informal and private water providers

Utility staff members may collude with informal water providers, enabling them to conduct illegal business in exchange for a share in profits.

Risk type: Practice

Risk driver: Internal ; External

DESCRIPTION

Informal water provision is common in many parts of the developing world and can play a valid and important role in filling the gaps in the formal system, i.e. in the water provision by utilities. However, systematic informal water provision may also be an indicator of serious governance problems in the formal system.¹ It may open loopholes for illicit practices by utility staff in collusion with informal water providers.

Utility staff members may collude with informal water providers, enabling them to conduct illegal business in exchange for a share in profits. This may include the illicit selling of water to consumers in the utility’s distribution network or illicit access to utility water resources. Utility staff may also provide water directly through illegal connections or renting out of water tankers. Consequently, they may oppose network extensions to the areas where they are involved in informal businesses.

RED FLAGS

• High levels of non-revenue water
• Few household connections in certain areas despite available network coverage
• Board members blocking extension to new service areas with high user potential and heavy involvement of informal service providers

KEY GUIDING DOCUMENTS

Halpern, J., Kenny, C., Dickson, E., Ehrhardt, D., and Oliver, C., 2008, Deterring Corruption and Improving Governance in the Urban Water Supply & Sanitation Sector: A Sourcebook, Water Working Notes, Note No. 18, International Bank for Reconstruction and Development and World Bank

Barraque, B., 2012, Urban Water Conflicts, Book from Urban Water Series, United Nations Educational, Scientific and Cultural Organisation – International Hydrological Programme (UNESCO-IHP)

TI and WIN, 2008, Global Corruption Report 2008: Corruption in the Water Sector, Transparency International (TI) and Water Integrity Network (WIN), Berlin, Germany

TARGETED EXAMPLES

Corruption among water retailers in Kibera, Kenya²

Target group: Utilities

Location: Kibera, Kenya

The number of water retailers [in Kibera, Kenya] is estimated at around 2,000, generating turnover of US$ 15,000 to $ 39,000 per day. Corruption and criminal practices, stimulated by fierce competition, are commonplace among players in the water sector. The cascade of pressure exerted ranges from the most powerful, including the employees of Nairobi water service (the conversion of which from a direct municipal service to a publically owned company has not stopped the corruption), to the most vulnerable […] For example, water vendors, both legal and clandestine, suffer from constant racketeering of water services staff (bribes to obtain connection or avoid disconnection) […].

Municipal officers collude with private water vendors²

Target group: Utilities

Location: Mexico

[Customers in a city in Mexico] claimed that ‘private water vendors have organised a black market for potable water in the popular districts taking advantage of the service interruption affecting a large part of the city’s southern area’. They added that the service interruptions were planned in collusion with municipal officers in order to create a market for private vendors […].

Water mafias collude with public water officials³

Target group: Utilities

Location: Bangladesh and Ecuador

In Bangladesh and Ecuador, private vendors, cartels or even water mafias have been known to collude with public water officials to prevent network extension or cause system disruptions. These service breakdowns help to preserve their monopoly over provision and increase the business for private water vendors in specific neighbourhoods.

Delayed network extension leads to black market⁴

Target group: Utilities

Location: Latin America

In a steep hillside squatter settlement in Latin America, poor households have waited for utility water for decades. With little confidence that the local council would extend the network, most communities opted for water provided by informal service providers, who stole or bought the utility water and delivered it in tankers. The price varies substantially as the providers were susceptible to the demands of the municipal water officials, paying them for the water they used and periodic silence payments. When one of these officials came to the squatter settlement and saw a huge new market, he decided to begin delivering water to the settlement himself – moonlighting at night using a utility tanker. He sold water at the same price as the local private provider, and in developing such a lucrative personal business, he made no further recommendations that the network be extended.

FULL REFERENCES

1. Halpern, J., Kenny, C., Dickson, E., Ehrhardt, D. and Oliver, C., 2008, Deterring Corruption and Improving Governance in the urban Water Supply & Sanitation Sector: A Sourcebook, Water Working Notes, Note No. 18, International Bank for Reconstruction and Development and The World Bank
2. Barraque, B., 2012, Urban Water Conflicts, Book from Urban Water Series, United Nations Educational, Scientific and Cultural Organisation – International Hydrological Programme (UNESCO-IHP)
3. TI and WIN, 2008, Global Corruption Report 2008 Corruption in the Water Sector, Transparency International (TI) and Water Integrity Network (WIN), Berlin, Germany
4. Plummer, J., 2007, Making Anti-Corruption Approaches Work for the Poor: Issues for Consideration in the Development of Pro-poor Anti-corruption Strategies in Water Services and Irrigation, Swedish Water House Report No. 22