An Analysis of economic performance of water companies in Kenya

Abstract

The performance of public sector firms has gained importance in the recent past. Public sector companies are under pressure to generate enough revenue to sustain themselves. Thus their dependence on the exchequer has been eliminated.

The objective of this study was to examine the economic performance of private water companies generally referred to as water service providers-(WSPs). Since the liberalization of the water sector, WSPs are required to generate enough cash flows to sustain themselves and also contribute toward improving the welfare of the citizens. In order to achieve this objective, this study surveyed 25 WSPs. Economic performance of WSPs was analysed in terms of equity, efficiency and effectiveness based on twenty two performanCi indicators. Medium and very large WSPs were reported to be the .fairest WSPs. Large WSPs recorded the average level of equity. But small WSPs

registered a low level of equity.

High performance among medium WSPs was attributable to high mean of performance of metering ratio compared to the overall. However, large WSPs recorded an average fairness due to poor (low) drinking water quality. Besides, very large and large WSPs recorded high performance in effectiveness and efficiency. Medium and small WSPs were reported to be less effective and inefficient. Among medium WSPs, inefficiency was evident from high total O&M expenditure with low total revenue. Meanwhile, small WSPs, reported low collection effectiveness due to significant difference in average cost recovery O&M through billing collection efficiency, average monthly gross salary per staff, low turn-over and collection per staff per month with respect to overall mean of these indicators.

The key performance indicators were identified to be sanitation coverage, average tariff, unit operating cost of water billed, unit cost of water produced, cost recovery on operation and maintenance, total cost recovery, cost recovery on O+M through billing, metering ratio, cost recovery O+M billing collection efficiencv, average monthly gross salary per staff, turnover per staff per month and collection per staff per month. Correlation analysis showed that there was significant relationship between sanitation

coverage and water coverage, average tariff with operating ratio and unit operating cost of water billed, unit cost of water produced and drinking water quality, unaccounted for water, average tariff and unit operating cost of water billed among others