LETS LECTURE: Solving the Water Shortage Problem

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The Liberia Water & Sewer Corporation (LWSC) is a state-owned enterprise responsible for producing and delivering potable water to the inhabitants of the Republic. But the residents of Monrovia have been without water now for 5 days. This is not the first time Monrovians have had this experience. Moreover, before this tragedy, Allafrica.com reported that out of 6 million gallons of water that LWSC was producing each day, only 2.5 million gallons were reaching the corporation’s customers. The other 4.5 million gallons, i.e. 75 percent of the total, was somehow getting lost, not getting delivered and therefore not getting billed.

LWSC charges residential customers ½ US cent/gallon; commercial customers, three times as much, 1½ US cents/gallon. 80 percent of its output is sold to residential customers; the remaining 20 percent to commercial (business) customers. So, if you do the arithmetic, it turns out that LWSC, even before this recent shutdown, was losing more than US$30,000 per day in potential revenue, as follows:

Residential: 80% x 4,500,000 galls = 3,600,000 galls @ $0.005 = $18,000
Commercial: 20% x 4,500,000 galls = 900,000 galls @ $0.015 = $13,500
Total Loss 4,500,000 galls = $31,500

Losses of that magnitude are huge. If uncorrected, it will amount to US$11.5 million over a one year period. The numbers tell us that out of every 4 gallons of water it produces, LWSC was only billing 1 gallon. Imagine what you would say if only 1 out of every 4 calls you made on your mobile phone was going through! What would you think? You would be going berserk. So, what exactly is the problem?

A good place to start is with LWSC’s board of directors because they are the people who are supposed to be giving direction to the company’s management. President Sirleaf should be asking herself whether or not she has the right people on LWSC’s board.

LWSC is a business and should be run as one. I don’t know much about the business acumen of its chairman, Mr. Kimmie Weeks, who made a name for himself in advocacy. Our finance minister, Mr. Amara Konneh, is probably too busy to attend board meetings regularly (one of the reasons I keep saying that ministers should not be appointed to public corporation boards).

With those two exceptions, on the face of it LWSC’s board is probably as good as you will get. It includes the president of a local bank (John Davies), a local businessman (Philip Parker), a lawyer (Harriette Badio) and a lady whose involve-ment with the water and sewer business in Liberia goes back to the bones of Abraham (Loris Shannon).

Then we look at the management. And here I will repeat my mantra. The President of Liberia has no business appointing managing directors of public corporations. They should be appointed by, and answerable to, their boards of directors. They should owe their appointment to years of demonstrated management experience and a track record of performance in business. Their positions should not be seen as part of the political spoils system, where they are appointed on account of nepotism, or as a political favour.

In this case, the incumbent, Charles Allen, happens to be someone with years of business experience. He came to the job from an executive position at a local bank. He knows how to read and interpret balance sheets, profit & loss statements, and cash flow statements. He is not one of our proverbial square pegs in a round hole. Nor is he an ANAS, an Adolescent Needing Adult Supervision.

So, why is it that all these high powered people cannot get the job done? Perhaps President Sirleaf might want to consider appointing a couple of large water consumers to LWSC’s board to beef it up. I am thinking of the likes of the CEOs of Monrovia Breweries and Coca Cola, people who eat performance management for breakfast and are accustomed to keeping their eye on the bottom line. Having a vested interest in the continuous flow of inexpensive water, they might be able to bring a greater sense of urgency to problem solving at LWSC.

Water that is produced but that doesn’t generate revenue is called, in industry parlance, non-revenue water (NRW). It is a problem that is faced by water utilities the world over, but more acutely in the developing world. It results from three principal sources: water that is consumed but not billed because it is not metered; commercial losses arising from theft, faulty meters or deliberate or accidental misreading of customer meters by staff in the field; physical losses due to leakages in the mains, in LWSC’s storage facilities or at the point of connection on customer premises.

In our case, LWSC’s NRW is 75 percent, which best practices tell us is an unacceptably high level. And there are solutions, starting first with diagnostics. Just as in clinical medicine, you cannot cure water loss until you have first diagnosed the problem. I am told that LWSC was presented an option to procure diagnostic tools for about US$10,000 and passed up the opportunity. Given the magnitude of their NRW problem, that would seem to me to be a no-brainer.

Lastly, LWSC can take a leaf out of the book of water companies in Latin America, Southeast Asia and elsewhere in Africa who have hired private sector contractors and awarded them performance-based service contracts to assist them to reduce their NRW. If properly structured, these contracts can reduce NRW dramatically. LWSC’s board should step up to the plate and do this.

The writer is a certified public accountant and a businessman. He can be reached at ([email protected]).

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1 COMMENT

  1. Thanks so much for this article. But Liberia is too old to continue to have the government controlling these agencies. Just to name a few: LEC, LTC, LWSC. When Liberia sees that it is time to privatize these agencies than we will be leading into the right direction. Yes, of course I am confident that Liberia is leading in the right direction and these are the discussions Liberians need to be having to enlighten their fellow citizens.

    When these agencies are privatized let government be part of this privatization process because the government is part of the environments and needs money to carrying out Universities, Hospitals, Schools, and Road constructions… And this also reduces taxes on the citizens and businesses… Which creates tons of jobs for the citizens.

    Take for instance, the government of Liberia privatizes LEC, people buy shares or portions of the company. The government of Liberia as well as other citizens buy portion (Shares) of the company, now when this is done the government is expecting quotient… which is called dividend.. But mathematically division result is quotient.. The profits or revenue generated for all shareholders the government is going to be part of that profit distribution…Which creates means for the government to invest in roads, schools and hospitals constructions.

    Liberians should stop thinking like others. Others designed their own way of governance, thus let us design our own way governing so as to teach our next generation those ways… As a follow who has advanced degree in Finance, it is expedient to approach our governance differently.

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