Basic service provision shouldn’t just be a money maker

8 October 2012

As both public and private utility companies claim more of the scarce income painstakingly saved by low-income households, leading to reduced expenditure on food and other necessities, are they forgetting that their core function is to provide services and not just make money?

A man carries buckets filled with water from a water tanker in Retiro, a shanty town in Buenos Aires, Argentina.

Everyone should have adequate supplies of clean water, a safe toilet, and other essentials for their health and well-being. These rights are clearly recognised within the Millennium Development Goals, even if they haven’t been achieved. Ensuring universal access to basic services requires governments in the global South and North to not only shift from Millennium Development Goal targets that only seek to address half of those in need as discussed in my previous blog, but also an understanding that basic services can’t be accessed if they’re not affordable.

For many decades, most local authorities in the Global South resisted providing services to informal neighbourhoods in towns and cities where much of the low-income population lived. They feared that allowing access to piped water, sanitation, refuse collection and drainage would recognise and consolidate the hold that residents had on the land, and make their eviction more difficult.

Given local government resistance to providing even the most basic of services – such as piped water – a range of informal suppliers moved in. They drove water tankers into informal settlements from which water could be bought by the bucket, or went as water vendors selling door-to-door. This addressed some needs, but added to the difficulties that residents faced, as they had to buy water on the informal market, at prices many times those paid by much wealthier citizens in formal areas who had water piped to their homes.

However, in many nations, attitudes to informal urban settlements have begun to change. Water utilities and municipal governments alike are realising that their interests are better served by formalising service delivery to residents of informal settlements, irrespective of whether or not secure tenure is on offer. But this hasn’t resolved all the problems facing the cash-strapped residents.

Utility companies (whether public or private) are now providing piped water supplies to those living in informal settlements, but at prices that make buying adequate supplies of water unaffordable – whether through tankers, water kiosks or direct to the household. They may also provide “pay per use” public toilets which, as the name suggests, charge individuals each time they use a toilet. They often get charged more for defecation than for urination.

The geographer David Harvey talks about ‘accumulation by dispossession’ to describe processes like the eviction of low-income residents from informal settlements, and the subsequent money (‘capital accumulation’) made through the redevelopment of such sites in his recent book Rebel Cities: from the Right to the City to the Urban Revolution. However as people are drawn into paying for services, often for the benefit of the same elites who made money off re-developing the area, this process might be referred to as ‘accumulation through market integration.’ 

The costs paid by residents who once lived in Sanjay Ghandi National Park in Mumbai, India for basic services were recently quantified; they are paying more to the state utility than they were to an illegal electricity provider when living in the Park (Vaquier 2010). The residents, who have now been relocated into formal housing, are now paying Rps 450 a month to secure basic utilities (about US $ 9) whereas before they paid Rps 350 (US $ 7). This difference may seem small but for households managing on very low incomes it is significant.

During a recent trip to southern Africa, I found that in low-income neighbourhoods in Harare, the capital of Zimbabwe, residents are being charged US $28 each month by the city council for water, sanitation and waste disposal. The water doesn’t run in the pipes and the waste isn’t collected– but even if the services did exist, these costs are excessive. To put these costs in context, the government’s legal minimum monthly wage for live-out domestic workers is the equivalent of (US) $80. Someone on that wage would be spending more than a quarter of each month’s salary on water, sanitation and waste collection, without even beginning to cover their other essential costs, such as food and rent.  

In Walvis Bay, Namibia I met residents who are being charged N$200 a month by a mutual fund for a housing loan on a two-room property, but are paying N$400 a month for water and N$800 a month for electricity. 

Using the World Health Organization standard for acceptable water costs (which is that water should cost no more than 5% of household income) to determine affordability, a study in Zambia found that 40% of the urban population in Lusaka, the country’s capital, couldn’t afford sufficient water (Dagdeviren 2008). Using the more exacting UK standard of no more than 3% of income would mean that 60% of households couldn’t afford adequate access. 

Such examples show that providing the urban poor with services can be a money earner. And, the high costs suggest that, rather than being concerned about managing these services to improve household well-being and extending basic services access to lower-income households, local authorities and water utilities are focussed on making money.

High basic service costs leave the lowest-income households with few options. They are forced to use surface water (shallow wells and water courses), practice open defecation, if there is no affordable alternative, and risk the dangers of illegal electrical hook ups, or manage without. Development should not ignore the realities faced by the urban and rural poor, particularly their lack of income.

Service payments can help capture income from informal labour markets

Behind these costs lies another reality. Entrepreneurs have long made money from investments in industries and commercial services: that is the system of capitalism. This system has provided increased opportunities for many. It has helped urban centres to grow strong, and in many cases prosperous. In recent years, growing informality in labour markets has helped to reduce production costs and increase profitability.

But this growing informal economy comes at a cost for the formal sector. Both informal employment and informal housing means that not much of the urban poor’s income is spent on formally-produced goods and services. Service payments can provide a way for the formal system to ‘capture’ the incomes of people living and working informally.

Of course companies have to be viable organizations. It is fair that people pay for services; most households want legal basic service connections and believe that they should be paying their share. But prices have to be affordable for most people most of the time if people’s rights to basic services are to be achieved, and their basic needs met.

Urban Poverty in the Global South: Scale and Nature, a book Diana Mitlin has co-authored with David Satterthwaite, will be published by  Routledge on 12 December 2012.

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