Mexico: Financial management of the WSaS company in the Guanajuato municipality (#183)
Description
In 1980, the Federal Government decided to decentralise the responsibility of providing water supply and sanitation services to the state governments. From that date, and for a period of 10 years thereafter, the government provided subsidies to allow the establishment of well structured organizations to take over the responsibility of service provision in every state.
When the subsidies were withdrawn, only a few organizations were able to maintain operations on their own. In 1992, the municipality of Guanajuato created SIMAPAG – Sistema Municipal de Agua Potable y Alcantarillado de Guanajuato (Municipal System of Drinking Water Supply and Sewage of Guanajuato) - as a decentralised public organization with their own budget and governance structure. Of the 31 water supply operator agencies like SIMAPAG in the state of Guanajuato, only 10 have a healthy financial status. However, SIMAPAG itself has shown an outstanding performance in terms of financial surplus and overall efficiency. In 2000, a financial surplus of USD $ 203,713 (58% of the total income) was calculated, giving the municipality the highest surplus of all water supply utilities in the state of Guanajuato. SIMAPAG has demonstrated that it is possible to provide quality water supply and sanitation services at the municipal level without the need for subsidies.
SIMAPAG had to implement several changes to their management structure while adjusting their orientation towards the users. The SIMAPAG board of directors is composed of people selected by the municipality who have no specific links to political parties. Having a neutral body has been one of the major strengths of the organization.
SIMAPAG also set up an automated billing and collection system that significantly improved the billing-collection ratio. The users were willing to pay for the services but the bureaucratic system for payment of bills made it difficult for the users to pay. With an improvement of the billing and collection system, user payments were made easier. This also allowed another source of income to increase: Registration fees and interest for late payments. There were also a review of household water meters and an inspection of the entire distribution system with the aim of finding leaks and other malfunctions. When the system was reviewed, improvements were implemented for the most efficient use of the resources (i.e. electricity), which lead to lower costs for general maintenance.
The tariffs in Mexico are very far from reflecting accurately the price of service provision to the users. The average production cost per m3 is approximately MXP 5.30 (approx. USD 0.53) but this does not include the cost needed for extensive maintenance or replacement of equipment or new investments. Being aware of this, SIMAPAG, with the approval of the congress, implements one of the highest tariff fares in the country. Although initially there was some resistance from the users, they are currently aware that this is necessary in order to provide a high quality service. Nowadays, users even pay an additional 10% charge for sanitation services.
By means of this implemented tariff and a more efficient billing system, SIMAPAG recovers around MXP 6.50 per m3, which leads to a profit of approximately MXP 1.20 per m3.
Training programmes for their staff on leadership, total quality management and teamwork has been one of the key strategies to improve the services they provide to the users. SIMAPAG has also done extensive work in creating a new culture for water usage. They have been involved in several activities, mostly focused on schools, in order to promote this message.
Lessons learned
Importance of case for IWRM
An organisation that provides water supply and sanitation cannot work independently from the institutional context in which it operates. It needs the support from the government to ensure that policies (for example tariffs) necessary for the sustainable provision of water services are implemented. It also needs the involvement of the consumers, who must use water efficiently and must be willing to pay for the water services provided.
Contact
Marco Antonio Ortiz Rendón
simapag2@redes.int.com, SIMAPAG