PRIVASTISATION OF WASTE DISPOSAL: ISSUES AND PROSPECTS

BY Abiodun Peter Bamigboye [now late], presented at the Environmental Health Officers Association of Nigeria annual scientific conference in Lagos, 2003

1.0     Introduction

          The failure of succeeding governments at various levels of Nigeria to effectively manage Municipal solid wastes (MSW) has remained a national embarrassment and a cause of concern. Waste management deficiencies remain one of the major health and development problems in the country. It is also a major cause of mortality especially of vulnerable population groups in the country as it exposes people to disease causing organisms and various pollutants from water and the physical environment. A strong association has long been established between the spread of communicable diseases and poor refuse management system. A look at most of the urban towns and villages in the country pictured a grossly deficient system of waste collection management and disposal-a sharp departure from what obtains in most developed countries of the world. The problem has thus become a complex one in Nigeria which requires urgent attention at all levels of policy initiation and implementation. The lack of capacity on the part of government and/or its agency has largely been responsible for this ugly situation.

In recent times, there has been lots of speculation as regards the intention of government to privatize waste management in Nigeria. Experts and professionals have continue to wonder on the viability of the idea while would be contractors have started their lobby to get involved in the business of waste management although without having much knowledge of its workability. It must be said at this juncture that Private Sector Participation (PSP) in waste management is not stately that should be implemented in haste. There is need for extensive knowledge and capacity building of the part of governments, professionals and the operators so that the benefits would be realizable. The choice of this topic and its target audience is therefore considered timely for addressing a pressing problem confronting our nation.

2.0     WASTES AND WASTE MANAGEMENT

Waste has been defined as a resource in the wrong place (Adewumi, 2001). Waste refer to lack of use or value or useless remains. It is a by-product of human activities. Solid waste encompasses diverse nature and constituents. It is generally classified as household, market or commercial, industrial, medical, construction, etc. All these could either be wet or dry in nature. It has therefore being advocated that the best way to deal with wastes is to restore value to it (Adewumi, 2001) to the point at which it ceases to be a waste. The lack of value in many cases can be related to the mixed and in many cases unknown composition of wastes which also compound management problems. The provision of municipal solid waste services is a costly and vexing problem for local authorities everywhere.

Solid waste management involves distinct operations: storage, collection, transfer and transportation, resource recovery, recycling and final disposal. Effective management of waste therefore aims at ensuring that waste does not in any way constitute danger to health and safety or man and the environment at every stage of its handling. Waste management from time immemorial has become an essential part of Public Health service management which is expected to benefits all residents of the community. The service is no-exclusive (i.e. benefiting all sections of the society), and non-rivaled, meaning that any resident can enjoy the service without diminishing the benefits of others (Dillinger, 1988). As a result of these characteristics, Solid Waste Management (SWM) thus become a public good to which local metropolitan government is typically responsible. Constitutionally, responsibility for the disposal of waste in Nigeria rests on the Local governments. It is however clear that Local Government Areas (LGAs) presently seem to be incapable of handling the situation either due to:

1. Lack of expertise or resources
2. Poor planning
3. Lack of proper understanding of the various issues involved in the handling and management of municipal.

The need for other levels to play key role thus become inevitable. Various approaches have been explored in other countries to address the problems presented by poor waste management. One of the which is allowing private firms to be involved on all or selected aspects of waste management. Many countries have moved towards privatization in the last decade but only few have done it successfully.

2.1.1  Problems of SWM in Nigeria

The problems of SWM in Nigeria present a situation that is difficult in a way to clearly understand the complexes. This is because so many factors compound the problem from place to place. The factors include organizational, finance, climatic and ecological. Generally speaking, the followings are features of the SWM services in most places in Nigeria.

1. d.    Low Service Coverage: In some places the public financed system covers only a little section of the population and as such other places especially the rural areas have no organized form of waste disposal
2. e.      Substantial inefficiencies: This is most cases in characterized by high costs but low quality services and also labor intensive but low labor productivity giving  rise to mountains of refuse in many places
3. f.      Insufficient resources in which there is little or no cost recovery and a near total dependence on general revenues or transfers. Thus whenever money fail to come from the central sources no service is provided.
4. g.     Widespread uncontrolled dumping especially in market places of major towns and entirely in the rural areas.
5. Unorganized collection methods
6. i.       Inconsistent policy characterized by lack of commitment
7. j.       Problem posed by poor urban planning and poor road infrastructure complicating problems of collecting and transporting wastes to disposal sites
8. k.    Inadequate data on per capital waste generation making planning cumbersome and unrealistic
9. l.       Problem of waste segregation/sorting which increases the proportion that goes final disposal.

3.0     PRIVATE SECTOR PARTICIPATION IN SWM

          One proven ways of obtaining efficiency gains in solid waste management is through the involvement of the private sector-that is when key success factors of competition, transparency and accountability are present (Cointreau-Levine, 1994, Cointreau-Levine et al, 2000). As a matter of fact there is a growing interest in the participation of private companies in solid waste management. Most times this is driven from failures of municipal systems to provide adequate services, and some time by pressure from national governments and international agencies. It is a system that has recorded success in the US, Canada, Hong Kong, Morocco, Ecuador, Ghana and other places (Cointreau-Levine et al, 2000) and its being experimented in various places in Nigeria including, Lagos, Ibadan, Akure, Onitsha, and a few other places (Ogunwolere, 2000).

PSP in itself is not panacea but a possible opportunity in solid waste management. There are important questions which needs to be answered and these are: whether and how to involve the private sector in the provisions of municipal solid waste services. It should be looked at as a strategic management option where existing management options for services delivery are either too costly or inadequate. It should be seen as a means of enhancing efficiency thus lowering cost and mobilizing private investment thereby expanding the resources available for urban infrastructure. PSP like other business require planning and direction both in the long and short term otherwise it is bound to fail.

3.1.    Approaches to PSP in Nigeria

3.1.1  Contracting

Contracting has become a viable means of securing as long as it is possible to adequately described outputs anticipated from the contract. Of all the methods opened to PSP in waste management, contracting waste collection to private firms offers the greatest opportunity for effective management. It theoretically offers the opportunity for a less costly service than the public service which makes it well suited for discrete activities within the solid waste system. This opportunity is bet harnessed through solid waste collection.

An important issue in this regards is the absence of barriers to entry. This service involves low economies of scale, technological simplicity and moderate investment costs (Ogunwalere, 2000). This is feasible for local firms with modest financial resources to enter into the business. Findings from the Latin America showed that most of the firms were small-to-medium sized, indicating that there were no barriers to entry, (Bartone et al, 1991). Similar situation also exist in Korea. In most places in Nigeria, Particularly in Lagos, less than 10% of the contractors has 1 or 2 collection vehicles as most of them depend on government vehicles.

Competition play an important role in getting low cost solid waste service from private collectors. In 1984 after many years of private collection system, the San Jone city in California re-examined the prices they were paying and dedicated that they might lower their waste management costs by activity increasing competition. They thus focused on helping a competitive waste management firm develop a new landfill. This approach waste found to have resulted in saving lot of contract costs to the tune of between US$25-$31 million in five years (Leite, 1991).

Some form of contracting involve a mix of public and private service. This approach was implemented in Bangkok where competition between private and public contractors led to the streamlining of the roles of the public service by 30% (Cointraneau, 1992). In Minneapolis where the approach experienced initial high cost than those of the private contractors, the public costs dropped towards the level of private contractors after five years (Bartone, 1999). This approach has the natural tendency to make both types of providers more accountable while it motivates the public service to be more efficient and on the part of the contractors it makes them realize that the city cannot be held hostage of cartels, monopoliers or collusion. This kind of approach is not yet organized to a level where the gains of competition could be maximized in Nigeria. However some form of collaboration exists between the private and the public service providers. The Lagos State Waste Disposal Board in 1985 (now Lagos State Waste Management Authority-LAWMA, divided the city of Lagos into zones and awarded contracts of refuse collection to selected private contractors to collect industrial and commercial wastes from large generators. 60% of user charges being collected by LAWMA was paid to the contractors while 40% was retained to cover their own cost of administration, billing and disposal in this form of contracting that was introduced at that time (Ogunwalere 2000).

3.1.2  Franchise

This is the method in which local government that is in charge of waste collection and disposal or any other agency so charged with the responsibility givers exclusive right to a qualified private firm for the responsibility to provide service to customers within a zone. In return for the right, the private firm pays a license to the government. The firm subsequently charges her customers appropriate fees to cover the cost of the service. Ceiling fixed by the government agency through ordinance may regulate the fees charged monitoring of the performance of the private firm having franchise agreement with government rests on the government agency. It is also their responsibility to regulate user charges.

An important advantage of franchise over contracting for government is that the private firm bears the cost of billing and collection of user charges. However it has the disadvantage of not usually resulting into the same low cost as contracting because of the cost of billing due to non-payment and late-payment (Cointraneau, 1992). However, there is need to make for a guaranteed lower cost than the public service. In doing this it is important to have a well defined contract performance measures, initiate enforceable contract sanctions, arrange for vigilant contract monitoring and cost accountability. There is also the need for the government agency to arrange for a means of receiving and managing complaints from residents about solid waste service.

Franchise has become a popular method of PSP in most places in Nigeria. It is being implemented in Ibadan, Lagos, Onitsha, Kano among others. Franchise if properly managed has the potential to enhance better efficiency and control. One major compliant from residents of Ibadan is that they were not given free choice to select their designated company and indeed some of the companies turnout not to be reliable (Cointraeau, 1992).

3.1.3  Informal Sector Waste Collection

In many developing countries, the informal sector provides waste collection services to low-income neighbourhood. While the formal sector is based on basic activities, the informal sector consists of non-basic services. This is common to see wastes being carried in carts being pulled by donkeys or carts being pushed by people. A major feature of this practice is the indiscriminate dumping of refuse by these cart pushers resulting from their lack of necessary equipments to haul wastes to official landfills. This practice has been reported to be predominant in Colombia where more than 600 clandestine dumps exist which were created by the informal sector using mainly donkeys (Coaintraeau 1989). The need to organize these collectors into a cooperative and developing a franchise arrangement whereby the rights and responsibilities of the informal sector collectors are defined has been suggested (Cointraeu, 1989). Community participation could be a very necessary tools in this wise in which the people are involved in the section of such informal refuse collectors in their neighborhood and negotiate the means of disposing the refuse with them. A high level of community organization would be a useful tool in achieving this. In doing this, a local leader may be put in charge of collecting fees from residents to fully cover costs of and also initiate actions to keep the neighborhood system self-sustaining.

3.1.4  Micro-Enterprise

Apart from this direct involvement of the sector in waste management, another form of PSP is through the incorporation of micro-enterprises and informal waste recycling cooperatives in the municipal solid waste management system. Research has shown that the promotion of micro-enterprises has proven to be an effective way of extending services to poor urban communities (Arroyo et al, 1999). The promotion and development of recycling cooperatives also provides a way of upgrading the living and work standard of informal waste pickers, resulting higher incomes for them and greater self esteem (Haan et al, 1998). Formalising the activities of scavengers would help in better organization of their services.

3.1.5  Concession

This is an arrangement under which the private sector finances and owns solid waste management facilities. This ownership is usually for a period of time sufficient to depreciate investments and provide a reasonable return to the investors. Concession agreement could specify performance standard, methods of judging performance, penalties for delay or non-performance, risk assignment, insurance requirements, dispute resolution and standard for workers’ safety and health environmental protection.

Concession components include building, owning, operating and sometimes transferring of facilities through long-term contractual agreements. Some components that are commonly referred to are:

1. Built, Own, Operate and Transfer (BOOT): This involves the building, owning, operating and after a specified period the transfer of the infrastructures. It provides a means of having the private sector financed facilities whose ownership will eventually be transferred to government.
2. Built, Own and Operate (BOO): This involves building, owning and operating waste management through contracting by a private firm. Such facilities can provide solid waste services such as transfer, disposal or resource recovery. BOO is widely used in many developed countries like the USA, Germany and Canada (Cointraneau, 1989).

3.1.6  Private Subscription

This involves each household and commercial establishment hiring private collection firms and paying the user fee charged by the firm. This brings in opportunity for open competition. This methods has been known to have some disadvantages including:

1. Higher costs than those incurred by government contracting with private firms
2. Usually more costly than the public service.

Collusion has always being an issue when open competition is practiced. Association of private refuse collectors exist in a number of cities in Nigeria especially Lagos, Ibadan, Akure and other places.

4.0     KEY ISSUES

4.1.1  Factors Influencing Private Sector Participation in Solid Waste Disposal

Privatizing solid waste management in developing countries requires elaborative consideration of all the issues involved and arriving at realistic decision as to whether to privatize a specific aspect or portion or the entire aspect of the service. In deciding whether to have PSP, many factors needs to be analyzed such as cost recovery, efficiency, public accountability, management, finance, economies of scale, legislation, institution and cost (Cointraneau, 1994). For each situation therefore, governments needs to weigh the economic risks associated with the political manipulation including payment, environmental regulations, tariff regulation, inflation and other associated factors. Cost factors in particular should be analyzed separately for the different components of solid waste service collection, cleansing, disposal and transfer.

However, some factors are worth considering in making decision to involve private sector in the service. These include:

1. Efficiency: The need to know the political realities constraining government from providing efficient service is required. These realisties include, cost accountability, labour tenure, government wage scales, labour practices, personnel benefits, work arrangement, bureaucratic procurement procedures and hiring and firing procedures. Also important is the need to find answers to questions like.
2. Where these constraints could be removed
3. Where same constraints could characterized the involvement of the private sector
4. If there are economies of scale.
5. Capability: Certain questions need to be addressed as regards to capability. These are:
6. Does the government recognize that expertise is essential for competent and low-cost solid waste management?
7. What are the differences between government and the private sector in technical and financial resources required to build or buy, operate and maintain waste management facilities
8. Can performance be effectively monitored?
9. Costs: The cost of running the public service must be compared vis a vis the cost of maintaining PSP. There must exist an accounting information to determine whether PSP would offer solid waste services delivery at a lower cost. The need to have a strategic planning and good feasibility study as relates to efficiency of technology and equipments is very important.
10. Accountability: There is need to assess whether PSP will disportionately benefit an elite, wealthy class with control over private capital or whether market opportunities will be available to small and middle sized business which would eventually lead to some redistribution of income and power

aa. Competition: PSP as matter of necessity must allows for healthy competition among firms on the hand and between firms and government on the other hand. Government policy on PSP must be made in such a way to facilitate this and appropriate provisions made to ensure that at all time the required atmosphere is created to make it work.

1. Risk: There must be a regulatory framework to protect the private sector against risks due to environmental damage, currency adjustments and inflation, political changes etc, so that the prices of services are not unduly burdened with hidden costs for risk protection. Signing contract for a minimum length of time to allow for full investment depreciation and economic of scale would reduce risk.

4.1.2  Expectations from the Private Sectors (as part of their sector participation process)

1. Technological assessment studies
2. Public consultations
3. Environmental Impact Assessment
4. Design facilities and acquire permits.
5. Activities Expected from Government

4.1.3  Activities Expected from Government

1. Identification of the activities to be privatized and the development of a private sector policy strategy
2. Preparation of the privatization (including detailed cost analysis and potential restructuring) plan
3. An appraisal phase which basically consist of preparing the transaction itself
4. Implementation of the privatization policy
5. Maintaining a balance between private and public sectors to secure contestability (e.g. monitoring public provision over some waste collection zones).
6. Minimizing labour redundancy, health and safety risks
7. Monitoring performance based on well specified contracts
8. Considering willingness to pay in determining user charges
9. Defining equitable collection zones in order to minimize collusion and procurement irregularities
10. Defining clear contractual clauses and well-advertised, transparent, equitable and scheduled procurement
11. Ensuring that government has available financial means to comply with its constraining and to establish cost-recovery systems
12. Developing the capacity of public sector to regulate and monitor private service providers
13. Providing governmental support by changing national laws and policies and by providing guidance and setting norms.

4.1.3  General Issues

1. Extent of privatization-is government backing out?
2. How much planning has been made prior to privatization
3. How much waste is generated per capita, within different socio-economic group
4. Facilities available for disposal-location, capacity, efficiency etc
5. Making collection efficient-transportation, storage, transfer station etc
6. Capacity building (personnel for monitoring) in terms of training, retraining, research etc
7. Modifying the role or state environmental agencies
8. Recycling-strategies to minimize waste available for disposal
9. The software components-Health education, information, community organization, sorting at source etc.

5.0     PROSPECTS

Although PSP in solid waste management has failed in a number of few places, it has continued to gain prominence in many other places with recorded success. (STAT 2002). The private sector:

• Improves efficiency and lower costs by intruding commercial principles of:

-         Limited and well focused performance objectives

-         Financial and management autonomy

-         Hard budget constraint

-         Clear accountability to consumers and providers of capital.

• Has better financial and management autonomy, a hard budget constraints and clear accountability to both customers and providers of capital. This would help  in providing better equipment and services
• Provide new ideas, technologies and skills. The activities of scavengers has recently introduced into the Nigeria industrial sector re-cycliable materials that is already solving problem of supply of original raw materials.
• Mobiles needed investment funds especially for short-lived collection vehicles
• Job creation for various categories of staff
• Environmental beauty and protection
• Enhancement in health status and community hygiene

All which is expected to lead to lower cost and tariffs.

Ample evidence abounds from around the world to support these claims. Findings from the United State, Canada and the UK shows that in about 2000 cities surveyed, the services provided by public monopolies typically cost between 25-4% more than competitively contracted services (Bartone, 1999).

6.0     Conclusion

The problems of solid waste management in Nigeria demand a radical approach to finding effective solutions to address the various problems of confronting the sector. It is also very clear that with the abundant human and material resources and a vast enterprising market, PSP in solid waste management has a great potential in Nigeria. It cannot be out of place for government in Nigeria to explore the opportunity offered by a wide range of resources and to work out strategies to make PSP in waste management workable in Nigeria. In doing this there would be the need for a waste management sector reforms and a commitment on the part of governments to really address waste management problems. Effective planning is fundamental to its success and a commitment (both political and administrative) to implement plan if very central to PSP in solid waste disposal.