Managing urban water services through segmentation, service and price differentiation: findings from sub-Saharan Africa

Water is life and its provision is vital not only for purposes of sustaining life but also for convenience, health, sanitation and economic well being. The United Nations estimates that over one billion people living in developing countries lack access to safe water, with a substantialp roportion of thesel iving in Africa. As a consequenceo f urbanisation and rapid growth of cities, urban water utilities in developing countries face an enormous challenge in meeting the water requirements of urban dwellers. The challenge is even greater when the prevailing poverty, high levels of debt and declining funding (in form of official developmenta ssistance)a re taken into account. In particular, Sub-Saharan Africa is facing low levels of water services and water supply coverage. Under thesec ircumstancesa, key objective for water utilities in Sub-SaharanA frica is to provide services to the growing urban population, including the poor, in a financially sustainable manner. To achieve this objective, utility managers need innovative methods of financing and managing urban water services. A systematic approach consisting of market segmentation, service and price differentiation is proposed as a suitable method of managing urban water services in Sub-Saharan Africa. This approach is the subject under investigation in the research, which is reported in this thesis. Using primarily the case study research methodology but also incorporating surveys, interviews and f6cus group discussions within the case study, research was carried out to investigate the use of a systematic approach consisting of segmentation, service and price differentiation for managing urban water services in the context of Sub-Saharan Africa. The detailed field research was carried out in Kenya and South Africa, and two case studies were prepared. Among the key findings was that this approach offers a framework for water utilities to structure their service delivery with appropriate pricing and serve more customers (including people living in informal settlements) at affordable cost, while achieving financial sustainability. The finding leads to the conclusion that segmentation, service and price differentiation is a suitable methodology that utilities can use to improve urban water servicesi n Sub-SaharanA frica.