Africa Water, Sanitation & Hygiene 2014 Sept - Oct Vol. 9 No.5 | Page 37

Regulation
devices; possible increases in leaks and repair bills where
better demand management raises network pressures;
recurrent costs such as the cost of vending and ongoing
repairs and monitoring; and selling more water at
subsidized lifeline tariffs rather than full tariffs. Service
providers should assess these cost and revenue effects
upfront.
Prepaid metering cannot compensate for inefficient
billing and collection. The viability of prepaid
systems—like most of a service provider’s business—
hinges on the tariff regime. If a service provider, for
whatever reason, charges below cost (e.g., through
lifeline blocks), it is unclear whether it can find added
financial benefit from using a relatively expensive charging
mechanism.
The performance of the technology is still
inconsistent. The technology is not yet as reliable or
effective as prepaid electricity, because prepaid meters
have more moving parts and are vulnerable to damp, grit
and air. If the prepaid industry is to grow, it is important
to ensure that meters can be repaired locally and that the
supplier can offer good after-sales service and spares.
How can services providers make prepayment work for
them and poor customers?
Be clear about the priority: Reaching people without
their own connections. Prepaid systems’ core potential
is in addressing the fact that many urban Africans still do
not have their own water connections and cannot access
subsidies. Prepayment does not offer an obvious answer
to these challenges, but some of these systems’ attributes
may provide a tool for addressing some of them.
Recognize that prepayment technology is not
intrinsically anti-poor. Some critics fear that prepaid
systems make it too easy for service providers to close
off water supplies where people cannot afford advance
payment, and when credit is exhausted. But the technology
is merely a tool of policy and regulatory frameworks
which can provide safeguards and lifeline support, and
guidance for working closely with customers in rolling out
the technology.
Recognize that prepayment does not equate to the
“commodification” of water. It has been implied that
prepaid meters typify the commoditization of water,
or even privatization. Significantly though, of the eight
service providers covered in the case studies, two of
the pace setters were neither private nor publicly owned
corporate agencies, but municipal water departments
concerned with providing services that meet the needs of
the people they serve.
Recognize the challenge of prepaid systems to
service providers. The high initial outlay of prepaid
systems poses big challenges. Service providers should
assess the cost and revenue effects of introducing prepaid

meters carefully early on, compared to the alternatives.
Economic regulators and higher-level policy makers could
play an important role in doing so.
Think big about the technology. If prepaid water
systems are to be applied more widely, the robustness
and reliability of prepayment systems need to be
improved. The game changer could be information
and communication technologies (ICT) to eliminate
cumbersome token usage and link prepaid meters to
mobile phones and vendors. The entry of Standard
Transfer System (STS) compliant technology holds
particular promise for loading credit and paying for water
across a common platform shared with prepaid electricity,
and promotes greater compatibility between different
brands through adherence to global specifications. A
combination of regulation and demand from service
providers for components across brands could produce a
mix of price, quality and innovation to reach the millions
of poor urbanites that still lack access to safe water.
To summarize . . .
Prepaid systems are not a quick fix, and require effective
policy, regulatory and other transformative measures plus
quick response times when they fail. But they are not
inevitably anti-poor and can make a tangible contribution
in the quest for access to improved water supply.
About the authors
Kathy Eales is an institutional specialist, with a particular
interest in how best to provide affordable and effective water
and sanitation services in rapidly growing dense settlements.
She has worked within South Africa’s Department of Water
Affairs; in Africa’s largest water and sanitation NGO, the
Mvula Trust; in municipal government, including the City
of Johannesburg, where she wa ́ɕ