Theme 3: The role of the private sector in transport, treatment and disposal / reuse

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  • KenCaplan
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Theme 3: The role of the private sector in transport, treatment and disposal / reuse

Welcome to the third and final week of discussions focusing on Engaging the Private Sector in Sanitation Service Delivery. We are grateful to our co-hosts of the last two weeks and to the numerous contributors across the two discussion forums (WSSCC LinkedIn CoP and SuSanA Forum).

As suggested in previous threads, where government fails to provide relevant services, the private sector usually steps in to fill the gap if they see an opportunity. The demand for services such as collection, transport, treatment, disposal or end-use is steadily growing. Private operators, however, often face difficulties to grow and maintain their businesses at a viable size. Governments on the other hand often struggle to regulate these private sector activities for service quality or price.

Partnerships between governments and the private sector offer opportunities to overcome these difficulties and expand sanitation services, especially in urban areas. "Public-Private Partnerships" have recently gained more attention in the sanitation value chain, combining the interests of both partners. Business models are increasingly covering components across the entire FSM value chain from toilet interfaces to the end-use or reuse of FS products.

This week’s discussion about prospects and challenges of engaging the local private sector in transport, disposal and reuse provides a discussion-platform for practitioners and researchers to learn from each other.

Guiding questions for discussion

1) How can governments and the private sector best work together to ensure service quality and reliability around safe resource recovery and end-use?

2) How can enterprises in the FSM sector be supported to scale up their efforts in low- and middle-income countries?

3) What experience is there of effectively regulating (often informal) providers of transport, disposal and reuse services?

4) Which business models are already showing promise in these components of the sanitation value chain? What can we learn from failed initiatives?

5) What incentive structures, tools and technologies could support the private sector to operate at a profitable level?



This week’s discussion is co-hosted by Mr. Ta Hung Anh, Ms. Magdalena Bäuerl and Mr. Andreas Knapp. Mr. Anh is a PhD Candidate at the AIT in Thailand, researching on FS collection and transport business models and promoting private sector engagement in this promising business. Ms. Bäuerl and Mr. Knapp work together at Vienna-based hydrophil GmbH. With significant experience in the water and sanitation sector, the three co-hosts have recently been engaged in FS-relevant projects, such as the Faecal Management Enterprise Project (SANDEC, 2014) and the development of the FSM toolbox project designed specifically for practitioners (AIT, 2015).

We know there is growing experience and research in this area amongst the network and are keen to hear from you.
Ken Caplan
Partnerships in Practice
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  • rezaip
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Re: Introducing Sub-Theme 3: The role of the private sector in transport, treatment and disposal / reuse

Many of the enabling environment issues valid for the private sector engagement in the earlier nodes of sanitation value chain are also valid for the later nodes of value chain that include transportation, treatment, and disposal / re-use.

Capacity of Local Authority: In developing economies, city authorities are already burdened with the health, water supply, waste collection, licensing and permits and sometimes also primary education. Being run by the locally elected representatives, these institutions run into troubles in exploring funding for new services like sludge transportation and treatment that earlier were overlooked both by the city dwellers and authorities as an essential requirement of urban living. In addition, occupational health and safety, public health and environmental safety and most importantly making a surplus by selling theses services pose a serious strain for the city authorities.

Sludge Transportation: In most cases, collection and transportation are very much linked together as service. However, in case of an unregulated environment, faecal sludge collection is closely linked to convenient disposal whereas transportation in this context would transportation of the collected sludge to the designated site and discharge of the same.

A few service models are being and have already been tested in Bangladesh as to how to make this transportation less expensive and supportive of the commercial viability of the sludge transportation business. In municipalities in Bangladesh, sludge transportation seems to be the main official services offered after receipt of advance payment that covers fuel cost in most cases.

As it has already been the case with solid waste management, engagement of private / community organisations in waste collection offering them either post-service payment or allowing them to charge from the households worked pretty well in large cities including Dhaka. Waste collection from the households also come with some personalized services like collection of the waste at the doorstep somehow develop the willingness among the households to pay and pay as they are asked for. Community waste collection remain at the informal sector who are involved in the business on a part time basis and who do their business with the cycle-carriers supplied to them by the city authorities or the development partners. Same model can be explored with faecal sludge transportation through the engagement of private sector / community organisation.

Transportation to the designated site remains a key issue. A small quantity of sludge can cause a high fuel cost but static or mobile secondary transfer stations can reduce the transportation cost drastically. However, like vacutugs, mobile transfer vehicles are also needed to be registered and recognized legally to make the transportation business formal and encourage investors.

Sludge Treatment: Financial viability of treatment remains a question as to who would actually pay for the treatment and who will build the system. Shall households pay for the treatment of sludge, poor and rich all alike? There is a wide consensus in general that sludge treatment plant should be built by the authorities or development partners and leave the operation profitably run by the private sector who would ensure environmental safety of the operation and also commercially operate the recovered resources e.g. renewable energy or organic agricultural input. It seems the treatment of sludge and disposal of the same as landfill can be operated by private sector while complying with appropriate regulations. Treated faecal sludge as an agricultural input calls for promotion and marketing among farmers as experience from Thailand reveals that a municipality gradually revised pricing of such compost from free to market-driven prices. Huge quantity of sludge also provides scopes for other uses. In this what we feel a greater public private partnership with huge investment is needed. And this solid cooperation has to be longer term.

Government and Private Sector Cooperation: There are several grounds for cooperation. Starting with formalizing many aspects of sludge transportation business including new types of vehicle recognition and registration. Experience shows that operational level cooperation between private and public sector in sanitation often fails due to the fact that the sectors have different pace of operation, accountability and also. As such local authorities as regulatory agencies work best. Also many of these businesses call for initial huge investment like construction and research which needs to be co-funded and be given a very long term period of payback period leaving scope for private sector earning a lucrative operational profit.
Support to FSM Enterprises: Support can come in the form of finance / lending at a reduced interest and longer term payback, promotion and awareness campaign jointly planned both by public and private sector.

Regulating Largely Informal FSM Private Sector: As long as business remains informal, it is hard to regulate. But poor FSM service providers can be brought under certification to observe occupational health and safety and safe disposal.

Business Models Showing Prospects and Learning: It appears FSM business can be a commercially viable business overnight if containment connection to the drains are restricted. This would immediately raise the demand for emptying and eventual sludge transportation.

Structure, Tools and Technologies Supportive of Private Sector Profitability: Cost effective smart monitoring like to check whether the sludge collected are deposited at the designated site properly can ensure a fair competition among the private service providers. There should also be testing and operating new vehicle for efficient transport and the coordination among different emptying process be it a large apartment block or emptying a small containment on a narrow street. In most cases, it seems that revision of emptying fees can make the business commercially viable. However, a recent visit in Thailand shows that municipality allowed private sector to collect processing fees in addition to transportation fees from the apartment dwellers while allowing the poor households paying only the collection fees. This kind of pricing and operation innovation can serve two purposes simultaneously: service providers’ profitability and collection of revenue for city authorities allowing some sort of social justice.

Note: Views expressed here is of the contributor's only and does not reflect views of any individuals, groups or institutions.
Reza Patwary
WaSH Business Advisor
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  • Magdalena Baeuerl
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Re: Introducing Sub-Theme 3: The role of the private sector in transport, treatment and disposal / reuse

Thank you Reza for your well-structured thoughts, which I think show very well how the private sector is and can be engaged along the entire FSM service chain. You have furthermore raised a very important topic, being the requirement of an enabling enviroment for private sector engagement. It stands without question that private operators and enterprises require a (political, institutional, socio-economic etc.) enviroment that allows them to start-up, develop and grow into viable businesses. Business models and different forms of governmental cooperation can hereby provide a profound basis for up-scaling, but the main question that remains is how an enabling environment can actually be created.

It would be great to hear about the experiences of stakeholders that were involved in the development of businesses along the FSM service chain (private enterprises as well as governmental authorities or regulators). Which obstacles had to be overcome and how were they managed? Which forms of cooperation with the government worked well? Which attempts failed?

Please feel free to share stories, thoughts and ideas or raise further questions!
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  • KenCaplan
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Re: Introducing Sub-Theme 3: The role of the private sector in transport, treatment and disposal / reuse

Thanks, Reza, for the comprehensive overview. Magdalena picks up on the enabling environment aspect which undoubtedly is critical. I have understood that transport is the main and overarching challenge to make such businesses viable, but also as the key challenge around public health aspects of illegal or at least inappropriate dumping. I am curious where transfer stations have actually worked to reduce the costs. Examples are welcomed with some explanation of the set up, who covered the cost of putting in the transfer stations, and how are they regulated.

Much appreciated -
Ken
Ken Caplan
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  • tahunganh
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Re: Introducing Sub-Theme 3: The role of the private sector in transport, treatment and disposal / reuse

Hi all,

Here are my comment about this very useful topics:

1) How can governments and the private sector best work together to ensure service quality and reliability around safe resource recovery and end-use?

The government or local authority have to set up a clear rule of law and law framework to register for the by-products and re-use products from FS. Then the customers will be more confident to use these products

The private sectors are very dynamics in business development. They will promote their products based on the market needs on the FS by products.

The government focus on law and regulation to help the private enterprises.

2) How can enterprises in the FSM sector be supported to scale up their efforts in low- and middle-income countries?

Low-interest loan and the tax reduction is the key supports. After that, the small enterprise can grow up in their own

4) Which business models are already showing promise in these components of the sanitation value chain? What can we learn from failed initiatives?

The key important components of FSM business model is the reuse business and by-product market. Once we can have resource recovery, FS by-products can be utilized and the whole value chain change from cost-based to value-based

5) What incentive structures, tools and technologies could support the private sector to operate at a profitable level?

Financial tool: tax reduction for Ltd Company in the start-up period and the bank support with low interest loan.

My Question for you input is:
What is the application for the FS by-products? And how to promote by-products with end-users?
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  • Magdalena Baeuerl
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Re: Introducing Sub-Theme 3: The role of the private sector in transport, treatment and disposal / reuse

Thanks Hung and just like you as a resource recovery enthousiast, I promote any undertakings that allow to create value from FS-products. Nevertheless a crucial question that we have to ask ourselves upfront is how revenues created at the end of the FSM value chain could be transferred for housholds to benefit from cheaper services. Could trucks be paid for delivering FS to a designated discharge spot in order to lower their operational costs (and assure constant FS quantities as well as creating an incentive against illegal dumping)? Would open market competition then be sufficient for truck operators to automatically lower the price of their emptying services or would additional regulations and initiatives (e.g. service platforms) be required?

The further down the chain we manage to reduce costs, the easier it becomes to transfer this effect to the households. Ken mentioned transport costs being a major cost-driving factor and the potential of cost-reduction through transfer stations.
A WSUP initiative in Maputo supported a local entrepreneur through loans for equipment and training as well as the construction of a transfer station (see attachment
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). It would be really interesting to hear about further experiences with transfer stations and the effect they have on operational costs.

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  • mayala
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Re: Introducing Sub-Theme 3: The role of the private sector in transport, treatment and disposal / reuse

In Bolivia the main issue related to improve this field is about incentives for gathering and transportation companies. There is currently a regulatory resolution of the Water Authority which requires that Water utilities should register the services provided by companies that are collecting faecal sludge in their localities . This resolution has achieved officially to register 28 transportation and collecting sludge companies in Santa Cruz (ETRL in Spanish). But there are many more that operate throughout the country and are not recorded because there are no incentives neither economic or socially to do so. Therefore they remain in the field of illegality
Sanitation and Knowledge Management Specialist at Sustainable Decentralized Sanitation Project at Netherlands Development Organization SNV Bolivia
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