Utility Service Reform
in Mauritania's Mining
Corridor
A Poverty and Social
Impact Analysis
PSIA and Political Economy
of Reforms
March 6, 2009
Social Development Department
The World Bank
Social Development
Department
Source: Political Economy of Policy Reform - Issues and Implications for Policy Dialogue and Development
Operations (World Bank, 2008).
Social Development
Department
Reform Context (1)
 Poverty and Social Impact Analysis (PSIA) and a consultative decision
making process in Mauritania carried out from 2005-2007
 Analysis of the proposed transfer of water and electricity services, provided
by the national mining company SNIM in the Nouadhibou-Zouerat mining
corridor, to another provider
 Problematic Situation:
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All settlements in the Nouadhibou-Zouerat corridor are entirely dependent on
SNIM for the provision of water and electricity services
SNIM, being a mining company, does not have the expertise necessary to
reliably serve utility services to a growing population in the corridor that is not
affiliated with the company
Provision of utility services is a drain on the fiscal resources of the company and
detracts from the reinvestment in modernizing the mining equipment necessary
for increased production
Social Development
Department
Reform Context (2)
 Inequalities in access to, and quality of, service provision between
stakeholder groups and between settlements:
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SNIM employees get water and electricity for free or at highly subsidized prices
Highly unequal access to services and substantial differences in prices paid
between the city of Zouerat and the smaller settlements of F’Derick and Choum
Consequence: widespread consumer dissatisfaction
 Purpose of proposed policy reform:
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Increase equality in access to, and quality of, utility service provision for all
stakeholder groups in all settlements
Make utility service provision in the mining corridor economically viable
Secure and strengthen SNIM’s economic competitiveness and financial viability
Social Development
Department
Reform Context (3)
 Proposed policy reform:
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Transfer utility service provision from the mining company SNIM to a professional
utility service provider (SOMELEC, SNDE)
Expand access to services to households that are currently not connected and
improve service quality for existing customers
Adjust tariff structure for water and electricity services to ensure economic
viability of utility operations (SNIM currently incurs annual costs for domestic
water supply of about USD 544,000 in the city of Zouerat alone, without any cost
recovery)
 However, the results of the PSIA showed that
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no single provider seems capable of operating utility services both in Zouerat and
all other settlements in the corridor due to technical and/or financial capacity
constraints
the expected tariff increases for water and electricity necessary to achieve
improvements in service provision would exceed most poor households’ ability to
pay
Social Development
Department
Reform Arena (1) – Stakeholders & Institutions
 Resistance by SNIM against the proposed transfer of utility services from the
mining company to a professional utility operator:
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SNIM welcomes the opportunity to reduce its non-mining costs by reducing utility
service activities but has major reservations about the reform proposals because
nationally-mandated service providers (such as SOMELEC and SNDE) are not
believed to have the capacity to manage the production and distribution of water
or electricity with the degree of reliability necessary for competitive mining
production
SNIM provides free water & electricity to its employees as part of their benefits
package (most SNIM employees live in a privileged quarter of Zouerat, the SNIM
Cité). Because the company mistrusts other service providers, it wants to stay in
charge of service provision in the SNIM Cité to ensure employee satisfaction
SNIM would like to cease all utility operation outside the SNIM Cité to save costs
Social Development
Department
Reform Arena (2) – Stakeholders & Institutions
 Reluctance of implementing agencies to take over service operation from
SNIM:

Implementing agencies largely favor the reform proposals but, following
economic rationale, are not willing to take over service operations in Zouerat
without also being responsible for the utility service provision in the SNIM Cité (all
upper-income households with the greatest ability to pay live in the Cité; service
provision is unlikely to be economically viable without serving this clientele)
 Resistance from the Municipality of Zouerat:
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The re-sale of water (provided for free by SNIM to the Municipality) is the single
most important source of revenue for the Municipality
The proposed reform would put the Municipality at risk of being excluded from
the future distribution system, resulting in substantial revenue losses
Social Development
Department
Reform Arena (3) – Stakeholders & Institutions
 Position of the Government and Regulatory Agencies:
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Key Government ministries are clearly in favor of reform implementation but are
reluctant to put pressure on SNIM to transfer service provision to a new operator
The Government acknowledges SNIM’s concerns about the potential new
providers’ capacity constraints
Undermining SNIM’s efficiency and mining productivity would have direct
implications on government revenues
The Multisectoral Regulatory Authority (MRA) would be well placed to promote
the transfer of services through licensing and other legal instruments
In reality, the MRA has done little to promote the reforms as it has neither asked
SNIM to become a licensed operator nor taken decisive steps to protect
consumers in the mining corridor
Social Development
Department
Reform Arena (4) – Stakeholders & Institutions
 Opposition from consumers & the poor against necessary tariff increases:
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SNIM employees currently not paying for water & electricity services would
strongly oppose reform implementation if SNIM decided to pass increasing costs
on to the consumers and make its employees pay for service provision
Opposition could also come from 25% of consumers who would not be able to
pay more for electricity services than they currently do.
The poor are likely to oppose new tariff structures unless stepped tariffs were
introduced
 Consequence: logjam in the reform process
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Due to these diverse and partially competing interests
and due to the unequal bargaining power of the parties involved
Social Development
Department
Reform Process (1) – Dialogue & Decision-Making
 Solution to the logjam situation: consultative decision making process
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A cascade of consultations was initiated, starting with individual discussions with
each stakeholder. Positions were inquired and issues, options and possible
solutions discussed.
Stakeholder groups representing a similar position were clustered and invited for
discussions.
Stakeholders then presented their opposing positions, and a common way
forward was identified through negotiations.
After a period of 18 months, stakeholders agreed to meet in a workshop to
discuss how a transfer could be facilitated.
 Outcome of the stakeholder workshop: functional solutions for reform
implementation
Social Development
Department
Reform Process (2) – Dialogue & Decision-Making
 Restructuring utility service provision:
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Stakeholders agreed that the best solution for Zouerat would be single operator in
charge of the distribution of water and electricity for the whole community, but
excluding industrial mining facilities
The operator would be supplied with water and electricity from bulk producers
which should be selected by public tender under the supervision of the
Multisectoral Regulatory Authority (MRA)
SNIM, SOMELEC and SNDE are invited to form a consortium to take part in the
tendering process
This solution would allow SNIM to retain control over the quality of services
provided by the new operator during the first phase, while preparing its own
financial pullout from the enterprise
Recommendations were made how to improve access to, and quality of, services
in all other settlements in the mining corridor
Social Development
Department
Reform Process (3) – Dialogue & Decision-Making
 Potential poverty and social impacts: Policy options to mitigate the risks of
reform for vulnerable groups
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Introduce stepped tariffs for water and electricity to offer pricing structures
according to what households can afford to pay
Devise mechanisms that allow for connection costs to be spread over time so that
households can make payments for their connection to the grid according
to their present ability to pay.
Incorporate protective measures for the poorest households, e.g. a life-line tariff
structure
Make general access to water easier and cheaper for the wider population
through community managed standpipes
Market gardeners (relying on waste-water for irrigation purposes) should be
granted safe access to pre-treated wastewater
The Municipality should be assigned a new role in the future service delivery
system so that they can continue to generate revenue
Social Development
Department
Reform Process (4) – The Way Forward
 Progress in implementing the PSIA recommendations has been challenged
by the difficult political situation in Mauritania (two coup d’états)
 Stakeholders have voiced an interest in resuming implementation once the
political turbulences in the country have eased
 The Bank’s PRISM project responded to the PSIA exercise by including a
social component in the second phase of the project, which provides the
conceptual and financial space necessary to support the transfer of services
once the political situation stabilizes
 The two main entities that will have to initiate and facilitate the reform
process (SNIM and the Ministry of Hydraulic and Energy) are confident that
they have gained sufficient public and political support to move ahead
Social Development
Department
Thank you!