Water Sector Reforms, Commercialization and Financial Sustainability of Public Water Utilities in Kenya: The Case of Homa Bay Water and Sewerage Company Limited

Reforms in the Kenyan water sector entrenched the aspect of commercialization, which subjected water services to market forces and necessitated establishment of autonomous public utilities, such as Homa Bay Water and Sewerage Company Limited, to improve cost recovery, efficiency and sustainability. This study focused on how commercialization, as an aspect of the reforms, influenced the utility’s financial sustainability. A cross-sectional design, with mixed methods approach, guided the study. Primary data were sourced in mid 2017, from water officers, water users and water committee members. Quantitative techniques included cross-tabulation with Chi square statistic, Relative Importance Index and Kendall’s Coefficient of Concordance. The results show that compliance of procurement activities to relevant legislations was the most important aspect influencing the utility’s financial sustainability (relative weight = 0.838); followed by effectiveness of internal audit in enforcing expenditure policies (relative weight = 0.825); and relevance of activities on which water revenues were spent (relative weight = 0.812). The analysis obtained a strong and significant concordance of respondents’ views regarding relationship between financial management practices and the utility’s financial sustainability (Kendall’s W= 0.862, x2= 64.491, df = 4 & p-value = 0.000). Consequently, ensuring that procurement activities are strictly guided by procurement laws is important for preventing irregularities and minimizing loss of financial resources; while strengthening capacity of the internal audit department and enhancing its independence, are crucial antecedents for the utility’s financial sustainability.