Private Operation of Water Utilities and Public Asset Holding Companies - Winning Combination or Losing Battle?

Several African governments, like others throughout the world, have been experimenting for some time with private sector participation in the provision of water supply and sanitation services. Some of these governments, though not all, decided to establish asset holding companies, in an effort to facilitate the transition to private participation. Those asset holding companies are state-owned entities entrusted with exclusive or partial responsibility for one or more of the following tasks: (i) owning infrastructure assets; (ii) planning and financing investments in the water supply and sanitation sector; (iii) regulating the activities of the private operator; and (iv) promoting public acceptance of private sector participation in the sector. The present paper discusses a number of African experiences with private sector participation in water supply and sanitation - some of which involved the creation of such asset holding companies and some of which did not - in an attempt to shed light on the pros and cons of establishing asset holding companies in the context of water supply and sanitation reform. The paper concludes that asset holding companies might have a comparative advantage only with respect to one of the functions listed above - the planning and financing of investments - and then only in some specific circumstances.