Published on The Water Blog

Why We Should Talk About Pre-Paid Systems, Rather Than Meters Only

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As African cities continue to grow at historic rates, basic services like water supply and sanitation are struggling to keep up. Sparked by the continuing challenges experienced by water utilities to connect poor communities to their networks, and to recover the costs of water supply, there has been a notable surge of interest in the use and implications of pre-paid meters for water supply service provision in African cities.  

These are burning issues, as urban service providers in Africa mostly still have low network penetration and are unable to provide continuous 24-hours a day supply to their existing customers. As a result, many urban dwellers are forced to rely on more expensive alternatives such as vendors, wells or boreholes, where they face heightened risks of potential contamination while paying much more per cubic meter of water than they would if they had access to functioning piped water supply networks.

ImageLittle systematic research, however, has been conducted to understand the opportunities, limits, costs and benefits of the different experiences of pre-paid systems, and their equity implications. The World Bank's Water and Sanitation Program (WSP) is attempting to address this dearth of knowledge through a study of pre-paid systems in eight African cities: Kampala, Uganda; Maseru, Lesotho; Lusaka, Zambia; Windhoek, Namibia; Nakhuru and Nairobi, Kenya; Mogale City, South Africa; and Maputo, Mozambique.

WSP has started to share emerging findings from this research, including a session at the recent African Water Association (AFWA) Conference in Abidjan, where utility leaders shared their perspectives on how and why they have been trying to use prepaid systems to reach more customers. At this session the Managing Director of Uganda’s National Water and Sewerage Company (NWSC), Dr. Silver Mugisha, explained the challenges, innovations and process management involved in serving over 200,000 people in Kampala with pre-paid systems. Mr. Sandile Mbabjwe, the head of Mogale City’s Water Department in South Africa, showed how Mogale City persisted despite some significant problems with technology, maintenance and costs in early initiatives, to reach a point where today, an estimated 50% of customers with household connections now have access to water though pre-paid systems. Despite the challenges, they are motivated to continue to scale-up the roll-out of such systems.

While this research, led by Chris Heymans, continues until June, four key takeaways are emerging:

1. The focus should be on the entire pre-paid system, not just on the pre-paid meters. Limiting the debate to pre-paid meters misreads the importance of the broader system’s architecture and support mechanisms that are just as necessary for a pre-paid system to work effectively. Numerous factors can influence the effectiveness of the pre-paid system: from access to potentially scarce replacement parts by the service provider (which has proven to be a real problem in some cases), to the accessibility and convenience of pay-points for customers; from the existence of uninterrupted water supply to minimize technical failures, the integration of data management systems and IT, to the importance of a strong communication strategy to avoid mixed messages and false expectations from consumers. Finally, ongoing monitoring has been identified as being critical in order to optimize non-revenue water reduction.
2. There are different costs (and benefits) associated with different customers and with three different uses of pre-paid meters:  public stand-posts; individual household connections; and institutional customers. The research so far indicates that the introduction of pre-paid systems can be complex and costly, especially when quantifying all of the related costs (beyond the installation of the pre-paid meters) including the infrastructure for selling and loading credit, software development and IT integration, customer sensitization, vendor commissions, spare parts, customer support, etc. Even with these costs, pre-paid systems that dispense high volumes (especially for institutional customers, and possibly for stand-posts) can generate enough economic benefit to become attractive to utilities, as there are no billing costs, no billing inquiries, no credit management, and no arrears to be financed. There are also notable political dividends generated by increasing revenue collection that may help defer tariff increases and extend and improve access for poor customers. Less clear from the research at this stage are the economic benefits for the utility of individual connections. Further research is being undertaken to understand the potential economic benefits for African utilities. The prepaid meters also still require close monitoring to identify faults or bypasses that can result in increased non-revenue water.
3. Customer demand is an important driver in the expansion of pre-paid systems.  While the study’s ongoing market research in Kampala, Lusaka and Mogale City will shed more light on customer perspectives,  a few interesting indications seem to be emerging.  To date, the responses to customer satisfaction surveys reflect a variety of views.  Nevertheless, there are strong signs that many customers with their own connections at the household level using pre-paid systems feel that they have more control over their payments, and enjoy being less at risk of a debt trap as pay-as-you-go enables them to manage their consumption within limits they can afford.  Similarly, customers that use pre-paid systems at stand-posts are demonstrating an appreciation for a perceived increased reliability of water and report to be enjoying improved service provision that is no longer dependent on the availability of the stand-post attendant.    
4. There is potential for prepaid systems to make service delivery more equitable. When considering the relatively large scope of the informal economy in African cities (an estimated 70% of some cities are informal) it should not be surprising that post-paid systems, which are premised on monthly payments by salaried customers, can be onerous for those with erratic and limited incomes. Pay-as-you-go systems give them a means to manage their cash flows better by paying in smaller, more frequent increments. Leaks are detected far sooner than if customers had to wait for the monthly billing cycle, and help vulnerable households avoid debt-traps. Moreover, in as far as prepaid systems enhance cost recovery and improve revenue collection, utilities are better resourced and more motivated to extend coverage to under-served areas. Prepaid meters can also enable utilities to target social tariffs accurately. In seven out of eight cities studied, poor households pay less for water from prepaid meters on public stand-posts than from kiosks or water vendors.

No doubt there are still many challenges for pre-paid systems and much more needs to be understood in terms of their usefulness and viability for both utilities and customers.

The increasing use of information and communication technology in Africa, its penetration, and more importantly, the wide-spread collective behavior of how individuals now utilize technology for linking with services in their daily lives, suggests that pre-paid systems can continue to evolve by harnessing ICT solutions that help eliminate cumbersome token usage and vendors.  In fact, in Nairobi, Kenya, the Nairobi Water and Sewerage Company implements pre-paid systems for some of its customers and is also developing a new mobile phone app, “Jisomee Mita” (or “Read the water meter yourself”). This new app facilitates the self-meter reading by customers who can report consumption to the utility, receive their bill, and pay their bill in a matter of minutes through the use of their mobile phones, all with the frequency (daily, weekly, twice monthly) that the customers themselves decide.  As with pre-paid systems, these and other future innovations will require embedding these tools within a larger service delivery system.  If successful, the future can look a bit brighter for the millions of unconnected households across the continent still waiting for more reliable and sustainable water supply.


Glenn Pearce-Oroz

Principal Regional Team Leader

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