Working paper 152
Although most public water utilities in developing countries perform poorly, some have achieved remarkable turnarounds and now deliver effectively on their mandate. Current analyses of such turnarounds focus on institutional- and organisational-level explanations that ignore the political economy factors that drive public sector performance in developing countries. This study employed the ‘political settlement analysis’ to explain both Uganda’s National Water and Sewerage Corporation (NWSC) turnaround that happened between 1998 and 2004 and why its performance has since been uneven. For the turnaround to happen, Uganda’s dominant ruling coalition, struggling to chart a developmental trajectory with limited domestic resources, agreed to a World Bank-inspired programme for building NWSC’s commercial and financial capabilities in 1998. The botched privatisation move helped bring the political elite, key technocrats and donors into a rare coalition that enabled a six-year programme of harmonised and uninterrupted support for NWSC. Meanwhile, the post-turnaround phase happened under different political dynamics, characterised by a fractious ruling coalition, increased political competition and frosty government–donor relations. The ruling elite turned to the newly effective NWSC for rents and for building its urban popularity. The pressures from this incentivised NWSC leadership to prioritise activities with visible and immediate commercial benefits, at the expense of long-term operational sustainability. These findings suggest that external support for institution building can succeed, where it is aligned with the dominant incentives generated by the local power relations. And how leaders of public organisations manage the changing political context within which they operate is as important as their technical capacity.