A primer on Alternative Service Delivery
“Ending Loadshedding” is starting with too narrow a problem definition and will lead us to solutions that are unsustainable.
What is “Alternative Service Delivery”
Alternative Service Delivery (ASD) is any alternative model for the provision of services, usually driven by a lack of capacity and resources to provide the service through a traditional public-sector owned, financed and bulk-service model.
The “alternative” may be in the technology used (for example composting toilets, precinct-scale grey-water systems, or distributed solar micro-grids), the ownership model (private, community, or hybrid models, with the public sector often playing a distributor, regulator or co-owner role), or the financing model (most of the examples are not financed through traditional consumption charges, clearly, so need to be financed through private finance, green bonds, or other impact-seeking financing).
Drivers of Alternative Service Delivery
Alternative service delivery should, fundamentally, enable equitable access to safe, affordable services while keeping up with growth (and growth patterns)
ASD recognizes that there are institutional constraints to our ability to attain the above relating to:
Limitations of the current “business” model structure (for example, in the energy space, the current model is to buy energy from other providers, and re-sell it at a markup, to a portion of the population; and provide to the rest - including indigent households as well as subsidised public sector actors and private sector industries. Switching from buying from Eskom to an IPP might help protect some from loadshedding, but it does not offer solutions for long-term robustness of the model against other threats - such as paying consumers moving off-grid)
Limitations of current capabilities (institutional, network/grid, financial - or financial mode - currently cities fund almost all infrastructure with cash, with only limited examples of use of bonds, and almost no examples of long-term debt financing for infrastructure financing, or use of cooperative of distributed ownership models)
ASD recognises that skills, finances, and new models exist when we expand our institutional boundaries. Networked governance, government by market, government by network, City as a platform are all relevant terms and institutional philosophies in this space.
ASD also recognises the following external drivers of change:
Pressures on current service delivery, usually caused by rates of urbanisation. Cape Town is estimated to have grown at 2.25% per annum over the past 5 years. Of course, growth rate alone is not enough to tell us about the pressures. A substantial amount of South African cities’ growth is in informal areas, backyard dwellings and incremental densification of areas like Delft, Harare, Du Noon. Other significant growth areas included formal growth up the west coast (Parklands ext.), Tygervally and Durbanville, and densification of the inner-city, Woodstock and Claremont. Even though these formal areas were planned and approved, infrastructure has not kept up and the City has had to halt new developments to deal with sewage capacity constraints.
New technology entrants (not only in the energy space, but also water treatment, mobility as a service, and indeed new types of services - for example should Cities be subsidising private data centres, or should they be providing the fibre - for a fee - to the data centres as a form of public infrastructure?)
Behavioural shifts among consumers affecting demand - both residential and business consumers of services are changing our patterns based on ability to pay for services, as well as preferences (“green”), or willingness to pay for services or comply with systems
Economic shifts (affordability of technologies, economic changes that inform households and firms ability to pay for services, types of industries and their levels of consumption, and pricing of national services)
Failure of other spheres of government (loadshedding and rail, but also failures in the water governance space, and implications for macro-economics as well as the fiscal environment - such as declining grants and transfers relative to demand)
Environmental factors e.g. topographical or water tables - and the difficulties providing traditional networks of bulk infrastructure (more prevalent in some cities than others, and especially important when considering services to informal settlements in unplanned areas)
With this in mind, while ASD gets a lot of attention in the energy and water sectors, it can arguably be approached in transport, waste management, technology services and even housing.
I would also caution, however, that ASD is not a panacea. In many instances, the lack of services to keep up growth is related to a lack of capacity to spend. The Municipal Money website is a great resource to explore municipalities’ underspent capital budgets, for example.
Responses to the challenge of ASD also occur at different scales:
Projects (like implementing a single on-site water reticulation system; or solar panels or composting toilets in a single informal settlement);
Programmes (like service through market in the waste management sector - i.e. creating a market for recyclables); or
Systemic (rethinking the whole model of local government - to something like City as a Platform).
Solving multiple problems at once
We’ve heard a lot lately about “ending load shedding” at a municipal level. However, if we set out to solve only that one problem, we are likely to do so in a way that embeds municipal structures that are not sustainable in our current economic model.
A view of a city as a system that seeks and finds equilibrium will hold in balance (among many other components) economic performance and the performance of service delivery mechanisms. Traditional city development says that as the population grows, productivity should increase - allowing people who live in cities to consume and pay for services; and infrastructure investment to support all of this will become more efficient as it is shared among a greater population.
There are a lot of neat assumptions in this view - that the types of people and skills will be perfectly absorbed into the economy (or be able to create it); that the city layout will be efficient (not sprawling); that existing infrastructure is well maintained; that certain ratios of infrastructure networks to city space and density will scale at certain efficient rates, and so on.
What is happening more and more, especially in South African cities, is that while our populations grow, we are not seeing our cities become proportionately more productive, or inclusive - rather, a significant amount of our growth is informal, and includes the unemployed.
Likewise, our infrastructure and service delivery is not keeping up with growth - unable to service not only informal growth, but also unable to service formal development.
Cities have attempted to manage this through a cross-subsidisation model - collecting revenue from the productive aspects of their populations and redistributing that to provide for those who have not been absorbed into the economy in meaningful ways.
Of local income (i.e. excluding National grants and transfers), service charges are important - source Municipal Money.
With the introduction of increasing types of “elite off-grid services” (the wealthy providing for their own energy production, at least in part), precinct and building scale infrastructure; and the “private parallel state”; this model appears increasingly precarious. Revenue from consumption charges (that’s government speak for your energy and water use) declines as people and businesses find technologies to produce their own, or become more efficient. Replacing this with “fixed charges” like “pipe levies” is one remedy, but is “regressive” in that this applies equally to all households regardless of income, household size or consumption patterns. Similarly, charges that increase based on the amount you use without factoring household size or additional dwellings per erf penalise often poorer households, and effectively have richer households paying less per litre or per kwH per person than poorer - thats, well, the opposite of cross-subsidisation; and where indigent households are receiving free services, they are likely to be receiving that a subsidy from middle and lower income residents, not the super-wealthy.
In some instances, the public sector has attempted to regulate away this change - in earlier years preventing, for example, the ability for households or businesses to connect their systems to the grid and feed in their power for credit, and more recently allowing this but charging higher tariffs and fees for houses that want to feed into the grid.
Despite an energy crisis, solar-enabled households that feed-in to the grid cannot be net-producers of energy over a 12-month period. You must still be a net-purchaser of energy over that time period (City of Cape Town Requirements for Small Scale Embedded Generation).
At the other end of the spectrum, informal households connect informally to the grid - sometimes building their own infrastructure. GreenCape and others look at democratising access to service delivery through alternative technologies, community-centred design and working with different stakeholders (if there’s one link you click through from this blog, go and have a listen to that podcast).
For the wealthier “consumer” of services the perspective might be: if the same or better level of service access can be achieved cheaper by an alternative provider, surely it is the role of the state to enable that? Individuals might have scant regard for their role in the bigger equity and redistribution considerations when they see their total municipal bill, or experience interrupted energy supply, or developers cannot develop as bulk infrastructure is not available - but technologies for hybrid and off-grid solutions exist. And of course, “the market” will capitalise on this interest - with new technologies, and new financing products.
From the perspective of the underserved: the object must surely not be too far away - ultimately, also about access to reliable services.
Taking a slightly broader view - some may want more than just access to the service, and may want to be able to be a shareholder in the production of the service. Cooperative energy micro-grids, waste management social enterprises, developers building heated water or waste water treatment into their precinct and levies are all examples of this.
The City of Cape Town has made some statements recently about protecting Capetonians from loadshedding. In my opinion, these promises need to be assessed in the context of a much wider transition towards alternative service delivery models. And these models go far beyond the City procuring energy from bulk-providers-who-are-not-Eskom, to enabling the operations and distribution of smart grids, that operate on different scales and have distributed ownership and participation.
It also involves a broader framing of the opportunities and needs. For example: do we need to perpetually subsidise energy through a grid to lower-income households, or do we, for example, also invest in equipping affordable housing with green building design, thereby reducing the consumption needs and utility spend pressure on low-income households, and potentially even including them in feed-in futures?
These are design and financing questions in the affordable housing space (rather than the IPP space), but if answered well, ones that offer significant bulk infrastructure savings and fundamental implications for the revenue-cross subsidization model of local government.
Alternative Service Delivery going wrong?
Uber might not be what people automatically think of as ASD, but I would argue that it is: it's a mobility service, introduced with a new technology, and a new ownership model.
Why do I place it under a heading of ASD going wrong? While it without a doubt increases the range of choices and safety for commuters, the following is also true:
There is tension between e-hailing services and car-free and emissions goals of cities
Recently, unreliable service levels are increasingly a complaint - i.e. customers are not happy about improved access to a reliable service
Drivers are unhappy about their benefits and “ownership” of the means and profit share
Arguably, at 25% (and higher for some e-hailing and similar modelled delivery apps) commission, there is high leakage from the local economy (some cities, including New York and San Francisco have introduced commission caps)
Perhaps most importantly, the VC-funded business model is precarioushttps://pluralistic.net/2021/08/10/unter/#bezzle-no-more, and nobody knows how stable the service is. The need for cities’ to develop tech-resilience is something I and other GGF2030 fellows wrote about in Policy Project 2 a few years ago in light of the risks that this poses.
There are a lot of lessons to be learnt from this in terms of society’s and in particular the states’ (who’s role it is to moderate interests for public value) ability to understand the risks inherent in new models of delivering traditionally public services, and at what level to regulate (labour level, individual driver licencing level, business level, etc).
Another example might be a small informal settlement washing station and public space upgrade project I saw presented recently at the GBCSA convention. The team had initially designed a grey water storage system, but this had operational requirements to it. This was unsupportable by the City, who preferred the grey water be directed into the storm water system. While I empathise with the institutional constraints to operationalise the maintenance of informal settlements’ grey water systems; looked at holistically and at scale, questions around job creation and “water abundance” of grey water systems seem worth pursuing before flushing it all into the sea.
How do we respond?
Firstly, we need to have a common set of values in place. What is it we are trying to achieve, and to protect? Earlier - I said that, fundamentally, ‘our’ goal was to enable equitable access to safe, affordable services while keeping up with growth (and growth patterns).
But perhaps not everyone agrees with that. Some might want to replace “enable” with “deliver”, centering the role (and revenue-collection-and-spending power of the local government institution, over its facilitation, regulatory or governing functions). In that situation, alternative service delivery will become a collection of projects of new technologies, still tightly controlled by and delivered by the City.
Others might push “enable” very fast, hoping for equitable access through some sort of market-driven and/or cooperative models. In these instances, clear guardrails to prevent exclusion or people being left behind, or disproportionate benefit of a new system doing further harm to those already struggling are needed, as are tools to properly manage system-wide vulnerabilities of a potential hodge-podge of project-scale technologies and backers.
Approaches to alternative service delivery need to recognise that beyond a collection of new technologies, is a fundamentally new operational model for local government - a hybrid of bulk service delivery, decentralised systems, and both enabling and regulating access.
The majority of the City’s expenditure goes to electricity. This is because they purchase energy from Eskom. Buying energy from Eskom (or any other producers), and re-selling it to residents is the single biggest financial item for the City. This is not scandalous, or new. It is how both energy provision in South Africa and local government municipal financial sustainability is set up. It is important to understand in terms of how considerations of alternative means of service delivery will be taken.
The transition to ASD requires capabilities to:
Understand and assess technologies (and more widely, to develop them, procure them, or enable, integrate & monitor them)
Develop legislature and policy (both to regulate new entrants, or enable new entrants through local powers; and to untangle national legislative constraints to ASD, etc)
Build institutional capacity to be able to co-produce solutions with communities
Innovate in funding and financing mechanisms
Develop hybrid governance mechanisms (where system integration is an option)
Not every service will follow the same path - the drivers of change are different. Sanitation in informal settlements has, for example, a different baseline degree of control over the situation, a different number of potential collaborators, several factors that complexify the range of tolerable technical solutions available (health, bulk connections, topography, legal frameworks etc) and a specific range of resourcing options (informal settlements grants, technology-related opportunities such as revenue streams from waste beneficiation, etc).