When it comes to managing waste in developing countries, the private sector can contribute technical skills, organizational capabilities, and flexibility. Yet private sector involvement alone will not solve all the problems. The public sector, while far from abrogating its responsibilities, has to strengthen regulations and step up project management. It is also vital to improve the financing of waste management services and to ensure a better-structured regulatory framework.

Solid waste management is often regarded as the most local of all public utilities. Since the first steps were taken to decentralize this service in developing countries, responsibility for it is increasingly falling to municipalities, as it has been the case in Europe for decades. Frequently subject to financial, material, and work force constraints, municipalities try to manage just the most urgent needs, such as removing waste from cities to keep them clean. Many focus their efforts on developing basic cleaning services—street sweeping, waste collection, gutter maintenance, and running landfills—with mixed results and high costs. In some cities in Sub-Saharan Africa, operating costs can account for 30 to 50 percent of a municipality’s total annual budget. Yet this approach, based on collecting and storing waste in open landfills, falls short of managing municipal solid waste on a long-term basis.

The need for integrated management

Reducing the quantity and noxiousness of waste at the source, introducing separate collection and sorting procedures to encourage recycling and reuse, organizing waste transportation, and investing in recycling, energy, and organic recovery technologies are the fundamentals of sustainable waste management. All the links in this chain are interdependent: they follow exactly the same path and address the same issues, regardless of region. An integrated system based on prevention-sorting-recycling-recovery-reuse is therefore key to reducing waste production over the long term and reducing the amount of waste deposited in landfills.

However, the public sector’s efforts to develop waste management toward an integrated system are hindered by the difficulties associated with investing in and maintaining facilities, the lack of business competencies in certain links of the chain, and the ongoing absence of sustainable financing sources.

Redefining the roles

The private sector can correct the management failures encountered in a state-run system and provide the technical skills often lacking in the public sector. In best-case scenarios, private operators have qualified staff and appropriate production resources, while still being flexibly organized.

To attract private investment, local authorities need to establish a strategic framework tailored to local conditions and based on consultation with all local stakeholders.

Since costs cannot be fully covered by the fees collected from users, calling on specific service providers (for collecting waste, operating a waste transfer plant, or technical landfill center) is more widespread than the appointment of a large-scale private operator covering the entire sector. Public-private partnerships involving a build-operate-transfer contract are the most common; these involve a system of direct payment to the private operator by public authorities, based on a management cost per metric tonne. This rate not only covers operating costs but also, in some cases, investment in initial infrastructure and upgrading works.

As it is difficult for municipalities in developing countries to pay private operators enough to cover the cost of all waste management services, the central government often has to provide additional funding. The private network is therefore split between primary collection, organized by a very active informal service, and the rest of the waste management chain, where one can find global corporations as well as local operators, some of whom are from the informal sector.

A complex connection

But private sector management of all or part of the system does not solve the problems entirely, and public authorities have to step up their involvement as regulators and project managers even further. Perhaps more so than for other public utilities, waste management requires coordination among numerous stakeholders at different stages in the process, and calls for a broad range of skills and know-how. Implementing a proper waste management policy implies a strong involvement from the public authorities running the service. This includes controlling costs, planning investment, negotiating contracts with service providers, educating users, establishing and enforcing regulations, and involving producers and consumers.

The project must take into account the town’s socio-spatial structure, the type of waste involved, the resources available, the institutional setting, and whether those involved are from the formal or informal sector. For a public waste management policy to be sustainable, a pragmatic, customized, and progressive approach is essential. Such an approach is preferable to applying high standards from the beginning. More generally, a clearly defined regulatory framework enabling companies to compete equitably is a prerequisite for effective private sector involvement.

Significantly, solid waste management services in both developed and developing countries rarely reach financial equilibrium. Local authorities in the developing countries often have to resort to three different funding sources—household waste collection fees paid by the user, a household waste collection tax, and general budget contributions—in an attempt to cover sector costs. Waste collection fees are paid directly by each household and usually apply to collection only. The amount is kept low, to be manageable for households, and is typically paid to private or informal waste collection operators. These fees are generally not enough to cover the system’s upstream costs.

Local authorities therefore try to obtain additional financing via a household waste collection tax, which is used to finance other aspects of the service. This tax is usually linked to a land tax on developed properties. In the case of local authorities in the developing countries, the base of this tax is reduced, and payment rates are low. Furthermore, the tax is collected by the state and channelled through the treasury.

Due to the lack of transparent systems for paying local taxes to municipalities on an ongoing basis, losses inevitably occur. Waste management services in the developing countries are therefore subject to the problem of mobilizing tax resources in towns and cities. Consequently, the income generated is insufficient to cover the costs of setting up an integrated waste management system.

For a public waste management policy to be sustainable, a pragmatic, customized and progressive approach is essential.

As sketched in this scenario, mobilizing the private sector, skilled as it is, does not in itself constitute a solution for better waste management. To be effective and appropriate, a waste management system must be accompanied by better financing mechanisms, increased technical and institutional capabilities on the part of public authorities, and a well-structured regulatory framework. In the absence of such an environment, private sector involvement—even if it can temporarily fill public management gaps—may still not be enough to achieve an integrated and sustainable waste management system.

This article was adapted with permission from Proparco’s magazine, Private Sector & Development (Issue 15, October 2012).