As the COVID-19 pandemic forced people into their homes and disrupted supply chains, a water utility in Lukanga, Zambia found itself with no good choice to make.
With fewer customers able to pay for water, the water supply company’s budget would only stretch to cover another month or two of operating expenses. Should it continue to pay the men and women who worked there? Or should it buy the chemicals it needed to deliver safe, treated water to people? There wasn’t enough to do both.
Water utilities around the world—especially medium-sized companies serving secondary cities and towns—struggled with tough decisions like these at a time when anxiety and uncertainty was already high. The truth is that many water utility companies are not resilient enough to coast through a major shock like a public health emergency, an extreme weather event or a natural disaster.
The truth is that many water utility companies are not resilient enough to coast through a major shock like a public health emergency, an extreme weather event or a natural disaster.
Part of our water sector governance and service delivery strengthening work focuses on building more resilient utility companies that are able to weather the storms—literal or figurative—thrown at them.
So, we embarked on an internally funded research project to understand the effects of the COVID-19 pandemic on medium-sized water utilities, and to help us learn which resilience capacities were most useful to them.
Our initial research findings from 52 utilities in eight countries across Southeast Asia, West and East Africa, and Central America are beginning to reveal which factors were the most protective during a time of unprecedented burden.
The pandemic's effects on the water sector: When ‘business as usual’ isn’t an option
Pre-COVID-19, many water supply companies were already attempting to increase water bill collection efficiency, enhance customer technology access, and maintain a skilled workforce. Covering operational expenses with limited capital set aside for investment was the norm. So, budgets felt the crunch almost immediately when the pandemic brought unprecedented business disruptions due to material supply chain discontinuity, increased workers’ safety requirements, and cash flow irregularities from deferred bill payments.
Meanwhile, governments in many areas mandated that utility companies stop disconnections for non-paying customers or halt debt collection efforts. Utilities also had to shift where the water was going; in some places, residential water usage soared as people stayed home, and overall use increased as residents dutifully washed their hands in 20-second bursts throughout the day.
Our research questions asked water utilities about their business continuity in the face of COVID: how well they were able to manage their finances, communicate with their customers, and keep the water flowing.
More demand and higher costs in the water supply industry
Nearly two-thirds of the utilities surveyed faced higher operational costs in 2020 as compared to the year before, as prices went up for inputs like power, chemicals, and maintenance equipment. On top of higher costs, a significant number of water supply companies also struggled with material shortages, delivery delays, and a lack of alternative suppliers, both domestic and international.
Although residential water consumption increased as stay-at-home orders began, over 40 percent of utilities reported decreased revenues, citing the loss of commercial customers’ demand for water, waived late payment fees, halted disconnections, and reduced collection efficiency.
To address the financial impact of the pandemic on the water supply industry, utilities we surveyed responded as best they could: by winnowing already lean budgets and eating into savings, mostly. Others went into overdraft status at their banks and requested higher lines of credit. Some utilities sought for national government subsidies and international assistance, turning to development partners for help.
Others cut wherever they could: office supplies, travel expenses, and overtime pay. That water utility in Zambia? The staff elected to delay their own salary payments so they could purchase chlorine to keep clean water running to their communities, still requiring additional grant assistance to do so.
Their decision speaks to these companies’ understanding that maintaining community engagement is paramount to building long-term resilience. Indeed, our research reflected the same finding: 65 percent of surveyed utilities increased their customer communications on key subjects like water supply continuity, bill payment delays, free water provision, and alternative bill payment methods.