The Government of Malawi (GoM) is undertaking a wide range of reforms in the water sector with the objective of increasing the availability and access of safe water to its people as articulated in the Malawi Growth and Development Strategy (MGDS) and in achievement of the Millennium Development Goals (MDGs). One of the proposed reforms is aimed at increasing the participation of local private sector operators in the distribution and management of water supply in low-income areas of Malawi’s two main cities of Blantyre and Lilongwe. Currently, water is predominantly supplied to these areas directly by the water boards themselves.

The paper is a Poverty and Social Impact Analysis (PSIA) study and examines the distributional impact of policy reforms on the well being of different stakeholder groups with particular focus on the poor and vulnerable. The overall objective of the study is to allow government to make an informed policy decision based on the expected negative or positive outcomes of such a policy reform.

The authors provide the following as the major findings of the study:

water prices in low income areas can be very high and vary widely with the poor paying far more than the non-poor

a better functioning water company does not automatically lead to better access

an impact simulation comparing different scenarios suggests that water boards remain public while private participation at the distribution level is promoted.

The authors conclude that:

reformed parastatal water boards and scaling up small scale Private Sector Participation (PSP) has the potentially greatest positive impact in each area

scaling up of PSP is much more likely if water boards remain parastatal.

Based on the findings, the following recommendations are made:

scale up and regulate small-scale PSP providers to benefit the poor

include additional social assistance measures to help the poorest access a minimum level of improved water

government should liberalise distribution of water and other services to allow participation of the private sector and legally recognised cooperatives or associations

government should not privatise water boards if reducing poverty is to achieved.