Arab States • Morocco

LYDEC: Providing Electricity, Water & Sanitation to Casablanca’s Shanty Towns Prepared by • Tarek Hatem Sector • Energy, Water & Sanitation Enterprise Class • Large National Company

Summary In 1997, LYDEC, a private sector consortium and a subsidiary of SUEZ Environment – a water and waste services group that is part of SUEZ – was assigned the management of Casablanca’s electricity, water and sanitation by the Moroccan authorities. The main objective of the 30 year agent management contract was to provide access to essential services (electricity, water and wastewater collection) to the inhabitants of Casablanca, representing 4.5 million inhabitants with 30 percent living in shanty towns (1,200,000 inhabitants). Since then, LYDEC has succeeded in increasing the percentage of people utilizing electricity and water services by 20 percent. In 2004, LYDEC was awarded the management of Casablanca’s street lighting. Surveys measuring customers’ perceptions of LYDEC’s services showed customer satisfaction had regularly increased from 50 percent in 1997 to 70 percent in 2006. Since 1998, LYDEC, in partnership with local authorities, started to connect households in various shanty towns and illegal settlements. These settlements were initially in the city’s periphery but later extended within city boundaries. The spreading of these settlements inspired His Majesty Mohamed VI, King of Morocco, to launch the National Initiative for 1 Human Development (INDH) in March 2005. . The INDH targets poverty and wants to secure access to essential urban services for the entire Moroccan population. From 1998 to 2005, LYDEC spent more than 220 million euros on these projects. With the launch of the INDH, LYDEC created a department dedicated to promote access to essential goods called “INMAE,” meaning “development” in Arabic. The department aims to connect more than 145,000 households by the end of 2009.

Longing to Get Away from Gloomy Challenges Until 1997, a Moroccan public company, Régie Autonome de Distribution (RAD), was responsible for water, electricity and sanitation services in Casablanca. With a population of 4.5 million that was growing at an annual rate of two to three percent, Casablanca’s existing schemes became incompetent; thirty percent of the population suffered from poor living conditions. Prior to 1997, water in Casablanca slums was supplied through street fountains, public standpipes and wells or tanks were used for sanitation. Electricity in these areas was also scarce, and shanty towns’ inhabitants resorted to illegal leaks and network connections, which resulted in accidents, some of which were fatal. The Moroccan government was also heavily burdened by other challenges of providing quality services that would satisfy the needs of different segments of the community (industry, water and electricity services to households). In efforts to meet these challenges, the Moroccan government delegated management of required utilities to Lyonnaise de Eaux de Casablanca (LYDEC) for a 30 year period, 1

INDH in French: “Initiative Nationale de Développement Humain”

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replacing RAD. “LYDEC was therefore prompted to bring electrical power to shanty towns and informal settlements, which previously had no regular service,” declared Jean-Pierre Ermenault, Managing Director of LYDEC.

Lyonnaise de Eaux de Casablanca (LYDEC)’s Strategic Posture LYDEC,a Moroccan and French Company with 3,250 employees, is a subsidiary of the water and waste services group SUEZ Environment, which has a share capital that is wholly and privately held by the sponsors of the scheme: SUEZ (51 percent), FIPAR Holding ‘CDG’ (20 percent), RMA Watanya (15 percent) and Bourse (14 percent). OBJECTIVES LYDEC’s goals are to enhance the quality of basic utility services, provide the city with appropriate infrastructures matching its needs and become a leading example of a partnership between a private-sector company, local authorities and the local community. It aims to improve, at a low cost, the water quality, electricity and sanitation services, while keeping former employees of RAD and preserving their legitimate benefits. The terms worked out in the management contract, negotiated between both the national and local Moroccan authorities and SUEZ Environment, embodied performance objectives that promoted keeping former staff despite overstaffing. Capitalizing on the group’s know-how, technology and dedication to performance-driven outcomes, LYDEC was positioned to increase outreach of water and electricity connections up to full coverage after 25 years. One of LYDEC’s missions also aims to reduce poverty by providing low-income segments of the population with network connections. Its objective is to implement water and sanitation connections but also social electrical connections. “LYDEC’s projects in Casablanca were not intended to make profits but to work in partnership with the Moroccan government in order to diminish fraud and generalize water access to all informal districts,” declared Jean-Pierre Ermenault, Managing Director of LYDEC. INVESTMENTS Total money invested throughout a thirty-year period should amount to three billion euros, whereby the operator provides one-third of this amount and the real estate promoters provide the rest. LYDEC’s investments in sanitation, electricity and water projects reached 220,700,000 euros between 1997 and 2005. Of the invested funds, sanitation projects accounted for 44 percent, water for 31 percent and electricity for 25 percent. After seven years of operation, LYDEC is now a profitable, primary Moroccan business and one of the 15 leading companies in the Kingdom, employing over 3,250 people with less than 25 expatriates, maintaining a reputable image, economizing water, providing a competent shield against floods and reducing electricity breakdowns by approximately 50 percent.

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LYDEC’s Projects in Casablanca LYDEC’s efforts to find solutions to Casablanca’s water problems include reducing wasted quantities in public standpipes and providing access to water to households. LYDEC launched the “Blue Connections” project to provide “water for all” and to increase the number of water connections within five years.

Figure 1: Access to Water

PROVIDING ACCESS TO ELECTRICITY SERVICES LYDEC used cost-effective techniques such as meters, a suitable tariff structure, and “street representatives” to access poor areas. In 2002, it implemented the BCC (Centralized Control Bureau) to achieve synergies among the company’s activities during events such as floods, whereby alert messages are relayed to shield electrical equipment in the corresponding area. LYDEC implemented an electricity distribution management system in each district and employed “street representatives” from the local community to manage and coordinate daily operations and provide technical support and distribution to users. On average, each street representative acts on behalf of twenty households – they collect payments to settle invoices based on each household’s respective consumption. Delegation of such work to people from the local community was essential to cut investment costs, because these representatives’ compensation fees were considerably lower than similar ones from a larger firm. In striving for better customer services, LYDEC provided managerial and technical training to Street Representatives, as well as electricians. Such innovative agreements, established with these Street Representatives, have allowed LYDEC to enhance its relationship with the local community. LYDEC’s investments to provide electricity access was shared with residents who paid 1,550 DH (approximately US$130) for each service connection provided. By using this methodology, LYDEC supplied legal access to electricity to more than 30,000 households in 120 shanty towns in Casablanca and increased the number of electricity connections

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In 2005, in partnership with local authorities and the population, LYDEC’s electricity supply initiative became part of INMAE, LYDEC’s participation in the National Initiative for Human Development. SANITATION PROJECTS LYDEC’s objective is to connect water sanitation services to more than 65,000 households and to increase the percentage of sanitation service coverage from 95 percent after five years to total coverage after twenty-five years. Cleaning of sanitation networks provided solutions to flooding problems. With LYDEC’s cleaned sanitation networks adding up to 40 km large collectors and 2,300 km of secondary networks. Throughout the first three years of delegation, approximately fifty thousand cubic meters of sediment, as well as different objects, were removed from the network at the cost of seven million euros. LYDEC’s efforts to reduce flood risks also included structuring works, the most crucial of which was the western collector interceptor sewer, which consists of a tunnel with a diameter of 4.0 m and a length of 4.7 km of capacity of 40 m3/s and was implemented in 18 months at the cost of 18 million euros. Other solutions included infrastructure investments in flood-sensitive areas, leading to a reduction of floods from 54 to 12, between 1997 and the end of 2003. WATER LOSS REDUCTION Supported by 300 of its employees, two local consulting firms and five contractors, LYDEC’s specific project regarding water losses saved an annual volume of over 24 million cubic metres of water between 1998 and 2002 (see Figure 3), and less non-revenue water charges represented operational income for LYDEC. Reduction of water losses was achieved through the following actions: • Cutting water losses in secondary network by 50% after inspecting 7,000 km of piping and repairing 20,000 leaks • Reducing feeder losses by using a specific method for concrete feeders with diameters greater than 400 mm by 28 percent • Improving reliability and quality of metering by 20 percent allowed saving 6.8 million cubic metres annually

Figure 2: LYDEC’s programme to control water loss

Figure 3: LYDEC’s infrastructure to manage wastewater

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Major Challenges Faced LYDEC’s commitment to manage water supply, sanitation and electricity in Casablanca faced several financial, socio-cultural and institutional challenges. FINANCIAL CHALLENGES Financial challenges were encountered due to limited government spending and dishonesty of street representatives who sold back the service to inhabitants at 20 percent more of its original cost. “Collecting money from households and settling invoices in return for electricity supply was not an easy task for street representatives, some of whom were not very honest. If we could start over again maybe we would have chosen one other route instead of block representatives. Perhaps an individual meters grouped in one area, or real estate promoters could be a solution,” stated Bouchra Ghiati, Communication Manager at LYDEC. SOCIO-CULTURAL CHALLENGES Several socio-cultural challenges were also faced during this development project, because it was difficult to gain peoples’ confidence and support. “In one district, for example, people didn’t want to take electricity meter[s] to measure consumption and insisted to bring their own devices. There were also conflicts between block representatives and individual families in reading electricity meters consumed,” added Bouchra Ghiati. Hence, the main challenge that faced LYDEC in carrying out its development plan was finding solutions that could appeal to inhabitants both socially and financially. Lack of electricity services has also caused many shanty town inhabitants to resort to illegal leaks and network connections, which resulted in accidents, some of which were fatal. “Most people used fraud because they had no other solutions, and accordingly were willing to pay for quality and to psychologically feel they are part of the society, they were willing to participate,” said Bouchra Ghiati. INSTITUTIONAL CHALLENGES Providing and coordinating the operation of quality services that would satisfy the needs of various segments of the community (industry, services, households and the poor) and different districts was a challenge, because “authorities wanted to relocate people residing in informal settlements, and LYDEC had to negotiate with authorities to supply these services,” stated Jean-Pierre Ermenault.

INMAE, a New Challenge Within the INDH On May 18th 2005, His Majesty the King of Morocco Mohamed VI launched a major national initiative and challenge to Morocco: the National Initiative for Human Development (INDH). The INDH targets poverty by promoting access to basic services and eradicating illegal settlements. For the Public Authorities of Casablanca, it implies connecting shanty towns to water, electricity and sanitation. Therefore, they decided to create an entity to manage the different issues related to the urban policy, IDMAJ SAKAN. The creation of this new structure showed the importance of this new political direction for Morocco.

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In response to this major political stand, LYDEC created a programme dedicated to connect households to water, electricity and sanitation services: INMAE, meaning “development” in Arabic. The INMAE programme has the obligation to provide access to 145,000 households by the end of 2009 and to further continue to develop the Blue Connections project. To answer its obligation, INMAE works with IDMAJ SAKAN in a public and private partnership and cooperates in following the given objectives. In 2007, LYDEC also gained financial aid from the World Bank (Global Partnership on Output Based Aid) for two sites, Lemkansa and Lahraouiyyine, which respectively contain 3,106 and 3,112 households. Within INMAE, LYDEC created a department dedicated to further develop ties with the community to not only gain adhesion when implementing the water project but also to give them information and to create a relationship based on confidence. Based on participatory methods and gender-specific focus groups, the work of INMAE included a social dynamic, which should promote better ties between the new customers and the company. For the inhabitants of the targeted shanty towns, water access has impacts on their everyday life and also helps them to get a legal status.

Impact of LYDEC’s Development Programmes on the Poor The target of LYDEC management was to offer socially responsible development programmes that provide better customer utilities and services, improve living conditions and strive to eliminate the social exclusion of Casablanca’s poor segment. Mutual efforts of both local and private sectors have allowed over 250,000 houses access to water, as well as wastewater supply networks, thereby annually saving over 25 million cubic metres of water. LYDEC managed both Casablanca’s electricity and water sanitation services that connected to more than 65,000 households and increased the number of people served with electricity and water by more than 20 percent. Since 2004, the Moroccan authorities also entrusted LYDEC with Casablanca’s street lighting, providing electricity and benefiting tens of thousands of poor households. LYDEC’s quality services (electricity, water, wastewater and waste collection) for poor areas of Casablanca provided several direct job opportunities to carry out tasks of installation and maintenance of these projects. Around 600 job opportunities have been created through LYDEC for the purpose of providing street network setup. LYDEC created jobs for Moroccan electricians and street representatives. Several direct jobs to carry out tasks of installation and maintenance of electrical connections, as well as about 1,250 representative positions have been created. LYDEC’s projects in Morocco contributed to the creation of many commercial and production activities, and micro-enterprise opportunities, such as hairdressers and clothing.

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In collaboration with the National Initiative for Human Development (INDH), LYDEC was able to geographically target the poorest social segments and elicit people’s participation, “as you bring services to the poor, you also bring recognition, and so they start to participate and add value to economic activities,” stated Abdelatif Abdarrazak, Social Animator at INMAE. LYDEC’s Blue Connections project allowed about 12,000 households in Casablanca access to clean drinking water. The additional number of water connections also provides better customer services to inhabitants and reduces water losses. Access to clean drinking water ensures environmental sustainability and empowers women, the main user of water and the person with the most family responsibilities related to water collection and use. Also, access to water significantly improves hygiene and prevents diseases. In providing access to electricity services, LYDEC improved living conditions of Casablanca’s inhabitants. This access also improved conditions for children’s education, allowing them to study throughout the evening, whereas before they depended on public lighting provided on streets or used candles and gas lamps. Better education for mothers also improved maternal health and increased child survival rates. Electricity connections have also reduced major risks attributed to illegal connections to networks and reduced dependencies on generating motors. Furthermore, electricity services have reduced household energy budgets from 200 to 300 DH (US$17) per month to 70 DH (US$6) per month.

Success Factors and Innovations At the crux of LYDEC’s key success is its dedication to improve the living conditions of Casablanca’s population, ensure environmental sustainability and maintain a close relationship with the community. “The nature of our business lines, which involve services essential for life on a day-to-day basis, entails a commitment with respect to the public to help improve the standard of living in society in general,” declared Jean-Pierre Ermenault. IMPROVING CUSTOMER SATISFACTION At the heart of LYDEC’s concerns about achieving customer satisfaction is “Customer Care.” Improving and modernizing customer services to adapt to the needs of Casablanca’s inhabitants involved increasing the number of customer agencies, extending working hours, allowing customers to settle their bills at any agency and accommodating services to target segments of industrial firms and property developers. “LYDEC worked towards optimization of standards, and better management of energy consumption,” declared Jean-Pierre Ermenault. Not only have electricity services reduced household energy budgets but surveys regarding services provided by LYDEC also showed that customer satisfaction increased from 50 percent in 1997 to 70 percent in 2006. CAPITALIZING ON THE LOCAL COMMUNITY AND LYDEC’S KNOW-HOW LYDEC’s goals included the transfer of knowledge to shanty towns of Casablanca to improve living conditions through increasing the company’s outreach of water, electricity and sanitation service coverage. Case Study • LYDEC: Providing Electricity, Water & Sanitation to Casablanca’s Shanty Towns

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PROVIDING TRAINING AND DEVELOPMENT PROGRAMMES LYDEC provided conceptual and technical assistance to both electricians and street representatives, allowing standardization and effective management of provision of networks. Electricians underwent training sessions focused on technical issues, and representatives from each street were trained on how to identify and respond to various problems such as electrical supply and reading electricity meters. LYDEC’s interest in improving the skills of its local workforce was initiated when it faced several skill shortages at the onset of its management- struggling to deal with a workforce that was poorly qualified. Likewise, suppliers and subcontractors suffered similar skill deficiencies, thereby rendering work of low quality that did not meet LYDEC’s performance requirements. With an illiteracy rate of 52 percent, SUEZ and LYDEC’s efforts to handle these issues included the transmission of technology from the parent company, inauguration of several “Culture Change Management” series and certification and training of both its suppliers and sub-contractors, which led to vast improvements in service quality and overall performance of the firm. In 1999, the renovated training centre was launched and was accessible to the workforce of the public sector, particularly to the National Water and National Electricity firms, NGOs and offered training for Sub-contractors and suppliers. The centre addressed both basic and computer illiteracy. Computer illiteracy was addressed through an information technology training endeavor in 1999. Wide-ranging illiteracy levels limited the ability to bring in new methods or to provide career development opportunities to staff. Therefore, “Functional Literacy” training was inaugurated in 2001. Staff and trade unions were consulted regarding business requirements. An NGO specialist carried out the programme with the OFPPT (the Moroccan Training Bureau). LYDEC was able to bring economic benefits to its staff, as well as improve their personal lives and society, in general. Suppliers and subcontractors now seek LYDEC certification as a positive reference. PUBLIC-PRIVATE INNOVATIONS BENEFITING BUSINESS AND THE POOR LYDEC, the Moroccan utility company, is an example of a public-private partnership with local authorities in an effort to manage water supply, sanitation and electricity in Casablanca as a step forward toward achieving the Millennium Development Goals (MDGs). The mutual agreement between both the national and local Moroccan authorities and SUEZ Environment embodied performance objectives that compelled quality enhancement of basic utility services, providing the city with appropriate infrastructure to match its needs and becoming a leading example of a partnership between a private-sector company, local authorities and the local community. Public authorities are responsible and accountable for the general interest, but they are also the decision makers who oversee implementation of innovative projects. The private partner is responsible for providing technical expertise and relied upon because of its ability to introduce new methods and technologies. Customer opinion surveys were carried out to regularly monitor development and to enhance quality of service. A supervisory system was created to follow-up and control technical, Case Study • LYDEC: Providing Electricity, Water & Sanitation to Casablanca’s Shanty Towns

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operational, price setting and profit sharing issues. Both parties agreed upon reviewing the terms of contract every five years and providing updates in congruence with actual conditions as required. A QUALITY-BASED APPROACH In 2004, LYDEC was a pioneer among firms in Morocco, as well as in all of Africa, in asking Vigeo, a European social accountability evaluation independent organization, to rate its quality-based approach applied in Morocco. Vigeo evaluation scheme is built on six obligation areas: respect of human rights, enhancement of human resources, environment shield, development of clients’ and suppliers’ interests, appropriate corporate governance and commitment to society. LYDEC achieved “committed” ranks with regards to “corporate government” and “community” aspects and has been evaluated as an active, highly transparent, efficient business government and society-committed organization that respects human rights and fulfills social responsibility objectives with regards to the environment, human resources, and other stakeholders (delegating Moroccan authority, shareholders, and clients).

Replicability & Scaling Up LYDEC’s successful approach in supplying electricity to shanty towns in 1997 made it replicable to other basic utilities such as water and sanitation services. LYDEC’s primary conceptual management model in Casablanca and Mohammedia has been further adopted in other Moroccan cities, namely Tangier-Tetouan and Rabat.

Conclusion LYDEC used innovative techniques to provide electricity to Casablanca’s shanty towns and provided material and technical assistance in aspiring for standardization and effective management of provision of networks. LYDEC is also an example of how a multi-utilities public-private partnership with local community involvement could yield better living conditions and improve customer services for poor segments of the society which fit with their needs and simultaneously provided services at a lower cost. Access to clean drinking water and sanitation ensured environmental sustainability, a better hygiene and disease prevention. Access to electricity services helped alleviate extreme poverty and hunger, and achieve universal primary education. Better education for mothers improved maternal health and increased child survival rates. LYDEC’s management model allowed the Moroccan government to replicate this model in other infrastructure projects and utilities in the Kingdom. The company is also a key participant in the INDH for the region of Casablanca. By creating INMAE, LYDEC sought to respond to the national policy and to fully and creatively participate in the development of Morocco.

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References Aboudrar, A. and A. El Hasnaoui. 2006. “Corporate Social Responsibility in Morocco: Practices and Perspectives.” Mediterranean Development Forum 5, Status of Corporate Social Responsibility in some MENA countries. January 2006. De Cazalet, B. “The role of Private Sector Participation in Developing the Water Sector in the Mediterranean Region: The example of Casablanca (Morocco).” Available at www.eib.org/Attachments/general/events/femip_amsterdam_25102004_B_de_Cazalet.pdf. International Chamber of Commerce. “LYDEC (SUEZ): Temporary Electrification of Shantytowns – Casablanca, Morocco.” Available at: http://www.iccwbo.org/uploadedfiles/wbcsd/SUEZLYDECUnidofullcase.pdf. Jamati, C. 2003. “Casablanca (Morocco): An Example of Public-Private Partnership.” Water Resources Development, Vol. 19, No.2, 153-158. June 2003. Operations Evaluation Department. 2001. Morocco Country Assistance Evaluation, Report no. 22212.14 May 2001. SUEZ Environment. “Our Vision on Public-Private Partnerships Innovative Projects.” Available at http://mexico.suez-environnement.com/fr/suez-environnement-et-leforum/partenariat-public-prive-----notre-approche/des-projets-innovants/des-projetsinnovants/ SUEZ Environment. “The Social Engineering Component in Fostering Access to Essential Services in the Poor Areas of Greater Casablanca, Morocco.” Available at http://mexico.suez-environnement.com/fr/enjeux-et-cas-locaux/eau-et-assainissementpour-tous/eau-et-assainissement-pour-tous/ SUEZ Environment. 2006. “SUEZ, a CSR Company, member of the Global Compact.” June 2006. Available at http://www.suez.com/documents/english/globalcompact/COP_2006_en.pdf. SUEZ Environment. 2005. “SUEZ in the Environment Business: Conclusions and Comments.”May 2005. Available at www.suez-env.com. SUEZ Environment. World Business Awards Press Kit, Marrakesh 6-9th June 2004. Available at www.suez.com. Tapping Into Water. Africa Investor, October – December 2004. Available from http://pppue.undp.org/indexAction.cfm?module=; accessed on 14 October 2006. United Nations. Report. The Millennium Development Goals (2006). Available from: www.un.org/millenniumgoals; accessed on 2 November 2006. World Business Council for Sustainable Development. 2005. “Collaborative Actions for Sustainable Water Management.” WBCSD programme on Water and Sustainable Development. August 2005. Available at www.wbcsd.org.

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September 2007 The information presented in this case study has been reviewed and signed-off by the company to ensure its accuracy. The views expressed in the case study are the ones of the author and do not necessarily reflect those of the UN, UNDP or their Member States. Copyright @ 2007 United Nations Development Programme All rights reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted, in any form by any means, electronic, mechanical, photocopying or otherwise, without prior permission of UNDP. Design: Suazion, Inc. (N, USA) For more information on Growing Inclusive Markets: www.growinginclusivemarkets.org or [email protected] United Nations Development Programme Private Sector Division, Partnerships Bureau One United Nations Plaza, 23rd floor New York, NY 10017, USA

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