Output-Based Aid in Morocco (Part 2): Expanding Water Supply Service in Rural Areas

Since the mid-1990s, Morocco has made big strides in developing access to potable water in rural areas. The National Water Supply Company, ONEP, has developed an important network of standpipes in rural communities and over 87 percent of the rural population has access to a source of drinking water.

Many households are now asking for domestic connections, but ONEP’s fixed costs make service provision to smaller communities through the development of domestic connections a loss-making business. To serve these populations better, ONEP is piloting Morocco’s first public-private partnership to subcontract water service provision and management in rural areas, using an affermage-type contract . During the first years of the ten-year contract, the private operator will receive performance-based subsidies from ONEP under an output-based aid (OBA) approach. This will allow the operator to break even early enough to develop a profitable business within the existing tariff structure.

If successful, this model for rural water supply could be scaled up in other small towns and surrounding rural areas, thus presenting business opportunities for the Moroccan private sector while enhancing access to piped water services for the poor.