Valuation of a community company and its impact on development strategies

Abstract

Water and sanitation are basic and essential rights for the adequate development of a population. In the context of the rural area studied in this work (Manglaralto, Ecuador), at the beginning of 1979 the Manglaralto Potable Water Board (JAAPMAN) was registered with the objective of managing the water supply in the area. This board is administered by local users, under the principles of joint work, local democracy, and self-management. Currently, the service provided reaches 26,362 people. JAAPMAN, during the 40 years that it has been operating non-profit, has generated significant assets in its operating infrastructure. With the creation of the Ministry of Environment and Water in Ecuador, there is the possibility that the community company will become managed by a public water company. This situation could cause conflicts and mistrust in society since the community has self-managed and solved its water supply for 40 years. This article aims to develop an inventory of physical infrastructure, equipment, machinery, plus operation and maintenance expenses, of the investment that has been made to date, to quantify its value and, more generally, estimate the company’s expenses. In this context, the method considers the following: (i) preparation of inventory tables; (ii) estimate of the value of assets, other income and general expenses; and (iii) proposal for development strategies. The most relevant result is that it indicates that the accumulated equity of the community enterprise is approximately two million dollars, which shows the good management carried out to date and, in addition, the possibility of obtaining international financing and support. Finally, it was revealed that joint work in the company is constantly evolving and is executed efficiently and effectively.