Why financial sustainability matters Evidence from sub-saharan Africa Sustainable Finance for Universal Rural Water Services World Water Week, 25 th August 2015 Tim Foster, Oxford University
Water service delivery costs in rural sub-saharan Africa likely exceed $1b per year % 60 50 40 30 20 10 0 Access to improved water sources in rural sub-saharan Africa 1 1990 1995 2000 2005 2010 2015 Piped on Premises Other improved 51.4% (316m) 4.7% (29m) 184m handpump users 2 O&M costs: 3 ~$485m p.a. 70m standpipe users 4 O&M costs: 5 ~$490m p.a. 29m with piped connections O&M costs: 5 ~$205m p.a. 1. Data drawn from WHO/UNICEF Joint Monitoring Programme (2015). 2. Estimate from Macarthur (2014). This corresponds with number of users of boreholes & protected wells, as calculated from JMP country files. 3. Based on mid-points of annual O&M cost requirement of US $2-3 per person (WASHCost 2011, adjusted to 2014 values). 4. Calculated from JMP country files. 5. Based on mid-points of annual O&M cost requirement of US $2-12 per person (WASHCost 2011, adjusted to 2014 values).
Community-based financing of O&M widely promoted in policies & assumed in finance plans = country with rural water cost recovery policy or financing plan assuming O&M costs covered by household contributions Sierra Leone: Tariffs may take the form of levies, monthly payments per household or periodic harvests Ghana: The method of tariff collection [is] the pay-as-you-fetch method at standpipes or pumps Uganda: Various methods can be adopted for collection of funds depending on the nature of the community Tanzania: Communities will establish a mechanism to pay the full costs of O&M and for higher service levels Zambia: Contributions could be monthly, biannually or annually Malawi: Collecting maintenance funds from each user household Some policies promote cost sharing for major repairs and rehabilitation 1. Based on information presented in Banerjee & Morella (2011) and GLAAS (2014). Banerjee & Morella (2011) listed countries with a rural water cost recovery strategy. GLAAS (2014) listed countries with a financing plan [which] defines if operating and basic maintenance is to be covered by tariffs or household contributions. Quotes taken from the following sources: Malawi Ministry of Irrigation and Water Development (2010), Tanzania Ministry of Water and Livestock Development (2002), Zambia Ministry of Local Government and Housing (2007), Uganda Ministry of Water and Environment (2011), Sierra Leone Ministry of Water Resources (2013), Ghana Community Water & Sanitation Agency (2011),
Mismatch between policy and reality Majority of waterpoints lack revenue collection Rural households paying for water (2008-09) 1 Cape Verde Namibia Benin Senegal Botswana Ghana Mozambique Uganda Burkina Faso Kenya Weighted average Nigeria Tanzania Madagascar South Africa Mali Zambia Malawi Lesotho Zimbabwe Liberia 0 10 20 30 40 50 60 70 80 90 100 90 80 70 60 50 40 30 20 10 0 Revenue collection rates 2 Tanzania Kenya Uganda Liberia Sierra Leone Rural utility collection rate (piped schemes) Standpipes/kiosks with revenue collection Handpumps with revenue collection 1. n=17,515 (Afrobarometer, 2014). Available at: http://afrobarometer.org/data. 2. Piped scheme data obtained from Uganda Ministry of Water and Environment (2014), WASREB (2014), EWURA (2014). Analysis excludes waterpoints located in urban areas. Analysis based on publicly available waterpoint datasets (Virtual Kenya, 2015; National Water Sanitation and Hygiene Promotion Committee, 2014; Sierra Leone, STATWASH Portal; Government of Tanzania, 2014; Government of Uganda, 2012). For additional data see Waterpoint Data Exchange http://www.waterpointdata.org
Inadequate finance has major operational implications Non-functionality rate twice as high when no revenue collected Rural waterpoint non-functionality rates (n=183,149) 1 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 43% 34% 22% 25% 24% 26% 16% 8% 13% 10% Kenya Liberia Sierra Leone Tanzania Uganda With revenue collection Without revenue collection If SDG is to be achieved in rural Sub-Saharan Africa then financial sustainability must be addressed 1. Waterpoints analysed include standpipes, kiosks, handpumps and protected springs. Analysis excludes waterpoints located in urban areas. Data drawn from publicly available waterpoint datasets (Virtual Kenya, 2015; National Water Sanitation and Hygiene Promotion Committee, 2014; Sierra Leone, STATWASH Portal 2014; Government of Tanzania, 2014; Government of Uganda, 2012). For additional data see Waterpoint Data Exchange http://www.waterpointdata.org/
Evidence from Kwale, Kenya
Two in five handpumps non-functional Most households cite financial reasons for lack of repairs 600 500 400 300 Functionality status of Kwale handpumps Functional 41 Non-functional 174 215 (41.5%) Reasons why handpump not repaired (n=1098) No money raised Repairs too expensive Water committee is inactive Acceptable alternative source 9.8% 5.2% 32.1% 31.2% 200 100 303 303 (58.5%) Not possible to repair Water quality is poor 5.0% 3.8% 0 Functional Non-functional (<1 year) Non-functional (1+ year) Total Use a rope and bucket instead 2.4% 40% of households resort to unimproved water sources when handpump breaks down
0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80-89 90-99 100-109 110-119 120-129 130-139 140-149 150-159 160-169 170-179 180-189 190-199 200+ Variation in frequency and cost of breakdowns Communities struggle to fund low-probability, high cost events No. of breakdowns No. of breakdowns in last 12 months in last 12 months Frequency and cost of breakdowns 30% 25% Distribution of repair costs (USD) 20% Cost of most Cost of most recent repair recent (Ksh) repair (Ksh) 15% 10% 5% 0%
Late payment and non-payment are common Payments predicted by ph, taste, group size and rainfall season 100 Collective payment rate (Monthly payments, 1987-2013) 90 80 70 60 50 40 30 20 10 0 198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013
USD per day Rainfall (mm) Pay-as-you-fetch: higher income and lower downtime Cash flows heavily influenced by rainfall Revenue and expenditure by month Downtime by payment approach (days) 2.5 0 2.0 100 Ad hoc 36 1.5 200 Fixed fees 35 1.0 300 0.5 400 Pay-as-you-fetch 13 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 500 Average rainfall 2007-13 Fixed fee income All O&M expenditure PAYF income Maintenance expenditure
Summary Finances critical to rural water sustainability & SDG Annual service delivery expenditure needs likely exceed $1b Mismatch between policy and reality Community-based financing promoted in policies and plans Majority of waterpoints lack revenue collection system Key insights from Kwale, Kenya Inadequate finance has impact on safe water access Communities struggle with repair cost variability Non-payment prevalent and shaped by social & environmental factors Pay-as-you-fetch generates most cash and reduces downtime