Performance-based finance for drinking water security in Africa

Financing water infrastructure for sustainable growth World Water Week, 30th August 2015

Rob Hope & colleagues, Oxford University

4.7% (29m)

51.4% (316m)

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20

30

40

50

60

1990 1995 2000 2005 2010 2015

%

Access to improved water sources in rural sub-Saharan Africa1

Piped on Premises Other improved

The $1bn challenge: Maintaining Africa’s rural water infrastructure

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).

184m handpump users2

• O&M costs:3 ~$485m p.a.

70m standpipe users4

• O&M costs:5 ~$490m p.a.

29m with piped connections

• O&M costs:5 ~$205m p.a.

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

Uganda: “Various methods can be adopted for collection of funds

depending on the nature of the community”

Ghana: “The method of tariff collection… [is] the pay-as-you-fetch method at standpipes or pumps”

Malawi: “Collecting maintenance funds from

each user household”

Sierra Leone: “Tariffs… may take the form of levies, monthly payments per household or periodic

harvests”

Tanzania: “Communities will establish a mechanism to pay the

full costs of O&M and for higher service levels”

Zambia: “Contributions could be monthly, bi-annually or annually”

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),

Some policies promote cost sharing for major repairs and rehabilitation

Mismatch between policy and reality Majority of waterpoints lack revenue collection

0 10 20 30 40 50 60 70 80 90

LiberiaZimbabwe

LesothoMalawiZambia

MaliSouth AfricaMadagascar

TanzaniaNigeria

Weighted averageKenya

Burkina FasoUganda

MozambiqueGhana

BotswanaSenegal

BeninNamibia

Cape Verde

Rural households paying for water (2008-09)1

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

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Tanzania Kenya Uganda Liberia SierraLeone

Revenue collection rates2

Rural utility collection rate (piped schemes)

Standpipes/kiosks with revenue collection

Handpumps with revenue collection

Inadequate finance has major operational implications Non-functionality rate twice as high when no revenue collected

8%

22%

13%

24%

10%

16%

34%

25%

43%

26%

0%5%

10%15%20%25%30%35%40%45%

Kenya Liberia Sierra Leone Tanzania Uganda

Rural waterpoint non-functionality rates (n=183,149)1

With revenue collection Without revenue collection

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/

If SDG is to be achieved in rural Sub-Saharan Africa then financial sustainability must be addressed

Kitui County (2012-2022)

Kwale County (2013-2019)

Evidence from Kenya

Rainfall predicts improved water infrastructure demand - Kitui County (2013-15)

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75

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125

150 -

500

1,000

1,500

2,000

2,500

3,000

Average Volume / litres

Average Rainfall / mm

3 per. Mov. Avg. (Average Rainfall / mm)

Smart monitoring systems – data to improve institutional design and delivery (Kwale, 2014)

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5000.0

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1.0

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Rai

nfa

ll (m

m)

USD

pe

r d

ay

Revenue and expenditure by month

Average rainfall 2007-13 PAYF income

Fixed fee income Maintenance expenditure

All O&M expenditure

Pay-as-you-fetch: higher income and lower downtime Cash flows heavily influenced by rainfall (Kwale County)

13

35

36

Pay-as-you-fetch

Fixed fees

Ad hoc

Downtime by payment approach (days)

Foster & Hope, 2016

Data - 229 years of financial records from 100 handpumps with >50,000 payment records Predictors of payment: • Distance to waterpoint • Water quality (pH, taste) • Productive use • Seasonality

Late payment and non-

payment are prevalent

Payment behaviour a ‘socio-ecological’ response

PAYF – higher income, higher unimproved use

Multi-decadal analysis of payment records - Kwale County

Will rural people pay for a professional maintenance service? - Choice Experiment analysis from Kwale (similar in Kitui)

Foster, Hope & Thomson, 2015

FundiFix Ltd. (Kwale) – a local enterprise to promote sustainability

Phase 1 – Maintenance system (14/15) • One year ‘free’ trial – control/treat. • 369 repairs for 213 treated pumps

over 12 months. • Ave. 1.7 repairs per pump per year. • Mean days to repair <3 days from >30

days • Hourly data on pump usage Phase 2 – Institutional design (16/17) • Community monthly fees to register

with FundiFix • Design of Water Services

Maintenance Fund blending user fees, county government and donors

Promising but sustainable? Communities pre-pay by MPESA with a guaranteed service or money back

Water Services Maintenance Trust Fund - Results-based finance (RBF) from users, government and investors

- Coordination at scale to reduce risks for communities, schools, clinics and local enterprise

Local bank Account #1 – Company cashflow Account #2 – Trust contributions

FundiFix Ltd.

Handpumps

Boreholes with kiosks

Piped systems

Regulator (WASREB)

Government (national, local)

Water Services Maintenance Trust Fund

User Payments $$

RBF $$

RBF $$ Performance

Metrics

• Sustainable finance critical to achieve universal drinking water security - Annual maintenance expenditure exceeds $1bn/pa

• Mismatch between policy and reality – Community-based financing but systematic revenue deficits

• Evidence from Kenya – Users pre-paying for professional service delivery (FundiFix Ltd.)

– Smart monitoring and data informs better design and delivery

– Legacy of past investment decisions limits future options

– Tension between universal delivery and financial sustainability

– Performance-based models: Water Services Maintenance Trust Fund

Summary

Papers, videos, blogs and more at: http://www.smithschool.ox.ac.uk/research-programmes/water-programme/ http://www.reachwater.org.uk/ http://www.oxwater.uk/ https://upgro.org/consortium/gro-for-good/ Join us at RWSN7 in Abidjan on Tuesday 29th November: https://rwsn7.net/