Trends in rural water sector development: addressing the challenges of sustainability and scale

South Asia Regional Conference on RWSS

Kathmandu, 10 -12 October 2012

Harold Lockwood

Aguaconsult

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Expectations and reality

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Progress - but mind the ‘sustainability gap’

+/- 60 – 70% functionality

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World Bank data Africa Percentage of rural water systems requiring rehabilitation

Uganda 10% Cote d'Ivoire 33%

Chad 13% Zambia 35%

Benin 14% Mozambique 40%

Burkina Faso 23% Namibia 40%

Ethiopia 25% Sudan 40%

Lesotho 25% Madagascar 50%

Rwanda 30% DRC 60%

Senegal 30% Malawi 75%

World Bank 2007. Africa Infrastructure Country Diagnostic Water Supply and Sanitation Survey Database.

5

>30%

India: ‘slippage’ and declining service levels

Information presented at IRC Slippage roundtable Briefing, Delhi, June 2009

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Triple-S study of rural water sectors • 13 countries - range of sector reform, aid

dependency and decentralisation

• Analysis of trends – common opportunities and barriers to service delivery

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Summary of sector development

Group 1 countries

• Low coverage levels ~ 30 – 40%• Focus on construction phase - ‘infrastructure challenge ‘• Reliance on voluntary CBM• Move towards scaled up programming

EthiopiaMozambique

Group 2 countries

• Coverage ~ 50 - 70% and expanding • Tension between coverage and ‘slippage’• Trend to systemic sector capacity building• Limited budgets and increasing demand for higher service levels

Honduras, Colombia, Ghana, Burkina Faso and Uganda

Group 3 countries

• Coverage of 75 – 85% + • Investment in building sector capacities• Addressing service quality challenges, sustainability and long-term capital replacement• Reaching last 10 – 15% remains a challenge

India (Gujurat), Thailand, USA, Sri Lanka, South Africa

Findings: political economy mattersDecentralisation and sector reform:• Range of experiences, but in many cases

decentralisation has been partial and local government capacity remains weak

• Rural sector reform has lagged behind urban and not fully supported politically

• Many well defined policies, but lack of supporting legislation and application – ‘policy to practice gap’

• Aid dependency has led to fragmented approaches and donors can undermine national reform efforts

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Many challenges remain, but improving

• Transfer of authority to local level, but with limited fiscal decentralisation; human resource capacity remains low

• Functions decentralised, but resistance and confusion over responsibilities: CWSA Ghana, PHEDs in some states in India, SANAA Honduras; MoIWD, Malawi

• But ....... other more positive examples of structured support to local government under decentralisation: Uganda, South Africa

• SWAps (including rural sub-sector) are becoming more commonplace: Uganda, S. Africa, Benin + more on the way

Findings: management models

• Community management still dominates• Higher coverage trends towards greater diversity of

management models

Findings: CBM is dominant but evolving Increasing trend from volunteerism towardsprofessionalised management:

• Out-sourcing of specific functions (Honduras, Sri Lanka)

• Applying good business practices (Programa de cultura empresarial Colombia)

• Full out-sourcing of O&M and administration for more complex systems (Ghana, South Africa)

Findings: alternative models emerging • Self supply increasingly recognised and supported -

Ethiopia, Thailand, Uganda - and is a reality to improve sub-standard services almost everywhere

• Public Private Partnerships, especially for piped schemes and rural growth centres

• Public authorities letting contracts for operation and maintenance to private firms – Ghana, Burkina Faso, Uganda

• Implications for regulation of rural water services – remains limited in most contexts

Findings: external support is important for sustaining service delivery

• Monitoring and oversight•Technical advice•Administrative and organisational support•Conflict resolution•(re-) Training•Information and resources

Support for service providers – community management committees, private operators, associations:

Findings: examples of direct supportInstitutional arrangements

Examples of direct support models

Direct supportby local government

Burkina Faso, Ghana, Mozambique, Indiaand Uganda

Central governmentor parastatal agencies

Honduras: national utility SANAA programme of circuit riders, called Operation and Maintenance Technicians (TOMs),Chile: regional private utilities are contracted by the Central Ministry to provide direct support to rural service providers

Association of Community -based Service providers

Brazil: Sistema Integrado de Saneamento Rural (SISAR) combines association of community-based service providers with support from a state-level utility

Local governmentsubcontracting a specialised agency orindividuals

South Africa: municipalities can contract a Support Services Agency (SSA), which can be a private company or NGO .Uganda: individual entrepreneurs, particularly hand pump mechanics or area-based mechanics, provide support.

NGOsEl Salvador: Asociación Salvadoreña de Servicios de Agua (ASSA) offers direct support to 170 rural communities.

Findings: focus on CapEx, but lack of systematic financing for other costs

Public sector financing or external aid transfers

Assumed to be community responsibility (tariffs)

Cost categories are less-well specified and consistently under-funded

Findings: full cost recovery from tariffs in rural sector is unrealistic • Assumptions of full cost

recovery under CBM appear (wildly) optimistic

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• In reality rural water tariffs often barely cover operational expenditure costs – need for subsidies?

Findings: even in USA subsidies are necessary

Average percentage of capital maintenance funded by source

System Type Funding Source Very Small

25-500

Small

501-3300

Medium

3301-10000

Large

10001-100000

Very Large

>100,000

Overall Average

for All Size Categories

Publicly Owned Systems

Current Revenue 45 53 50 56 65 51DWSRF & Other

Government Loans

11 19 14 12 6 15

Government Grants or Principal Forgiveness

30 15 16 6 2 17

Private Sector Borrowing

9 11 17 25 27 14

Other 6 3 2 0 1 3Source: Pearson, 2007 in Gasteyer, 2011

Findings: costs and financing for direct support varies • Little (comparable) data – lack of disaggregated costs • Support systems provide different functions/types of

services – supply and demand based approaches• Costs vary with service level, technology and

topography Case Institutional

modalityEstimated cost US$/capita/year

% of total costs of service

S.A. Alfred Nzo Private company 5.24 65%

S.A. Chris Hani Private company 9.94 53%

SISAR, BBA Brazil Association 3.63 33%

Ghana District LG 0.67 3 – 19%

Mali Private company 0.34 n/a

Mozambique District 0.0012 n/a

Key messages:

• Costs of direct support are significant – accounting for ~ 20 - 25% of all long-term recurrent expenditure• In (lower) middle income countries ~ US$2 – 3 person/year appears to be sufficient order of magnitude• < US$1 person/year appears too low to be effective

Findings: cost benchmarks (WASHCost)

Cost component

Primary formal water source in area of intervention

Cost range US$ (2011)

[min – max]

Total capital expenditure (total per person)

Borehole and handpump [20 - 61]

Small schemes (< 500 people) or medium schemes (between 500-5000 people)

[30 - 131]

Total recurrent expenditure (total per person per year)

Borehole and handpump [3 - 6]

All piped schemes [3 - 15]

Key message:• Over 20 year life-span, per person recurrent costs represent 2 to 3 times the capital expenditure cost of bore holes with handpumps• Over 20 year life-span, per person recurrent costs represent 2 times the capital expenditure cost of piped systems (all size schemes)

Capital expenditure dominates

Recurrent expenditure and support effort

dominates

Coverage rates

25% 50% 75% 100%

Capital maintenance expenditure dominates

Summary: as sectors evolve, effort, cost and institutional requirements also change

0

100

Source: Moriarty, 2011

Danger zone: as basic infrastructure

is provided, coverage risks stagnating at

around 60 – 80%

Danger zone: as basic infrastructure

is provided, coverage risks stagnating at

around 60 – 80%

Costa Rica ~2000: a cautionary tale

Instituto Costarricense de Acueductos y Alcantarillados

Dirección de Acueductos Rurales

Recap and implications for funders

CapEx

25% 50% 75% 100%

CapManEx

OpEx + support

Group 1 countries: increasing coverage and laying the groundwork

Group 2 countries: transition to service delivery approaches

Group 3 countries: consolidating service delivery

CapEx

25% 50% 75% 100%

CapManEx

OpEx + support

CapEx

25% 50% 75% 100%

CapManEx

OpEx + support

CapEx

25% 50% 75% 100%

CapManEx

OpEx + support

Group 1 countries: focus on increasing coverage and lay groundwork sustainability

• Strengthen CBM – legalisation to clarify roles and mandates

• Improve and invest in structures for post-construction support

• Align DP programmatic support, particularly around implementation approaches – avoid fragmentation

• Improve monitoring systems to focus on services, not just coverage

Capital investment for new hardware and:

CapEx

25% 50% 75% 100%

CapManEx

OpEx + support

Group 2 countries: support sectors in transition to service delivery

•Support sector reform and institution- building – clarifying policy and practice •Move toward sector-wide support•Structured support to decentralisation: improved fiscal transfers and capacity•Diversification in service delivery models•Rationalise monitoring frameworks – one national system•Improve life-cycle cost data and financial planning

Invest in scaled-up solutions as first order coverage is achieved for the majority:

CapEx

25% 50% 75% 100%

CapManEx

OpEx + support

Group 3 countries: consolidate service delivery focus in ‘mature’ sectors

• Asset management planning• Capacity support to local government• Financial mechanisms for capital

maintenance expenditures• Life-cycle cost analysis and more

investment in direct and indirect support• Regulation – monitoring of services and

service providers• Strategies to reach the last 10-15%

Invest in sector capacity and address systemic weaknesses by improving:

Thank you.

For further information see:

http://www.waterservicesthatlast.org/ http://www.washcost.info/

Or contact me on: h.lockwood@aguaconsult.co.uk