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AfricaSan3
Kigali, 19th – 21st of July 2010
General
Session Title: T9 - Making sanitation last forever: financing sanitation and hygiene behavior change in low
income areas
Date/ Time: 20 July 2011, 10:30-13:00
Convened by: Catarina Fonseca (IRC), Alana Potter (IRC) Notes taken by: Rajesh Advani (WSP)
Speaker(s) and their presentation title(s):
Session 1 - Financing sanitation and hygiene: global level
1. Christophe le Jalle, Ps-Eau - financing the sanitation chain: an overview
2. Andreas Holtkotte, KfW - financing sanitation in low income areas: what do we need?
3. Guy Norman, WSUP – Progress linked finance: step by step financing concept for urban sanitation
infrastructure
Session 2 – Financing sanitation and hygiene: country perspectives
4. Catarina Fonseca, IRC – Findings from applying life cycle cost approach methodology to sanitation
(Burkina Faso, Ghana and Mozambique)
5. Kwabena Nyarko, KNUST – Sanitation costs in Ghana
6. Andre Uandela, WASHCost Mozambique – Costs of hygiene interventions in Mozambique
Core Messages and Lessons Learned
Please note most important messages for sanitation stakeholders that can contribute to achieving improved sanitation in
Africa and add the according lessons learned and/or actions required.
Message and, if applicable, speaker Lessons learned/ Actions required
Christophe le Jalle, Ps-Eau
Categorize expenditures into broad categories and Would be better to reimburse investments over a period of
identify the sources of funding for each: time rather than paying for it all up front, so that results can
1. Studies: Local government (LG), national be tracked
government, donors When transfers are used they should be used with prudence
2. Investment: Grants, tariffs, taxes, subsidies, to ensure they go to the right place for which they are
transfers intended
3. Operation and Maintenance (O&M): User fees Access - develop long term mechanism
and subsidies Small networks may not generate enough business to
4. Renewals: User fees and subsidies warrant private investment
Treatment: mobilization of investments is a huge barrier +
Categorize investments into area by value chain recovery of O&M is also a challenge
and identify source of funds:
1. Access: financed by public subsidies or grants Suggested that most investments are financed by public
and in some cases by private sector e.g. funds and that it is very challenging to attract private
evacuation of sludge investment into the sector
2. Network: small network financed by public
funds, large networks by funds linked to O&M can be made by: Tax on water bill, payment by the
government and banks; O&M paid by users emptiers for desludging, municipal budget, reuse of the
3. Treatment: essentially a public cluster. Studies sludge to meet a portion of the cost
to be financed by local authorities, national
government or external support
National and local governments tend to focus on water,
Andreas Holtkotte, KfW so importance of sanitation is low on the priority ladder
Need adaptive technologies, no need to reinvent with the officials. Further need for awareness.
the toilet – implement the solutions, ensure Critical need to harmonize the efforts amongst donors,
adequate financing, hygiene promotion and
AfricaSan3
Kigali, 19th – 21st of July 2010
awareness raising on all levels as the current scenario leaves the implementing
country confused
Are the efforts to expand sanitation in low income No, efforts to expand are not enough - Projects are
areas enough to ensure financial sustainability? completed and donors move out at max doing a review
over 2-3 years.
Limited donor funds should address structural changes
– changes in national systems, reform these to sustain
the gains achieved
Combine investment with awareness campaigns and
link to other sectors like health.
Sustainable financing Donor finance is not sustainable, need to include
domestic resources
Award finance to the people coming up with the best
initiatives
Guy Norman, WSUP
Outlined Progress-Linked Financing (PLF), a Stepwise approach towards paying the grant – not to wait
proposed approach by which large financing until the project is complete
institutions such as development banks may Who will design the conditions, what are they and how
finance infrastructure in sanitation would they be verified? Is the process standard or varied?
Under PLF, concessionary finance is provided Link it to national programmatic approaches and identify
on achievement of certain indicators over a 4- and start with a pilot
5 year period with interim disbursements An interim report of a feasibility study, carried out by ODI
linked to performance for WSUP, is available from gnorman@wsup.com
To be implemented at local level and involves
the development of viable business models
Should be conditional on pro-poor policy, on
capacity improvements in e.g. non-revenue
water reduction and billing, and on
demonstrated generation of non-subsidy
revenue streams and inputs
Services are delivered following huge investments but
Catarina Fonseca - IRC then they decline owing to low follow up. Need to
Use of money can be more cost effective invest more in capital maintenance and direct support
40% of total capital expenditure (CAPEX) to sustain the services e.g. in sample from financing
investments go to the garbage sanitation in Ghana there was no capital maintenance
Breakdown of costs involved in sanitation: but small local government support, Mozambique had
o CAPEX almost 25% of expenditure on capital maintenance
o operations and minor maintenance although no local government support
o capital maintenance Sanitation expenditure is almost completely covered by
o expenditure on direct support (part of households– no difference in household (HH)
operating expenses (OPEX) in utilities) expenditure between HH that received subsidies and
o expenditure on indirect support those that didn’t
(ministerial level and LG), More sophisticated technologies do not result in higher
o costs of capital - finance costs in the sanitation service levels – higher investment can move
case of loans households from no service to basic service but nobody
moved to a high category of services delivered.
How are we going from financing and costing
technologies to costing services? – using the Main message is need to plan for capital maintenance
lifecycle cost approach. Examples from large scale costs and follow up post construction in addition to
data collection on costs and service levels capital investment and O&M.
The lifecycle approach enables you to cost services
resulting in more robust financing approaches
There will be full day training on the lifecycle approach on
Friday 22 July – enquire from reception
AfricaSan3
Kigali, 19th – 21st of July 2010
Ghana and Mozambique country presentations
Focused on the use of the lifecycle approach to There is little readily available expenditure data
determine investment in sanitation at all levels HH expenditure in hygiene promotion is higher than public
expenditure
Study found that major costs involved were the OPEX costs:
2-3 year O&M cost is more than the CAPEX cost of
construction
The lumpsum cost of constructing a latrine could be a
constraint to increasing access in rural areas
The large expenditure on soap for hygiene was a surprising
finding
In Ghana, the government has setup a US$35 million
revolving fund to finance CAPEX in sanitation
Discussions
Please note core content of relevant discussions among speakers, panel members and from the audience.
Topic of discussion Areas of consensus, disagreement or recommendation
Session 1 Questions
In terms of cost categories, where do you get the Yes, this has costs but it is not taken into consideration in the
cost for malpractice and corruption, and how do you modeling, as it would be averse to achieving the objective.
deal with it?
How do you deal with the political economy of low Structure the projects to pass those responsibilities to the local
income communities in cities (mafia taking control agency
of toilets)?
O&M – how do you deal with the low income At HH level O&M is very low and should not be a problem but
earners lack of willingness to pay? Are you expecting both capital maintenance and investment costs are still a
government to look for the funding? challenge. Can find ways to assist but too much subsidy will
break the private and local government sectors capacity to
intervene
Panelists agreed that the potential is huge
What potential to sanitation projects have to
contribute to economic development to ensure
sustainability? Link to agriculture and energy for
example?
What can local banks offer to finance the sector? Need to develop mechanisms to encourage private sector
involvement because local banks have a problem of finding
good projects to finance
KfW is piloting a project in Kenya linked to achieving targets
over a 3-4 year period. Suggests it is enough collateral for a
commercial bank to lend to the project
Session 2 Questions
What are the costs in relation to income levels? Difficulty in defining who are the poor within the poor? Used
local country definition of poor and very poor. In some areas
there is no cash income, so normal approaches do not apply.
Revolving fund and implication that HH will meet the Yes, as O&M cost for 2-3 years is more than the CAPEX cost of
entire costs – will they be able to afford it? construction.
This comment was a source of controversy, and warrants further
investigation. The Ghana team (in charge of sanitation) will
Africa is littered with failed revolving fund so how discuss and analyze further the government approach
AfricaSan3
Kigali, 19th – 21st of July 2010
will the Ghana fund address this risk?
Has Lifecycle documented the technological costs Yes documented on website in English et en francais
arrived at in its approach? www.washcost.info
Panel discussion
Why are banks reluctant to invest in sanitation?
For those that think banks are unreasonable, consider that
they are investing your money, your pension, hence the
need for them to invest wisely
Don’t waste grant funds that comes in – plan your
investments to deliver services. don’t squander it on things
that people do not value
How do you bring about behavior change at
government and highlight the importance of Need to justify to government the need to spend more on
sanitation at government level? sanitation? For e.g. we are spending so much on defense,
but this is justified by insurgencies, rebel activity, need for
security etc.
What will be done with the resources is a good starting
point!
In Nigeria for example, the World Bank finance is small in
the context of that country, hence the interventions have to
focus on changing the systems to ensure longevity
Economics of sanitation – we are looking at the costs rather
than the benefits of better sanitation – that may be a better
approach.
Subsidy – the word refers to public financing. No HH is going
to spend money on changing his own behavior, so
government needs to put resources towards this
Equity – the poor are paying more – look at creating finance
mechanisms that address the issue of the very poor
Also need behavior change of donors as well to soften the
conditions of support
Summary of Commentators Contribution
Please summarize shortly how the commentator put the session into the wider context of sanitation.
Need to understand what we are looking for to finance. Costs breakdown and disaggregated data provides guidance on where
cost effectiveness can be achieved.
Need to diversify the financial approaches. Mechanisms have to be put in place to resolve the issue locally, and thought has to
be given as to how to make sanitation attractive to the local banks.
This is all dependent on government policies and planning/reporting mechanisms: we need to identify ways of changing the
behaviours and administrative practices not just of individuals, but also of governments and other key institutions.
Additional Information
In this section, you might record any relevant additional information about the session.
AfricaSan3
Kigali, 19th – 21st of July 2010
The session warrants further discussion on how private sector finance will be attracted into the sanitation sector. In particular,
where public funding continues to finance 100% of the capital costs and does not focus on leveraging private sector financial
resources, how will private sector finance compete with cheap public money? Have revolving funds failed because there is too
much cheap money against which they are competing? What incentives need to be put in place for revolving funds to work?
