WSS sector finance in sub-Saharan Africa A regional comparison framework Thomas Fugelsnes, Economist, WSP - AF Kampala, Uganda, February 2004

2 What is resource flows assessments?  Sector Institutional Mapping  The study uses the concept of WSS service providers: national level government departments, national level utility, local government WSS departments, local level utilities, PSSPs and CBOs  Sector Financial Mapping  Channels of funds, sources of funds and use/utilization of finance  Analysis of Public funds  Decision-making for allocations of public resources, review of rules, procedures and regulatory framework; and analysis of monitoring and accountability systems

3 Why Resource flows assessments?  Finance is a constraint in countrywide scaling up of sector reforms and to achieve the MDGs  Inadequate understanding of WSS sector finance - a reason for lack of WSS incorporation into PRSPs in SSA  Financing in WSS tends to be diverse with equal importance of public and private/community resources

4 The resource flows assessment process  Countrywide assessments of resource flows  Develop regional comparisons to feed back into country assessments  Phase 1: Country studies in Kenya, Ethiopia and South Africa  Phase 2: Zambia, Uganda (sanitation), Yemen, West Africa (one or two countries if possible) and regional comparisons

5 Why regional resource flows comparisons?  At country level  Countries to see how they continuously allocate resources as well as that of other countries, providing a basis for improved future resource allocations  Civil society advocates and parliamentarians to make governments accountable for resource allocations  Donors to see in tandem prioritization and actual resource allocations, adjust their development priorities and assistance  All stakeholders to gain access to good practices and innovative ideas, and adapt these to local challenges to improve performance

6 Why regional resource flows comparisons?  At regional level  Feed into NEPAD and AMCOW  Regional donor groups, African Water Facility  Multinational donors

7 Three statements heard in the WSS sector today  “We need more funding, ready for donor projects”  “There’s a ceiling to how much that can be financed on public sector budgets”  “Decentralization and sector coordination”… Countries decentralizing but no capacity at local level…

8 Regional WSS finance comparisons can help addressing those issues  Adequate funding  How much public funding?  User financing  Internal generation and efficiency  Donor support  Integrating NGOs in sector coordination policies

9 Leveraging point 1: How much should be allocated to the sector through public budgets?  There’s no right or wrong answer to the question - But WSS resource flow studies show limited public sector resources for WSS  The WSS sector receive low allocations in both Ethiopia and Kenya  Illustrations of indicators that can hint at answers can come out of a regional comparison…

10 Adequate funding 1: WSS expenditure as share of public expenditure

11 Adequate funding 2: WSS expenditure as share of GDP

12 Adequate funding 2: Total WSS expenditure as share of GDP compared to health

13 Adequate funding 3: Comparative annual WSS expenditure per capita (USD)

14 Adequate funding of WSS in public budgets  There’s a need to assess resource requirements and compare with resource availability in the sector  The Ethiopia Public Expenditure Review of water – an example of projections of expenditure requirements in investment plans:  Ambitious projection scenario  Moderate projection scenario  Low scenario  Regional resource allocation and performance comparisons may help in advocacy for adequate funding

15 Leveraging point 2: User Financing  Internal generation  The WSS is hitting the ceiling for how much it can be allocated under the PEAP in Uganda, still resource required  Two ways this can be addressed…  More user charges  More community contributions to capital costs (esp.ly for RWSS)… And supporting / coordinating greater NGO and community resources  The assumption is that user financing is not part of the ceiling if it is off-budget  User charges important (39% Kenya)

16 Leveraging Additional Resources  Comparing sector expenditure as a % of GDP - health versus WSS Are we crowding out non-public resources? Source: Sub-Saharan Africa: World Development Report, Other countries: WSP-AF ongoing studies. Sub Saharan Africa EthiopiaKenya South Africa

17 Leveraging point 2: User Financing Contd  URWS  Efficiency in collecting user charges  Generating operational surplus  Both are linked to institutional reforms  RWSS  Community contributions  Uganda and Benin 5%  Ethiopia 10%  Kenya often 20-60%  China as high as 75%  And often non contributed at all  Linked to cost-sharing policy, design of financing mechanisms and institutional reforms

18 Leveraging point 3: How to balance sector coordination with NGO involvement?  Kenya/Ethiopia – high share of off-budget or donor resources  20% of total sector expenditure and  70 % of donor resources  South Africa story…  Decentralization story…

19 Share of served population by type of WSP UrbanRural

20 Expenditure estimates for different levels and service providers

21 Way forward: Benchmarking WSS sector finance  For country processes and regional process to feed into each other  Such comparisons may help in advocacy for adequate funding of WSS  Ten indicators

22 Way forward: Benchmarking WSS sector finance  Adequate public funding:  Percentage of total national expenditure allocated to WSS (dev. and recurrent)  WSS budget allocations as share of GDP (national)  Percentage of budget allocations to the WSS sector relative to other other social sectors (dev. and recurrent)  Budgetary ceiling for WSS within MTEF as compared to other relevant sectors  Ratio of total donor/NGO contributions to national budget for WSS expenditures

23 Way forward: Benchmarking WSS sector finance  User financing:  User charges as a share of total sector finance  Ratio of user charges to recurrent expenditures by service providers  Prevalence and share of user charges among different service providers

24 Way forward: Benchmarking WSS sector finance  Donor funding/NGO:  Percentage of total expenditures by CBO/PSIP (dev. and recurrent)  Percentage of donor funds integrated into national budget

25 Way forward: Benchmarking WSS sector finance  Efficiency – not really addressed here:  Utilization – actual as share of planned in national budgets  Value-for-money  Operating performance of service providers