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

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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

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Why regional resource flows comparisons?

At regional level Feed into NEPAD and AMCOW Regional donor groups, African Water Facility Multinational donors

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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…

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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…

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Adequate funding 1:WSS expenditure as share of public

expenditure

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Ethiopia(2000)

Kenya(2001)

South Africa(2003)

National andLocal Budgets

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Adequate funding 2:WSS expenditure as share of GDP

-

1.0

2.0

Ethiopia Kenya South Africa

PublicExpenditure

Total SectorExpenditure

12

Adequate funding 2:Total WSS expenditure as share of

GDP compared to health

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Ethiopia Kenya South Africa

WSS 2001

Health 2000

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Adequate funding 3: Comparative annual WSS expenditure per

capita (USD)

1 24 3

5552

-

25

50

Ethiopia Kenya South Africa

CapitalExp. PerUnservedPopulation

RecurrentExp. PerServedPopulation

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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

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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)

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Leveraging Additional Leveraging Additional ResourcesResources Comparing sector expenditure as a % of GDP - health Comparing sector expenditure as a % of GDP - health

versus WSS versus WSS

Are we crowding out non-public resources?Are we crowding out non-public resources?

Source: Sub-Saharan Africa: World Development Report, 2003. Other countries: WSP-AF ongoing studies.

0

3

6

9

Health

Public

Total

Sub Saharan Africa

0

3

6

9

WSS Health

Ethiopia

0

3

6

9

WSS Health

Kenya

0

3

6

9

WSS Health

South Africa

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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

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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…

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Share of served population by type of WSP

0.0

50.0

100.0

Ethiopia Kenya South Africa

0.0

50.0

100.0

Ethiopia Kenya South Africa

National

Local

Non-govt

Urban Rural

20

Expenditure estimates for different levels and service providers

0.0

50.0

100.0

Ethiopia Kenya South Africa

National

Local

Non-govt

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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

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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

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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

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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

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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