Financing Water sanitation Infrastructure for Economic Growth … · 2019-06-29 · Financing Water...

Financing Water & sanitation Infrastructure for Economic Growth and Development

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Lead Convenor:

African Development Bank / African Water Facility

Co-convenors:

Department of Environment and Water Affairs, South Africa (DWAF), World Bank/Water and Sanitation Program (WSP) ,World Water Council (WWC), Food and Agricultural Organization (FAO), Global Water Partnership (GWP) andInfrastructure Consortium for Africa (ICA

Water Partnership Program WPP

The African Development Bank,

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Agencecanadienne dedéveloppementinternational

CanadianInternationalDevelopment Agency

Technical Summary

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Financing Water & Sanitation Infrastructure forEconomic Growth and Development

Technical Summary: Proceedings and Outcomes of the SessionsDuring the 2nd African Water Week

9-11 November 2009Johannesburg, South Africa

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This document was prepared with support from the Water Partnership Program (WPP) of the African DevelopmentBank and with the financial support of its Water Partnership Program donors i.e. the Government of Denmark, the

Netherlands and Canada (CIDA).While every effort has been made to present reliable information, the African Development Bank accepts no responsibilitywhatsoever for any consequences arising out of its use nor is any opinion expressed in this publication necessarily theopinion of the Bank. The material in this publication is copyrighted. Copying and/or transmitting portions or all of this workwithout permission of the African Development Bank may be a violation of the applicable law.

ACKNOWLEDGEMENTSThis report was prepared by Kwabena Sarpong Manu, Consultant and Lead Rapporteur for the thematic session underthe guidance of Sering B. Jallow, Manager, North, East and South Africa, Water and Sanitation Department (OWAS),Tefera Woudeneh, Chief Water Operations Officer, African Water Facility (AWF) and Arthur M. Swatson Jr., Principal Waterand Sanitation Engineer and Finance Session Thematic Coordinator, (OWAS). The Bank would like to thank all the Session Conveners and Co-Conveners, authors of presentations, as well as thepanellists for their valuable inputs. Sincere gratitude also goes to session Chairs, conveners and rapporteurs for theirvaluable input. The support of colleagues from various Departments and Units of the Bank including the Agriculture &Agro Industry, Energy, Environment and Climate Change, Infrastructure Consortium for Africa and Language ServicesDepartments deserves mention. The invaluable contribution from our development partners to the outcomes of thethematic session is appreciated. Specifically, the Bank would like to thank the following institutions for their contribution in diverse ways to the success ofthe thematic session on Financing Water and Sanitation Infrastructure including:

• Department of Water and Environmental Affairs, South Africa• World Bank/Water and Sanitation Program-Africa• Global Water Partnership• Organization for Economic Cooperation and Development• EU Water Initiative I• World Water Council• Food and Agriculture Organisation• Islamic Development Bank• International Federation of Agricultural Producers

The Bank would also like to thank the African Ministers’ Council on Water (AMCOW), UN Water Africa and UNSGAB fortheir cooperation and support in delivering the sessions. Similarly, the Bank would like to thank the discussants for thehigh-level panel on Financing Water Infrastructure for their insights on the subject. Their views shared with us have beencaptured in this report. It is the Bank’s expectation that the report will add to the knowledge base on water sector financeissues.

Graphical Conceptualization

African Development Bank, External Relations and Communication Unit in cooperation with Finzi Usines graphiques;Justin Kabasele T. and Mouna Lazzem

PrintingFinzi Usines Graphiques

CoordinationConsultant Sören Bauer


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List of boxes ivList of tables ivList of figures ivAcronyms and abbreviations vExecutive summary viiSECTION 1: INTRODUCTION 11.1 The Africa Water Week Series 11.2 The 2nd African Water Week 21.3 Financing Water Infrastructure for Economic Growth 21.4 Organisation of the Finance Session 31.4.1 Concept and Approach to Thematic Session on Finance 41.4.2 Assessment of the sessions on finance 51.5 Purpose of the Report 5SECTION 2: FINANCE SESSION - PLANNING AND OUTCOMES 52.1 Session Planning 52.1.1 Aims and Expected Outcomes of the Session 52.1.2 Content of Sessions 62.2 Financing Water Infrastructure for Africa’s Economic Growth and Development: 8

he Big Picture2.2.1 Session Background 82.2.2 Issues and Messages 82.3 Financing Water for Energy and Agriculture 112.3.1 Session Background 112.3.2 Issues and Messages 112.4 Financing of Water Supply Services 142.4.1 Session Background 142.4.2 Issues and Messages 152.5 Session on Financing for Water Resources Management and Governance 172.5.1 Session Background 172.5.2 Issues and Messages 172.6 Country and Donor Experiences 192.6.1 Session Background 192.6.2 Issues and Messages 192.7 Africa Infrastructure Country Diagnostic: Main Findings and Messages 202.8 Summary of Finance Issues 222.9 Messages for Finance Ministers Put Forward by Banellists on Financing Water 22

Infrastructure Annexes Error! Bookmark Not Defined.annex 1: Consolidated Abstracts for Finance Presentations 27annex 2: Approach, Content and Structure of Parallel and Plenary Sessions 53annex 3: Finance Session Plan 65

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AfDB

AICD

AMCOW

ANBO

ANEW

AWF

AWV

AWW

DESA

GDP

GWP

ICA

ISC

IWRM

JMP

LOC

MDGs

African Development Bank

Africa Infrastructure Country Diagnostic

African Ministers Council on Water

African Network of Basin Organisations

Africa Civil Society Network on Water and Sanitation

Africa Water Facility

Africa Water Vision

African Water Week

Department of Water and Environmental Affairs, South Africa

Gross Domestic Product

Global Water Partnership

Infrastructure Consortium for Africa

International Steering Committee for the 2nd African Water Week

Integrated Water Resources Management

Joint Monitoring Programme for the MDGs

Local Organising Committee of the 2nd African Water Week

Millennium Development Goals

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Box 1 1: Features of Session on Financing Water Infrastructure for Economic Growth and Development at AWW-2Box 1 2: Questions addressed by Session on Financing Water InfrastructureBox 2 1: African Development Bank’s Commitments towards Water Infrastructure DevelopmentBox 2 2: Key Messages on Financing Water Infrastructure in AWW-2 OutcomesBox 2 3: Fundamental Key Financing / Investment Areas (Farmers’ Perspective)Box 2 4: Messages on Financing Water for Energy and AgricultureBox 2 5: Messages on Financing Water Supply ServicesBox 2 6: Messages on Financing Water Resources ManagementBox 2 7: Message from, Dr. Uschi Eid, Vice-Chair of UNSGABBox 2 8: A Message to African Ministers of Finance – William Cosgrove, Honorary President, World Water CouncilBox 2 9: Key Messages from the Private Sector to Finance and Water Ministers - Johan Kruger, Managing Director, AfCapConsulting, S. Africa)

Table 2 1: Thematic Sessions and Presentations

Table 2 2: Credit Rating for Some African Utilities

Figure 2 1: Financing of Africa's Water Infrastructure: Requirements vs Current Spending

Figure 2 2: Financing Requirements as Percent of GDP to Achieve MDG in WSS

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Aims and expected outcomes ofSessions on Financing

E.3 The sessions aimed to achieve thefollowing:

a) setting the pan-African water sectorneeds in context and elaborate the strongnexus between water and economic growth;

b) enable participants to appreciate the bigpicture on financing infrastructure and thekey actions that are needed to achieve thedesired results including key messages tobe considered in support of promoting thewater–finance dialogue;

c) take stock of and present the variousinitiatives supporting water for agricultureand energy in Africa and discuss futurepriority actions;

d) create an agenda to accelerate marketfinancing for the water sector on thecontinent based on emerging lessons frompilot activities that have been underway overthe past years.

e) increase knowledge on financing inrelation to water resources management

Introduction

E.1 The Second African Water Week (AWW-2) was held in Johannesburg, South Africafrom 9-13 November 2009 under the theme“Carrying forward the commitments ofSharm El-Sheikh on water and sanitation:Sprint to the finish”. The aim of the WaterWeek was to determine the collectiveimplementation of the actions and com-mitments outlined in the African Water Vision2025, the World Summit on SustainableDevelopment and Millennium DevelopmentGoals (MDGs) related to water andsanitation. In particular, AWW-2’s intendedfocus was on the implementation of theAfrican Union’s Sharm El-SheikhCommitments on Water and Sanitationmade by the regional political leadership andthe strengthening of partnerships as Africasprints towards the 2015 MDGs targets.

E.2 Upon a request from AMCOW, the AfricanDevelopment Bank co-ordinated the deliveryof the Thematic Session on Financing WaterInfrastructure for Economic Growth andDevelopment, in collaboration with a numberof regional organisations. Each organisationleveraged resources to plan and deliver thesessions that were assigned to them.

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MDWP

NEPAD

NGO

O&M

OBA

ODA

OECD

PANAFCON

PANAFCON

PPP

RECs

RLBOs

RWSSI

SWAP

TAC

UNSGAB

WSP-Africa

WSS

Multi-Donor Water Partnership Programme

New Economic Partnership for African Development

Non-Governmental Organisation

Operation and maintenance

Output-based aid

Official development assistance

Organisation for Economic Cooperation and Development

Pan-African Implementation and Partnership Conference on Water

Second Pan African Implementation and Partnerships Conference

Public-Private-Partnership

Regional Economic Communities

River and Lake Basin Organisations

Rural Water Supply and Sanitation Initiative

Sector Wide Approach to Planning

AMCOW Technical Advisory Committee

United Nations Secretary-General’s Advisory Body on Water

Water and Sanitation Programme, Africa

Water and Supply and Sanitation

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11.There is a wide (perhaps widening) diversityacross Africa. There is no financing blueprintsuitable for all countries. Fragile states needspecial attention.

Outcomes of Sessions on Financing

E.7 The outcomes of the Thematic Session onFinancing were captured in Summary ofProceedings and Outcomes of the 2ndAfrican Water Week and endorsed in theJohannesburg Ministerial Statement.

E.8 The key decisions to move forward onthe region’s water agenda from theMinisterial Statement, which are ofrelevance to the issue of financing, arepresented below:

AMCOW makes the following decisions as follow-up to the implementation of the Sharm el-SheikhCommitments on Water and Sanitation made byour Heads of State in July 2008:

a. Reporting of country actions inrespect of water security

i. The document “Delivering on Africa’sWater Security Commitments: AFramework for Reporting Actions to theAfrican Union” is adopted as theRoadmap for the Implementation of theSharm el-Sheikh Commitment

3. There is a need to demonstrate thecompelling economic case for investmentin water and sanitation.

4. All countries should develop nationalplans with clear financing strategies andensure development partners align withthese

5. A broad mix of finances from manysources has to be mobilised

6. Financing for water resourcesdevelopment and management and forgovernance functions needs more attentionand appreciation

7. A balance is needed between thefinancing of physical infrastructure, theenabling environment and governancefunctions – they are all essential

8. Huge infrastructure deficit exists forhydropower and agricultural watermanagement but these have now re-emerged as priorities.

9. Action is needed at all levels - from locallevel with CSO support through to regionalcooperation and development

10. Countries have to overcome a majorpolitical dilemma – setting tariffs that recovercosts

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and governance, including how thisinfluences investment in infrastructureand economic development morebroadly, focusing on creating theenabling environment for attractinginvestment and using it effectively;

f) identify key messages that can beused in the preparations for the Waterand Finance Ministers meeting that isforeshadowed in the Sharm el-Sheikdeclaration;

g) present the highlights and mainfindings of the Africa InfrastructureCountry Diagnostic (AICD) for the watersector; and

h) provide presentations on countryand donor experiences relating tofinancing water and sanitation in theregion with the aim of sharing goodpractices.

E.4 In view of the urgent need to promotebetter dialogue between the financeand water sectors given the inextricablelinkages between water infrastructureand economic growth and povertyreduction, the sessions were structuredto deliver key messages that wouldcontribute to further strengthening thisdialogue, and largely inform the meetingof Water and Finance Ministers.

Key issues

E.5 The African Water Vision 2025 released in2000 estimated the financial requirementsto deliver the Vision at US$20 billion per yearover a 20-year time horizon. The lion’s shareof that investment – some US$ 12 billion –is what was estimated as the financingrequired to achieve the Vision’s targets indrinking water and sanitation. Updated data,made possible through ongoing studies onAfrica’s infrastructure financing requirement,put the new estimate at US$50 billion peryear, largely as a result of more realisticestimates for hydroelectric power. Theestimated gap in financing is assessed atsome US$30 billion. Closing this gap requiresactions from all actors. However, AfricanGovernments hold the key to creating thenecessary enabling environment to supportthe harnessing of available funding.

E.6 The following summarises a number of‘known’s’, which should engage the attentionof policy-makers and development partners:

1. Many positive developments in the lastfive years - political and financial; theseprovide a good platform for going forward.

2. Huge financial challenge – $30 to50bn/yr raises the need to harness allfinancial means and develop bankableprojects and programmes.

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development of the water and sanitationsector. Achieving sustainable cost recoveryfrom the “3 Ts“, tariffs, transfers and taxesis key to accessing repayable funding.

7. Special consideration is necessary infinancing policies for sanitation.

8. Neither public funding nor ODA nor thecombination of both will be enough; so weneed innovative approaches to rise to thechallenge ahead.

9. There are only two sources of funds toprovide water services and build the neededinfrastructure – (i) user payment for services,and (ii) public funding from taxes. The variousmechanisms used to borrow money orotherwise to fund investments are simplymeans of leveraging these two sources.Transfers from outside the country(development assistance) are made possibleby taxpayers elsewhere.

10.Develop local capital markets.

Economic considerations

11.“Do not invest in water for water’s sake!”The rates of return of these investmentscan be high, even compared with the

Some key messages for meeting ofFinance and Water Ministers

Governance

1. Proper economic performance, meaninggood corporate governance and the politicalframework must be appropriate for banksto consider loans; they need investmentsecurity and therefore security andpredictability of financial plans. On top, afunctioning financial market is necessary.

2. Real progress is not possible without nationalleadership and involvement.

3. De-politicise tariffs and give certainty on howadjustments will occur.

4. Simplify and synchronise businessenvironment to create space for privateinvestment.

5. Build information base and capacity toprepare projects to attract private investmentand debt.

Financing strategies

6. National governments should establish anational financing strategy for sustainable

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achievements and to mobilisingresources for the Rural Water Supply andSanitation Initiative (RWSSI) 2nd and 3rdphase implementation; that meeting willalso discuss broader water securityissues of AMCOW initiatives.

iii. Increasing commitment to the AfricanWater Facility to scale up its support formajor infrastructure programmes andprojects;

iv. Promoting scale-up support to CountrySector Reviews, National MDGInvestment Plans and National FinanceStrategies;

v. Reviewing achievements and mobilisingresources for the Rural Water Supply andSanitation Initiative (RWSSI) 2nd and 3rdphase implementation;

vii.Encouraging urgent disbursement ofimplementation funds in small-scalewater management in response to theAfrica Food Price Crisis;

viii.Strengthening engagement with the G8over implementation of the Evian ActionPlan and Joint Statement of the G8 AfricaWater Partnership.

ii. Countries should internalise the actionsin their national plans and provide annualreports on their water security status;

iii. Regional Bodies - RECs, RLBOs - shouldadopt the reporting mechanism andprovide input to AMCOW’s annual reporton progress on water security;

iv. The modalities for a peer reviewmechanism on country water andsanitation progress shall be developedby the secretariat in consultation withpartners;

v. The AMCOW Secretariat shall be stre-ngthened to monitor and report actions;

vi. The Executive Committee (EXCO) shouldgive directives on themes of future AfricaWater Week.

b. Convening of Meeting of Water andSanitation Ministers

i. The meeting of African Ministers of Waterand Finance requested by the AU andto be convened by the African Ministers’Council on Water (AMCOW) and theAfrican Development Bank (AfDB). Themeeting will be dedicated to reviewing

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Action/Issue Recommendations Governance Aspect

Implementing Decisions from AWW-2 and AMCOW 7th Session

1. Reporting country actions in line with framework

1.1 The AfDB, AMCOW and regional partners should discuss and co-ordinatesupport to the AMCOW secretariat, to jump-start the reporting process and also toavoid duplication in providing support. In this respect the Bank should urgently calla meeting of key partners – AU, AMCOW, UN Water, WSP, GTZ, to follow up

2. Meeting of Water and Finance Ministers

2.1 A Concept Paper should be circulated to AMCOW and all partners detailing out:a) Assignment of responsibilities; b) Definition of focus of the meeting and agenda;c) Definition of technical papers2.2 The presence of key personalities will add more visibility to the meeting and theyshould be given sufficient lead-time notice. Suggestions included:• President Ellen Johnson-Sirleaf • President of the African Development Bank Group• Heads or deputies of Development Partner Organisations• Chairmen of Regional Economic Communities • Mr. Kader Asmal, former Minister of Water of South Africa. [He demonstratedthat it can be done once there is political will. He is senior, a great and convin-cingspeaker who will be listened to].

Organisational Matters

3. Definition of agenda and format of future AWW

3.1 AWW events should be used to get countries to report on their water actions inresponse to the commitments made by the regional leadership. Having back-to-back conferences such as happened with AWW-2 and PANAFCON can bediversionary and should be avoided

4. Facilitation at AWW4.1 AWW should always have a professional Lead Facilitator who will co-ordinate alltechnical activities, lead briefing and debriefing sessions, ensure the timely submis-sion of Proceedings and Outcomes, review and refine agenda during the event etc.

5. Evaluation of AWW

5.1 An evaluation of the Water Week must be an important aspect of theorganisation. Where possible, two processes should be followed: a quickassessment of partici-pants’ expectations before the conference and an evaluationafter the conference.

6. Dedicated website 6.1 There should be a dedicated website for documents prepared for the WaterWeek, and for the dissemination of the conference outcomes. The cost ofmaintaining this website should form part of the overall budget for the conference

7. Translation of documents7.1 The translation of documents, particularly into French, should be given urgentattention in order to ensure full participation of all. This will become more importantas more emphasis is put on country reporting at future events

Recommendations and Way Forward

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of the burden and ability to pay; (ii) efficientrevenue collection and use of fundsavailable; (iii) efficient operations; (iv)subsidies targeted to the poor; (v) publicaccounting for use of funds, servicesprovided and efficiency (e.g. reducingunaccounted for water); (vi) informing gov-ernment decision-makers of options thatallow them to make trade-offs betweenhigher-cost approaches and the servicelevels they permit with lower costapproaches (perhaps less advancedtechnology) with increased service levels.

Use of ODA

15.Development partners should stick to theircommitment and provide ODA at a level thatcan make a maximum impact.

opportunity cost of capital, but the benefitsof many when discounted at social rates ofreturn would cover the investment manytimes over.

12.Apply economic justification criteria to usegrants and concessionary loans as viabilitygap funding.

Accountability

13.Water managers should be required tooperate their institutions and prepare andbuild their projects efficiently and effectivelyas a condition of investing public funds.

14.Practices that lead to efficient and effectiveoperations include: (i) tariffs that cover costswhile taking account of equitable distribution

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Development Bank (AfDB) and the TunisianGovernment, under the theme ‘Accelerating WaterSecurity for Africa’s Socio-EconomicDevelopment’. Attended by over 500 regional andinternational water and sanitation actors and 26African Ministers with responsibility for water,AWW-1 provided an opportunity to bring Africa’spolitical leadership into contact with water sectorpractitioners. More importantly AWW-1, and the2008 AU Summit that followed it, brought muchgreater visibility to the challenges that face watersecurity and sanitation in Africa and generated anincreased commitment to address them. AWW-1 also provided an increased awareness of thecontribution of water resources infrastructure toeconomic growth, as highlighted in the TunisMinisterial Declaration on Accelerating WaterSecurity for Africa’s Socio-Economic Development.

Box 1 1: Features of Session on FinancingWater Infrastructure for Economic Growth

and Development at AWW-2

•Theme Co-ordinator: AfDB•Sub-theme Conveners: AfDB, AWF, WSP-Af,

AfWA, WWC, World Bank, FAO, GWP, DWEA, IFAP, ICA, EUWI

•Sessions: 4•Presentations: 16•Panel discussions: 2Attendance per ses-sion (average) 120

1.1 The Africa Water Week Series

The African Water Week (AWW) series nowfeature as a regular item on the regional waterand sanitation agenda. Based on a decision takenin 2007 by the African Ministers Council on Water(AMCOW) to institutionalise an annual waterweek, AWW has the following as its mainobjectives:

• creating a platform for African water sectorprofessionals, stakeholders and partners todiscuss the opportunities and challenges ofachieving water security for the socio-economic development of Africa andformulate concrete policies;

• taking stock of the status of achievementof the water and sanitation MDGs in Africa,reviewing the key achievements andchallenges and proposing strategies andactions for accelerating achievement of thewater and sanitation targets; and

• building consensus and providingrecommendations for consideration at thehighest political level.

The First African Water Week (AWW-1) washosted in Tunis in March 2008 by the African

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discuss the theme’s key messages in front of awider audience, including, more particularly,ministers and political leaders who were expectedto participate in the plenary. The high-level panelwas expected to bring out the key financingissues and reiterate the actions that have to betaken to address the issue of financing waterinfrastructure.

In view of the urgent need to promote betterdialogue between the finance and water sectorsgiven the inextricable linkages between waterinfrastructure and economic growth and povertyreduction, key messages from these sessionssought to contribute to further strengthening thisdialogue and to target the meeting of Water andFinance Ministers.

Each of the three sub-themes had a LeadConvener, who collaborated with otherpartners to leverage resources, effort andexpertise.

1.4 Organisation of the Finance Session

1.4.1 Concept and Approach to Thematic Session on Finance

The African Development Bank prepared andsubmitted a conceptual approach and structureof the session on Financing Water and SanitationInfrastructure for the consideration andcomments of partners and collaborators. This isattached as Annex 2 to this report. The Bankhandled the overall co-ordination of these

fast approaching, several questions on financingneed to be addressed (See Box 1.2). The sessionprovided the opportunity to review financingneeds and flows in the sector, examine furtherthe bottlenecks, and explore opportunities forscaling up financing using approaches that aremore efficient. The session also enabled actorsto share the advances being made in innovativefinancing such as accessing less traditionalsources of finance for small water and sanitationproviders, benchmarking and credit rating ofutilities to improve access to domestic capitalmarkets and advances in regional financearchitecture.

Three important focus areas and sessions wereidentified which altogether addressed thespectrum of key financing issues ranging fromregional needs and gaps, infrastructure delivery,financing mechanisms and institutional and policyissues. These were:

a. Financing water infrastructure for Africa’sgrowth and development

b. Scaling-up financing of WSS services tomeet the MDGs

c. Financing WRM and governance

A number of country, programme and donorpresentations were made in a 4th session toshare experiences.

It was expected, following the conclusions fromthe sessions, that a High Level Panel would

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1.3 Financing Water Infrastructure for Economic Growth

Africa’s low base of water infrastructure and weakinstitutions account for poor progress in the fightagainst poverty and retard economic growth.Whilst the linkages between water security andeconomic growth cannot be disputed,sustainable financing for scaling up infrastructureand improving water resources management inAfrica has remained a major challenge. Recentrevision of the Africa Water Vision financingestimates has resulted in a doubling at the veryleast of the original estimates (apart from watersupply and sanitation) to realize Africa’s watersecurity objectives.

Financing is a cross-cutting theme and hasfeatured in many of the declarations andcommitments that have been made by Africa’spolitical leadership. Of the 20 commitments madein Sharm el-Sheikh, as many as 6 related directlyto finance. In view of its crucial importance inaddressing the contribution of water infrastructureto economic growth, the African Union has calledon “African Ministers in charge of Water andFinance in collaboration with the AfricanDevelopment Bank and development partners,to hold a meeting of Ministers of Water andFinance to develop appropriate financingpolicies”.

The thematic session on Financing WaterInfrastructure was one of four themes thatfeatured on the AWW-2 agenda. With theMillennium Development Goals timeline of 2015

The success of AWW-1 created highexpectations for the Second African Water Week(AWW-2) and subsequent events. It is expectedthat these events will support efforts ataddressing the region’s water security issues bybuilding on the knowledge base and providingopportunities to measure progress throughcountry reporting of actions.

The African Development Bank was requestedby AMCOW to convene the thematic session onFinancing Water Infrastructure for EconomicGrowth and Development at AWW-2.

1.2 The 2nd African Water Week

AWW-2 was held in Johannesburg, South Africafrom 9-13 November 2009 under the theme“Carrying forward the commitments of Sharm El-Sheikh on water and sanitation: Sprint to the finish”.The aim of the Water Week was to determine thecollective implementation of the actions andcommitments outlined in the African Water Vision2025, and the World Summit on SustainableDevelopment and Millennium Development Goals(MDGs) related to water and sanitation. Inparticular, AWW-2’s intended focus was on theimplementation of the African Union’s Sharm El-Sheikh Commitments on Water and Sanitationmade by the regional political leadership in 2008,and the strengthening of partnerships as Africasprints towards the 2015 MDG milestone. In linewith the latter, the Second Pan AfricanImplementation and Partnerships Conference(PANAFCON) was held back to back with AWW-2 in Johannesburg on 11 November 2009.

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2.1 Session Planning

2.1.1 Aims and expected outcomes of the session

The Financing Water Infrastructure session wasco-ordinated by the Bank in collaboration withother international partners. The sessions aimedto achieve the following:

i) setting the pan-African water sector needsin context and elaborate the strong nexusbetween water and economic growth;

j) enable participants to appreciate the bigpicture on financing infrastructure and thekey actions that are needed to achieve thedesired results including key messages tobe considered in support of promoting thewater–finance dialogue;

k) take stock of and present the variousinitiatives supporting water for agricultureand energy in Africa and discuss futurepriority actions;

included Ministers. Many of the outcomes andmessages captured in the final Summary ofProceedings and Outcomes of the 2nd AfricanWater Week related to financing, as expectedfrom its cross-cutting nature.

1.5 Purpose of the Report

This Report on Outcomes captures theprocesses and activities associated with theoverall organisation of the sessions onFinancing Water Infrastructure, and the keyissues and messages emanating from thesessions relevant to the African water agenda.It is important to indicate that many of theissues discussed in presentations and capturedin outcomes of the sessions have been dealtwith in the Africa Regional Paper launched atthe 5th World Water Forum in Istanbul in March2009. That document has defined a detailedset of actions to address the financing and otherchallenges facing water security in Africa, andhas further been reinforced by the documentDelivering on Water Security Commitments:Framework for Reporting Actions to the AfricanUnion. This report on outcomes is thereforeintended to reinforce those actions, and toremind regional governments and water actorsto focus on implementing these actions atcountry and sub-regional levels. More valuecan be added to future Water Week eventswhen countries report the actions they havetaken.

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Box 1 2: Questions addressed by Sessionon Financing Water Infrastructure

The thematic session on Financing Water Infra-structure was structured to address these ques-tions, among others:a. What is the scale of financing needed at regional

and national levels to address deficient water infrastructure requirements?

b. What can be done to scale up delivery of infrastructure and services and how can financing mechanisms be improved in support of this?

c. Are governments increasing finance to the sec-tor through local resource mobilization efforts,

d. Are governments fully exploiting the use of in-novative financing mechanisms that also tap into private financing?

e. Are countries introducing approaches that provide incentives to improve efficiency of resource utilization, enhance performance of utilities and improve their bankability?

f. Are we improving governance, which is essential for effective investment?

g. Are sub-regions/countries taking advantage of economies of scale offered by regional infrastructure financing?

Each of the three sub-themes had a LeadConvener, who collaborated with otherpartners to leverage resources, effort andexpertise. Conveners also had responsibilityfor defining the session agenda, lining uppresenters, pan-ellists and chairs. A LeadRapporteur for each of the sessions pooledtogether the inputs from all the sessionrapporteurs and presented these to the AWW-2 Lead Rapporteur to ensure that the keymessages from the Financing sessions werecaptured in the conference outcomes.

An International Steering Committee (ISC)was set up to co-ordinate the technicalpreparations and ensure that the agendaachieved the stated aims of the conference.The South African Government alsoestablished a Local Organising Committee(LOC) to oversee the local preparations forAWW-2. The ISC operated mainly throughemails and telephone conferences to play itsoversight role.

1.4.2 Assessment of the Sessions on Finance

The finance sessions were delivered over oneand half days in 17 thematic presentations anddonor perspectives and two panel discussions.The sessions were well co-ordinated and verywell attended. An average of 120 participantsattended each of the sessions and these

sessions, while collaborating institutions in theother sub-thematic areas took responsibility forthe development of their sessions. Considerationwas given to outcomes that would feed into thedialogue between Water and Finance Ministers,which the AU has requested the Bank andUNSGAB to convene.

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Theme Presentations Convener(s)

1. Financing Water Infrastructure for Africa’s Growth and Development

1. Africa Water Vision – Revisiting needs and prospects2. Financing of the business of water supply and sanitation 3. Water for growth and development – Implications for

dialogue on water and finance in Africa4. Water for agriculture and energy in Africa - major

challenges, different initiatives and follow-up echanisms5. Renewed interest in Agriculture and new commitments

in support of the sector6. Practical Examples for PPP financing for water for energy 7. Fundamental Financing Areas Necessary to achieve

Food and Energy security in Africa: Farmers Perspective

AfDB (Lead), World WaterCouncil (WWC), Infras-tructure Consortium forAfrica (ICA), the FAO andSouth Africa’s Ministry ofWater and EnvironmentalAffairs

2. Scaling up financing of WSS services to meet the MDGs

8. Small and large scale debt financing efforts in Africa including bond transactions, microfinance and pooled finance structures

9. The Credit Quality of African Water Utilities10. Panel discussion

WSP Africa (Lead), UNHabi-tat, Africa WaterAssociation (AfWA)

3. Financing for Water Resources Management and Governance

11. Establishing a Conducive Investment Environment12. Financing IWRM13. Experiences of financing WRM programmes in Africa14. Panel discussion

Global Water Partnership(Lead), African WaterFacility, European WaterInitiative (EUWI)

4. Country and Donor Perspectives

15. Experiences in PPP in Irrigation in Africa16. La délégation de gestion en hydraulique rurale, un état

des lieux sur 7 pays 17. Financing the Water Value Chain in South Africa 18. Putting Water Security High on the Political Agenda in

Ghana

AfDB and WorldBank/WSP Africa

Table 2 1: Thematic Sessions and Presentations

The following sections summarise the key issues and messages from the various sessions. Themessages that were captured from the sessions as part of the AWW-2 outcomes are reproducedhere in boxes.

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strengthening this dialogue, and largely informthe meeting of Water and Finance Ministers

2.1.2 Content of sessions

Session 1 was on Financing Water Infrastructurefor Africa’s Growth and Development. Thesession had two segments and was designedas a key strategic session aimed at setting thepan-African financing needs in context andsought to make the nexus between water andgrowth better understood. It examined thefinancing needs of the Africa Water Vision tounderstand the key issues emanating from therecent AfDB estimates on meeting the financingrequirements to meet the Africa Water Vision2025, and the most recent African InfrastructureCountry Diagnostic (AICD) Study. The big pictureon financing also looked at development of waterinfrastructure of regional and sub-regionalimportance. The second segment looked atfinancing water in relation to other sectors,especially agriculture and energy and how thislinks to infrastructure, water resourcesmanagement and adaptation to climate change.The session emphasized how to make existingcommitments work rather than invent new ones.

The session plan, agenda, the presentations andthe list of presenters, panellists, chairs andrapporteurs are provided in Annex 2.

The sessions and their conveners are indicatedin Table 2.1.

l) create an agenda to accelerate marketfinancing for the water sector on the continentbased on emerging lessons from pilot activitiesthat have been underway over the past years.

m) increase knowledge on financing in relationto water resources management andgovernance, including how this influencesinvestment in infrastructure and economicdevelopment more broadly, focusing oncreating the enabling environment forattracting investment and using iteffectively;

n) identify key messages that can be used inthe preparations for the Water and FinanceMinisters meeting that is foreshadowed inthe Sharm el-Sheik declaration;

o) present the highlights and main findings ofthe Africa Infrastructure Country Diagnostic(AICD) for the water sector; and

p) provide presentations on country and donorexperiences relating to financing water andsanitation in the region with the aim ofsharing good practices.

In view of the urgent need to promote betterdialogue between the finance and water sectorsgiven the inextricable linkages between waterinfrastructure and economic growth and povertyreduction, the sessions were structured to deliverkey messages that would contribute to further

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1Emerging findings from a prospective study funded by the French Ministry of Foreign Affairs on water for growth and development in Africabeing carried out by the World Water Council, describes the nature of future water development challenges and, inter alia, proposes thedevelopment of a virtual basin model to enable greater integration of regional development policy and river basin planning.

largely the issues and actions needed areknown. What is needed now is to assessprogress and improve delivery on agreedactions especially where innovation andreform is badly needed;

c) A significant number of new financeinstruments and channels have beenestablished. A summary, and their resourcelevels, should be made accessible toAMCOW. These should be strengthenedrather than creating new ones;

d) A key established lesson is that regionaldecision making and financing processesinvolve complex political economies and caneasily flounder. It is important, therefore, tobuild on the current strong push for greaterriver basin management in Africa andregional economic integration. To makethese kinds of decisions and to generateregional public goods there is a pressingneed to draw together1:

• economic, social and political integrationprocesses under existing and emergingregional trade agreements; and

• supranational river basin managementinstitutions (which encompass areas thatare home to a growing proportion of thecontinent’s population and, in future, willbe key drivers of social and economicdevelopment).

risks and uncertainties associated with majorreliance on small-scale agriculture foremployment and livelihood security in manycountries. An overarching risk also lies in thecomplex association between the above factorsand the uncertain nature of future climatechange. These factors call for dialogue fordecisions to be taken at a regional, and‘supranational’ level.

To underscore the important linkage betweenwater and economic growth, the AU hasrequested a meeting of Water and FinanceMinisters to deliberate on policies and strategiesfor financing water infrastructure. It was indicatedthat the AfDB and UNSGAB are working onputting this meeting together in 2010.

Some of the key messages coming out of thepresentations included the following:

a) The Regional Paper on water security hasdefined a number of actions to address thefinance challenge; countries shouldinternalise these actions in their wateragenda. This includes the need to clearlyestablish the investment requirements andthe policies and strategies for raising theneeded finance, relying on the 3 T’s – taxes,tariffs and transfers;

b) There is a principal change in the scale offinance needs into water resourcesinfrastructure to boost economic growth and

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the African Water Vision and measures to closethis gap. The following sections summarise theissues and messages from the variouspresentations:

2.2.2 Issues and messages

The African Water Vision 2025 released in 2000estimated the financial requirements to deliverthe Vision at US$20 billion each year over a 20-year time horizon. The lion’s share of thatinvestment – some US$ 12 billion – is what wasestimated as required to achieve the Vision’stargets in drinking water and sanitation. Updateddata, made possible through ongoing studies onAfrica’s infrastructure requirement, put the newestimate at US$50 billion per year, largely as aresult of more realistic estimates for hydroelectricpower. The estimated gap in financing isassessed at some US$30 billion.

Findings from the recently completed study,African Infrastructure Country Diagnostic (AICD),also underscore the extent of the financing gap,the importance of hydropower in driving Africa’swater security and development, and thechallenges in sustainable delivery of water supplyservices.

Africa’s unique challenges, including hydro-logical variability, the shared nature of mostmajor river basins, the exceptional levels ofcurrent population growth (at a continental scalethese are twice the global average) and the

2.2 Financing Water Infrastructure for Africa’s Economic Growth and Development: The Big Picture

2.2.1 Session background

Session 1 was on Financing Water Infrastructure

for Africa’s Growth and Development. Thesession had two segments and was designedas a key strategic session aimed at setting thepan-African financing needs in context andsought to make the nexus between water andgrowth better understood. It examined thefinancing needs of the Africa Water Vision tounderstand the key issues emanating from therecent AfDB estimates on meeting the financingrequirements to meet the Africa Water Vision2025, and the most recent African InfrastructureCountry Diagnostic (AICD) Study. The big pictureon financing also looked at development of waterinfrastructure of regional and sub-regionalimportance. The second segment looked atfinancing water in relation to other sectors,especially agriculture and energy and how thislinks to infrastructure, water resourcesmanagement and adaptation to climate change.The session emphasized how to make existingcommitments work rather than invent new ones.

Four presentations were made that looked at thebig picture of the nexus between waterinfrastructure development and economicgrowth, the extent of the gap between currentspending and financing requirements to meet

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Box 2 2: Key Messages on Financing Water Infrastructure in AWW-2 Outcomes

(a) The update of financing needs for Africa’s water resources infrastructure has established the scale offinancing required to meet the MDGs and the African Water Vision. Countries should disaggregate theserequirements to the national level and seek the funding to boost economic growth;(b) Closing the financing gap requires actions from Governments and National Stakeholders, Private Sector,Civil Society, Regional Bodies and Development Partners. Country ownership and increased local sources offinance are key pathways to achieving the goals; (c) A significant number of regional finance instruments and channels have been established. These shouldbe scaled up instead of creating new ones, whilst addressing any inherent weaknesses. These instrumentsinclude the Rural Water Supply and Sanitation Initiative, the African Water Facility and the Water for AfricanCities and others.(d) More specifically countries should:

• Prepare sector investment plans that draw synergy between major water-using sectors, particularly energy and agriculture;

• Undertake reforms that reduce operational inefficiencies and assure cost recovery, using the 3Ts – tariffs, taxes, transfers

• Deliver on the eThekweni commitment on financing sanitation (0.5% of GDP)• Meet agriculture investments under the Maputo public expenditure pledge (10% of GDP) • Enhance and promote the role of the private sector and local finance, mindful of the reality that the

prudent pricing of the cost of services holds the key to sustainable delivery of the service.

shared the perspectives of a farmer, whoidentified the areas of financing necessary toachieve food and energy security in Africa.


The urgent need to secure water for food andenergy through developing the infrastructure tocontrol and manage water has been emphasizedby all concerned stakeholders during varioustechnical and political events, including AWW-2. Africa is well endowed with significanthydropower resources, which are only exploited

2.3 Financing Water for Energy and Agriculture


The session on energy and agriculture wastreated as a stand-alone even though the themerelates to water infrastructure development. Thepresentations addressed the major challengesin agricultural water management and water forenergy, and identified the different initiatives andfollow-up mechanisms that have been put inplace in support of the sector. The session also

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Figure 2 1: Financing of Africa's Water Infrastructure: Requirements vs Current Spending [Source AfDB estimate]

Box 2 1: African Development Bank’s Commitments towards Water Infrastructure Development

The AfDB has indicated its commitment to towards the development of Africa’s water infrastructure. This isbeing carried out through the following initiatives and schemes: a. Increase sector financing through increased levels of ADF 12 and General Capital Increase 6 b. Increase financing of urban and rural water supply and sanitation to about US$1bn pac. Increase financing for Agricultural Water Development and Hydropowerd. Support a meeting of AMCOW Ministers and Ministers of Finance in 2010e. Organisation of the 2nd RWSSI International Conference to take stock and renew commitments (2010);f. Implementation of the Bank’s plan to increase water storage by 1% p.a. up to 2013 g. Support countries to prepare Sector Investment Plans including finance strategies by developing and

sharing frameworks and tools. Accelerating progress in Africa’s fragile states - A Fragile States Facility has been set up by the Bank with anallocation of 600m US$ under 2008-2010 ADF XI

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Box 2 3: Fundamental key Financing / Investment Areas (Farmers’ Perspective)

A. Production and Productivity• Technology Development/Research• Disease, Pest and Vector Control• Water for Production • Sustainable management of land and water resources • Improved access to high quality inputs • Labour Saving Technologies including Appropriate Mechanisation

B. Access to and Sustainability of Markets• Railways, and telecommunications• Increased Value-addition in Agriculture• Strengthening warehouse Receipt System• Increased capacity of farmers’ organizations to build up skills in management, entrepreneurship, and

group dynamics• Building Market information infrastructure • Community Access Roads and trunk roads

C. Farmer Institution Development• Farmer institutions are important forums for mobilising farmers for delivery of services.• They play a leading role in technology promotion, market organisa-tion and value addition• Through the PPP, consider channelling development funds through organised farmer groups• They play a key role in monitoring public sector programmes and ensuring accountability

D. Fund to Reward Farmers for Ecosystem Services and Carbon offsets• Farmers are custodians of our Environment • Africa must create and fund a package incentives that encourage and enable farmers to continue

providing ecosystem services • Farmers carbon offsets must be aggregated and compensated • Fund renewable energy initiatives in Africa• This will be realised if only Africa pushes for Agriculture Chapter in the Copenhagen Climate treaty

in December 2009

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energy and agricultural productivity, with seriousimplications for development and trade balance.

During last year’s Conference on “Water forAgriculture and Energy in Africa: The Challengesof climate Change” held in Sirte, Libyan ArabJamahiriya, detailed portfolios of projects andprogrammes of investment in water control foragriculture and energy in Africa were discussed,with a total budget of 65 billion US dollars spreadover twenty years. The Sirte 2008 Declarationcalled upon the African Union Commission todesign a road map and a mechanism formonitoring and evaluating implementation, incollaboration with FAO, the African DevelopmentBank, the Economic Commission for Africa,NEPAD and the Libyan Arab Jamahiriya.

AMCOW could play a major role to ensurestrengthened partnerships for water for energyand agricultural development, enhanced privatesector participation and greater attention to thecomprehensive river basin-wide strategies forwater development. This could be fosteredthrough the proposed meeting between Waterand Finance Ministers.

at less than 10% of its potential, compared to80% in OECD countries or nearly 30% in otheremerging countries on other continents.

The recent food crisis has been a wake-up call torevitalize African agriculture and ensure more reliableaccess to agricultural water. In an expression ofstrong commitment to support agriculture in Africa,in July 2009, the G-8 leaders pledged $20 billionover three years to strengthen agriculture throughNEPAD’s Comprehensive African AgricultureDevelopment Program (CAADP).

In Maputo, in 2003, the Heads of State andGovernments of the African Union committedthemselves to allocating at least 10 percent oftheir national budgetary resources for agricultureand rural development. In 2004, the SirteDeclaration focused on ways to implementintegrated and sustainable development ofagriculture and water in Africa. In 2005, theReport of the Commission for Africa highlightedthe need for investment in water and energyinfrastructure. Despite all the above and theothers after, progress, unfortunately, remains tooslow and Africa is lagging behind in terms of

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Figure 2 2: Financing Requirements as percent of GDP to achieve MDG in WSS

Source: AICD

and lenders; and capacity building for waterand sanitation utilities. Given the significantfinancing gap for bulk water and waterefficiency measures, there was a need to focuson financing options within local markets andensuring the sustainability of water utilities.This also calls for leveraging both concessionaland commercial funds.

The need for commercial financing is supportedby the following:


There have been calls for the design ofinnovative financing arrangements thatsupport water provision. Five major priorityareas that require increased finance have beenoutlined by the African Water Association:water utilities and governance; access todrinking water and sanitation in rural and peri-urban areas; building capacity of the privateservices sector; difficulties between borrowers

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Box 2 4: Messages on financing water for energy and agriculture

(a) There is a need for a stronger collaboration between financial institutions to ensure joint implementation of programmes supporting water for agriculture and energy including the AfDB-Business Plan for agricultural water development, water storage enhancement, the IsDB-Jeddah Declaration and the WB-Irrigation Business Plan;

(b) The Public Private Partnership (PPP) approach in hydropower as well in irrigation schemes contributes to reducing the risks and financing gap, thus improving the quality of works and assuring the good operation and the durability of the assets;

(c) The preparation of “bankable projects” is important in this endeavour. Partners are, therefore, called upon to provide more support for upfront project preparation activities and capacity building

(d) Recognizing their role in mitigating climate change, farmers should be offered financial incentives to invest in renewable energy, farm practices that sequestrate carbon and activities that protect and restore water catchment systems;

public sector funds for infrastructureinvestments from these sources. Many Africancountries will need to spend more than 5percent of their Gross Domestic Product(GDP) to achieve the MDGs in WSS. Yetidentifying sources of additional finance isonly one dimension to the problem of sectorfinance. The session looked at ways to buildsystems and capacity for efficient andeffective spending of public money andinnovative ways to tap into private orcommercial financing.

2.4 Financing of Water Supply Services


Session 2 addressed the topic Scaling-upFinancing of Water Supply and SanitationServices (WSS) to meet the MDGs. Sourcesof finance for WSS investments have beensummarized as the 3Ts: Taxes, Transfers andTariffs. Financing WSS is conventionallyviewed as determining sources of additional

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Box 2 5: Messages on financing watersupply services

(a) Governments need to invoke regulation thatfacilitates borrowing (for instance tax deductibilityof water-linked funding) and provide policy securitythat reduces the risk perception around the sector.

(b)Financiers need to design innovative facilitatingmechanisms relying on the cash flows of the utilityrather than more traditional asset secured lending;

(c) Better market information is required to ensurethat fair risk assessments can be made by potentiallenders;

(d) Use of market-based financing mechanismsshould be mindful of the possible impact on thepoor and tariff structures should be defined tobalance the interests of both the provider and theconsumer.

The session looked at funding for the so-called‘soft’ interventions, as well as making sure bigwater resources investments are spent wiselyand sustainably. It also covered ways to getfinance into WRM including regional financingand using Adaptation Funds.


A lot of good progress has been made in the lastfive years, internationally and in Africa, onfinancing water resources management. Inparticular, political awareness has increased andactions are underway to establish a moreconducive co-operative environment. Yet, waterresources management lacks an institutionalhome and champion and is a neglected area forfinancing. This requires improving governance,building capacities and strengthening institutionsin order to reduce risks and provide a stablepolicy environment.

Critical success factors for financing WRM in theareas of governance and innovative financingwere elaborated, many of which have beenunderscored in the various declarations andcommitments made by the political leadership.The declarations all stress that the enablingenvironment is critical to the flow of public fundingand private investments as a well-governed sectorreduces commercial, political and reputationalrisk and brings greater and more stable returns,which catalyze investment. What is required is forgovernments to unpack these declarations andlocalise the actions that have been defined.

2.5 Session on Financing for water resources management and governance


Session 3 was on Financing Water ResourcesManagement and Governance. It covered theestablishment of a conducive environment andthe stewardship of water resources to makeinfrastructure investment feasible and functional.

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Name Country Currency) ST Term Rating LT Term Rating

SONES Senegal CFA A1 A+

SONEDE Tunisia TD A1- A

National Water Uganda UShs A2 A

ONEA Burkina CFA A2 BBB+

Athi Kenya KShs A2 BBB+

Nairobi Kenya KShs A3 BBB-

Table 2 2: Credit Rating for Some African Utilities

Several lessons are emerging from attempts byutilities to source commercial funding. Theseinclude: a) capacity constraints in thedevelopment of deals e.g. capital investmentplanning and investment preparation (EIA, tenderdocuments and procurement, etc); b) the needto have a Transaction Advisor to provide capacityto the client, and improving internal processes(e.g. treasury management) to ensure post-transaction sustainability; c) issue of local versus

foreign currency; and concessionality constraintslinked to Highly Indebted Countries Initiative(HIPC).

The session noted while there is increasingviability among some African utilities, not muchcommercial financing is happening, due in largepart to: a) major macroeconomic challenges; b)lack of policy support for borrowing; and c)competition with concessional finance.

Source: WSP-Africa

financing mechanisms designed to satisfythe needs of the water utilities in the form oflong tenured loans and bonds. Recentinnovative transactions such as K-Rep micro-project f inance in i t ia t ive in Kenya andissuance of a utility bond in Botswana areproof of the market's appetite for suchtransactions. However, for such innovationsto go up to scale there is need to designappropriate policies and regulations thatfaci l i tate the use of these financingarraignments.

• For countries to achieve economicallyfeasible levels of sector expenditure (say2 to 3 percent of GDP) without hitting theMTEF ceiling for public expenditure

• Market rigor helps increase sustainabilityby increasing oversight of water providerand operational controls and promotessecond generation reforms.

Local debt capital markets have beenevolving and are now capable of providing

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a. Experiences in PPP in Irrigation in AfricaThe presentation reviewed current Africanexperiences in PPPs, which have beenimplemented. The Swaziland Water andAgricultural Development Enterprise (SWADE),a parastatal body, is implementing majorirrigation projects in Swaziland. SWADE’sapproach is to form partnerships with farmers’associations in order to build their capacity andmanage their irrigation infrastructure effectively.The presentation noted from the review thatthere is a need for a professional third partybetween Government and farmers in PPP inagricultural water development to ensuresuccess.

b. Financing sanitationKfW presented main findings and a set ofrecommendations on the financing of sanitationbased on deliberations of a symposium held inFrankfurt. The recommendations were:

Recommendation 1: Invest more in wellprepared hygiene awareness and sanitationdemand creation as return on investment canbe very high.

Recommendation 2: Target the lower incomegroups more efficiently Funding gaps for thepoor can be reduced through Lower costtechnologies for investment and operation, micro-credit to increase the capacity to pay for investmentand targeted subsidies based on properunderstanding of opportunities and constraints ofpoor people, inclusive planning and project design

The session noted that the AU meeting of Waterand Finance Ministers in 2010 should reflectstrongly on tested approaches for:

• optimizing the use of various financinginstruments

• drawing on ODA as leverage for finance fromother sources

• packaging more bankable projects forinvestment

• enhancing the quality of the enablingenvironment, in terms of stable policy &legislation; sound governance & leadership;and strong institutional capacity

2.6 Country and Donor Experiences


Session 4 shared Country and DonorExperiences on the sub-themes above, includingperspectives on public-private partnerships (PPP)in water security, financing the sustainable deliveryof WSS services whilst ensuring the needs of thepoor, and country processes to raise the statusand visibility of water in economic developmentand national decision-making.


The following summarises issues raised in someof the presentations:

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Box 2 6: Messages on financing waterresources management

A number of messages came out of the session onfinancing water resources management. Theseincluded the following:

(a) Both hard (infrastructure) and soft interventionsare needed and are inextricably linked. Without thegovernance and IWRM interventions, financing willnot be available and infrastructure will be sub-optimal;

(b) More work is needed to better understand thefinancing of water resources development,management and governance functions. Additionally,there is a need to develop the economic case forwater, both for services and resource management;

(c) Prioritisation of the allocation of water to differentsectors is an emerging governance issue that requiresattention;

(d) WRM plans and financing strategies are essential,with each country’s strategy unique to their situation.

(e) Many administrations are unable to spend budgetallocations and need to develop capacities;

(f) Alternative and more targeted financing andorganisational structures are needed to effectivelymanage the continent’s water resources.

“Instead of water people thinking about fi-nance, finance people should think aboutwater”.

Ola Busari, Trans-Caledon Tunnel Authority,South Africa

The African Water Facility is a key source of fundsto help establish the enabling environmentincluding for IWRM, better planning,transboundary WRM, building capacities andextending knowledge and research. Demandsfor funding for water resources managementfunding expressed to AWF have included:development of national and transboundary waterresources management plans and programmes;implementation of information systems formonitoring and evaluation; water resourcesmanagement at the catchment levels; andcapacity building. Noting the important role thefacility plays, there were calls for full support tobe accorded to it by partners and Africangovernments.

The session noted that there is a need to ensurea careful balance between supportinggovernance and enabling environments versusphysical infrastructure projects that deliverimpacts on the ground. It also underscored theneed to look at the issue of water rights in termsof securing investment and financing. It alsourged a clear balance between investment inwater infrastructure and investments in protectionand conservation of water resources.

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e. Africa is already spending US$7.6 billion ayear on meeting the MDGs for water supplyand sanitation, substantially more thanpreviously known.

f. A further US$2.7 billion a year goes to wastedue to various sector inefficiencies, includingunder-pricing, weak revenue collection,distribution losses, over-manning and lowcapital budget execution.

g. Even if all these inefficiencies could beaddressed, a funding gap of US$9.3 billion ayear would remain with respect to the MDGs.

h. Cost recovery for water supply could befurther increased without detrimental effecton poverty, given that access patterns todayare highly inequitable and existing sectorsubsidies highly regressive.

i. Utility inefficiency has adverse impacts onuniversal access and service quality; thereis some evidence that institutional reformsare having an impact on efficiency.

The main messages to emerge on water arepresented as follows:

a. Africa’s water spending needs amount toover US$30 billion a year; two thirds of thissum is needed to meet the MDGs for watersupply and sanitation.

b. The cost of achieving water security remainsan unknown quantity in Africa, but theplanned increases in hydropower over thecoming decade will go some way towardsexpanding available storage.

c. There is significant potential to develop largeand small-scale irrigation schemes in Africa,but viability depends on keeping capitalcosts down to best practice levels andfocusing on high value crops.

d. Access to piped water and flush toilets hasbarely increased during the last 15 years;the only rapid growth in access is takingplace with respect to boreholes andunimproved latrines.

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2.7 Africa Infrastructure Country Diagnostic: Main Findings and Messages

The AICD is one of the most detailed studiesever undertaken of infrastructure in Sub-Saharan Africa, covering all aspects ofeconomic infrastructure, including ICT,irrigation, power, transport and water. In thecase of water supply, the study collectedextensive primary data from 80 water utilitiesin 24 countries, as well as detailed informationon public expenditure patterns in the sector,and provides new estimates of the cost ofreaching the Millennium Development Goals.The work on irrigation included extensive spatialmodelling of the viability of developing suchinfrastructure across Africa. The potential fordevelopment of new water storageinfrastructure based on hydropower schemeswas also assessed. The main AICD reportAfrica’s Infrastructure: A Time for Trans-formation will be published in November 2009.A companion volume entitled Africa’s WaterInfrastructure will follow in 2010.

for poor housing areas and reduction of initialcapital investment costs for the poor.

Recommendation 3: High urban growthrequires an open mind for all relevanttechnical options

Adequate options include on-site facilities inlower density urban areas (<160-200 inh./ha),shared facilities in very high-density slums,condominial sewerage systems in higher densityurban areas and modular and semi-centralsystems with water and energy reuse.

Recommendation 4: Make full use ofprofessional commercial service providersfor sustainable services

Regulation and financing mechanisms need toset the right incentives for utilities and protecttheir financial viability (legal framework,accounting standards, business plans,milestones, action plans), and there is a needfor cooperation of utilities with local authorities,private providers, NGOs and civil society.

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Box 2 7 Message from Dr. Uschi Eid, Vice-Chair of UNSGAB

To close the financing gap is a big, big challenge and UNSGAB has given quite some consideration, which Iwill share with you, summarized in five points:

1. National governments should establish a national financing strategy for sustainable development of the waterand sanitation sector. Achieving sustainable cost recovery from the „3 Ts“, tariffs (taken as a price for serviceand not be determined by political opportunities), transfers and taxes is key to accessing repayable funding.Governance and management improvements are key in this respect. But it is also clear that sanitation is differentfrom water, more decentralized by onsite sanitation. Also, it often involves more actors. Therefore, specialconsideration is necessary in financing policies for sanitation.

2. Real progress is not possible without national leadership and involvement. National governments have toincrease their efforts for improving management and making additional funds from users and public budgetsavailable to improving water and sanitation services. I would like to remind, that the eThekwini Declarationcontains a commitment to establish a separate budget line for sanitation and to aspire to devote at least 0.5% of the GDP.

3. It is important to prepare for more market finance for utilities, to help to close the enormous financing gap.Examples from Uganda and Senegal show, it can work. But still today most African utilities are far away frombeing able to tap market finance. In order to do so, very specific criteria have to be met: 1. Proper economicperformance, meaning good corporate governance and 2. The political framework must be appropriate forbanks to consider loans; they need investment security and therefore security and predictability of financialplans. On top, a functioning financial market is necessary.

4. It is necessary not only to consider financing for water and sanitation, but also for water resource management.For example much more storage capacity than Africa has today is needed. Climate change greatly adds to thischallenge. Let us face it: Australia and Ethiopia have similar water conditions, but Ethiopia has only 1/100th ofAustralian's storage capacity. If Ethiopia wants to arrive at the Australian level, Ethiopia has to invest 5% of itsGDP for the next 80 years.Obviously neither public funding nor ODA nor the combination of both will be enough. So we need innovativeapproaches to rise to the challenge ahead. On a personal note: I think the Clean Development Mechanism, wherepollution rights are traded, should also be used to help to close the financing gap in water resource management

5. The last point, I want to mention, is ODA. It is essential to maximize the impact of ODA, by looking to itsleverage (for example through risk guarantees) and its catalytic effect. Development partners should stick totheir commitment and provide ODA at a level that can make a maximum impact. They should optimize andleverage the use of their scarce ODA funds and allocate them to populations that are in greatest need.

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18.A balance is needed between the financingof physical infrastructure, the enablingenvironment and governance functions –they are all essential

19.Huge infrastructure deficit for hydropowerand agricultural water management butthese have now re-emerged as priorities.

20.Action is needed at all levels - from locallevel with CSO support through to regionalcooperation and development

21.Countries have to overcome a majorpolitical dilemma – setting tariffs thatrecover costs

22.There is a wide (perhaps widening) diversityacross Africa. There is no financing blueprintsuitable for all countries. Fragile states needspecial attention.

2.9 Messages for Finance Ministers put forward by Panellists on Financing Water Infrastructure

Boxes 2.7 and 2.8 capture the key messagesfrom two of the high-level panellists on FinancingWater for Africa’s Economic Growth. Even thoughthere was no opportunity for the views to bediscussed, they are highlighted here because oftheir relevance to the planned meeting of themeeting of Finance and Water Ministers.

j. In view of the funding gap, many countriesface a difficult policy choice betweenadopting lower cost water and sanitationtechnologies or simply taking more time tomeet the MDGs.

2.8 Summary of finance issues

12.Many positive developments in the last fiveyears - political and financial; these providesa good platform for going forward.

13.Huge financial challenge – $30 to 50bn/yrraises need to harness all financial meansand develop bankable projects andprogrammes.

14.There is a need to demonstrate thecompelling economic case for investmentin water and sanitation.

15. All countries should develop nationalplans with clear financing strategies andensure development partners align withthese

16.A broad mix of finances from many sourceshas to be mobilised

17.Financing for water resources developmentand management and for governancefunctions needs more attention andappreciation

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Box 2 9: Key Messages from the Private Sector to Finance and Water Ministers - Johan Kruger,Managing Director, AfCap Consulting, South Africa)

Below are thoughts from the private sector on ways to ensure greater private investment in water infrastructure

A. Depoliticise tariffs and give certainty on how adjustments will occur

B. Simplify and synchronise business environment to create space for private investment

C. Build information basis and capacity to prepare projects to attract private investment and debt

D. Develop local capital markets

E. Apply economic justification criteria to use grants and concessionary loans as viability gap funding

F. Develop and retain skills and experience

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Box 2 8: A Message to African Ministers of Finance – William Cosgrove,

Honorary President, World Water Council

Below are the views of W Cosgrove on financing water infrastructure, captured in a message to the plannedmeeting of Ministers of Finance and Water.1.You do not invest in water for water’s sake!Your Government is not investing in water. It is investing in economic and social development. This may bethrough:

o Investing in energy (and at the same time, if it is in hydropower for climate mitigation and flow regulation that may reduce risks of droughts and floods);

o Investing in food production to feed your own population, to reduce foreign exchange requirements or perhaps earn foreign exchange;

o Investing in water infrastructure to attract industry and touristso Investing in job creation through all of the above;o Investing in health and education through the delivery of water services for a better quality of life for all

of your citizensThe rates of return of these investments can be high, even compared with the opportunity cost of capital, butthe benefits of many when discounted at social rates of return would cover the investment many times over.2.You should insist that water managers operate their institutions and prepare and build their projects efficientlyand effectively as a condition of investing public fundsThere are only two sources of funds to provide water services and build the needed infrastructure – (i) userpayment for services through some form of tariffs and(ii) public funding from taxes. The various mechanismsused to borrow money or otherwise to fund investments are simply means of leveraging these two sources.Transfers from outside the country (development assistance) are made possible by taxpayers elsewhere sharingthe burden. Practices that lead to efficient and effective operations include:

o Tariffs that cover costs (inception, operation and maintenance) while taking account of equitable distribution of the burden and ability to pay;

o Efficient revenue collection and use of funds available;o Efficient operations (World Bank analysis of statistics shows that 1/3 of African countries are performing

better than the world average in achieving the Millennium Development Goals. These are also those operated more efficiently);

o Subsidies targeted to the poor;o Public accounting for use of funds, services provided and efficiency (e.g. percent unaccounted for water)o Informing government decision-makers of options that allow them to make trade-offs between higher-

cost approaches and the service levels they permit with lower cost approaches (perhaps less advanced technology) with increased service levels.

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The First African Water Week in Tunis, 2008provided an increased awareness of the vitalcontribution of water resources infrastructure toeconomic growth, beyond the perspective ofdrinking water alone. That the latter is importantis not in dispute. However, achieving thecontinent’s objectives in drinking water andsanitation is inextricably linked with fastereconomic growth. Growth that will requireinvestment in agricultural livelihoods, access toelectricity, and reduced vulnerabilities to floodsand droughts. The Africa Water Vision hadestimated the financial requirement for such waterresources infrastructure to be around 8 billionUS$ per year. However, new informationemerging at the time of the preparations for the5th World Water Forum in March 2009 suggestedthis figure had underestimated the scale of theneed, perhaps significantly. Consequently, theAfrican Development Bank commissioned anupdate of the financial requirement, based onbest available information at the time across thedifferent water use sectors.

Updated data, presented in the African RegionalPosition Paper at Istanbul in March 2009suggested the financial requirement for waterresources infrastructure was in fact verysignificantly larger – at close to 40 billion US$per year. Recently released data from WHO atthe time suggested the costs of meeting thedrinking water and sanitation MDG targets to beclose to the 12 billion US$ per year originallyestimated by the African Water Vision.Consequently, the total financial need to attain

Annex 1: Consolidated Abstracts for Finance Presentations

A Session: financing water infrastructure for africa’s growth and development

1. Presentation: Africa Water Vision – Revisiting needs and prospects

Sering Jallow, Manager, Water and SanitationDepartment, OWAS 2, African DevelopmentBank, Tunis

ABSTRACT

The African Water Vision 2025 remains the guidingframework for the continent’s water development.The Vision set out the continent’s aspirationsthrough targets in drinking water and sanitation,agricultural water management, energy access,flood and drought management and the softmeasures needed to set these in place. Whenoriginally released in 2000, the financialrequirements to deliver the Vision were estimatedat 20 billion US$ each year over a twenty yeartime horizon. The lion’s share of that investment– some 12 billion US$ each year – was seen tobe required to achieve the Vision’s targets indrinking water and sanitation, with finance beingone key area requiring redress, alongside otheraccompanying measures to improve the invest-ment setting and prospects of delivery.

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• Preparations for the 2nd RWSSI InternationalConference The Bank continues to work tomobilize in-creased donor and otherfinancing in support of the Rural WaterSupply and Sanitation Initiative, and to dis-burse in line with increasing coverage of safewater and basic sanitation to 80% of therural populations in Africa by 2015. TheRWSSI 2 Conference will bring together keypartners to take stock of progress and re-new commitments to scaling up access toRWSSI. The Second RWSSI InternationalConference will review achievement andseek to mobilize resources for 2nd and 3rdphases of implementation. The Meeting ofAfri-can Water and Finance Ministers will bethe basis of the Conference.

2. Presentation: Water for growth and development – Implications for dialogue on water and finance in Africa

Alan Nicol, Director of Policy and Programmes,World Water Council, Marseille, France, E-mail: [email protected]

Keywords: growth, regional groupings, watermanagement, water supply, shared river basins,public goods

ABSTRACT

This presentation describes the emerging findingsfrom a prospective study funded by the FrenchMinistry of Foreign Affairs on water for growth

together the different, and complementarystrands of the finance story.

• Country Sector Reviews, MDG InvestmentPlans and Finance Strategies The processof Country Sector Overviews has progressedto a second phase following the first roundin 30 countries. An MDG costing tool is beingapplied to get an idea of the requirementsto meet country MDG targets. AfricanDevelopment Bank has been encouragingcountries to seek its support in thepreparation of Water Sector InvestmentPlans. For example, the Bank participatedin the First Ghana Water Forum onaccelerating water security for economicgrowth and pledged its commitment toassist in the preparation of its plan.

• Disbursement on small-scale water mana-gement under Food Price Crisis The Bank’sAfrican Food Crisis Response launched inmid-2008 provides a framework foraccelerated support to countries affected byincreased food prices. Financed by portfoliorealignment, payment support and the Bank’ssurplus accounts, the Response is injectingnearly 0.5 billion US$ into short-term support.Eight projects worth around 200 million US$were approved in 2008 for rural developmentand water mobilization. In September, theBank approved its Irrigation Plan to mobilizeresources to increase irrigation and waterstorage capacity by at least 8.5 billion cubicmeters over a six years period.

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• Increased commitment to African WaterFacility to scale up its operations The Facilitywas established in response to the regionaland international consensus to address theneed for increased investments for thedevelopment and management of waterresources in Africa. The operations of theFacility are supported through donorcontribution, with pledges to date amountingto 110 million Euro from 11 donors includingtwo from Africa. The AWF continues play aleading role in many of the strategic initiativeson the AMCOW agenda and to strengthenwater governance and mobilise thesubstantial investments necessary formeeting Africa’s water needs at national andregional levels.

• A proposed Short-term African WaterFinance Task Force to monitor financial crisisAt the time of the In-frastructure Consortiumfor Africa’s meeting on Financing Water inSenegal in December, 2008 the globaleconomic crisis was gathering pace, and aneed foreseen to monitor the impacts inorder to protect invest-ment flows to water.It is recommended that this Task Force beinitiated under the auspices of AMCOW inorder to seize opportunities for waterinvestments under the numerous financialdisbursement mechanisms and stimuluspackages that have been set in place tomitigate the crisis. The Task Force couldalso usefully bring together the differentinstitutions engaged in finance to pull

the African Water Vision was updated at Istanbulto an estimate of 50 billion US$ per year.

This presentation will present the update of financerequirement set out in the African Regional PositionPaper at Istanbul to reinforce the scale of thefinancing need across the African water sector inall its development uses, and to highlight thesignificant difference compared with the original2000 estimates. It is acknowledged there is anongoing renewal of finance estimates in differentparts of the water sector, including through theAfrica Infrastructure Country Diagnostic and theemerging portfolio of agriculture investments.Other papers to be presented at the FinancingSession at Johannesburg will present new datain different parts of the sector that will again renewthe overall financing picture.

This presentation will also present an update onthe ‘Immediate Actions’ set out in the AfricanRegional Posi-tion Paper as relate to financing.This will include a summary of progress towards:

• Meeting of African Water Ministers andFinance Ministers. This action carries theendorsement of Heads of State in theirSharm el-Sheikh Declaration. The Bank isengaged in dialogue with AMCOW andUNSGAB in preparations towards thismeeting, which will take place in 2010. Themessages coming out of the deliber-ationson Financing at this Water Week will informthe organization of the meeting and itsexpected outcomes.

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economies and that reflects moreadequately the complexity of future policychoices;

c) support the dissemination of strongernarratives on water for growth and deve-lopment that can make available to a wideraudience – including the media – a strongbusiness case for investment strategies inwater at national and regional levels.

The presentation will illustrate opportunities fordeveloping such a model based on three regionsof Africa and three major river basins. The interimfindings will provide an input into widerconsultations and dialogue during 2010.

3. Presentation: Africa’s Water Infrastructure: A Preview of AICD Findings

V. Foster and Cecilia M. Briceño-Garmendia,Sustainable Development Department, AfricaRegion, World Bank, 1818 H Street NW,Washington DC 20433, (E-mails: [email protected], [email protected])Keywords: Water finance; efficiency; irrigation;water resources; water supply; sanitation.

ABSTRACT

This presentation presents the highlights andmain findings of the Africa Infrastructure CountryDiagnostic (AICD) for the water sector.

It is important, therefore, to build on the currentstrong push for greater river basin management inAfrica and regional economic integration.

Tools to help support this process exist, includingbenefit sharing approaches that enable greaterunderstanding of the policy options betweencountries sharing transboundary river basins.However, the political complexity of cooperatingover shared resources means that rarely havethese mechanisms been put into practice. Onekey challenge lies in presenting information anddata on regional integration, national developmentchal-lenges and shared river basins in such away that potential water investment opportunitiesare easily identified and understood by thefinancing community in terms of their contributionto economic growth and development.

A ‘virtual basin’ model is proposed that will buildon existing knowledge and enable the combiningof data and information from investment, tradeand financing communities, on the one hand,and water, environment and productive sectorson the other. This will seek to achieve thefollowing:

a) combine elements of the river basin asplanning unit with wider ‘problem shed’understandings that are inherent withinregional trade arrangements and economicgroupings;

b) enable planning and management that isfurther integrated within regional political

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However, the nature of future change on thecontinent is of such a scale that many decisionson investments in water infrastructure - including‘natural’ infrastructure - will have to be taken ata regional, ‘supranational’ level. Based on ananalysis drawn from three regional groupings –SADC, the EAC and ECOWAS – this presentationargues that in order to make these kinds ofdecisions and to generate regional public goodsthere is a pressing need to draw together:

a) economic, social and political integrationprocesses under existing and emergingregional trade agreements (including greaterconvergence of social and productive sectorpolicies, and natural resource managementstrategies at a national level); and

b) supranational river basin managementinstitutions (which encompass areas that arehome to a growing proportion of the continent’spopulation and, in future, will be key drivers ofsocial and economic development).

Greater coupling of the two will enable strongerinvestment decision making on regional publicgoods that can reinforce economic growthopportunities and support social andenvironmental sustainability.

Emerging messages

However, a key established lesson is that regionaldecision making and financing processes involvecomplex political economies and can easily flounder.

and development in Africa. The study, beingcarried out by the World Water Council, describesthe nature of future water developmentchallenges and, inter alia, proposes the de-velopment of a virtual basin model to enablegreater integration of regional development policyand river basin planning.

Context

Africa faces unique challenges. These includethe shared nature of most major river basins, theexceptional levels of current population growth(at a continental scale these are twice the globalaverage) and the risks and uncertaintiesassociated with major reliance on small-scaleagriculture for employment and livelihood se-curity in many countries. An overarching risk alsolies in the complex association between theabove factors and the uncertain nature of futureclimate change.

Addressing the challenges

Solutions to these challenges have local, nationaland regional dimensions. Many interventionsalready address required changes at local andnational levels. These include improving watersupplies and sanitation to protect local livelihoodsand ensure a healthy population, water for powergeneration to broaden opportunities forlivelihoods diversification, and the strengtheningof soil and water conservation to raise agriculturalproductivity and reduce risks associated withrainfall variability.

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A. Financing water for food and energy in africa

1. Key note Presentation: Water for agriculture and energy in Africa - major challenges, different initiatives and follow-up mechanisms

Maher Salman, FAO

ABSTRACT

Growth is a priority for Africa and all the naturalresources are available to make it happen. It willrequire a massive investment in agriculture,particularly water and energy infrastructure –ranging from rural roads and small-scale irrigationto large multi-purposes projects - to break downthe internal barriers that hold Africa back.Substantial progress has been made in the recentpast in terms of national, regional and internationalcommitments. In 2002, NEPAD’s ComprehensiveAfrican Agriculture Development Programme(CAADP) offered a framework for investment inagriculture in Africa. In Maputo, in 2003, theHeads of State and Governments of the AfricanUnion committed themselves to allocating at least

p. A further US$2.7 billion a year goes to wastedue to various sector inefficiencies, includingunder-pricing, weak revenue collection,distribution losses, over-manning and lowcapital budget execution.

q. Even if all these inefficiencies could beaddressed, a funding gap of US$9.3 billiona year would remain with respect to theMDGs.

r. Cost recovery for water supply could befurther increased without detrimental effecton poverty, given that access patterns todayare highly inequitable and existing sectorsubsidies highly regressive.

s. Utility inefficiency has adverse impacts onuniversal access and service quality; thereis some evidence that institutional reformsare having an impact on efficiency.

t. In view of the funding gap, many countriesface a difficult policy choice betweenadopting lower cost water and sanitationtechnologies or simply taking more time tomeet the MDGs.

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k. Africa’s water spending needs amount to overUS$30 billion a year; two thirds of this sum isneeded to meet the Millennium DevelopmentGoals (MDGs) for water supply and sanitation.

l. The cost of achieving water security remainsan unknown quantity in Africa, but theplanned increases in hydropower over thecoming decade will go some way towardsexpanding available storage.

m. There is significant potential to develop largeand small-scale irrigation schemes in Africa,but viability depends on keeping capitalcosts down to best practice levels andfocusing on high value crops.

n. Access to piped water and flush toilets hasbarely increased during the last 15 years;the only rapid growth in access is takingplace with respect to boreholes andunimproved latrines.

o. Africa is already spending US$7.6 billion ayear on meeting the MDGs for water supplyand sanitation, substantially more thanpreviously known.

Introducing the AICD

The AICD is one of the most detailed studies everundertaken of infrastructure in Sub-SaharanAfrica, covering all aspects of economicinfrastructure, including ICT, irrigation, power,transport and water. In the case of water supply,the study collected extensive primary data from80 water utilities in 24 countries, as well as de-tailed information on public expenditure patternsin the sector, and provides new estimates of thecost of reaching the Millennium DevelopmentGoals. The work on irrigation included extensivespatial modelling of the viability of developingsuch infrastructure across Africa. The potentialfor development of new water storageinfrastructure based on hydropower schemeswas also assessed. The main AICD report Africa’sInfrastructure: A Time for Transformation will bepublished in November 2009. A companionvolume entitled Africa’s Water Infrastructure willfollow in 2010.

Main Messages for Water

The main messages to emerge on water are asfollows.

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ABSTRACT

Agriculture remains the sector through whichmany developing nations of the world can achieveeconomic growth and poverty reductionobjectives. Indeed, this is true of many Africancountries. It was in realization of this importantrole played by Agriculture that the African leadersendorsed the Comprehensive Africa AgricultureDevelopment Programme (CAADP), at the 2003Maputo Heads of States Summit as an Africaninitiative for spearheading an agriculture-ledeconomic development strategy.

Based on four mutually reinforcing thematicareas, commonly known as Pillars, CAADP seeksto achieve a sustained agriculture average annualgrowth rate of 6%. Each of the four pillarsincorporates policy, institutional reform andcapacity building. Pillar 1 of CAADP focuses onsustainable land and water management andgives special attention to Agricultural waterdevelopment. Indeed, this is upon the realizationthat most of Africa’s agriculture is rain fed, a factwhich critically limits the potential of the sector.Sadly, investment in this area has not beencommensurate with the needs. Current trendsare not encouraging and champions are neededto turn this around. Statistics show that less than10% of Africa’s arable land is under managedwater and land development and only about 7%is under irrigation, a far cry from 41% in southAsia and 29% in East and South East Asia. CAAPPillar 1 however calls for more investments inland and water development spe-cifically on three

- have reminded just how urgent a massiveacceleration of investment in agriculture hasbecome. Therefore, the Second Africa WaterWeek should not recall the same commitmentsbut concretely proceed to enabling the rightconditions for the economic, social andenvironmental viability of such investments.

To achieve this ambitious objective, a joint effortof all parties – governments, regional andinternational institutions, technical and financialpartners, the private sector and civil society – isurgently need. The way forward could be signedby stronger collaboration between financialinstitutions and joint implementation of program-mes; a strong collaboration with AMCOW toensure that the funds of the African Water Facilitywill also be directed to water development;strengthened partnerships for water andagricultural development; renewed private sectorparticipation; greater attention to thecomprehensive river basin wide strategies forwater development; joint efforts in buildinggovernance and management capacity withinimplementing institutions.

2. Presentation: Renewed interest in agriculture and new commitments in support of the sector

Rudo Makunike, NEPAD-CAADP

Scope: Describing the African leaders’commitment to agriculture and status of CAADPimplementation

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It is, however, becoming more evident that thereis a need to harmonize the range of actionsplanned by the major donors with the objectiveto boost investments in water, agriculture andenergy in Africa. In particular, clear synergiesbetween the operations of all donors’ can beseen in the context of:

− The African Development Bank BusinessPlan, which estimates total investmentrequirements of UA 4,971 million to beallocated to agricultural water development,water storage enhancement, and institutionalsupport and project preparation studies.

− The Islamic Development bank JeddahDeclaration which, with a financing packagethat amounts to US$ 1.5 billion over a periodof five years, aims at re-vitalizing theagricultural sector to increase overall pro-ductivity and rural incomes.

− The World Bank Africa Region IrrigationBusiness Plan, which aims at promotinglarge and small-scale irrigation developmentand watershed management in a rain, fedenvironment.

The First Africa Water Week called for theinternational community to give greater attentionto investments in water infrastructure, facilitatingtransboundary infrastructure development, anddeveloping national plans and strategies forachieving water security. The events of the lasttwo years – the food crisis and the financial crisis

10 percent of their national budgetary resourcesfor agriculture and rural development. In 2004,the Sirte Declaration focused on ways toimplement integrated and sustainable deve-lopment of agriculture and water in Africa. In 2005,the Report of the Commission for Africahighlighted the need for investment in water andenergy infrastructure. Despite of all the above andthe others after, progress, unfortunately, remainstoo slow and Africa is lagging behind in terms ofenergy and agricultural productivity, with seriousimplications for development and trade balance.

During last year Conference on “Water forAgriculture and Energy in Africa: The Challengesof climate Change” held in Sirte, Libyan ArabJamahiriya, detailed portfolios of projects andprogrammes of investment in water control foragriculture and energy in Africa were discussed,with a total budget of 65 billion US dollars spreadover twenty years. The Sirte 2008 Declarationcalled upon the African Union Commission todesign a road map and a mechanism formonitoring and evaluating implementation, incollaboration with FAO, the African DevelopmentBank, the Economic Commission for Africa,NEPAD and the Libyan Arab Jamahiriya.

Elements of this follow-up mechanism have startedto materialize in the form country-based actionsand specific supporting programmes such as theone of Lake Chad with the objective to raiseawareness and to mobilize funds to safeguard thelivelihoods of the 30 million riparian people.

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be provided with electricity of quality at affordableprice in order to improve their living standardsand reduce poverty.

Africa also still provides some stark illustrativestatistics: With a population of 13.4% of the worldand a land area of 15%, it has only 2% of theworld’s industrial capacity. Per capita income isonly 15% of the average for the world and thewhole of Africa consumes only 3% of worldenergy.

However, the sharp increase of fossil fuels prices,the cost for their transport but also the awakeningof the public awareness towards the advantagesof properly exploited renewable energy resourcesto fight climate changes and to manage waterresources for multi usage are all factors forexplaining the recent regain of interest for thedevelopment of hydropower schemes.

Africa is well endowed with significanthydropower resources, which are only exploitedat less than 5% compared to 80% in OECDcountries or nearly 30% in other emergingcountries on other continents. The cost ofhydropower energy is amongst the mostcompetitive for many reasons despite the upfrontcapital investments are significant.

Nowadays, with the concern on environmentaland socio-economic impacts potentially resultingfrom hydropower schemes, approaches and

In light of above, this paper gives a comprehensivesynopsis of the CAADP and the global and Africanpolitical commitments to this programme. It alsomakes a case for of investment financing both inagriculture in general as well as in agriculturalwater, given the significant impact of developingthis resource on agricultural productivity and itscontribution in helping attain the CAADP goal of6% average annual productivity.

3. Presentation: Practical Examples for PPP financing for Water for Energy

Roger M. Gaillard, Lead Specialist Infrastructureand PPP, OINF, Infrastructure department, AfricanDevelopment Bank

Keywords: Energy and food security, hydropower,multipurpose, private partner, Public PrivatePartnerships, risks sharing,

ABSTRACT

The presentation is relating to the subject of theuse of water to produce energy. It recalls thatthe African continent is lagging behind at theworldwide scale with a very low per capitaconsumption of electricity. With the obviouscorrelation which has been demonstratedbetween the electricity consumption rate andthe level of human development indicators (likeliteracy, access to water, mortality, etc……) itappears now paramount that populations must

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The CAADP framework guides countries to focuson analytical work and undertake evidence-basedplanning, build and manage alliances andpartnerships to mobilize resources for agriculturalinvestment priorities, and design informedinvestment programmes. While the public sectorbudget is important in investment financing,equally important are private sector investmentsas well as financial support from developmentpartners. CAADP advocates for countries toincrease investments not only in agriculture, butalso in water and land management. Within thecontext of the CAADP country processes, thereis opportunity for investment programmefinancing to tap into global resources such asthe $20 billion commitment from the G-8countries.

The international commitment to agriculture,particularly African agriculture, has seen moreand more development partners aligning withthe CAADP as a framework through which theinjection of their financial resources in theagriculture sector can be aligned. IndeedCAADP as Africa’s own strategic frameworkfor Agriculture makes it possible to effectivelyaddress the fundamental barriers andbottlenecks in the enabling environment foragricultural development such as policy,institutional barriers and technological barriers.CAADP has therefore emerged as a key entrypoint for aligning and harmonizing support toAfrica’s agriculture sector.

key areas namely Sustainable Land Management(SLM), agricultural water and land policy andadministration.

The implementation of CAADP has been tippingmore towards demonstration of real impact onthe ground, in terms of agriculture productivityand livelihood issues. This has seen Agriculturereceiving worldwide attention from global leadersand topping the global developmental and foodsecurity agenda. The recent challenges posedby the rising food prices and climate change havegone to draw further attention to Agriculture. InJuly 2009, the G-8 leaders pledged $20 billionover three years to strengthen Agriculture. Theirstatement “We commit to provide resources –whether financial, in-kind or technical assistance– in support of CAADP and other similar regionaland national plans in Africa” is a clear assertionof this global attention to agriculture.

There is therefore more concerted effort thanbefore, from both African and international leadersto further advance CAADP. The decisions anddeclarations of the April 2009 African Ministersof Agriculture, Land and Livestock conferenceas well as the July 2009 Africa Heads of Statesummit clearly demonstrate Africa’s commitmentto Agriculture in general and to CAADPspecifically. This commitment at the African levelis translating into commitment and action by bothstate and non-state actors through the signingof the CAADP compacts.

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the same hydro resource. Emphasis must alsobe put on the fact that the consideration of theproject through the prism of regionalizationinvolving four countries is paramount. Eachcountry in isolation could not have succeededto mobilize alone the needed worth 1.5 billion $for the project execution.

As a matter of conclusion, it is worth recallingsome of the key commitments taken during the14th Session of the UN Commission onSustainable Development in Johannesburg in2006 by the African Ministers. The first of the 17key commitments states that parties shallCommit to working together (ministers of waterand energy) to unlock the hydropower potentialof Africa as a major renewable energy option topromote sustainable development, regionalintegration, water and energy security, andpoverty eradication in Africa.”

Among the 16 other commitments drawing aroad map for Africa in the Hydropower sector,those of strong relevance to the subject of thisconference are with to be quoted:

• Agree to promote the integration ofhydropower generation with other water usesand to promote hydropower on existing dams.

• Agree to promote hydropower development,within the principles that exist at national,sub-regional and regional levels of integratedtrans-boundary water resource managementand benefit sharing arrangements.

• Assurance of efficient operation andmaintenance activities by a private operatorwhich remuneration is based onperformance and results.

• Streamlining of the activities on the multiaspects of river basins management withone single organization.

In October 2009, a conference was held in Dakarin order to test the interest of potential privatepartners to participate to the financing and theconstruction of the project. The results areencouraging and confirm the potentially retainedscheme where the HV line will be under theresponsibility of the states while the two powerplants could be financed, constructed, operatedand maintained by private partners.

This project with its unique nature and dimensionin the region demonstrates the success of thecombination of two important factors like:

• The strong will to cooperate by 4 countrieshaving not equitable resources but a regionalvision, and their e wise approach to develop,exploit and jointly manage a transnationalriver basin,

• The adequate structuring of the project forattracting private investors and partners toset up a PPP.

The final tangible results are twofold in achievingenergy and food security at the same time from

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program that is contemplated to be implementedwith the participation of private partners furtherto the resolution of the OMVG Council ofMinisters. The project is multinational with theparticipation of the four countries, which areGambia, Guinea, Guinea Bissau and Senegal.

The project comprises two hydropower schemes,the first one in Sambangalou on the Gambia riveron Senegal territory with an installed capacity of128 MW. The other scheme is located in Kaletaon the Konkoure river on the Guinean territorywith an installed capacity of 240 MW. A 225 kVHV line of 1677 km, interconnects the two powerplants with the four national distribution networksand the regional grid linking other countries. Theestimated cost of the project (2008 update) isequivalent to 950 million Euros.

Since 2002, the AfDB has financially supportedthe OMVG for worth US $ 9 million for executingthe feasibility studies and completing the finaldesign and tender documents and for theappointment of an advisor for structuring theproject under a PPP. This option has been selectedfor various reasons, the major ones being:

• Reduction of the burden on the nationalbudgets of the four countries through theparticipation of private funds to close thefunding gap.

• Assurance of high standards and quality inthe construction of the components bycontractors financially involved in the project.

concepts have evolved in order that hydropoweris no longer in conflict with other water uses.Today, most of hydropower schemes aredesigned as multipurpose projects respectful ofand complementary to other sectors interestslike: navigation, irrigation, fisheries, leisure, watersupply, solid transport and coastal erosioncontrol, watershed erosion abatement, soil salinitycontrol etc. There is a strong consensus nowthat countries should follow an integratedapproach in managing their water resources andin planning hydropower development incooperation with other water-using sectors.

There is actually a trend to support thedevelopment of the hydropower sector in Africathrough realization of new schemes under theformat of Public Private Partnerships (PPP) withan adequate blend of public and private fundsand a well-balanced sharing of risks. The PPPformat allows governments to minimize theburden on the public funds and budgets withtheir re-allocation to other sectors like education,health or social ser-vices. The involvement of theprivate partners assures a more efficient operationand maintenance, which is paramount for capital-intensive assets, which have a very long lifetime.The participation of the private partner alsoinduces the transfer of skills, capabilities andknowledge, which are cruelly lacking in this sectorin the majority of the African countries.

The specific hydropower project, which ispresented herein, is the Organization de la Miseen Valeur du Fleuve Gambie (OMVG) Energy

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Area 2: Improving Access to and Sustainability

of Markets: Productivity growth without significantimprovements in marketing is an opportunity lost.Farmers need to be assisted to participate inhigher value-added market chains than they canat present. Therefore, Africa must finance majorpublic works like roads, railways, andtelecommunications. To harness Markets, newinvestments must be directed towards

(i) Increased Value-addition in Agriculture,emphasizing Strategic Commodities,involving the promotion of Public PrivatePartnerships (out grower models, thewarehouse receipt system, contractfarming), and assistance with improvingpost harvest handling, storage, rural marketinfrastructure, and

(ii) Increased capacity of farmers’ organizationsto build up skills in management, entrepre-neurship, and group dynamics so they canengage in higher-level value-chain activitiesincluding collective marketing.

Area 3. Farmer Institution Development: Farmerinstitutions are important forums for mobilisingfarmers around a common objective, delivery ofservices as well as policies that supportagricultural development. They form key entrypoints for service delivery to individual householdsor communities. Farmer organisations play aleading role in technology promotion, marketorganisation and value addition. Yet Majorityfarmer institutions in Africa are still characterized

increases are predicted with increased frequencyand severity of extreme climate events, such asrainstorms, heat waves, droughts and floods.Africa, like the rest of the world is grappling withthe problem of environmental degradation and itsattendant negative adjuncts, notably thedeepening water crisis. Africa stands at the brinkof an escalating environmental calamity. Theencroachment, drying up and depletion of R. Rwiziin Uganda, dwindling waters of River Nile, Lake.Victoria, Lake Chad (whose basin is shared by fiveAfrican Countries). Even Major public works likedams, irrigation and gravity water schemescontinue to dry up despite the huge resourcesinvested in such projects.

Financing Areas Necessary to achieve Food andEnergy security in Africa

Area 1: Enhancing Production and Productivity.

To contain food and energy insecurity, factorproductivity (land, labour, and capital) will haveto be raised substantially. To this end, Financingshould be directed towards: (i) Technology Deve-lopment/Research; (ii) Ad-visory Services andTechnology Delivery; (iii) Disease, Pest and VectorControl; (iv) Sustainable Management of Landand Water Resources; (v) Water for AgriculturalProduction; (vi) Development and Promotion ofLabour Saving Technologies includingAppropriate Mechanisation; (vii) Improved Accessto High Quality Inputs and Stocking Materials;(viii) Accelerated Production of Selected StrategicEnterprises (including food security crops).

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Federation, Plot 27, Nakasero Road, P.O.Box6213, Kampala, Uganda, Email:[email protected],[email protected]:www.farmersenclave.blogspot.com

ABSTRACT

Introduction and situational context

Water, food and energy constitute an increasinglyinter-dependant nexus in which agriculture takesa central position. Climate change continues toadversely affect the quality and availability ofwater, food and energy. Ninety five percent ofthe food in Sub-Saharan Africa is grown underrain fed agriculture! However, there is a newrecognition on the continent of the fundamentalimportance of agriculture to the African economy.Major initiatives include Maputo Declaration andthe Comprehensive Africa Agriculture Deve-lopment Programme (CAADP), which manyAfrican Countries have committed to the principleof agriculture-led growth as a main strategy. Thisnew attention to agriculture comes as Africabegins to face the considerable and urgentchallenges ahead.

With a population growth of 2.4 percent perannum, every day, there are more mouths to feedon the continent. Sub-Saharan Africa sufferssevere food energy deficiency at 51 percent (Smith,Lisa C.Wiesmann, Doris, 2007, International FoodPolicy Research Institute). Climate change isalready upon us: unprecedented temperature

• Agree to promote trans-boundary water basinorganizations and regional power pools.

• Agree to improve cooperation andcoordination between the Ministersresponsible for water and energy, particularlywithin the ambit of African Ministers Councilon Water (AMCOW) as they have a goodbasis for cooperation.

• Call on multilateral and bilateral fundingagencies to engage with African countries onhydropower development, promoting nationaland regional project development facilitiesand innovative funding mechanisms. Ministerstake note of the establishment of the Infras-tructure Consortium Secretariat at the AfricanDevelopment Bank (AfDB) for the necessarycoordination and mobilization of resources.

As far as this last key commitment is concerned,the actions and initiatives taken by the AfricanDevelopment Bank in supporting the OMVGEnergy Program as exposed in this paper andpresentation is self-explanatory of the AfricanDevelopment Bank tangible and strongadherence to the impetus given by the highestauthori-ties of African countries.

4. Fundamental Financing Areas Necessary to achieve Food and Energy security in Africa: Farmers Perspective.

T.M. Rwakakamba, Manager Policy Researchand Advocacy, Uganda National Farmers

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irrigate 27.5 ha. The scheme is managed by acooperative, which interacts with various privatesector suppliers on behalf of the farmers.

SWADE

In Swaziland the Swaziland Water and AgriculturalEnterprise (SWADE) a parastatal organizationhas been implementing two major irrigationprojects: the Komati Downstream DevelopmentProject (KDDP) and the Lower UsuthuSmallholder Irrigation Project (LUSIP).

Komati Downstream Development Project(KDDP)

Implementation of KDDP began in 1999 andinvolves pumping irrigation water from the KomatiRiver, mainly for sugarcane. The community wasmobilized to form farmers’ associations, whichare effectively commercial companies. SWADEhas assisted in the formation of these FAs, trainedand mentored them and facilitated both thecapital and recurrent financing from DevelopmentFinance Institutions (DFIs). There are now 21 FAscultivating 3800 ha.

Lower Usuthu Smallholder Irrigation Project (LUSIP)

At LUSIP, water is diverted from the River Usuthuand carried through a Feeder Canal to a reservoirformed by three dam walls. Water is stored duringthe rainy season and distributed throughout theyear to irrigate mainly sugarcane. Once more,the community has been mobilized to form FAs

projects, e.g. highways, are not particularlycommon in irrigation infrastructure projects, andparticularly not in Africa as a whole.

There are two broad types of model:

i) Concession to a developer with full costrecovery

ii) Third party management of an irrigation system,

Examples of both types of model are reviewed

Examples of PPPs

Guerdane irrigation Project Morocco

The first model is extremely rare in Africa as therisks are high for the commercial developer. TheGuerdane Project in Morocco, initiated in 2004,claimed to be the first of its kind in Africa. Thisproject involved the provision of additional waterresources to an existing project, which wasthreatened by declining groundwater resources.Private sector companies were invited toconstruct a 90 km. Pipeline and other irrigationinfrastructure to enhance irrigation water supplies.The private sector supplies 43% of financingwhilst Government provides the balance througha combination of subsidy and soft loan.

Nakhlet Small scale Irrigation Scheme, Mauritania

This is a small irrigation scheme, which pumpswater from a tributary of the Senegal River to

43

renewable energy, farm practices thatsequestrate carbon and activities that protectand restore water catchment systems.

5. Public Private Partnerships in Irrigation Infrastructure: African Experience and application to Swaziland

D.M.P.Lukhele* and A.B. Belsey*, CEO, SWADE,PO Box 5836, Mbabane, Swaziland,(E-mail: [email protected])** Project Director, Lower Usuthu Smallholderirrigation Project, SWADE, Po Box 5836,Mbabane, Swaziland, (E-mail: [email protected])

Keywords: Public private partnership, Irrigation,Infrastructure

ABSTRACT

This paper reviews current African experience inPublic Private Partnerships (PPPs) and examinesdifferent types of PPP, which have been implemented.The Swaziland Water and Agricul-tural DevelopmentEnterprise (SWADE), a parastatal body, isimplementing major irrigation projects in Swaziland.SWADE’s approach is to form partnerships withfarmers’ associations in order to build their capacityand manage their irrigation infrastructure effectively.

PPPs: Models

Private Public Partnerships although common inthe financing of some types of infrastructure

by low capacity to effectively perform their rolesand to demand for delivery of agriculturaladvisory/extension services. This therefore meansthat African financing efforts should focus onstrengthening the capacity of these institutions tofully participate in the commodity value chaindevelopment and combating climate change andensuring accountability of public resources inAgriculture. Integrated Support to Farmer Groups,is an effective way of realizing improvements inagricultural production and productivity. Sincethese activities take place through groups, it alsomeans that advisory services, monitoring andaccountability would be more effective.

Area 4: Fund to Reward Farmers for Ecosystem

Services and Carbon offsets: Farmers interactwith the environment daily and are a centre ofgravity in climate change mitigation andadaptation. Not only do farmers produce food,feed and fibre, but also a whole range ofecosystem services directly and indirectlybenefiting society and the environment. In orderto achieve long-term positive effects, incentivesmust encourage and enable farmers to continueproviding ecosystem services through theadoption of environmentally friendly practices.Stewardship programs offer the necessarypositive incentives to encourage farmers to adoptthese practices. Farmers should therefore beable to benefit from these programs throughwhich their existing and future activities toenhance water quality and ensure its efficient useare recognized and rewarded. Therefore, farmersshould be offered financial incentives to invest in

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Faso, Senegal and Tunisia. In addition to thefinancial viability of the companies, the regulatoryenvironment and prevailing economicenvironment, the state of the banking sectorand capital market development was assessed.This assessment was done by Global CreditRatings, a premier credit rating agency activein Africa.

The survey finds that there is a strong degree ofbankability emerging in the African Water Sector.Donor finance does in some cases reduce thebankability of utilities by occupying a significantplace in the capital structure of utilities, whileoperational issues, particularly around receivablesmanagement, continues to affect the short termliquidity of utilities. Overall, however, the sevenwater utilities surveyed are considered invest-ment grade by Global Credit Ratings on a localcurrency scale.

C. Session: financing for water resources management and governance in africa [GWP]

1. Presentation: Establishing a conducive investment environment

Alan W Hall, Facilitator, sub-theme 3, GWP,(email: [email protected])

Keywords: financing; budgets, projectpreparation, governance.

of water linked funding) and provide policysecurity that reduces the risk perception aroundthe sector. Financiers may need design innovativefacilitating mechanisms relying on the cash flowsof the utility rather than more traditional assetsecured lending. Better market information isalso required to ensure that fair risk assessmentscan be made by potential lenders.

2. Presentation: Africa Water Utility Regional Comparative Utility Creditworthiness Assessment

M. Joffe, Global Credit Ratings, Johannesburg,South Africa ([email protected])

Keywords: Water utility, credit rating, Africa

ABSTRACT

As African water utilities seek to access thecommercial markets, credit ratings andbenchmarking processes will becomeincreasingly important. From the utilities point ofview, such reviews will enable them to under-stand their bankability as well as communicatewith potential lenders around key financial andoperational ratios. Additionally, such exerciseswill provide comfort to financiers who will nothave an in depth understanding of the sector.

A credit assessment exercise was carried out forseven water utilities in Kenya, Uganda, Burkina

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ABSTRACT

It is an opportune time for African water utilitiesto access the commercial markets for theirfinancing and funding needs.

The prior decade saw the institutionalization ofwide spread reforms across the water sectorsin most African countries. The reform processhas focused on cost recovery tariffs, efficiencyin management and human resourcing andcommercialization of the utility operations.Consequently, the reform process hasincreasingly created financially viable entities,particularly in urban areas.

Local debt capital markets have also beenevolving and are now capable of providingfinancing mechanisms designed to satisfy theneeds of the water utilities in the form of longtenured loans and bonds. Recent innovativetransactions such as K-Rep micro-project financeinitiative in Kenya and issuance of a utility bondin Botswana and are proof of the market'sappetite for such transactions.

Whilst commercial debt brings a number ofbenefits such as increased accountability,planning capacity and utility autonomy a numberof obstacles present themselves in the effort toleverage private finance into the sector.Governments need to invoke regulation thatfacilitates borrowing (for instance tax deductibility

The Department of Water Affairs is responsiblefor the operation and maintenance of the majorwater infrastructure. All of the water users bothin and outside of the project are members of theIrrigation District, a statutory body that willcontract a service provider to maintain andoperate the tertiary delivery systems and collectirrigation fees. The Executive Board of theIrrigation District is elected by the water users.

In SWADE’s approach, the FAs are considered tobe part of the private sector and the partnershipbetween SWADE (public sector) and the FAs is away of empowering the FAs so that they caninteract effectively and independently with otherstakeholders in both the public and private sectors.

B. Session: scaling up financing of wss services to meet the mdgs using market resources: how far have we come?

1. Presentation: Financing water services: Progress towards attracting market finance

K. Virjee, * Water and Sanitation Program, WorldBank, Kenya, ([email protected])

Keywords: Commercial Debt, Water Utilities,Access to Finance

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governments and national development bankshave a role in helping to de-velop local capitalmarkets.

There are numerous financial instruments thatcan be applied to water, and finance expertiseshould be brought in rather than relying on waterpeople to put together financing packages. Thesemay include: developing local capital markets,credit enhancement such as guarantees, creditrating of utilities, benchmarking, pooling for bondissues, etc. Decentralisation can mobilise financialresources from all sources for local water serviceswith more flexible financing terms but is not apanacea and there is a need for a mix of modelsfor specific situations. Mechanisms have to befound to encourage micro-enterprises and micro-finance, including for women’s groups. There isa need to address information gaps throughcapacity development within publicadministrations. This should include support forbid preparation and tendering, and projectpreparation.

There is also a need to expand all existing sourcesof finance for investment and not rely solely onnational budgets and ODA. Indeed ODA shouldprovide a catalytic role to leverage other sourcesof finance. For example, donors can providesupport through loan guarantees (e.g. the USAIDDevelopment Credit Authority), and revolvingfunds for the preparation of fundable projects.Such guarantees mobilise local capital and avoidforeign exchange risks by using local currencyloans.

in place, as well as more awareness of differentfinancing mechanisms for water, although actionis needed to meet the commitments made. Butwhat does this mean in practice?

Governance and reducing risk

Of the 87 recommendations contained in theCamdessus report, half relate to improvinggovernance to reduce risk and ensure funds areused effectively. The report stressed that theenabling environment has a critical impact on theflows of public funding and private investments.Evidence shows that better governance increasesaccess to finance for infrastructure and requiresinter alia adequate policies and laws; effectiveinstitutions; an effective regulatory environment;transparency and accountability. A well-governedsector reduces commercial, political andreputational risk and brings greater and morestable returns, which favours investment. Bettergovernance will also improve allocation of scarceresources, reduce the cost of infrastructure (e.g.from re-duced corruption or better/cheaperoptions), avoid ‘white elephant’ projects and helpto forestall the deterioration of national assets.

The Gurria task force called for more focus onthe demand side and the sub-sovereign level.Local development banks and micro-finance areincreasingly important for channelling funds tothe local level but need support andstrengthening, e.g. more independence, legalrecourse to enforce contracts, and competentand honest staff and management. Central

47

credit reporting system). Multilateral support alsoincreased. The G8 countries represent about82% of all donor funding. Support from G8countries is not solely restricted to ODA flows,but includes stimulating better governance andpolicy reforms, preparing plans and strengtheningpartnerships, including support to AMCOW. TheG8 highlights governance issues as an obstacleto progress, along with a lack of priority for waterand sanitation in national plans and budgets. TheG8 progress report recommends further dialogueand stronger partnerships with African countriesthrough the Africa-G8 Partnership.

In parallel with global activity, political processesin Africa (informed by regional and nationalstakeholder consultations) led to the AMCOWBrazzaville declaration on financing in May 2007.This was followed in June 2008 by the AfricanUnion Sharm el-Sheikh declaration, in whichHeads of State committed governments to“significantly increase domestic financialresources”. It also called upon Ministers of waterand finance to develop appropriate investmentplans, to develop local financial instruments andmarkets and mobilize increased donor and otherfinancing. The AU called on Ministers of financeand water together with the AfDB to hold ameeting to develop financing policies and calledon the G8 to reaffirm its commitment to implementthe Evian WAP and to strengthen partnership withAU member states through AMCOW.

It can be concluded, after many years of politicalprocess, that there is now a political framework

ABSTRACT

This paper gives a brief overview of internationalperspectives on financing water and thegovernance reform and instruments needed tocreate a more conducive environment forinvestment. The paper looks at some of the keypolitical processes that have led to commitmentsfrom African governments and internationalpartners and at the actions necessary to convertthese commitments into action.

Political impetus

At the global level, a key catalyst for action onfinancing for water was the high level CamdessusPanel (March 2003) and the subsequent adoptionof some of its recommendations in the G8 WaterAction Plan (WAP) at the meeting in Evian, France,later that year. This stimulated a flurry of activityon financing water, including the Gurria TaskForce in 2006 and ministerial statements onfinancing at the World Water Forums in Mexicoand Istanbul. Collectively these and otherinitiatives have given a political impetus tofinancing for water as well as a more analyticalview from a finance, rather than a purely waterperspective.

The G8 produced a progress report during 2009on their Water Action Plan. The report showsthat bilateral disbursements to Africa (Sub-Saharaand N. Africa) for water and sanitation increasedsignificantly from US$ 382 million to US$ 889million from 2002 to 2007 (based on OECD-DAC

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Other sectors are not sufficiently aware that thesustainability of their sector depends onsuccessful water resources management andthe presence of good governance. Somestakeholders are aware of the risks, e.g.businesses have raised this at the WorldEconomic Forum and some are acting to reducewater related risks to their business. However,there is little indication that this has translatedinto commensurate financing from governmentsand donors.

Soft and hard interventions

There is a dynamic interaction between thesupply (hard) side of water resourcesdevelopment (infrastructure and O & M) and thedemand side and soft interventions, such asinstitutional and legal reforms, participatoryprocesses, information, accountability andintegrity, dispute resolution etc. Bettergovernance might reduce the need for or thecost of infrastructure and better infrastructuremight reduce governance difficulties through pro-vision of secured access to water (e.g. byreducing conflict over water). Infrastructure forwater resources management and developmentvaries considerably and could be for productivepurposes (such as for energy, industry oragriculture), or for protective purposes (such asflood management, wastewater and pollutioncontrol, catchment management and eco-systemmanagement). The latter are mainly public goods

Context

The big-ticket items for financing as highlightedin the Framework for Action (FFA) presented atthe World Water Forum in 2000 are related towater resources management (e.g. floods,agriculture, pollution control etc). Existingestimates provide ballpark figures that illustratethe size of the challenge. The FFA estimated theannual needs as some US$150 bn, comparedwith US$30 bn for domestic water & sanitationservices. In 2007, the UNFCCC estimated thatexpenditures in water infrastructure will need toincrease due to climate change. Adaptation fundsare a potential source of finance for WRM, andstronger links are needed between waterresources planning and National AdaptationProgrammes of Action.

A recent GWP paper stresses the strong linkbetween water financing and governance and theOECD is presently looking more in-depth into thisissue. Unlike WS&S little work has been done onfinancing for WRM, but given the daunting level offinance needed this has to be rectified to minimisesupply-side infrastructure costs and understandthe funding needed for demand-side measures.Making the right decisions on investment andensuring financial sustainability depend on bettergovernance and reforming policies and, whilst thelevel of funds needed is much lower, thegovernance and management functions also needto have secure and adequate financing.

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2This paper draws from the work of the Global Water Partnership and from the work of the OECD and its expert group on financing waterresources management

to develop more bankable projects forinvestment.

2. Presentation: Financing and water res-ources development and management

M. Walshe2, R. Martin-Hurtado, GWP, Stockholm,Sweden (email: [email protected]),OECD, Paris, France (email: [email protected])

Keywords: financing; IWRM; governance;infrastructure.

ABSTRACT

This paper argues for more understanding offinancing for water resources development andmanagement (WRM). With increasing challenges,not least from climate change and growingdemand, water security will not be attainedwithout a much clearer understanding of financingfor water resources. Moreover, productive sec-tors, (agriculture, industry, energy etc) as well asa healthy environment depend on moreinvestment in water resources management.Water resources often lacks an institutional homeor political champion and is thus taken for granteddespite its profound impact on the economy ofa country and the well-being of its citizens. Itscrosscutting nature demands an integratedapproach and an effective governance system,which require increasing levels of funding.

Building on the commitments

Despite raising awareness and political will,putting together the required finance has beenslow and blockages remain. Governance issuesalong with limited prioritization of water in nationalplans and budgets are two key obstaclesdiscussed above. A third obstacle is the shortageof bankable projects attractive to financing in-stitutions - even though there are adequate fundsavailable for support. Initiatives such as the EU-Africa Infrastructure Trust Fund (based in EIB)and the NEPAD Project Preparation Facility setup in 2005 at the AfDB, have funds to supportproject preparation for regional projects but wateris not well represented other than through supportfor hydropower projects. The water sector shouldnot let a focus on river basins risk sidelining waterfrom other mainstream economic activity underthe RECs.

Considerable progress has been made onestablishing a political environment for investmentand further ‘global initiatives’ are not needed. Itremains for these commitments to be convertedinto practical application at the national level bytranslating declarations by governments intodomestic policy. The proposed meeting of waterand finance ministers in 2010 is an opportunityto do this. The meeting should consider how tomaximize the use of various financinginstruments, how to get more from ODA as aleverage for finance from other sour-ces and how

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3. Presentation: Experiences of financing Water Resources Management Programs in Africa

M. Blomberg, African Water Facility, AfricanDevelopment Bank, Tunis, Tunisia([email protected])

Keywords: Water resources, WRM IWRM,TRWM, funding, Africa

ABSTRACT

The African Water Facility (AWF) wasestablished in 2005 with the objective ofmobilizing and applying resources for the Waterand Sanitation Sector in Africa, in support ofachieving the African Water Vision 2025. TheFacility is an initiative of the African Ministers’Council on Water (AMCOW), and isadministered by the African Development Bank.The AWF portfolio currently comprises 51projects of which 24 focus on Water ResourcesManagement (WRM).

With food security and climate variability concernsgaining importance, the significance of WRM hasbeen recognised and is receiving greater attentionwithin and outside the sector. Yet less than halfof the African countries have WRM plans, andthose that do severely lack resources toimplement them. Transboundary organisationsspecifically face issues related to short termunsecured funding.

There are only three sources of funds: tariffs andother user contributions, tax-based subsidies,and external transfers (3 T’s), even loans have tobe paid back from taxes or tariffs. Matching thebest sources to different functions requires carefulanalysis, e.g. for public goods and sociallydesirable projects, innovative funding may bepossible with a mix of public and private finance.Strategic financial planning for WRM, similar tothat developed for WS&S by the EUWI FinanceWorking Group and OECD, may be a way toidentify the most realistic use of different sourcesof finance for different functions.

Conclusion

There is a complex interplay between the costsand the benefits of WRM, which raises manygovernance questions. What systems ofgovernance need to be put into place? Are thereminimum levels of governance that must beachieved? What areas of governance expenditureproduce the best returns? Similarly, what typeand size of water resources infrastructure isneeded to achieve water security? This paper isthe beginning of a process in support of on-goingwork by the OECD, GWP, EUWI and others. It isa work in progress and the aim is to stimulatedebate at the Africa Water Week. The authorsinvite comments and, in particular, examples ofinnovative financing of water resourcesdevelopment and management and watergovernance, or indeed examples of blockagesto such funding.

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resources infrastructure the functions arerelatively well understood but we need todetermine costs and how to benefit fromoptimisation as well as how to access financingfrom different sources. The interaction betweendifferent governance and infrastructure functionsand their costs and sources of finance has tobe understood. The priority is thus to investigatethe functions, costs and financing of WRMinfrastructure and governance and on theinteraction between these elements.

More work is needed to investigate the economicand financial dimension of managing waterresources: the actual expenditures presentlyincurred, the ways of minimising costs, and thepossible financing sources to pay for waterresources management. Government, theprivate sector and social organisations all havea role in providing finance although for mostgovernance functions finance should be mainlyfrom government budgets to ensure vestedinterests do not unduly influence decision-making processes. Investments in WRMinfrastructure have a lumpy nature and long leadin time, which has financial implications. Theeconomic valuation of the benefits of waterresources management has been discussed forsome time but has never been carried out. Amacro-economic case for water (includingresource development and management anddelivery of services), similar in nature to the SternReview on the Economics of Climate Change,has yet to be carried out.

that will require different financing solutions tothe former that can raise private finance.

Insufficient funding will prevent us from gettingadequate policies and laws, effective institutions,an effective regulatory environment, access toreliable information, and transparent and reliableperformance measurement. More informationis needed on the costs of governance functionssuch as: monitoring and information mana-gement policymaking and planning, stakeholderengagement, and administration andenforcement of policies and regulations. Thereis presently very little guidance on cost normsfor establishing integrated water resourcesmanagement, creating the enabling environmentfor a well-governed sector, and there isuncertainty on what are the priorities forfinancing.

Different functions have different prospects forfinancing. The supply of well-defined serviceswith clear beneficiaries, such as for waterabstraction or control of pollution, are suitablefor user payments (tariffs or license fees) whereasareas which are public goods may have to beprovided through central or local governmentbudgets, (i.e. allocations of taxation receipts) orthrough cross subsidization. For watergovernance functions, we need to quantifybenefits across the value chain; determine thecosts of performing the necessary and beneficialfunctions and finally assess how to finance theappropriate level of governance. For water

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has resulted in a doubling at the very leastof the original estimates (apart from watersupply and sanitation) to realize Africa’swater security objectives.

1.2 Six years after the release of the report ofthe Camdessus Panel on Financing andthe various G8 commitments, is theresufficient progress in Africa? With theMillennium Development Goals timeline of2015 fast approaching, what can be doneto scale up delivery of infrastructure andservices and how financing mechanismsbe improved in support of this? Aregovernments increasing finance to thesector through local resource mobilizationefforts, are we fully exploiting the use ofinnovative financing mechanisms that alsotap into private financing? Are weintroducing approaches that provideincentives to improve efficiency of resourceutilization, enhance performance of utilitiesand improve their bankability? Are we im-proving governance, which is essential foreffective investment? Are we takingadvantage of economies of scale offeredby regional infrastructure financing?

1.3 The Thematic Session should thereforeprovide the opportunity to review financingneeds and flows in the sector, examinefurther the bottlenecks and exploreopportunities for scaling up financing usingmore efficient approaches. The sessionshould also enable actors to share the

Annex 2: Approach, Content and Structure of Parallel and Plenary Sessions

Sub-Theme: Financing Water and Sanitation Infrastructure

Detailed Session Agenda

Monday 9th to Wednesday 11th November,2009

Lead Convener: African Development Bank/Africa Water Facility

Co-Convenors: Global Water Partnership (GWP),OECD, World Bank/Water and SanitationProgram (WSP), World Water Council (WWC),Infrastructure Consortium for Africa (ICA), Foodand Agricultural Organization (FAO), Departmentof Water and Environment Affairs, S. Africa,

Conceptual Approach to Thematic Session

1.1 Africa’s low base of water infrastructureand weak institutions is accounting forpoor progress in the fight against povertyand retarding economic growth. Thelinkages between water security andeconomic growth cannot be disputed.However, sustainable financing for scalingup infrastructure and improving waterresources management in Africa remainsa key challenge. Recent revision of theAfrica Water Vision financing estimates

53

and strengthen WRM. The demand for WRMfunding expressed to AWF may be categorisedin four main areas of support:

- Development of national and transboundaryWRM plans and programs to secure follow-on investments

- Implementation of information systems forbetter planning and monitoring of waterresources

- Decentral ised IWRM to catchmentlevel

Capacity building of RECs and river/lake basinorganisations to more effectively carry out theirmandate

The water sector faces a general shortage offundable programs, inadequate data for planningand weak insti-tutional frameworks. There arealso challenges specific to WRM and governancethat have limited the funding of these activities:Results of investments made are not readilyvisible in the short term, and implementation ofsustainable systems requires alternativeorganisational and financial structures comparedto the long established central and localgovernment systems.

AWF is an African response to the Sector’schallenges providing support for a wide range ofwater governance interventions, which aredesigned to improve the enabling environment

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resources investments are spent wisely andsustainably. The session would cover ways to getfinance into WRM including regional financing andusing Adaptation Funds.

AWW-2 Theme:Financing Water and Sanitation Infrastructure

Parallel Session: Financing Water Infrastructure for Africa’s Growth and Development

Segment 1: The Big Picture

Conveners: African Development Bank/AfricaWater Facility

Co- conveners: Infrastructure Consortium forAfrica, World Water Council, World Bank

Date and time: Monday 9 Nov 2009, 14:30 – 15:45

Aim

This session is designed as a key strategic sessionaimed at setting the pan-African water sectorneeds in context. It seeks to elaborate the strongnexus between water and economic growth.Participants will be able to appreciate the bigpicture on financing infrastructure and the keyactions that are needed to achieve the desiredresults including key messages to be consideredin support of promoting the water–finance dialogue.

climate change. The session will emphasize howto make existing commitments work rather thaninvent new ones.

Session 2: Scaling-up financing of WSSservices to meet the MDGs (Lead: WSP).

Financing Water Supply and Sanitation (WSS)Infrastructure in Africa is widely regarded as thekey chal-lenge to meeting national goals and tomeeting the WSS MDGs. Sources of finance forWSS investments have been summarized as the3Ts: Taxes, Transfers and Tariffs. Financing WSSis conventionally viewed as determining sourcesof additional public sector funds for infrastructureinvestments from these sources. Yet identifyingsources of additional finance is only onedimension to the problem of sector fi-nance. Thesession will look at ways to build systems andcapacity for efficient and effective spending ofpublic money and innovative ways to tap intoprivate or commercial financing.

Session 3: Financing WRM and governance(Lead: GWP. Co-convenors – OECD, AWF)

This session covers establishing a conduciveenvironment and the stewardship of waterresources in order to make infrastructureinvestment feasible and functional. The sessionlooks at funding for the so-called ‘soft’interventions, as well as making sure big water

55

1.5Each of the three sub-themes has a LeadConvener, who is collaborating with otherpartners to leverage resources, effort andexpertise. A Lead Rapporteur will pooltogether the inputs from all the session rap-porteurs and will present this to the AWW-2 Chief Rapporteur and ensure the keymessages from the Financing Theme arecaptured in the outcomes.

1.6Below is a description of each of the threesub-themes of the Financing Theme. Theseare further elaborated in the sessionsynopsis and plan that follows.

Session1: Financing water infrastructure forAfrica’s growth and development (Lead: AfDB.Co-convenors – WWC, ICA, WB)

This session has two segments and is designedas a key strategic session aimed at setting thepan-African needs in context and seeks to makethe nexus between water and growth betterunderstood. It will examine the financing needsof the Africa Water Vision and also seek tounderstand the key issues emanating from therecent African Infrastructure Country Diagnostic(AICD) Study and the relevant issues for thesector. The session would look at financing waterin relation to other sectors, especially agricultureand energy and how this links to infrastructure,water resources management and adaptation to

advances that are being made in innovativefinancing such as accessing less traditionalsources of finance for small water andsanitation providers, benchmarking andcredit rating of utilities to improve access tothe domestic capital markets and advancesin regional finance architecture. The questionof tracking the impact of finance as part ofthe accountability for results may also beexamined. Countries, NGOs and otherentities will be encouraged to shareexperiences, and best practice from otherregions will be encouraged.

Overall Session Description

1.4The Financing Theme is a crosscutting onethat is linked to all the other three themesof the Conference. Three important focusareas and sessions have been identifiedwhich altogether address the spectrum ofkey financing issues ranging from regionalneeds and gaps, infrastructure delivery,financing mechanisms and institutional andpolicy issues. In view of the urgent need topromote better dialogue between the fi-nance and water sectors given theinextricable linkages between waterinfrastructure and economic growth andpoverty reduction, key messages from thesesessions will seek to contribute to furtherstrengthening this dialogue.

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the development of water for food and energyin Africa. The session also aims to take stock ofand present the various initiatives supportingwater for agriculture and energy in Africa anddiscuss future priority actions.

Session Description

The sub-theme will start with a keynote addressthat will present the financing requirements andchallenges facing water development for foodand energy security in Africa. The presentationby FAO will also summarize on-going andplanned initiatives in support of these sectors.This will be followed by another presentation fromNEPAD-CAADP about the political commitmentsto support agriculture and recent pledges insupport of the agriculture sector in Africa. Thesession will present several experiences in theregion for clean energy development and public-private-partnership in developing irrigation inaddition to the African farmer’s perception to-ward achieving food security and the currentfinancing strategies. The session will end with anopen discussion including the presenters and 2-3 Ministers in the form of a panel.

Theme: Financing Water and SanitationInfrastructure

SESSION 1: Financing Water Infrastructure forAfrica’s Growth and Development

Segment 2: Financing Water for Food andEnergy in Africa

Lead convenor: AfDB

Co-convenors: World Bank, Food andAgriculture Organisation, Islamic DevelopmentBank, International Federation of AgriculturalProducers

Date and time: Monday 9 Nov 2009,

16:00 – 17:30

Aim

Following the High Level Meeting on “Water forAgriculture and Energy in Africa, the Challengesof Climate Change” in Sirte December 2009, thesession aims to present the challenges facing

57

Time Component: Topic & Scope Convener/Chair/Presenter

Session Chair: Hon. Monyane MOLELEKI, AMCOW EXCO, Minister of Natural Resources, Lesotho and Chairman ofGoverning Council of African Water FacilitySession Rapporteur: K. S. Manu

14:30

Welcome, Purpose of Sub-ThemeIntroduction of session and speakers. Recap ofkey messages on financing from previousAfrican high-level declarations.

Chair: Hon. Monyane MOLELEKI Facilitator: Arthur Swatson (Principal Water and Sanitation Engineer, AfDB)

14:40

Africa Water Vision – Revisiting needs andprospects Follow up from 5th World Water Forum, Istanbuland African Water Vision Needs

African Development BankPresenter: Sering JallowOfficer in Charge, Water and SanitationDepartment/African Water Facility

15:00Water for growth and development –Implications for dialogue on water andfinance in Africa

World Water CouncilPresenter: Dr Alan Nicol, PhDDirector of Policy and Programmes

15:15Financing of the business of water supplyand sanitation

DWAF, South AfricaPresenter: Helgard Muller, Chief Director,DWAF

15: 30 Discussion and Targeted interventions

10.30 Wrap up and end of Segment 1 Chair

water in relation to other sectors, especiallyagriculture and energy and how this links toinfrastructure, WRM and adaptation to climatechange. The session will emphasize how to makeexisting commitments work rather than invent newones. Different perspectives will be sharedincluding the civil society views.

Session Description:

The session is in two segments. These will examinethe financing needs of the Africa Water Vision andalso seek to understand the key issues emanatingfrom the recent AICD Study and the relevant issuesfor the sector. The session will also look at financing

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strategic and technical feasibility perspective.The session will also consider particular initiativesin Africa and analyze factors affecting theirsuccess and failure.

Questions to a panel of experts will address thefollowing, among others:

1. Viability – Has the African water sectorincreased in financial viability in the pastdecade? What are key reforms required andbarriers to this increased viability?

2. Financial knowledge – Have utilitiesincreased their relationships with financiers?Have technology innovations allowed forincreased use of innovative financialproducts in utility management? Have utili-ties started to borrow funds?

3. Given the increase in utility viability, whathave been key obstacles to increased longterm lending to the water sector (eitherthrough bonds or through loans)?

a. Knowledge of financialproducts/markets

b. Borrowing approvals and regulation

c. Anticipated effect on the poor and/ortariff adjustments


Parallel Session 2: Scaling up Financing of WSSServices to meet the MDGs using MarketResources: How far have we come?

Lead convenor: Water and Sanitation Program– Africa (WSP-Af)

Date and time: Tuesday 10 Nov 2009, 09:00 –10:30

Aim

The session seeks to create an agenda toaccelerate market financing for the water sectoron the continent based on emerging lessonsfrom pilot activities that have been underway overthe past years.

Session Overview

For a number of years, since the Camdessuspanel, the water sector has been advocatingefforts to increase the use of market orcommercial financing to develop new waterinfrastructure. A series of development partnerinitiatives and in-country efforts have been madeto demonstrate that this is possible and beneficialto the sector. This session will critically analyzethe rational for looking for market funds, from a

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Session Chair: Amadou Thierno DIALLO, Manager, Energy & ICT DivisionsSession Facilitator: Dr Hesham KandilSession Rapporteur: OSAN, AfDB

16:10

Opening Setting the scene for the session, objectiveand expectations

African Development Bank

16:10

Water for agriculture and energy in Africa -major challenges, different initiatives andfollow-up mechanisms Key note address onthe status of major challenges and variousinitiatives to support Water for agriculture andenergy-follow up mechanisms/implementationof Sirte, WB and AfDB business plan, IsDBJeddah Declaration, etc.

Food and Agriculture Organisation (FAO)Presenter: Maher Salman, Technical Of-ficerFAO

16:25Practical Examples of PPP financing forwater and energy

African Development BankPresenter: Roger Gaillard, Lead, Infrastruc-ture & PPP - AfDB

16:40

Renewed interest in agriculture and newcom-mitments in support of the sectorDescribing the African Leaders commitments toagriculture and status of CAADPimplementation

NEPAD/CAADPPresenter: Ms. Rudo Makunike, NEPAD-CAADP

16:55Fundamental Financing Areas Necessary toachieve Food and Energy security in Africa:Farmers Perspective

IFAPPresenter: Twesigye RwakakambaUganda National Farmers Federation

17:10 Discussion Chair and Facilitator

17:30 Closing

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it effectively. Different experiences will be sharedand future priority actions discussed. Keymessages and information will be identified thatcan be used in the preparations for theWater/Finance Ministers meeting that isforeshadowed in the Sharm el-Sheik declaration.

Description

The sub-theme will set the overall context andrationale for financing for water resourcesmanagement highlighting specific aspects relatedto governance and funding public goods that maydiffer from financing water supply services (coveredin other sub-themes). This will cover ways to getmore finance into WRM including regional financingand using Adaptation Funds and how to ensureinvestment in water infrastructure is used effectivelyand sustainably. Presentations will give examplesof strategic financial planning, financing for inte-grated water resources management, and how tobring water financing into the mainstream of nationalbudgets. Examples will be given of financing waterresources management programmes by the AfDBGroup.


Parallel Session 3: Financing for WaterResources Management and Governance inAfrica

Session conveners: Global Water Partnership

Co- conveners: Organisation for Economic Co-operation and Development, African WaterFacility, African Development Bank

Date and time: Tuesday 10 Nov 2009, 11:00 – 13:00

Aim

The session aims to increase knowledge onfinancing in relation to water resourcesmanagement and governance, including howthis influences investment in infrastructure andeconomic development more broadly. Thesession will focus on creating the enablingenvironment for attracting investment and using

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Session Chair: Joel KOLKER Session Facilitator: Dominick de Waal Session Rapporteur: WSP

09:00Background presentationSetting the scene for the session, objective andexpectations

African Water Association

09.10

Overview of market finance initiativesSmall and large scale debt financing efforts in Africaincluding bond transactions, microfinance andpooled finance structures

WSP-AfPresenter: Kameel Virjee

09.20The Credit Quality of African Water UtilitiesSummary of findings from a review of seven Africanwater utilities

WSP-AfPresenter: Marc-Joffe, Global CreditRatings

09.50

Panel discussion: Facilitated discussion aroundkey questions including from the audienceIntroduction to panel questionsIntroductions: Water Utility, Financier, CreditEnhancement agency, Credit Rating AgencyFacilitated discussion around key questionsincluding from the audience

WSP-AfPanellistsW. Muhairwe, NWSC, Uganda; FrancisMugo, NCWSC; Anne Aliker , Stanbic,Kenya; ABSA, South Africa: Marc Joffe;CR, South Africa:Facilitator: Dominick de Waal

10:30 Summary and Conclusions WSP-Af

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Africa, covering all aspects of economicinfrastructure, including ICT, irrigation, power,transport and water. In the case of water supply,the study collected extensive primary data from80 water utilities in 24 countries, as well asdetailed information on public expenditurepatterns in the sector, and provides newestimates of the cost of reaching the MillenniumDevelopment Goals. The work on irrigationincluded extensive spatial modelling of the viabilityof developing such infrastructure across Africa.The potential for development of new waterstorage infrastructure based on hydropowerschemes was also assessed. A representativeof the World Bank, who led the study, will presentthe highlights and present key messages arisingfrom the study.

The country and donor experiences will followand will touch specifically on financing,including that of major infrastructure, PPPs inagriculture and water and sanitation deliveryand country processes in raising the pro-fileof water’s contribution to economic growthand the need to increase financing for thesector.


Parallel Session 4: Highlights of AfricanInfrastructure Country Diagnostics

Session conveners: African DevelopmentBank/WSP-Africa/Global Water Partnership

Date and time: Tuesday 10 Nov 2009, 14:30 –17:30

Aim

This session will present the highlights and mainfindings of the Africa Infrastructure CountryDiagnostic (AICD) for the water sector. Thesession will also benefit from presentations oncountry and donor experiences relating tofinancing water and sanitation in the region withthe aim of sharing good practices.

Description

The AICD is one of the most detailed studies everundertaken of infrastructure in Sub-Saharan

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Session Chair: Hama Arba DIALLO former Minister of Foreign Affairs, Burkina Faso & former Executive Secretary ofUnited Nation Convention on Combating Desertification (UNCCD)Session Facilitator: Alan Hall, Senior Adviser GWP Session Rapporteur: Allan Hall

11:00

Welcome, Purpose of Sub-ThemeIntroduction of sub-theme and speakers by Chairincluding recap of key messages on financing WRMfrom previous African high level declarations

Chair: Hama Arba Diallo Rapporteur: Alan Hall

11:05

Establishing a Conducive InvestmentEnvironmentInternational perspectives, water governance anduse of different instruments

GWPProfessor Ola Busari, Executive Manager,Trans-Caledon Tunnel Authority (TCTA),South Africa

11:20

Financing integrated water resourcesmanagement:Some lessons on ensuring the availability of waterresources to sustain economic activities andenvironmental purposes

Global Water PartnershipMartin Walshe, Deputy ExecutiveSecretary, GWP

11:35Experiences of financing WRM programmes inAfrica

Africa Water FacilityMalinne Blomberg, Financial Specialist

11:50

Panel DiscussionPanel Discussion offering reflections on key issuesarising from the session, new innovative ideas forfinancing including potential of taping into adaptationfunds, and key messages for the Water/FinanceMin-isters meeting that is foreshadowed in theSharm el-Sheik declaration

GWP/AWFPanellistsSanjay Wijesekera, Team Leader, Water &Sanitation Team, DFID (UK), BrianHollingworth, Economist, South Africa,Zandile Mathe, Chief Director, FinancialManagement, DWEA, South Africa Facilitator: Alan Hall

12:50 Summary of Key Messages & Recommendations Rapporteur: Alan Hall

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To date such investment has been lacking. Inspite of some progress being made in institutionalreform and increased political commitment, keychallenges remain to be addressed. Africanleaders have recognized the need to ensure astronger integration of water sector developmentwith the broader developmental agenda and toensure priority is given to water as a key enablerof growth. This is manifest in the Sharm el-Sheikhcommitments on water and sanitation and a keymessage from the Africa Regional Position Paperpresented at the 5th World Water Forum inIstanbul.

In ensuring concrete actions are taken to realizethis, a key step forward is the strengthening ofdialogue between water and finance sectors.This has been a key recommendation of theAfrican Heads of States and a process stronglysupported and endorsed by UNSGAB, the AfDBand other key partners. The Plenary Session willtherefore seek to identify key perspectives to becarried forward in this dialogue.

The session will also highlight the key messagesfor water and finance ministers from the parallelsessions on Finance dealing with water andgrowth, scaling up WSS financing to meet theMDG targets and financing wa-ter resourcesmanagement. It will also seek to assess the stateof follow up on key commitments by the G8towards financing of water infrastructuredevelopment and water resources managementin Africa through the G8-Africa dialogue.

Annex 3: Finance Session Plan

PLENARY SESSION: Financing Waterand Sanitation Infrastructure forAfrica’s Growth and Development

Conveners: African Development Bank,Global Water Partnership (GWP), WorldBank/Water and Sanitation Program (WSP),World Water Council (WWC), Dept. of Water andEnvironment Affairs, S. Africa

Date and time: Wednesday 11 Nov. 11.00am– 12.30pm

Aim

To provide an important platform for discussingkey issues and messages related to financingwater infrastructure in support of Africa’s growthand development and in particular the messagesthat need to be carried forward in the dialoguebetween Water and Finance Ministers in Africa.

Description

The linkages between water security andeconomic growth cannot be disputed. In comingyears hard policy choices will face decisionmakers including how to ensure that adequateinvestments are made – and main-tained – inwater infrastructure that enables economies andsocieties to continue to grow both sustainablyand equitably.

65


Session Chair: Sering Jallow Session Facilitator: Renaud Paubelle Session Rapporteurs: Renaud Paubelle/Allan Hall

14:30Welcome, Purpose of Sub-ThemeIntroduction of sub-theme and speakers by Chair andobjectives and outcomes of the session

Chair: Sering Jallow Rapporteur: Alan Hall

14:35Africa’s Water Infrastructure: A Preview of AICDFindings

AfDB/ICAVivien Foster, World Bank

14:55 Facilitated discussion of highlights

Session Chair: Sering JallowSession Facilitator: AfDB Session Rapporteurs: Allan Hall/Dominick de Waal/Kwabena Sarpong Manu

15:15 Trans-Caledon Tunnel Authority Confirmed

15:45 – 17:30

Experiences in PPP in Irrigation in Africa

Arthur Belsey, Swazi Water &Agricultural Development EnterpriseConfirmed

Country and Donor Experiences:Kenya, Ghana, KFW/EIB/ADB

Summary

chair

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Time Monday 09 Nov 09 Tuesday 10 Nov 09 Wednesday 11 Nov 09

09:00 –10:30

PLENARY SESSION: WELCOMING & OPENING List of proposed Speakers:1. AU Commissioner2. RSA Water Minister3. President of AMCOW

Parallel Session Cont’dSession: Scaling Up Financing of WSS Services to Meet theMDGs using Market Resources: How far have we come? [WSP] i) Kamel Virjee, WSP: Small and large scale debt financingefforts in Africa including bond transactions, microfinanceand pooled finance structures ii) Marc-Joffe, Global Credit Ratings: The Credit Quality ofAfrican Water Utilitiesiii) Panellists: NWSC, Uganda: W. Muhairwe, NCWSC, Kenya:Francis Mugo, Stanbic, Kenya: Anne Aliker, ABSA, SouthAfrica: 2 persons (tbc); CR, South Africa: Marc Joffe

OPENING PLENARYi) Opening & key note address bythe President of RSAii) Special Guests to be invited tospeak for 10 minutes each

11:00–13:00

SETTING THE SCENE FOR THE CONFERENCE• 2nd AWW Overview – AMCOW ES• Status report on progress in delivering the MDGs:By UNICEF• Delivering on water security and sanitation com-mitments: Action Plan for reporting to the AU byAfDB• Overview of Sub-themes

Parallel Session – Cont’dSession: Financing for Water Resources Manage-ment andGovernance in Africa [GWP]i) Prof Ola Busari, TCTA: Establishing a ConduciveInvestment Environmentii) Martin Walshe, GWP: Financing IWRMiii) Malinne Blomberg, AWF: Experiences of financing WRMprogrammes in Africa Panellists: Mr Sanjay Wijesekera, Team Leader, Water &Sanitation Team, DFID (UK), Brian Hollingworth, Economist,South Africa, Zandile Mathe, Chief Director, FinancialManagement, DWEA, South Africa

Plenary Session – cont’di) Finance Panel Discussions onKey messages Panellists: Uschi Eid (Vice Chair,UNSGAB; Prof. Kairu, Chair,ANEW); AfDB – Bobby Pittman,VP, AfDB; Johan Kruger, ManagingDirector, Afcap Consulting , S.Africa), William Cosgrove, WorldWater Councilii) Consolidated outcome of AWW2 iii) Closing of the AWW2

13:00 – 14:30

BREAK

14:30–15:45

PARALLEL SESSION Session: Financing Water & Sanitation Infra-structure (AfDB)i) Sering Jallow, AfDB : Africa Water Vision –Revisiting needs and prospects ii) Alan Nicol, WWC: Water for growth and devel-opment – Implications for dialogue on water andfinance in Africaiii) Helgard Muller, Chief Director, Water Ser-vices, DWAF: Financing of the business of watersupply and sanitation

Parallel Session – Cont’dSession: AICD [AfDB]i) Vivien Foster, WB/ICA: Africa’s Water Infrastructure: APreview of AICD FindingsFollowed by facilitated discussion of highlightsSession: Country and Donor Perspectives [AfDB]i) Trans-Caledon Tunnel Authority (“TCTA”)

PANAFCON II (OPEN SESSION –HIGH LEVEL SEGMENT)

15:45–16:00

BREAK

16:00 – 17:30

Session: Financing Water for Food and Energy inAfrica [AfDB]i) Maher Salman, FAO: Water for agriculture andenergy in Africa - major challenges, different in-itiatives and follow-up mechanismsii) Roger Gaillard, AfDB: Practical Examples for PPPfinancing for water for energy iii) Rudo Makunike, NEPAD-CAADP: Renewedinterest in Agriculture and new commitments insupport of the sectoriv) Twesigye Rwakakamba, Uganda National FarmersFederation: Farmer’s perception toward achieving foodsecurity and the current financing strategies

Session: Country and Donor Perspectives [AfDB] –cont’dii) Arthur Belsey, Swazi Water & Agricultural Devel-opment Enterprise: Experiences in PPP in Irrigation inAfrica iii) Ghana [topic to be confirmed]

(Additional country presentations )

PANAFCON II (CLOSEDSESSION – HIGH LEVELSEGMENT

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Session Programme

PLENARY SESSION: Financing Water Infrastructure for Africa’s Growth and DevelopmentTIME: 10:30 – 12:00 TBC CONVENORS: AfDB/AWF, WWC, DWEA + WSP and GWP

Feedback fromParallel Session

11:00Chairman’s Opening RemarksMinister of Planning or Finance, S. Africa (tbc)

11:05

Presentations: Key Messages from Finance Parallel Sessions (Rapporteurs:Alan Hall, Snr. Advisor GWP and K.S. Manu, Lead Rapporteur,African Development Bank)

11:15Introduction of Panel Discussion and PanellistsFacilitator: Alan Nicol, WWC

11:20

Panel Discussion1. AMCOW – Bai Mass Taal (Executive Secretary)2. UNSGAB – Uschi Eid (Vice Chair) tbc3. ANEW – Prof. Kairu (Chair)4.AfDB – Bobby Pittman (Vice President)5. Private Sector (S. African Private Sector rep) tbc6. World Water Council (rep tbc)

12:00Contributions from Floor and wrap upRapporteurs: K.S. Manu, Alan Hall

Second African Water Week (AWW-2)

Financing Water and Sanitation Infrastructure: Plenary, Wednesday Nov. 11, 2009, 10.30 – 12.00

[This programme is as planned. However as mentioned in the main report the session didnot take place as a result of the confusion in programming on the last day of the conference.

It is however presented to guide future events]


Financing Water & sanitation Infrastructure for Economic Growth and Development

www.afdb.org

Lead Convenor:

African Development Bank / African Water Facility

Co-convenors:

Department of Environment and Water Affairs, South Africa (DWAF), World Bank/Water and Sanitation Program (WSP) ,World Water Council (WWC), Food and Agricultural Organization (FAO), Global Water Partnership (GWP) andInfrastructure Consortium for Africa (ICA

Water Partnership Program WPP

The African Development Bank,

Temporary Relocation Agency (TRA),

13 Avenue du Ghana, BP 323,

1002 Tunis Belvédère, Tunisia

Tel. (216) 71 333 511 / 7110 3450

www.afdb.org

Agencecanadienne dedéveloppementinternational

CanadianInternationalDevelopment Agency

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