Output-Based Aid for Water in Africa:
Uganda Small Towns Water Project
Eng Chris Azuba
Ministry of Water & Environment, Uganda
African International Water Congress
Kampala, March 15 -18, 2010
Context – small towns water reform
OBA in Uganda’s water sector
Small towns and RGC project - design,
implementation, achievements and
Small towns water sector reform
Prior to 1997,Central Government ran all
formal water supply systems with most
resources anchored at the centre, but with
regional/ town offices working on the
This was not sustainable: decision making
was far from the users.
Example: Revenue from water sales had to
be remitted to the Centre as “government
revenue”, and requests for operational funds
would follow a long laborious process which
could take as long as 3 months.
After the reforms…
New framework for
the small towns
Performance Contract water sector
Water Authority 5 Member WSS Board
(Assets Management) •Chair Social Services Committee
•Rep of domestic consumers
Management Contract •Rep of institutional consumers
•Rep of Other Consumers
(Management of Technical, Financial and Commercial Operations)
OBA interventions in Uganda
Objective: Pilot OBA sub-projects in 6 small towns
(extensions) and 4 RGCs (greenfield). Project expected to
benefit almost 45,000 people
Outputs: 1) Household yard-taps or public kiosks and 2)
continued service for 1 year (small towns) or 6 months
(RGCs). Total number of connections: 2000
Private operators have been engaged in Design-Build-
Operate (“DBO”) contracts of 5 years in brownfield, 7-10
years in greenfield.
Private Sector leveraging: 10-30% of capital costs
depending on small town/RGC.
Available subsidy is $2,6m for first 10 towns; subsidy per
town ranges between 80 to 90% (whereas normally with
donor funding, 100%).
Memorandum of Understanding (MoU)
DWD Agreement GPOBA
Performance Contract Fiduciary Private
Water Authority Funds
Geographic: concentrated rural areas in Uganda for those
currently without access. Self-selection: public kiosks
Innovation and efficiency
A competitive bidding process resulted in an average
efficiency gain of 20% in 10 towns.
Subsidies are one-off investments and tariffs cover O&M costs
plus a margin for investment. Tariffs levels are embedded in
the contracts. These contracts are of longer duration that what
has been seen so far in the Ugandan water sector
Progress to date…
In the 6 towns, progress is as follows:
Town Target Completed Remarks
Kachumbala 156 150 Verified
Kalisizo 150 150 To be verified
Luweero 250 180 To be verified
Rukungiri 200 113 Awaiting additional
Wakiso 300 300 Verified
Wobulenzi 200 68 To be verified
Construction in the 4 RGCs is at an advanced stage and
is expected to be completed by the end of March 2010.
Achievements and challenges
Tariffs embedded in contract = big step in Uganda.
Acceptance of “tariff localization”.
Bidding process demonstrated enthusiasm from POs.
Real challenge in getting bidders to understand the new
format of bidding documents. Some lots were re-bid.
Some towns = no subsidy required for making connections.
Outputs being delivered – some more slowly than others –
construction and verification process approaching
Access to finance, in particular to “pre-finance” investments
until OBA subsidy disbursed is a challenge.
JVs with construction companies helped.
Phasing in of outputs in the greenfield cases were required (but still
40% paid on working connections and water delivered).
POs relied more on own cash, working capital (e.g. supplier credit)
than bank loans.
Conclusions and way forward
Uganda-tailored approaches. Working
largely with existing contractual framework.
Challenges related to technical assistance
capacity and access to finance remain.
Now scaling-up: increased collaboration
with all stakeholders, donor harmonization
and adopting (and adapting) government
approaches as far as practicable.
MoWE has agreed in principle to adopt OBA
approaches within the new WSDFs, being
negotiated for next fiscal year, regardless of
source of funding.