Output-Based Aid for Water in Africa

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Output-Based Aid for Water in Africa

  1. 1. 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
  2. 2. Outline  Context – small towns water reform  OBA in Uganda’s water sector  Small towns and RGC project - design, implementation, achievements and challenges  Concluding remarks
  3. 3. 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 ground.  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.
  4. 4. After the reforms… MW&E New framework for the small towns Performance Contract water sector Assets Delegation Water Authority 5 Member WSS Board •Town clerk (Assets Management) •Chair Social Services Committee •Rep of domestic consumers Management Contract •Rep of institutional consumers •Rep of Other Consumers Private Operator (Management of Technical, Financial and Commercial Operations) Customer Contract Users/Clients
  5. 5. 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%).
  6. 6. Institutional framework Memorandum of Understanding (MoU) MoWE Grant Implementation Agreement DWD Agreement GPOBA Implementing Agency Monitoring and Verification Function Performance Contract Fiduciary Private Agent Sector Small Town RGC Funds Administration Local Agreement Water Authority Funds Disbursement Agent DBO Agreement Contracts Private Operator Service Control provision Funds Water users
  7. 7. Targeting Geographic: concentrated rural areas in Uganda for those currently without access. Self-selection: public kiosks
  8. 8. Innovation and efficiency A competitive bidding process resulted in an average efficiency gain of 20% in 10 towns.
  9. 9. Sustainability 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
  10. 10. 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 applicants 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.
  11. 11. 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 completion.  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.
  12. 12. 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.

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