Life cycle costing in mozambique agua-san

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Over 40 participants convened in Switzerland to participate in the 28th AguaSan meeting from 18 to 25 June. People discussed how to financing for sustainability of WASH services. The life-cycle costs approach was at the forefront of this discussion. WASHCost’s Peter Burr presented a key note, while Arjen Naafs of WASHCost Mozambique presented a case study and an adapted training component. Participants recognised the importance of identifying all the costs, defining who will finance the costs at present moment, and who will finance the costs in the future.

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Life cycle costing in mozambique agua-san

  1. 1. Mozambique
  2. 2. Applying Life Cycle Costing in Mozambique Embedding cost analyses
  3. 3. Content1. Background2. Learning alliances and theory of change3. Data collection – including sampling4. Obtained information on all different cost pies5. Linking costing with financeMoz Examples of use of LCCA in Mozambique June 2012
  4. 4. MOZAMBIQUE20 million people , 800.000 km2 10 Provinces , 128 provinces GDP (current US$ 418)RankedExamples of usecountriesin MozambiqueMoz 172 out of 177 of LCCA (Human Development report 07/08) 2012 June
  5. 5. Country contextNational water law (1992) & Water Policy (1995/1997):  Service levels according to demand and economic capacity  Tariff for recovery of O &M  Decentralisation  PrivatisationMoz Examples of use of LCCA in Mozambique 5 June 2012
  6. 6. WASHCostLaunched November 2008Memorandum of understandingHosted by governmentLearning alliance members:  National and provincial gov.  International NGOs  Some districts and communities  UniversitiesMoz Examples of use of LCCA in Mozambique 6 June 2012
  7. 7. RURAL WATER SUPPLY Community ownership Borehole (20-70 m) AFRIDEV Shallow wells Mini systems starting up Mainly domestic useMoz Examples of use of LCCA in Mozambique June 2012
  8. 8. SMALL SYSTEMS o Rehabilitated systems o Mainly ground water o Limited coverage of town o Trend towards private operatorMoz Examples of use of LCCA in Mozambique June 2012
  9. 9. SANITATION AND HYGIENE o Traditional latrines o Slab latrines o Institutional latrines o Community mobilisation (PEC)Moz Examples of use of LCCA in Mozambique June 2012
  10. 10. PERI-URBAN • High number Private operators • Public tap stands • Higher sanitation coverage • Unclear admin structureMoz Examples of use of LCCA in Mozambique June 2012
  11. 11. Content1. Background2. Learning alliances and theory of change3. Data collection – including sampling4. Obtained information on all different cost pies5. Linking costing with financeMoz Examples of use of LCCA in Mozambique June 2012
  12. 12. Theory of changeMoz Examples of use of LCCA in Mozambique June 2012
  13. 13. Theory of change experience • Redefine LA to country context – GAS group • LA does not validate, only advices • Don´t ask others to do your work.... • Great exposure but don´t overload – work with in much smaller groups 2-5 peopleMoz Examples of use of LCCA in Mozambique June 2012
  14. 14. Content• Background• Learning alliances and theory of change• Data collection – including sampling• Obtained information on all different cost pies• Linking costing with financeMoz Examples of use of LCCA in Mozambique June 2012
  15. 15. Data Collection Sample strategyGood aspects Learning lessons2. Working with 2. Poor Urban areas Statistics are actually rural Methodology worked well 3. Community boundaries3. Credible sampling unclear 4. Logistics 5. Unique situations 6. Go to where costs are
  16. 16. Applying the LCCA in Mozambique1. Understanding Capital Expenditure - CapEx (Provincial)2. Capital Maintenance Expenditure CapManEx (District)3. Visualizing expenditure on Direct Support (District)4. Cost of Capital (National) Moz Examples of use of LCCA in Mozambique June 2012
  17. 17. The use of LCCA in Mozambique1. Understanding CapEx costs- Borehole construction & supervision- Average borehole costs- Variance over regions and years Moz Examples of use of LCCA in Mozambique June 2012
  18. 18. The use of LCCA in Mozambique 4 times larger lot indicates 20% lower unit rateperson (500 p bh) Per Per person (300 p bh)Moz Examples of use$ 27 in Mozambique of LCCA $ 462012 June
  19. 19. The theory of change • Transparency • Cost reduction Facilitation of the Learning Alliances Better How much does2011 Contracts Data from identification of Implementation gaps in planning a borehole cost? • Cost per region Better • Cost per person2011 planning Data used in dissagregated • Cost per contractor planning lifecycle unit costs • Cost per funder • Current cost over time Moz Examples of use of LCCA in Mozambique June 2012
  20. 20. The use of LCCA in Mozambique1. Understanding CapEx costsActual Policy Actions:• A transparency & accountability tool• Cycles of yearly updated values for budgetingIn progress:• Influence of donors, procurement (lot Size)• Trends over time – better budgetting Moz Examples of use of LCCA in Mozambique June 2012
  21. 21. The use of LCCA in Mozambique2. Understanding Capital Maintenance Expenditure- What does it include?- How is it different from O&M? Moz Examples of use of LCCA in Mozambique June 2012
  22. 22. The use of LCCA in Mozambique- Costs are high and unclear (>2000 USD)- Identification of outliers – Transparency and cost drivers Moz Examples of use of LCCA in Mozambique June 2012
  23. 23. The use of LCCA in MozambiqueCapital maintenance expenditurePolicy at the momentCapManEx value identical for all districtsDesired policy:District budget realistic for CapManEx (based on quantity, age and type of infrastructure) Moz Examples of use of LCCA in Mozambique June 2012
  24. 24. Spending 100.000 USD – example • 10 new boreholes • 8 new boreholes @ @ 10.000 USD 10.000 = 80.000 • 10 rehabilitations @ 100 bhs 2.000 = 20.000 - 10 bhs breakdown 100 bhs +10 new bhs +8 bhs ----------- --------- 100 bhs 108 bhs Incorporate CapManEx into CapEx
  25. 25. The use of LCCA in Mozambique3. Expenditure on Direct Support- What does it include?- How it was calculated? Moz Examples of use of LCCA in Mozambique June 2012
  26. 26. The use of LCCA in MozambiqueExpenditure on Direct SupportCurrently there is a wide varianceDistrict size (thus distance) influences per person costs. A three times larger district has roughly double the costs. Moz Examples of use of LCCA in Mozambique June 2012
  27. 27. The use of LCCA in MozambiqueExpenditure on Direct SupportActual Policy actions:The average cost is US$ 1.1 per person per year, and the median is US$ 0.6. Average 100,000 USD per districtDesired actions:Direct support should be based on combination of coverage, population density and access Moz Examples of use of LCCA in Mozambique June 2012
  28. 28. The use of LCCA in Mozambique4. Cost of CapitalFinancing large water and sanitation programs with long term loansFor example:Loan of 20 million USD for 50 years, with 10 year grace. 0.75% interest Moz Examples of use of LCCA in Mozambique June 2012
  29. 29. The use of LCCA in Mozambique4. Cost of CapitalPolicy actions:- Awareness raising of burden of loans- Making cost of capital integrated in particular in small town systems.- Realistic allowable return on equity (for private operators) Moz Examples of use of LCCA in Mozambique June 2012
  30. 30. Lessons learned • Linking costing with transparency • Using yearly cycles for updating values • The strengths and threats of “quick wins” – working with a learning alliance • Examples of policy actionsMoz Examples of use of LCCA in Mozambique June 2012
  31. 31. Content• Background• Learning alliances and theory of change• Data collection – including sampling• Obtained information on all different cost pies• Linking costing with financeMoz Examples of use of LCCA in Mozambique June 2012
  32. 32. Discussing items• Ideal costs, where are they? Can modelling help? USD 2 USD 1 2 USD USD 5 USD 5 1 USD Moz Examples of use of LCCA in Mozambique June 2012
  33. 33. Discussing items • Sanitation Recurrent cost – whatxneeds 1.5 14 to be planned from governament view? 1.7 x USD 2.9 x 8.8 USD 51.8 USD 2.2 USD 1.8 USDMoz Examples of use of LCCA in Mozambique June 2012
  34. 34. 5USD 22 USD 81 USD 160 USD 495 USDMoz Examples of use of LCCA in Mozambique June 2012
  35. 35. • 10,000 latrines with 2.2 USD per latrine: investment by HH 22,000 USD in sanitation in district • New latrine 5 USD per latrine: CLTS triggers 10,000 latrines, triggers investment of 50,000 USDMoz Examples of use of LCCA in Mozambique June 2012
  36. 36. Discussing items • It is great to understand the current cost but going to “ideal” costs needs alternative (ways of) financing: – Thinking next to your project cycle – “selling” Sustainability packages?Moz Examples of use of LCCA in Mozambique June 2012
  37. 37. THANK YOUMoz Examples of use of LCCA in Mozambique June 2012

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