This document discusses financing sustainable water services. Some key points made include: - Water services require funding to be sustainable, but "free water" is an illusion and does not generate enough revenue. - The costs of not having adequate water services are very high for both the public and businesses. - Water pricing needs to cover real costs to avoid a vicious cycle of low funding, degraded infrastructure, and poor service quality. - While some innovative financing instruments exist, projects need sound business models where revenues cover total expenditures. - Water pricing is political and policymakers need to understand that tariffs and taxes must fund real costs, not just short-term interests. - Most people are willing to pay for reliable water

1. Financing & Economic Instruments
Wrap-up - Business
Jack Moss,
Executive Director - AquaFed

2. Thou don’st get owt for nowt
• You don’t get anything for nothing
• You get what you pay for
• Free is an illusion
• Revenue - Three times nothing is still nothing
• If the multiplier is only after the decimal point
we face revenue erosion
IF WE WANT SUSTAINABLE WATER
SERVICES WE HAVE TO PAY FOR THEM

3. The costs of ‘not’ are very high
• Not having the water you need, of the quality you
require, when and where you need it is VERY
expensive
• Failure of public provision results in high private costs
• Businesses recognise the importance of pricing and
want to see water priced for sustainability
• But what ‘water’ are we talking about
– Too vague
– Too general
– Too Abstract
• Water itself or the services and benefits it delivers?

4. Unsustainable VS Sustainable Water
Financing
Costs
Revenue
Value
Perception
Unsustainable
Costs Revenue
Value
Perception
Sustainable

5. The Vicious Spiral of Low Funding
Funds lost to System:
•Non –recovery
•Corruption
•Rents
Low Service
Quality
Infrastructure
Degradation
Inadequate
Maintenance
Operational
Inefficiency
Inadequate
Investment
Low Fee Revenues
& Low Willingness
to Increase Tax
Based Water
Funding
Low
Perception of
Value
Potential Investments
Driven away by
Perception of
High Risk & Low Returns
Good Quality Human
Resources Driven away
By lack of Opportunity
& Low Achievement
Loss of positive
externalities &
increase of
negative
externalities
AquaFed

6. Sophisticated Instruments for a
Poorly Defined Problem
• Some very clever ideas in search of a problem
to solve
• Positive message is the methodical approach to
measurable and quality data
• What you treasure you will measure
• There is money available – but projects must be
sound
• Business model must ‘stack up’
• TOTEX = Coherence of CAPEX & OPEX

7. 2 1/2 Ts + ?
• Long-Term Financial Sustainability
• Tariffs T1
• Taxes T2
• Are transfers sustainable?
• Are transfers enough?
• Perverse effects of donations, subsidies, etc.??
• There is a need for more ‘up-front’ funding
• Concessional funding
• Bonds
• Commercial loans

8. Willingness to Charge
• Water pricing is political
• How do you persuade a politician that T1 + T2
must cover the real costs?
• Where it is done it works
• Not in my mandate period!
• Smoothing the heavy up-front lump

9. Willingness to Pay Ability to Pay
• The vast majority of people are willing to pay
– Provided they have a reliable service
• Many would like to have the opportunity to
pay
– If only there was a service available for them to
pay for!
• A few really cannot afford to pay
– Special provisions are needed for them
– This is entirely possible but needs care
– These people should not be the benchmark for T1

10. Linkages
• There are strong linkages between
• Sustainable finance
• Governance
• Performance
SUSTAINABLE VALUE GENERATED
FROM WATER

11. www.AquaFed.org