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The Senegalese pro-poor approach to tackle the urban water sector affordability/viability issue

5th World Water Forum World Water – Istanbul – Thursday, March 19 2009 Session 5.2.2. : convened by OCDE - Suez Environnement - IWA. The Senegalese pro-poor approach to tackle the urban water sector affordability/viability issue. Affordable and sustainable water and sanitation services :

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The Senegalese pro-poor approach to tackle the urban water sector affordability/viability issue

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  1. 5th World Water Forum World Water – Istanbul – Thursday, March 19 2009 Session 5.2.2. : convened by OCDE - Suez Environnement - IWA The Senegalese pro-poor approach to tackle the urban water sector affordability/viability issue Affordable and sustainable water and sanitation services : The role of tariffs and other instruments By Mouhamed Fadel NDAW Technical Adviser to the urban water Minister and coordinator of PEPAM projeau@orange.sn - www.pepam.gouv.sn

  2. URBAN WATER : THE INSTITUTIONAL FRAMEWORK State Concession contract « Affermage » contract SONES Asset company SDE Performance contract Private partner Clients THE PPP CONTRACTUAL SCHEME

  3. SENEGAL: CHALLENGES OF THE URBAN WATER SECTOR • Financial issues to adress • Developing and maintaining the infrastructure • Providing access to water services to the poorest (PRSP, MDGs) through private connections • Ensuring sustainable financial viability of the sector • Covering environmental costs (Treatment plants, sludge disposal, protecting surface water)

  4. SENEGAL: MAIN URBAN WATER DATA • Urban population served 4.5 millions • % of population having access to potable water : 98% • - Private connections : 74 % • - Stand pipes : 24 % • 60 major cities of the country including Dakar • Annual volume produced : 135.000.000 m3 • Annual volume sold: 110.000.000 m3 • UFW (Unaccounted For Water) : 20 % • Number of connections : 482.752 • Sector annual revenue : 105 millions $ • % of metering : 98,5 % • Private customers billing collection ratio : 98% • Government billing collection ratio : 100 % • 1.220 staff members (SDE : 1140 – SONES : 80)

  5. AFFORDABILITY/ACCESS ISSUES FINANCING THE WATER SECTOR INVESTMENT PLAN (1996-2008) • 1. CONCESSIONAL LOANS TO SONES : 250 MILLIONS $ (77 %) • DIRECT LOANS TO SONES : AFD AND WADB : 100 millions $ • REASSIGNMENT OF LOANS FROM GVT TO SONES (BEI, BOAD etc…) : • 20 ans - 3,5 %: 60 millions $ • EQUITY (50% IDA + 55% KFW) : 90 millions $ • 2. PRIVATE OPERATOR (SDE) : 64 MILLIONS $ (20 %) • 3. LOCAL COMMERCIAL BANKS : 11 MILLIONS $ (3 %) • TOTAL : 325 MILLIONS $

  6. AFFORDABILITY/ACCESS ISSUES WATER COVERAGE EXTENSION (1996-2008) • 861 kms network extensions to the periurban areas and secondary cities • 145.531 subsidized social connections to poor households : 30 $ • 56.921 ordinary connections to wealthy households : 150 to 600 $ F 500 public standpipes in new urban settlements • 1.800.000 new persons benefiting of improved drinking water services (98 % coverage rate among with 74% of private connections) .

  7. AFFORDABILITY/ACCESS ISSUES SOUND COMBINATION OF 3 T + TIME (3% INCREEASE PER YEAR FROM 1996 TO 2003) • Tariff for social block = 40 cents $/m3 • Second block : 1.3 $ • Third block (dissuasive) : 1.8 § • Tariff at standpipes = = 3 to 5 times the social block tariff TD TP AVERAGE TARIFF : 1.1 $/M3) TS

  8. AFFORDABILITY/ACCESS ISSUES ALLOCATION OF TARIFF REVENUES • Private operator revenues to cover operating cost and partial renewal of investment : 30contract 0 FCFA (55%) – SDE- Revenues linked to fulfillment of performance targets • Public asset holding company fees to cover new investment and debt service : 150 FCFA (28%) – SONES • Sanitation surcharges on water to cover partial O&M costs and rehabilitation of facilities which lifespan inferior to 15 years : 41 FCFA (8%) – ONAS • Taxes (mainly VAT of 18 %) : 46 FCFA (9%) - STATE

  9. REMAINING CHALLENGES • Major gains of efficiency already reaped • Financing of the third generation of investment for Dakar (desalination?) • Limited possibilities of future tariffs adjustments to maintain the financial sustainability of the sector (domestic tariffs frozen since 2003) – Demand and WTP study • Maintaining level of the subsidized rate for the first 20 m3 block : 40% of the total water at a tariff covering 60 % of the O&M costs • Compelling issue of urban sanitation (O&M costs and partial rehabilitation of facilities)

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