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Resource Flows Assessments in Sub-Saharan Africa: A Finance Sector Comparison Framework

This study explores the financing of Water Supply and Sanitation (WSS) sectors in sub-Saharan Africa, analyzing resource flows, financial mapping, and decision-making for resource allocations to achieve sector reforms and MDGs. The regional comparison framework aims to improve future resource allocations and accountability among stakeholders. Leveraging points include adequate funding assessment and user financing strategies.

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Resource Flows Assessments in Sub-Saharan Africa: A Finance Sector Comparison Framework

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  1. WSS sector finance in sub-Saharan Africa A regional comparison framework Thomas Fugelsnes, Economist, WSP - AF Kampala, Uganda, February 2004

  2. What is resource flows assessments? • Sector Institutional Mapping • The study uses the concept of WSS service providers: national level government departments, national level utility, local government WSS departments, local level utilities, PSSPs and CBOs • Sector Financial Mapping • Channels of funds, sources of funds and use/utilization of finance • Analysis of Public funds • Decision-making for allocations of public resources, review of rules, procedures and regulatory framework; and analysis of monitoring and accountability systems

  3. Why Resource flows assessments? • Finance is a constraint in countrywide scaling up of sector reforms and to achieve the MDGs • Inadequate understanding of WSS sector finance - a reason for lack of WSS incorporation into PRSPs in SSA • Financing in WSS tends to be diverse with equal importance of public and private/community resources

  4. The resource flows assessment process • Countrywide assessments of resource flows • Develop regional comparisons to feed back into country assessments • Phase 1: Country studies in Kenya, Ethiopia and South Africa • Phase 2: Zambia, Uganda (sanitation), Yemen, West Africa (one or two countries if possible) and regional comparisons

  5. Why regional resource flows comparisons? • At country level • Countries to see how they continuously allocate resources as well as that of other countries, providing a basis for improved future resource allocations • Civil society advocates and parliamentarians to make governments accountable for resource allocations • Donors to see in tandem prioritization and actual resource allocations, adjust their development priorities and assistance • All stakeholders to gain access to good practices and innovative ideas, and adapt these to local challenges to improve performance

  6. Why regional resource flows comparisons? • At regional level • Feed into NEPAD and AMCOW • Regional donor groups, African Water Facility • Multinational donors

  7. Three statements heard in the WSS sector today • “We need more funding, ready for donor projects” • “There’s a ceiling to how much that can be financed on public sector budgets” • “Decentralization and sector coordination”… Countries decentralizing but no capacity at local level…

  8. Regional WSS finance comparisons can help addressing those issues • Adequate funding • How much public funding? • User financing • Internal generation and efficiency • Donor support • Integrating NGOs in sector coordination policies

  9. Leveraging point 1:How much should be allocated to the sector through public budgets? • There’s no right or wrong answer to the question - But WSS resource flow studies show limited public sector resources for WSS • The WSS sector receive low allocations in both Ethiopia and Kenya • Illustrations of indicators that can hint at answers can come out of a regional comparison…

  10. Adequate funding 1:WSS expenditure as share of public expenditure

  11. Adequate funding 2:WSS expenditure as share of GDP

  12. Adequate funding 2:Total WSS expenditure as share of GDP compared to health

  13. Adequate funding 3: Comparative annual WSS expenditure per capita (USD)

  14. Adequate funding of WSS in public budgets • There’s a need to assess resource requirements and compare with resource availability in the sector • The Ethiopia Public Expenditure Review of water – an example of projections of expenditure requirements in investment plans: • Ambitious projection scenario • Moderate projection scenario • Low scenario • Regional resource allocation and performance comparisons may help in advocacy for adequate funding

  15. Leveraging point 2: User Financing • Internal generation • The WSS is hitting the ceiling for how much it can be allocated under the PEAP in Uganda, still resource required • Two ways this can be addressed… • More user charges • More community contributions to capital costs (esp.ly for RWSS)… And supporting / coordinating greater NGO and community resources • The assumption is that user financing is not part of the ceiling if it is off-budget • User charges important (39% Kenya)

  16. Leveraging Additional Resources • Comparing sector expenditure as a % of GDP - health versus WSS Are we crowding out non-public resources? Source: Sub-Saharan Africa: World Development Report, 2003. Other countries: WSP-AF ongoing studies. Ethiopia Kenya South Africa Sub Saharan Africa

  17. Leveraging point 2: User Financing Contd • URWS • Efficiency in collecting user charges • Generating operational surplus • Both are linked to institutional reforms • RWSS • Community contributions • Uganda and Benin 5% • Ethiopia 10% • Kenya often 20-60% • China as high as 75% • And often non contributed at all • Linked to cost-sharing policy, design of financing mechanisms and institutional reforms

  18. Leveraging point 3:How to balance sector coordination with NGO involvement? • Kenya/Ethiopia – high share of off-budget or donor resources • 20% of total sector expenditure and • 70 % of donor resources • South Africa story… • Decentralization story…

  19. Share of served population by type of WSP Urban Rural

  20. Expenditure estimates for different levels and service providers

  21. Way forward: Benchmarking WSS sector finance • For country processes and regional process to feed into each other • Such comparisons may help in advocacy for adequate funding of WSS • Ten indicators

  22. Way forward: Benchmarking WSS sector finance • Adequate public funding: • Percentage of total national expenditure allocated to WSS (dev. and recurrent) • WSS budget allocations as share of GDP (national) • Percentage of budget allocations to the WSS sector relative to other other social sectors (dev. and recurrent) • Budgetary ceiling for WSS within MTEF as compared to other relevant sectors • Ratio of total donor/NGO contributions to national budget for WSS expenditures

  23. Way forward: Benchmarking WSS sector finance • User financing: • User charges as a share of total sector finance • Ratio of user charges to recurrent expenditures by service providers • Prevalence and share of user charges among different service providers

  24. Way forward: Benchmarking WSS sector finance • Donor funding/NGO: • Percentage of total expenditures by CBO/PSIP (dev. and recurrent) • Percentage of donor funds integrated into national budget

  25. Way forward: Benchmarking WSS sector finance • Efficiency – not really addressed here: • Utilization – actual as share of planned in national budgets • Value-for-money • Operating performance of service providers

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