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27 November 2008

Money blues, dirty water

African water services must raise billions of dollars from the private sector annually to meet rising demand, experts say.

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African water services must raise billions of dollars from the private sector annually to meet rising demand and UN development goals as the global financial crisis threatens investment, experts say.

Hundreds of millions of Africans have no clean water and, in some countries, the majority of people defecate in the open as there are no toilets, spreading disease and contributing to some of the world's highest death rates amongst children.

At a meeting focusing on how to harness private capital to fill a multi-billion dollar shortfall for water and sewage services, dams and irrigation, experts acknowledged the impact the global financial crisis could have on funding.

"It's going to be more difficult to raise all kinds of ... commercial and private sector finance, and it may even be more difficult to raise aid in future," water sector and development specialist James Winpenny said.

In 2000, the United Nations General Assembly set targets to reduce poverty by 2015, including cutting in half the number of people without access to safe or affordable drinking water.

But this objective, like many other of the so-called "Millennium Development Goals," looks unrealistic for many African countries where public infrastructure is crumbling after decades of under-investment and poor management.

Improving management
"We're hearing encouraging noises from the donor side, saying they're going to maintain funding," said Alex Rugamba from the African Development Bank.

"Certainly in the short run we may see a dip (in private funding). The cost of borrowing will go up."

The Organization for Economic Cooperation and Development (OECD), a club of the world's richest countries pledged to keep up development assistance to poor countries, but said management of water resources must be improved.

"If present policies prevail, by 2030 another billion people will live in areas without enough water," said an OECD statement.

Rakotobe Andrianarison, director of the African Development Bank's water and sanitation division, said Africa needed around $2.5 billion a year to improve water and sanitation services.

He said some funding could be found through better management of existing African resources, including by reducing losses from water pipes, which at around 35 percent are nearly twice the international standard.

Spend on infrastructure
Experts added that Africa needed to double its $100 billion-a-year infrastructure spending, and private capital was key to achieving that.

Zambian farmers, for example, were gradually buying back an irrigation system paid for by donors, using extra income earned from the additional crops they could now grow.

Over half a dozen water companies from across Africa met in Dakar earlier this week and received "shadow credit ratings."

These indicate the interest premium water companies may have to pay if they issued bonds to fund growth, and show how well run they are as businesses, said Lorenzo Bertolini, of the World Bank-backed Public-Private Infrastructure Advisory Facility.

"This is a pioneering process for utilities in Africa," Bertolini told Reuters. "They need to address the financing gap and do better with what they have already." – (Reuters Health)

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Enviro health Centre
Water Centre

November 2008

 
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