LEVERAGING PUBLIC FUNDING TO MOBILIZE CAPITAL FOR DECENTRALIZED SANITATION AND OPERATIONAL EFFICIENCY, KENYA
In Kenya, an ambitious National Water and Sanitation Investment Plan (NAWASIP) seeks to raise funds for achieving universal access to water and sanitation by 2030. The plan estimates the investment gap to be $8.32 billion (2023 to 2030).
In support of the plan, the Kenyan accelerator aims to facilitate $10 million through a financing facility for operational efficiency and WASH service delivery.
Operational efficiency will improve creditworthiness of water service providers and enhance their eligibility for commercial financing. Lessons learnt from the financing facility will be a reference for and catalyze the development of innovative models to attract additional commercial financing to the water sector. The accelerator also targets a cumulative reduction of municipal water losses from 40 percent to less than 25 percent, with access to WASH services for 2 million people. The targets will be facilitated jointly through World Bank operations.
Preparatory work is under way, and, in FY23, the Ministry of Water, Sanitation, and Irrigation approved the preparation of the accelerator as complementary to the World Bank’s Water, Sanitation, and Hygiene Program in Kenya (K-WASH), with funding secured from the Public-Private Infrastructure Advisory Facility to support nationwide sanitation services market sizing, and technical advisory support to national and county governments to establish or improve attractiveness, regulation, and oversight of private sector engagement in water supply and sanitation services.
Kenya loses more than 0.9 percent of its GDP to lack of access to WASH. About 34 million Kenyans have no access to basic sanitation, 20 million lack access to basic drinking water, and 33 million lack access to basic hygiene services. It is expected that the private sector will contribute $2 out of every $5 of the financing for NAWASIP. However, private sector participation in the water and sanitation sector is low due to the absence of a conducive enabling regulatory environment and public water utility inefficiencies (including non-revenue water), which affect creditworthiness and discourage commercial financing.
The accelerator builds on previous work by 2030 WRG and the World Bank Water Global Practice to reduce non-revenue water in Kenya. Five project concepts for performance-based contracts for non-revenue water reduction were completed during FY23.
These project concepts, targeting five of the biggest utilities, were designed to demonstrate how a performance-based contract for non-revenue water reduction—the first of its kind in Kenya—can work in this sector.
These projects are now ready for resourcing and will be seeking financing through the facility as it comes online. The design of a disbursement-linked indicator for private capital mobilization under the K-WASH program was also completed during FY23 through joint discussion with the Ministry of Water and Sanitation and the World Bank.
This will increase the amount of funding leveraged by water service providers from private capital or commercial funding sources. Bankable projects supported by the indicator will fund interventions defined in water service provider performance improvement action plans for improved cost-efficiency.
Further data and analytics and technical advisory support are required to provide a basis for structuring future PPP contracts between public water service providers and private operators. During FY23, 25 target county governments agreed to participate in and coordinate stakeholder dialogues for the 2030 WRG-led sanitation market sizing and assessments in their jurisdictions. Apart from undertaking the market assessment and scoping, the accelerator will provide support to these and other interested water service providers on the design of the technical, financial, and legal structures of performance-based contracts for non-revenue water investments.