Cross-border water and sanitation infrastructure development
More than 100-million people in the SADC region do not have access to safe drinking water and over half of the region’s population do not have access to improved sanitation facilities. These urban statistics exclude the poor living in informal settlements. The need for water and sanitation infrastructure in SADC is dire.
Presently we are dealing with so many water-related issues. “The one question we are all faced with is how we ensure the sustainable use and management of water resources because water is a finite resource,” says Graham Ching’ambu, regional fund manager at Development Bank Southern Africa (DBSA). The sustainability of water resources, both surface and groundwater, is especially acute when we experience the reality of climate change and the need to adapt and mitigate against that in terms of building resilience in the water sector.
Infrastructure needs to be developed, rehabilitated, expanded and climate proofed to be resilient to floods and droughts. The recent outbreak of the Covid-19 virus is a strong reminder of the importance of access to WASH facilities, especially for the poor, to ensure community resilience to adverse outbreaks or effects of climate.
“We also have the challenge that there is very, very limited access to water and sanitation in the world-at-large, the continent and particularly in the southern African region,” adds Ching’ambu. “And, of course, we always have the money issue. How do we sustainably finance all these needs?”
This is essentially what the SADC Water Fund seeks to respond to. In 2012, the SADC member countries established the SADC Water Fund as a regional development financing facility with the mandate of strengthening the coordinating function of SADC by funding projects to improve regional water and sanitation infrastructure and to facilitate information and knowledge sharing.
The Fund’s development objectives include climate resilience as well as the application of integrated water resources management principles for infrastructure developments in the SADC region.
Addressing such a colossal need presents both a challenge and opportunity for innovation in infrastructure technological approaches, financing and implementation models anchored on enabling policies and market structures within the region.
The SADC Water Fund Secretariat was mandated to ensure its operationalisation and it selected DBSA as an existing and reputable development finance institution to house the funds and to ensure its operation. This allows the Fund to leverage the bank’s institutional capacities and promote synergies with DBSA’s other activities. The DBSA also co-funds projects. The Funds’ seed financing of €15-million is a grant provided by Kreditanstalt für Wiederaufbau (KfW).
The Fund has three programmes that have a nexus approach with the following strategic priorities:
• Cross-border WASH. To improve water and sanitation transboundary infrastructure along major trade corridors in the region, which is vital in promoting regional integration and addressing rapid urbanisation due to cross-border trade and traffic volumes.
• Regional water utilities innovation resilience. To source and invest in pilot projects (locally-relevant innovative technology, financing and governance models) for a resilient water sector in major cities in transboundary catchments.
• Transboundary water information system. To support transboundary hydrological and metrological data collection as well as the development of information for sustainable infrastructure, risk preparedness and climate adaptation.
The SADC Water Fund exists to capitalise partner funds and coordinate sector financing. It selects bankable project proposals (quality feasibility studies must be available), provides support to them in finalising project documentation and raises funds from development partners. The Fund facilitates, monitors and evaluates cross-border coordination during project preparation, implementation and post-implementation.
“Essentially, once we pull the money and resources together, we ensure that the Fund is appropriately invested in the priority projects in such a way that there is protection and promotion of the low-income communities, so that the heart of DBSA’s shared prosperity becomes a reality within the region,” says Ching’ambu.
Money is not the only difficulty when dealing with transboundary infrastructure. The policy and regulatory environment within the water sector is a challenge and so is preparing the right project.
“You could have the money, but if the project is not well prepared, there is a hindrance in terms of being able to move to implementation. We need to consider the right financing instrument that is appropriate for a project. There is no one-size-fits-all approach. We need to deal with each specific case separately. But, most important, is to ensure that we can implement these projects. This is a key passion for the bank,” he adds.
Mamarinyana Ratsaka, Head of Programme Management Services in the Infrastructure Delivery Division at DBSA, says that one of the lessons learnt about the fund is that implementing cross-border water projects is not an easy process. “The other big lesson that we have learnt is with the identification of projects. We have found that a lot of projects are not properly prepared.”
The DBSA provides transparent fiduciary management and assurance to stakeholders. “You must plan practically and in a structured way. This preparation gap, as Ratsaka highlights, has been of the most difficult challenges to overcome and hence our model is now to invite all partners around the table so that we can overcome this hurdle,” explains Ratsaka.
In a collaborative way, internally and with other external partners, the DBSA ensures projects are suitably prepared with appropriate investment. The bank has a rolling investment portfolio of prioritised projects in the region that it invests towards and can break the silos that exist between preparation and investments.
Ching’ambu says that many delivery hurdles exist. “Foremost are the institutional mechanisms, especially from a regional perspective. How do you bring the many stakeholders together in a mechanism that is institutionalised and that will drive the process forward? This is the gap that DBSA bridges. We can bring together multiple countries and have an institutionalised approach to collaboration for ventures, which allows for optimised investment.”
“The development impact and the shared prosperity only becomes a reality when there is actual implementation of the project,” he adds. The DBSA has a growth and financing sustainability strategy anchored on the diversification of portfolio, products (funding instruments) and partnerships. “If we have a portfolio that we roll and build into a solid pipeline, then we have a pipeline towards which we can structure appropriate financing products and in collaboration with partners, we are able to make maximum regional impact.”
“The Fund is a key financing facility within SADC’s vision of establishing a regional development fund, which is the instrument to promote socioeconomic development and integration within the area. We have this proper, strong focus added to our focus on safeguarding integrated water resource management for infrastructure development and therefore, we have espoused a thematic approach within the three broad cluster areas to make sure that we endorse regional innovation for resilience as well as to ensure that we have climate resilience systems in transboundary water information systems,” says Ching’ambu.
The DBSA works with the private sector in terms of delivering service in the implementation of the projects and those engaged in international competitive bidding processes. The bank is looking at innovating and is essentially looking to develop new delivery models that open the space for the private sector.
Sustainability is one of the investment principles of the Fund, so the DBSA gauges the environmental, social and governance (ESG) aspects of the projects that it is involved in. In terms of sustainability, the bank looks for projects that will be well-managed post implementation and that will reap the intended benefits. The project sponsor’s capacity to sustain and maintain the operations and safeguard that investment for the people is considered. The development impact of a project is also regarded.
For example, the DBSA is currently working on a project in Kazungula, Zambia for the supply of water and sanitation infrastructure. The Kazungula Water Supply and Basic Sanitation Project has had its water treatment plant and water supply system as well as its storage reservoir and distribution networks upgraded. Kazungula is soon to be an upcoming town with a newly constructed Kazungula
Bridge that has seen an increase in trade volumes there. So, you see the regional multiplier potential of establishing a proper water supply service in a town like that because people from all around the region are trading. There is also growth in terms of industries and other activities in the area.
Another ongoing project is the Lomahasha Namaacha (LoNa) Water Supply Project where a bulk transmission line and distribution network is being constructed from the Simunye Water Treatment Plant in Eswatini to Namaacha town in Mozambique. Booster stations will provide rural offtakes for the communities along the way. A pumping main is being installed to Lomahasha and Namaacha Reservoirs. The Kazungula and LoNa projects should be completed in 2024 and in the first half of 2025 respectively.
Ching’ambu concludes that the SADC Water Fund has around €50-million and an active working pipeline of over €100-million of projects that it is looking to develop and see implemented within
the region itself. About €67-million of this sum represents projects that are ready for funding, including the second phases of LoNa and Kazungula.
DBSA PROJECT PIPELINE
Two projects with completed feasibility. Chirundu Cross Border (Phase 1: €7.6-million, Phase 2: €13-million) and Livingston Water Supply (€23-million).
Two projects currently being prepared with a DBSA-managed resource; the Project Preparation and Development Facility. Kazungula Phase 2 (€6-million) and LoNa Phase 2 (€12-million).
One innovative technology project. Ramotswa Aquifer between Botswana and South Africa which has been motivated for German government support in collaboration with KfW (€8-million).
SADC HYCOS project is being motivated for Green Climate Fund aid in collaboration with the DBSA Climate Finance Unit (€2-million for development and €40-million for implementation).View more