Africa’s Poor Water Infrastructure Draws Big Investments

With grand rivers like the Nile, Congo, Niger, Zambezi and Limpopo, sub-Saharan Africa appears to have ample water. But the uneven distribution of those and other water resources leaves many countries facing increasing levels of water stress as population and economic growth outpaces existing water infrastructure.

“Only 58 percent of Africa’s population enjoys access to safe drinking water,” according to the African Development Bank, which notes in both urban and rural areas, the number of people depending on unsafe surface water continues to grow.

Besides the human need, the economic sectors which require water – such as agriculture and energy – have brought to the forefront opportunities for expanding water infrastructure in the region.

“Africa has very high non-revenue water and very high water scarcity issues, not to mention the other issues which are just clean drinking water,” Ben Gardner, president of Northeast Group told AFKInsider.

According to the World Bank, “Factors contributing to the prevailing situation of under-maintenance are institutional weaknesses in the wake of decentralization, inadequate attention to technology choice, low pump density, restrictive maintenance systems, and the lack of a supply chain to adequately maintain complex machinery.”

Part of the solution is the recognition that countries must boost cooperation in managing cross-border or “trans-boundary” rivers, lakes and ground water for shared economic growth.

Infrastructure Solutions

Water security is defined by the World Bank as “reliable water supplies and acceptable risks from floods and other unpredictable events, including those from climate change.”

To meet the Millennium Development Goals, it is estimated that Africa would have to spend $15 billion annually, four times more than the current spending of $3.6 billion on water projects.

Finding innovative water infrastructure solutions was center stage – along with investment possibilities – at the 5th Africa Water Week Business Forum in May, where increasing water use efficiency in agricultural was given particular prominence.

It is estimated that 85 percent of all industrial water withdrawals in Africa go to agriculture.

During October’s 6^th U.S.-Africa Infrastructure Conference in Washington sponsored by the Corporate Council on Africa, a panel discussion focused on the varied opportunities for investment in the water, sanitation and hygiene market.

“There was a long discussion on water and sewage and drainage, which had a big focus on the compact that’s happening in Zambia that is financed by the U.S. Millennium Challenge Corporation,” Vivienne Sequeira, Corporate Council on Africa’s Director of Infrastructure told AFKInsider.

“And actually, that’s one of the reasons our trade mission [went] to Zambia – so our participants can learn more about that project.”

That trade mission to Zimbabwe, Tanzania, and Zambia took place Oct. 26 through Nov. 4 to explore business opportunities in the agribusiness, energy and infrastructure sectors. In Zambia, the Millennium Challenge Corporation has been offering opportunities to compete for funding for infrastructure and institutional strengthening projects through Zambia’s five-year, $355 million compact.

The upcoming March 2015 Zambia International Water & Infrastructure Conference and Exhibition in Lusaka will also focus on financing water infrastructure projects, including sustainable solutions and technological breakthroughs.

During the Corporate Council on Africa’s conference, World Bank municipal finance specialist Kirti Devi noted that while there is a need to mitigate water security risk, there are also huge opportunities for investment throughout Africa.

One of those opportunities targets the critical need to curb wasted water. Inefficiencies and failing infrastructure cost utilities about $3.7 billion in revenues each year.

“Inefficiencies are divided between distribution losses and revenue under collection. Average distribution losses stand at 35 percent, far above the world norm of 20 percent,” according to the African Development Bank.

“In the worst cases – such as the Democratic Republic of Congo, Ghana, and Zambia – these combined inefficiencies can create an economic burden of 0.7 to 1 percent of GDP.”

“The big issue is ‘non-revenue water,’” Ben Gardner, president of Northeast Group told AFKInsider. “If 100 percent is sent in one end of the pipe and only 70 percent comes out the other end of the pipe, there’s 30 percent non-revenue water.”

“This lost water creates additional needs for costly treatment plants, increases the demand for energy from pumping stations, and puts added stress on already strained communities and environments,” according to the Northeast Group 2013 report Emerging Markets Smart Infrastructure: Smart Water, looked at the smart water infrastructure market in 72 emerging market countries through 2023, including Ghana, Kenya, Rwanda, South Africa, Tanzania, Uganda and Zambia.

The report notes “lost revenue from this water only increases the need for government subsidies, which already are necessary to cover a significant portion of the costs of water in many countries.”

The Infrastructure Consortium for Africa points out that besides old and leaking pipes, “lack of metering, poor billing and collection procedures, as well as illegal water connections” contributes to the loss of revenue for utilities.

Northeast Group’s Gardner says their research indicates using smart water meters – much like smart electric meters – can help water utilities and developers identify where there are leaks in the water infrastructure.

“So, you can do smart meters at the residential level, but you can also do smart metering at the network level or through the water distribution network – what we call ‘smart water networks.’ And that can help identify where there’s non-revenue water,” Gardner told AFKInsider.

Cross-Border Water

According to the World Bank, 40 percent of rural dwellers continue to rely on surface water but in many countries, less than 1 percent receives piped water.

The Bank cites some “best cases” in Lesotho, Mozambique, and Uganda which have managed to shift 2 to 3 percent of the rural population from surface to piped water each year. Yet, one in three rural water distribution points still need rehabilitation.

In the other countries, surface water use is actually increasing and that is forcing governments to set aside differences in favor of regional cooperation on trans-boundary river and lake basin infrastructure policy.

“Africa has some 63 international river basins that “are shared by two or more countries and require careful coordination of water resource management and associated infrastructure investments,” according to the World Bank.

The issue is how countries can work together to better manage these shared waters. Corporate Council on Africa’s Vivienne Sequeira told AFKInsider that trans-boundary issues came up at their October infrastructure conference, noting that such issues are important “as soon as you talk about regionalization.”

“Clearly, there’s the need to look at it not just as these small pockets of population, but as a group,” Sequeira told AFKInsider.

Cross-border use of water also impacts energy development.

“You need power to get water, and water to produce power in some technologies,” Sequeira told AFKInsider.

However, a July 2014 World Economic Forum report notes “to date, energy and water infrastructure and policy decisions have been made independently of one another, often with outdated assumptions regarding rising demand and resource scarcity.”

As demand for electricity grows steadily while water supplies continue to dwindle, the water-energy nexus is slowly becoming part of decision making throughout the region and opens up opportunities for innovative solutions.

Big Funding Goes to Water

The African Water Facility – an initiative the African Ministers Council on Water and managed by the African Development Bank to help implement the Africa Water Vision 2025 – has been funneling money towards water infrastructure projects since it was created in 2006. One recent program announced on Oct. 10 involves a $2.5 million grant to the Hadejia-Jama’are-Komadugu-Yobe Basin Trust Fund for creating a strategic plan to develop water resources for over 15 million people in Northern Nigeria.

In September, the African Development Bank approved a loan of $91 million and a technical support grant of $10 million to finance Ethiopia’s $2.4 billion “One Water, Sanitation and Hygiene National Program” (OWNP), one of the largest such projects in the world.

In July, Rwanda’s government and the African Development Bank announced support for the African Union-led Kigali Action Plan to mobilize at least $62 million to help finance water-related projects for five million people in the 10 African Union member states of Burundi, Central African Republic, Chad, Liberia, Madagascar, Mali, Sierra Leone, South Sudan, Lesotho and Mauritania.

With the exception of Lesotho and Mauritania, these countries are regarded as “fragile states.” The project includes soliciting direct donations through a crowd funding platform.

In June, the World Bank, African Development Bank, French Development Agency and Japan International Corporation Agency pledged to boost water supply and improve sanitation in Nigeria with a combined financial commitment totaling $638 million.

Countries and private sector are actively developing new models of partnerships to find solutions to the sustainable water funding. There is even support for the privatization of water infrastructure projects in the way some countries have privatized energy projects.

One emerging trend to watch is the focus on water storage and irrigation infrastructure for agriculture to mitigate huge swings in precipitation across the region – an issue expected to intensify from climate change stresses.

According to the World Bank, only six million hectares, concentrated in a handful of countries, are equipped for irrigation. Though this represents less than five percent of Africa’s cultivated areas, these irrigated regions account for 20 percent of the current value of total agricultural production.

Finding bankable solutions to water storage such as Pumped Storage Plants (PSP) for irrigation would not only open a huge market for such projects, it would also strengthen and even widen the agricultural economy.