Costs and financing

Powerpoint presentation by Zemede Abebe [and others], RIPPLE MUS Research Team, given at the World Water Forum in Turkey, 2009.

How to finance multiple use water systems for the rural poor? Lessons learnt from the domestic water sector in the Olifants river basin, South Africa

This international workshop paper focuses on the water policies and institutions in the domestic water sector of South Africa, and on characteristics of rural water supply in terms of level of services, costs and financing. Empirical data from the former homelands of the Olifants river basin show that, although the main determinants of costs are difficult to determine due to the extreme variability of situations, water costs per capita increase with the quantity of water delivered so without economy of scale. Very few water-pricing policies are implemented, so everybody, including poor people, have a free access to water.

This case study aims to document the experiences of the Asociación de Usuarios de Agua Potable Challacaba located in the peri-urban District 9 of the Municipality of Cochabamba, Bolivia in developing a community managed water supply system that meets both domestic and productive needs.

The case study concentrates on explaining the key factors that enabled the community to create a users’ association and a sustainable water distribution scheme. There is an apparently self-reinforcing, virtuous-loop between a good low cost water service, productive uses to derive maximize benefits from the water service, improved willingness to pay for the water supply, and an ability to continually invest to maintain and improve the system.

The water distribution system in Challacaba consists of a deep borehole linked to a piped network serving the 435 inhabitants. It offers a high quality, dependable service at very low costs. Water is available 24 hours a day, compared to only 2 hours a day at the nearest point (2 kilometres away) served by the city water supply company SEMAPA. Although there are elevated manganese levels in the groundwater supply, there was no microbial contamination compared to the SEMAPA supply which is not potable. Water is supplied to the members of the system on a metered basis, at a cost of 0.19US$/m3 compared to 0.51US$/m3 for SEMAPAs supply. The study shows that the widespread belief (among professionals not communities) that centralized utilities offer economies of scale in providing water in peri-urban Cochabamba should be questioned.

The initial system was developed in 1980 at a time of drought. Then, 36 households contributed US$100 each to the cost of a borehole fitted with a manual pump. In the following years, the community contributed (US$150 each household) to raise sufficient money to install a piped water system. This was constructed using the services of PLASTIFORTE (a local pipe manufacturing enterprise to which Agua Tuya is linked). In 2005, the community again at their own initiative upgraded the system installing new pipelines and a hydro-tower. The hydro-tower, at a cost of US$2000, maintains adequate pressure in the system at a fracture of the cost of an overhead tank. The number of users has now increased to 60 households.

One of the consequences of a good service with appropriate quality and adequate quantity at low cost is that it is possible for households to use the supply for productive activities, especially raising animals and milk production. Such water-intensive activities generate income and help households to sustain their livelihoods. In total, 44% of the families keep animals and their consumption is 12.9 m3/month (86 lpcd) compared to 9.7 m3/month (65 lpcd) for families without animals. Most of the families with animals (69%) keep cows with an average of 7 each. Other livestock include pigs, sheep and poultry. Milk from dairy production is sold nearby at a price of 0.18US$/litre giving an average income of 269US$ year per cow. Water represents about 1% of the costs of milk production, compared to 15% where families have to buy water from tankers for their livestock.

Taking advantage of their strong community organization, and the well functioning water system, the community has been able to introduce a number of unique elements. Firstly, members are able to borrow money from the water supply committee who operate accounts that are in surplus despite the low water charges. Members can borrow up to US$300 which is then often used for investment in productive activities like dairy farming. Secondly, an additional small monthly fee on the water bill covers burial costs of members. Thirdly, all members receive a hamper at Christmas from the committee. For all these water, and financial services, members still pay considerably less than households connected to SEMAPAs supply.

Factors that reinforce a virtuous loop of sustainability in the service include the strong sense of ownership of the system with active participation in management and decision making, appropriate low cost technology such as the hydro-tower, and appropriate financial models. In this case, all the investment has been made by the system members. Uniquely, the water committee also provides financial services (small loans and burial insurance) to the members.

The community in Challacaba are now planning to drill a second borehole to increase the supply to the system, especially for further productive activities like small gardens ( huertas).

The full report and a presentation (both in Spanish) can be found here

Cover page of the proceedings