6th World Water Forum – Africa Target 5 Report

Strategic Financing Framework : 3Ts and Innovative Financing Mechanisms in the Water Sector in African Countries

Case Study: Zambia

Draft, 31st October 2011

Prepared by Dr Rolfe Eberhard

Contents

The story of 3Ts and water sector financing in Zambia............................................................2Best practice: Pro-poor urban funding basket..........................................................................6Best practice: Regulating ring-fenced commercial utilities......................................................8Acknowledgements and resources.........................................................................................12Annexure: World Bank and African Development Bank financing activities in the water sector..................................................................................................................................... 13

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The story of 3Ts and water sector financing in Zambia1

Adoption of key policy principles in 1994 created the basis for new institutional arrangements

Key milestones in the reform of the water services sector in Zambia were the adoption of seven principles in the 1994 National Water Policy (see text box) and the promulgation of the Water Supply and Sanitation Act in 1997. This was strongly supported by the constitution that stipulates a state obligation “… to provide clean and safe water”. Reforms in the water resources sub-sector followed later, commencing in 2003 and resulting in a new Water Resources Management Act in 2011.2

The 1994 policy split water resources from water services and handed the responsibility for water services to the Ministry of Local Government and Housing, while the Ministry of Energy and Water Development retained responsibility for water resources (Principle 1).

A new regulator, the National Water Supply and Sanitation Council, was established under the Minister of Energy and Water Development (Principle 2). All assets of the 46 Water Supply schemes under the responsibility of the water ministry were transferred to local authorities in 1997 (Policy Principle 3).

In support of Principle 4 (cost recovery) and 5 (human resource development), the provision of water supply and sanitation services in urban areas was commercialised. Commercial utilities were formed, owned by local authorities who joined together on a voluntary basis. More than 90% of the urban population live in areas served by the ten Commercial Utilities. The remaining urban population are served by 13 local authorities and six privately run schemes.

A National Irrigation Policy and Strategy was developed in 2006, followed by a National Irrigation Plan. The objectives of the strategy and plan included development of socially desirable and economically viable irrigation schemes; construction of communal bulk water supply systems; facilitation of irrigation infrastructure-development for improved agricultural productivity; establishment of an Irrigation Development Fund to help farmers access funds for irrigation equipment; facilitation of establishment of water rights that are supportive of sustainable agricultural development; and promotion of sustainable utilization of wetlands.

1 3Ts refers to taxes, transfers and tariffs. OECD note that “taken together, these three sources form the basis for achieving sustainable cost recovery” and that, “in many countries there is a ‘financing gap’ between the costs of meeting expected targets and the revenues coming out of the 3Ts. Expected future cash flows from the 3Ts can form the basis for attracting repayable finance, such as loans, bonds and equity”. (OECD, 2010)2 This overview is based on “Water Supply and Sanitation Sector Reforms in Kenya, Tanzania, Uganda and Zambia” (gtz, 2008) and “Water Sector Reform in Zambia.” (NWASCO, 2004).

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Seven key principles guiding reforms1. Separation of WRM from WSS.2. Separation of regulatory and executive

functions within the water supply and sanitation sector.

3. Devolution of authority to LAs and private enterprises.

4. Full cost recovery in the long run.5. Human resource development leading to

more effective institutions.6. Technologies appropriate to local

conditions.7. Increased funding by the Government of

the Republic of Zambia (GRZ).

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Government responsibilities for water

The Ministry of Energy and Water Development has overall responsibility for the water sector (both water resources and water supply and sanitation), including national water policy formulation and water resources planning and management. The Ministry of Local Government and Housing has the mandate for policy, planning, coordination and funding mobilisation for the water supply and sanitation sub-sector. The Ministry of Health is responsible for health, sanitation and hygiene promotion and the Ministry of Education is responsible for sanitation in schools. The Water Sector Advisory Group, composed of a cross-section of stakeholders in the sector, provides coordinating and advisory functions.

Regulated commercial utilities provide services in urban and peri-urban areas

The ten commercial utilities, responsible to provider water supply and sanitation services in both urban and peri-urban areas, are a key feature and strength of the sector. These utilities are public companies owned by the local authorities and are regulated by the National Water and Sanitation Council. The intention is for these utilities to achieve full cost recovery.

Rural water and sanitation services are provided by the District Councils

Rural water supply and sanitation units within the district governments are responsible for implementing rural water supply and sanitation programmes. Seven Provincial Support Teams support these units.

A national development plan aims to achieve sector goals

Sixth National Development Plan 2011-5 sets out the sector goal, and key programmes and initiatives to achieve this goal: “The sector goal is ‘to achieve 75 per cent accessibility to reliable safe water and 60 per cent adequate sanitation by 2015 in order to enhance economic growth and improve the quality of life’.3 In order to achieve the SNDP objective of promoting sustainable water resources development and sanitation, the strategic focus of the sector will be to provide water and sanitation infrastructure and develop skills to ensure effective water resource management and the efficient provision of reliable and safe water and sanitation services”. These goals are to be achieved through five programmes: water resources infrastructure development, climate change adaptation and mitigation, research and development, integrated water resources management, national rural water supply and sanitation programme and a national urban water supply and sanitation programme.

Government spending on rural water is centralised

Spending on rural water supply in Zambia by government is largely centralised. Funds are transferred to districts only to a very limited extent. The Rural Public Expenditure review reported that “so far, only one program is piloting a decentralised approach in some selected districts for expenditure decisions delegated to councils for rural water supply investments.”4

Although investments in rural water have increased significantly, the efficacy of these investments is not known with confidence

Total annual contributions from the government, development partners and NGOs have increased significantly for rural water supply and sanitation over time – from US$9 million to US$28 million in the period 2005 to 2009.5 This is attributed to the development of the National Rural Water Supply and Sanitation Programme, launched in 2007. Finding levels have increased notwithstanding the fact that funding arrangements are fragmented (see figure below). There are many parties involved in

3 The same document reported water coverage in 2009 at 53 percent and sanitation coverage at 33 percent.4 Nordic Consulting Group (2010)5 This corresponds to more than a 100% increase in per capita investments (Nordic Consulting Group, 2010).

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funding water supply and sanitation services through a variety of implementation arrangements, including national government (Ministry of Local Government and Housing, local authorities, community-based organisations, donors and NGOs.) A recent Public Expenditure Review of Rural Water reported that there were more than 60 different programs and projects in the sub-sector, and that data on facilities built and the operational effectiveness of these facilities is inadequate.6

Figure 1: Financial flows in rural water sector7

Financial resources for the urban sector appear inadequate relative to the need

The draft National Urban Water Supply and Sanitation Programme estimates investment requirements to be between US$ 106 to 173 million per year from 2009 to 2015. The Programme anticipates funding of about US$ 50 to 60 million will be available for this, leaving a funding gap.

There are wide discrepancies between budgets and spending

Although the sector investment programmes for the urban and rural water supply and sanitation sectors are used as the basis for budgeting, there is a wide variance between budget and actual releases suggesting that other supply side constraints exist, related to the capacity to spend.8

Confidence in government financial systems is low and only a small share of development partner assistance is provided on-budget or as full budget support

Only 6% of development partnership spending on rural water is full budget support. While about 30% of spending goes through the government budget system, but is for specific projects, the majority (over 60% does not go through the government’s budget system – see below.

Table 1: Flow of funds - development partners - rural water supply9

The flow of funds in the sector is shown in the figure below.

6 “Public Expenditure Review - Rural Water Supply – Zambia.” (Nordic Consulting Group, 2010).7 Source Nordic Consulting Group (2010).8 AMCOW Country Status Overview – Zambia, draft. (2011).9 Nordic Consulting Group (2010).

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Figure 2: Organisation of the Urban Water Supply and Sanitation Sector (source: draft NUWSSP)

User contributions

In rural areas, users are expected to make a 10% contribution to the capital costs and to be responsible for operations and maintenance costs. In urban areas, users are expected to pay for the full cost for individual connections, and to pay tariffs that, in the long-run, are expected to recover the full costs of the service. Actual practice differs from policy. The estimate user contributions amount to about $8 million per annum, a small share of total spending.10

Concession loan finance

The World Bank, African Development Bank, Danida (recently) and European Investment Bank (recently) provide concession loan finance to the water sector. Lending conditions to government are based on standard IDA loan conditions. Details of some active projects are provided in the Annexure. (KfW, European Union and Jica have provided, and are continuing to provide, grants only.)

Commercial finance

Lusaka Water and Sewerage Company uses local banks to finance investments for the construction of water distribution networks in new areas in and around city. These loans are ring-fenced and the revenue collected from these areas used to replay the loans in the first instance. One drawback with this arrangement is the high interest rates attached to these loans. Lusaka Water and Sewerage Company Water had intended issuing a municipal bond but operational inefficiencies within the utility, large accumulated customer debt, high nonrevenue water and highly subsidized water tariffs were major constraints. These same factors make it hard to increase the levels of investment into the sector.

In water resources, commercial farmers finance the construction of their own dams using commercial loans. The information regarding these kinds of investments is not tracked.

The new urban programme prioritises pooled funding

The National Urban Water Supply and Sanitation Programme (NUWSSP) has been recently released (October 2011). Key points related to the future direction of funding modalities for urban water and sanitation services are as follows:

The Devolution Trust fund will continue as independent statutory instrument, parallel to the new NUWSSP management structure in the Ministry of Local Government and Housing.

10 AMCOW Country Status Overview – Zambia, draft. (2011).

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Pooled funding is a priority modality, with the project-based approach to be continued in the transition period and, thereafter, only in exceptional cases (for example, for JICA).

Funds for the Commercial Utilities are to go through a dedicated account in the Ministry of Finance and National Planning, and then directly to the Utilities.

The detailed financing mechanisms, together with implementation guidelines, are still to be finalized within the next twelve months. The guidelines of the Devolution Trust Fund are to be used as a basis for these guidelines.

The Cooperating Partnership will prepare for joint appraisal.

Best practice: Pro-poor urban funding basketA pro-poor basket fund

The Devolution Trust Fund was established in 2006 by the Regulator to assist the Commercial Utilities to improve water supply and sanitation services. The Fund is a pro-poor basket fund established specifically for the purpose of providing funds to increase access to water and sanitation services in low-income peri-urban and urban areas, focusing on the ‘last mile’ of the water network – service connections to improve access – and on household sanitation facilities. The fund also has a performance enhancement window to assist the Commercial Utilities to improve their financial viability.

The fund is demand driven

The Trust Fund issues calls for proposals. Proposals are submitted by the Commercial Utilities. The Fund assesses the proposals in terms of a pre-defined set of criteria (for example, cost per beneficiary and impact on coverage and health). Successful proposals are granted funding. The management of the project follows a well-defined project implementation framework. The Commercial Utilities enter into a financing agreement with the Fund and funds are released to the utilities based on the project milestones being reached, including reporting on and accountability for expenditure. The utilities are responsible to implement the projects, with a project steering team comprising relevant Community-Based Organisations and Local Authority representatives. The Fund also provides support as and when necessary, and monitors project progress and outcomes.

Two funding windows – a general fund and a performance enhancement fund

The general fund is open to all licensed Commercial Utilities and is intended to fulfil the main purpose of the fund – funding new connections and sanitation for poor households in urban areas. More specifically, the purpose of the General Fund is to facilitate funding for investment in appropriate low-cost technologies in water supply and sanitation for low-income urban areas, and to assist with establishing sustainable management systems for these installations/facilities, in areas that have had no water or with very limited supply (below 20% coverage) for both peri-urban and low-cost areas, with interventions that include water kiosks and individual household connections.11

The performance enhancement fund is available to Commercial Utilities who have successfully implemented projects with funding from the general fund and have proven efforts to improve WSS situation for urban poor within past twelve months, to assist utilities to improve their commercial viability through reducing operational costs and/or increasing revenues. This money is provided as a grant or concession loan.

11 Guidelines on the use of DFT Funds (DTF, May 2011).

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Appropriate standards and choice of technology

A uniform minimum standard of 40 litres per person per day is used and there is a policy to ensure that this standard is available to all, even the lowest income groups. Availability is measured by the regulator (hours per day). Water kiosks are made available for a designed maximum number of households per kiosk to reduce walking distance (within 300 meters), and avoid congestion and long waiting times. The standard includes a minimum pressure and care is taken in the detailed design of the kiosks.

Sound governance is secured through a well-structured Committee

The Fund management reports to the Devolution Trust Fund Committee. The Committee reports through the Board of the Regulator to the Minister. The composition of the Committee ensures participation in decision-making by national governmental and non-governmental stakeholders in the sector. The decisions of the Committee are made independently of the Board of the regulator.

Professional management and accounting

The Fund is managed and run by a small professional team. The fund maintains its own accounts and publishes separate financial statements. It is audited by independent auditors according to international standards under the auspices of Zambia’s Auditor General.

Funds come primarily from development partners

Most of the money for the Fund comes from grants from Cooperating Partners (German Development Cooperation, DANIDA, and EU). These partners have signed a joint Memorandum of Understanding to coordinate their activities, related to the disbursement of funds, monitoring and reporting, and to undertake joint reviews. Government has contributed about 3% of the funds to date.

Outcomes

Approximately 800 000 people have been provided with sustainable access to safe and reliable water supply by the Fund in peri-urban and other low-income areas, through 55 projects, in the period 2006 to May 2011.12

Affordability

There is limited flexibility in household budgets among poor people to absorb a large increase in water charges. Therefore, the fund provides a full subsidy for the infrastructure and there is no recovery of capital costs through the tariff. The kiosks supply water in terms of a regulated tariff. A subsidised lifeline tariff is applied at kiosks. The operations and maintenance costs of the kiosks are covered from cross-subsidies from utility revenue from other users.

Scale

The Fund has received contributions of about US$4 million per year (on average) in the five-year period to date.13 The fund therefore represents a small fraction (less than 4%) of the urban water sector’s investment needs (over US$100 million per annum).

Projects are monitored throughout the project cycle and impact assessments are undertaken

Monitoring involves the Fund’s social and technical consultants. The commercial utilities must submit monthly reports, a completion report and, thereafter, quarterly reports for two years. The social and technical consultants undertake onsite inspection visits which may be planned or unannounced. All projects are visited on completion. Impact assessments are undertaken six months and two years after project completion.

12 www.dtfwater.org.zm 13 Devolution Trust Fund Annual Report 2010.

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Sanitation projects are more challenging

The initial focus of the fund was on water. However, the Zambian Water and Sanitation Act obliges Commercial Utilities to provide sanitation services to defined service areas and sanitation coverage is very low – more than 70% of households do not have acceptable sanitation. Consequently, a sanitation concept was developed and piloted. The Fund works only with legally mandated commercial utilities. Target communities make informed choices for the most appropriate option using a demand-responsive approach. A community participatory assessment methodology is used and interventions are at both the household and public level. However, implementation of the sanitation projects has been more challenging compared to water projects with delays in project implementation and completion. This leads to poor outcomes, including vandalism, the need to redo work, budget overruns, frustration at the community level and reduced political will to fund further projects.

Ensuring good contracting performance is an on-going challenge

The performance of the technical and social contractors is assessed. Contractors must score at least 65% in order to be eligible for new service contracts. Assessments undertaken in the 2010/11 financial year resulted in five out of eight, and four out of ten technical and social contractors respectively qualifying for new service contracts. The negative impacts of poor technical contractor performance include delays in completion, variation orders on works, theft of materials on site, wrong specs for equipment, design-based variation orders on materials and poor quality works. The negative impacts of poor quality social contractor performance include the need to retraining vendors, omission of certain activities, vandalism, high vendor turnover and mismanagement of social activity budgets.14

Reflections

The Devolution Trust Fund represents best practice in a number of areas. Better coordination between donors reduces transaction costs through a Memorandum of Understanding. The rules for the allocation of funds are based on clear criteria – targeting (pro-poor benefit) and effectiveness. There is effective monitoring of outcomes (facilities built and their operational status) and impacts (impact assessments). Reporting is excellent. Governance arrangements for the Trust are sound.

Scalability and replicability

The Fund is small relative to the size of sector-wide financial flows (less than 5%) and there is potential for the funding to be increased. The approach is replicable and a similar approach has been implemented in Kenya, to good effect.

Best practice: Regulating ring-fenced commercial utilitiesIndependently regulated, ring-fenced and well-governed commercial utilities result in improved sector financing

A well-designed institutional structure comprising an independent regulator regulating commercial ring-fenced utilities contributes to improved sector financing in the following ways:

Finances from water revenues are ring-fenced and kept within the sector, thus increasing the availability of financial resources within the sector.

The performance of commercial utilities is more transparent as a result of reporting to and by the regulator.

14 Devolution Trust Fund Financial Performance Review, 2010-11, Kennedy Mwila-Fund Accountant.

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Increased transparency, including the performance ranking of the utilities, increases the incentives for good performance. (Poor performance is not hidden.)

Attention has been paid to good governance of both the regulator and the commercial utilities, contributing to good performance.

Improved performance by the utilities means resources are used more efficiently, effectively making more resources available in the sector to contribute to good outcomes.

The regulator approves tariffs that allow for cost-recovery.

Financiers are more inclined to lend to well-forming utilities within a stable regulatory environment and where tariffs cover costs and enable debt to be repaid.

The Zambian water regulator is a regional example of best practice

The National Water and Sanitation Council is an example of best practice regulation in the region. The Regulator is soundly governed, well managed and its performance with respect to its primary functions – monitoring, reporting, tariff approvals – is excellent. As a result, there is demonstrable improvement in sector performance over time.

Sound governance is key

Principle and practices have been put in place to ensure sound governance of both the regulator and the commercial utilities. Guidelines have been developed setting out the basis on which boards are to be appointed. These guidelines ensure skills-based boards that are not subject to political capture.15 Governance costs are also monitored to ensure that these are appropriate.16

Professional management ensures good outcomes

The regulator is well managed and has competent staff. This has been achieved through sound talent-based selection procedures for managers and staff, and the implementation of good systems. Although the regulator benefited from technical assistance in its early years, building strong internal capability from the beginning has been a key to its success.17

Monitoring and reporting ensures transparency in performance

The regulator produces an annual urban and peri-urban water supply and sanitation sector report, providing detailed reporting on the absolute and relative performance of the commercial utilities, private providers and for the sector as a whole. These reports have improved over time as data reliability has increased. These reports represent an example of best practice in the sector in Africa.18

Improving performance through direct supervision

The regulator can act to improve performance where utilities are performing particularly poorly. This is done in terms of a mechanism called “Special Regulator Supervision”. The regulator signs an agreement with the utilities. In terms of this agreement, the regulator monitors the operations of the utility much more close, including attending Board meetings and monitoring internal decision. 15 Werchota, pers comm. (2011).16 The regulator reports on the cost of governance boards to the utilities. In Zambia, these costs are, on average, less than 2% of total costs. See annual sector performance reports produced by NWASCO. Available at www.nwasco.org.zm.17 “Implicating managers and supervisors actively right from the beginning in the elaboration ofstrategy and instruments for performance management with only limited technical support from outside was one of the reasons of success so far. It allowed for a high degree of capacity building which is not achievable through conventional training and building of substantial ownership for the measures within the CUs. It motivated personnel to increase performance and to gradually change management style. Such an approach is not a quick-fix but needs time. The reward is that such an approach is less costly on medium terms and more sustainable.” Water sector reform in Zambia. 2004. NWASCO.18 These reports are available at www.nwasco.org.zm.

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The utility is expected to develop a plan to improve performance. This plan must have timeframes and the utility must report monthly on progress against the plan.

This enforcement mechanism has been used a few times with good results. For example, Nkana Water and Sewerage Company, the first company to subjected to this scrutiny, is now one of the best water companies in Zambia.19

The performance of the commercial utilities has improved over time

The above arrangements, together with specific interventions with individual commercial utilities (for example, technical assistance contracts and project financing), have contributed to improved sector performance over time.20 The next steps are to tackle inefficiencies in utilities to put them in a better position to attract investments, particularly private sector funds.21

Water Watch Groups increase citizen oversight over performance

The Regulator has established Water Watch Groups with the intention to protect the interests of consumers, to follow up on their complaints and to improve communication between consumers and providers. These are voluntary groups and comprise six to eight customers from a particular service area (typically a town).22 Their functions include holding public meetings with consumers, holding meetings to review/validate complaints, engaging in outreach and publicity programs and submitting periodic reports. The Groups receive support from the regulator, including training and some basic administrative support but are not paid. Clear criteria for eligibility have been established. The regulator’s experience with the Watch groups has confirmed that consumer involvement is key to the success of water sector reforms. However, the Watch Group members need to be committed, and must operate in terms of clear objectives. These Groups are particularly important in the low income urban areas where the quality of service provision usually lags behind. The Watch groups ensure that consumer complaints are taken seriously. Where utilities fail to do so, the regulator reports this failure publically and the utility is fined.23

The regulator has a secure and independent funding model

The regulator is funded from a levy on water sales. The regulator receives 2% of the water revenue (billings) from the regulated providers. This provides a stable and secure revenue base for the regulator. The disadvantage of this system is that is can be argued that the regulator has a conflict of interest in its role of approving tariff increases because it benefits directly from any increase in water revenues. The other disadvantage is that the regulator’s revenue is protected from the collection inefficiency of the utility, reducing the incentive of the regulator to improve this efficiency.

Impacts on sector financing

The impact of the sector reforms has not been as positive for sector financing as anticipated. Investment flows into the sector are still fragmented and the sector reforms have not extended to the reform of government’s own financial systems. Consequently, investment funds are still insufficient to meet the needs. However, the absorptive capacity of institutions is also a concern. Institutions currently do not have the capacity to spend the amounts that are required to be invested when assessed on an ‘investment needs’ basis.

19 The information for this section comes from “Water supply and sanitation in Zambia: reform and regulation.” Chola Kasoma Mbilima. 2007.20 See annual sector performance reports produced by NWASCO. Available at www.nwasco.org.zm. See also “Water supply and sanitation in Zambia: reform and regulation.” Chola Kasoma Mbilima. 2007.21 Chinokoro (pers comm, 2011).22 The first group was established as a pilot group in 2002 in Lusaka. There are currently 12 groups in operation. See www.nwasco.org.zm.23 This information is from www.nwasco.org.zm and www.gwptoolbox.org (Zambia: Water Watch Groups #340).

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Reflections

The urban water sector reforms in Zambia have created ring-fenced commercial utilities regulated by an independent regulator. This structure, together with attention to sound governance of both the regulator and the commercial utilities has resulted in improved sector performance (overall) and created necessary but not sufficient conditions for enhanced financing of urban water and sanitation services. The aggregation of service provision into clustered regional providers also enabled more effective regulation and better performance.24 What is also necessary is the reform of government’s own financial systems to enable a more coordinated sector-wide approach to funding water and sanitation. This reform process is underway and a National Urban Water Supply and Sanitation Programme has recently been released (October 2011).

Replicability

Similar water sector reforms were undertaken in Kenya, except that assets were held by regional public entities tasked with facilitating investment.25 This shows that the essential elements of the model are replicable, provided there is sufficient political will and enabling policy and legislation. However, the institutional structure on its own is not a sufficient condition for better sector performance and improved financing. What is also needed is the reform of government’s own financial systems, improved coordination between development partners and attention to sound governance.26

24 For a discussion on the benefits of clustering, see the Kenya Case Study.25 See the Kenya Case Study.26 This list is not complete, but the main missing elements in Zambia are government financial system reforms and improved donor coordination. For an extensive discussion on reform experiences in four Africa counties, see “Water Supply and Sanitation Sector Reforms in Kenya, Tanzania, Uganda and Zambia.” GIZ. 2008.

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Acknowledgements and resourcesI wish to thank in particular the following people for their generous assistance with time, resources and perspectives: Samuel G'onga: Fund Manager, Devolution Trust Fund; Peter Lubambo, Director, Department of Infrastructure and Support Services within the Ministry of Local Government and Housing; Ngosa Mpamba, Department of Water Affairs, Ministry of Energy and Water Development; Herbert Chinokoro, African Development Bank; Kelvin Chitumbo, Director, NWASCO; Peter Sievers, Danida, Uwe Stoll, KfW, Roland Werchota, GIZ.

The interpretations and synthesis of these diverse perspectives and any inaccuracies in data presented remain the responsibility of the author.

If you want to find out more:

Devolution Trust Fund. www.dtfwater.org.zm; Guidelines on the use of DFT Funds (DTF, May 2011); Devolution Trust Fund Financial Performance Review, 2010-11, Kennedy Mwila-Fund Accountant. Devolution Trust Fund, Zambia: Implementation of Pro-poor policy for WSS in Zambia, UN Independent Expert’s Consultation on Good Practices with State Actors: 19-20 Jan 2011, Geneva.

National Water Supply and Sanitation Council. www.nwasco.org.zm. Urban and peri-urban water supply and sanitation sector report. 2010-11.

Government policies, strategies and plans: Ministry of Energy and Water Development (1994) National Water Policy. Ministry of Local Government and Housing: National Rural Water Supply and Sanitation Programme (2007), National Urban Water Supply and Sanitation Programme (October 2011). Ministry of Finance and National Planning: Draft Sixth National Development Plan (2011 – 2015).

Sector reform papers. Water supply and sanitation in Zambia: reform and regulation. Chola Kasoma Mbilima. 2007. Water sector reform in Zambia. 2004. NWASCO. Water Supply and Sanitation Sector Reforms in Kenya, Tanzania, Uganda and Zambia. GIZ. 2008.

Sector reviews. Zambia Joint Annual Water Sector Review Final Report. Grontmij. June 2011. Public Expenditure Review - Rural Water Supply – Zambia. Nordic Consulting Group. 11 September 2010. Pre-Appraisal Findings and Suggested Next Steps towards a National Urban Water Supply and Sanitation Programme. March 23, 2009. Dr. Verena Pfeiffer. Water Supply and Sanitation Sector Finance and Resource Flow Assessment. WSP. June 2004.

Sector financing. Investments in water resources, water supply and sanitation in Zambia. Paper prepared by Cooperating Partners, October 2011. World Bank: Project paper on a proposed credit in the amount of SDR 6.5 million (US$ million equivalent) to the Republic of Zambia for a Water Sector Performance Improvement Project - additional financing, March 18, 2009.

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Annexure: World Bank and African Development Bank financing activities in the water sector

African Development Bank27

The African Development Bank Group commenced operations in Zambia in 1971. In the water and sanitation sector, the Bank has to-date financed 12 operations for close to USD 341 million. The current projects are:

(1) Nkana Water Supply and Sanitation Project (USD 57 million): The objective of the project is to improve access to water supply and sanitation services to the populations of Kitwe, Kalulushi and Chambishi Towns by rehabilitating and extending water supply and sanitation systems in the three urban areas.

(2) (2) National Rural Water Supply and Sanitation Program (USD 24 million): The program supports 12 Districts in Northern and 3 Districts in Luapula Provinces within the context of the Government of Zambia’s National Rural Water Supply and Sanitation Program. Programme closes on 30 June 2013.

(3) Central Province Eight Centres Water Supply and Sanitation Project (USD 36 million): The objective of the project, which is scheduled to be completed in December 2011, is to improve the quality and delivery of water supply and sanitation services in the eight centres of Kabwe, Kapiri-Mposhi, Mkushi, Serenje, Chibombo, Chisamba, Mumbwa and Nampundwe.

World Bank28

Current World Bank support is in the following:

(1) Water Sector Performance Improvement Project (WSPIP) (US$23m) to Lusaka water and Sewerage Company. Additional funding of US$10m was approved and signed in 2010 and became effective in April/May 2011.

(2) Irrigation Development and Support Project was approved by the Board in February 2011 for an amount of US$115m

(3) Water Resources Development Project in an amount of US$40m is scheduled for delivery in 2013 subject to conclusion of the preparation process by MEWD.

The Water and Sanitation Programme provides the following support:

(1) Supporting Enhanced Service Delivery to the Urban Poor (2009-2011)

(2) Supporting Reforms for Sustainable Rural Water Supply and Sanitation (2009-2010)

In addition a Commercial Agriculture Project with an estimated budget US$30 million is under preparation.

27 Source: Zambia, Joint Water Sector review 201128 Source: Zambia, Joint Water Sector review 2011

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