DECISION SUPPORT SYSTEM FOR ASSESSING FULL COST RECOVERY OF WATER DEVELOPMENT IN RURAL AFRICAADAM ABRAMSONDOCTORAL CANDIDACY EXAMINATION16 MARCH, 2010

UNDER THE SUPERVISION OF: PROF. EILON ADAR*, PROF. ALON TAL** AND DR. NAFTALI LAZAROVITCH***

* ZUCKERBERG INSTITUTE FOR WATER RESEARCH** INSTITUTE FOR DRYLAND ENVIRONMENTAL RESEARCH*** FRENCH ASSOCIATES INSTITUTE FOR AGRICULTURE AND BIOTECHNOLOGY OF DRYLANDS

משפט- רב בלא נספה ויש ראשים ניר אכל

Abundant food is in the fallow ground of the poor, But it is swept away by lack of judgment

Proverbs 13:23

Outline Overview

Cost Recovery Beta Site Appropriate Technologies

Research Objectives Hypotheses Methodology

Timetable

Rural Water Development: A brief historyThree major periods:

Water as a human right (1960-1992)Top-down, mostly donor or government funding, health-based approachWater as an economic good (1992-present) Sustainability, demand-driven approachCost recovery (2002 to present)“Golden standard” for sustainability, yet deemed next to impossible in resource poor areas

Cost Recovery In theory, the idea of recovering ALL costs is

emerging as a sustainable way to achieve water service goals in rural areas (UN, 2002 and World Water Council, 2004). Benefits include: Economic payback for project replication Community ownership Poverty reduction

In practice, however, this is rarely achieved. China appears to be the only developing country to demonstrate a successful cost recovery strategy (World Bank, 2004).

Sub-Saharan Africa: Rural Water Trends

One of the lowest rates of access to improved water sources in the world.

Slowly making progress: in 1980, 35% of the population had access to improved

water sources. In 2008, this figure had reached 46% UN Millennium Development Goal: 70% by 2015

Water projects in SSA are systematically unsustainable. Many sources are unusable within a few years of installation. One study found between 35-80% of water sources in 11 different SSA nations to be non-functional (Sutton, 2004).

Challenges include technical failures, lack of ownership, lack of financing and capital, inaccessibility.

Beta Site Overview: Simango, Zambia

57 km North of Livingstone Avg Rainfall: 700 mm / yr Groundwater depth: 15-20 m Mean Income: 1,320,000 Kwacha = $280.50

Mean Bags Maize Sold = 13.48 = $186Total Mean Income = $466.50 / household

32.7% report Health Problems from Drinking Water Mean Time to Fetch Water: 30.4 minutes

50% of the population spends more than 20 minutes each tripIn dry season, mean household time fetching water/day: 92 minutes

Beta Site: Water SourcesHand-dug Well (Traditional)

Hand Pump / Borehole

Sand River Extraction

Dam / Reservoir

Appropriate TechnologiesHand-drilling Techniques

“Baptist” Sludging Technique

Hand Auger

Appropriate TechnologiesPumping

Rope and Washer Pump

Treadle Pump Access 2

Appropriate TechnologiesTreatment

BioSand Filtration – Household Use

Slow Sand Filtration – Community Use

Appropriate TechnologiesIncome Generation

Low Cost Drip Irrigation (LCDI)

Research Objective 1How feasible is achieving full project cost recovery of rural water development for meeting sufficient water supply standards in resource poor areas of SSA:

With various levels and technologies of water development, treatment and delivery?

With and without additional income generation? At the household and communal level?

Hypotheses: In many cases, low-cost, small-scale technologies will enable full

cost recovery through user payments in resource poor areas of SSA. Where cost recovery is not feasible through user WTP due to

financial limitations, incorporating additional income generation will enable users to generate enough income to pay back costs.

Household level interventions are less financially viable, yet may be more socially acceptable than communal approaches.

Research Objective 1- DSS Methodology

Decision Support System (DSS) to analyze cost recovery feasibility of various technological and financial approaches under site-specific environmental and social parameters.

DSS modes allow for comparative analysis of various policy approaches for any given set of environmental parameters:

1) Economic Goals:Cost Effectiveness, Cost Recovery, Profit Maximization

2) Financing mechanisms: User demand (WTP), Income generation

3) Technological approaches

WTPAdditional

Income

Mode Payment

DSS Modes

External Source

Status quo

Policy approaches for meeting water standards

Economic Goal

Policy Approach

Additional

Income

Research Objective 1- Field Methodology Implement the DSS to make recommendations for cost

recovery at numerous locations at the Beta Site. Micro Loan Program (MLP) to disburse loans according to

recommendations of the DSS and recover payments over 2 years.

For Income Generation approaches, MLP will purchase back produce at a fixed rate during the duration of the study.

Success rate of loan repayment will be documented for each loan given, as well as additional income generated.

Surveys both before and after interventions will be conducted to document baseline and treatment effects with regard to peripheral benefits of food security and income generation as well as health impacts associated with improved water services.

Research Objective 1- A sub-question

Is Low Cost Drip Irrigation (LCDI) an effective source of income generation for rural SSA communities or households? How does it compare to other income generating activities? “Effective”

Technology => Income generation => Policy objective

Hypothesis: LCDI is an effective technology for achieving both cost recovery and significant levels of profit in rural SSA communities and households.

Research Objective 1- Sub-question Methodology

Methodology:1. Develop a crop model for yield predictions of

produce. Incorporate the model within the DSS framework.

2. Use model to predict yield and expected income generation within the decision-making process.

3. Test theoretical model predictions at the beta site.4. Calibrate crop model.5. Make conclusions regarding effectiveness of LCDI.

Use DSS to input relevant parameters for LCDI in order to make predictions of its efficacy to achieve cost recovery and significant profit under various environmental situations.

Research Objective 2How effective is a simple analytical nutrient-irrigation crop model in a rural SSA setting in identifying optimal fertilizer and irrigation applications? What field-level management implications do the results of the model suggest?

Hypothesis A: The crop model will be able to predict yield and income generated to a reasonable level of accuracy for small scale gardens at the Beta Site and will serve as an effective tool for making income predictions within the DSS.

Hypothesis B: Expected management implications are that water-saving approaches to irrigation, and efficient fertilizer applications are economically rewarding even on a small scale.

Research Objective 2- Methodology

1. Develop a sub-module within the DSS that will predict yield of suitable income-generating crops for the beta site environment under various environmental conditions.

2. Apply sub-module to a diversity of water interventions at Beta Site.

3. Compare predicted income with actual income and assess the performance of the sub-module.

Research Objective 3What are the policy implications of the DSS and fieldwork results with regard to cost recovery? How does the full cost recovery approach compare to conventional grant-based water development efforts as well as profit-maximizing approaches in SSA in achieving human development goals? Policy Objectives:1. Cost Effectiveness2. Cost Recovery3. Profit Maximization

Hypotheses: Profit maximizing approaches achieve the greatest benefit, where

feasible, since they achieve cost recovery as well as additional income. They are most often limited by lack of access to initial capital.

Where full cost recovery is achieved, benefit to users will be greater than in the status quo, cost-minimizing approach.

WTPAdditional

Income

Mode Payment

DSS Modes

External Source

Status quo

Policy approaches for meeting water standards

Economic Goal

Policy Approach

Additional

Income

Research Objective 3- ExampleSome examples of policy comparisons:

Mode1: When costs are minimized, meeting water standards costs an average of $300 / household.

Mode2: User demand can account for 20% cost recovery in 2 years, leaving an average net cost of $240 / household.

Mode3: When cost recovery from 50% of income generated in the first 2 years is considered, 80% of costs are recovered, leaving an average net cost of $60 / household to reach water standards. Full cost recovery is achieved when 60% of income generated is recovered the first 2 years.

Mode4: When profit maximization is the global constraint, users can theoretically earn an average of $500 / household in profits per year.

Research Objective 3- Methodology

1. Run the DSS under all 3 economic objectives (cost effectiveness, cost recovery and profit maximization) in various situations at the Beta Site.

2. Implement recommendations. 3. Calibrate DSS and apply it to other hypothetical

scenarios common in Sub-Saharan Africa.4. Analyze trends with regard to scale,

technological aspects, and social constraints. Perform sensitivity analysis to investigate the effects of various parameters on DSS output.

5. Make policy conclusions.

Timetable

A1: Compile DSS literatureA2: Develop DSSA3: Run / assess DSS

B1: Preliminary AssessmentB2: Run / assess DSS for Field Site

C1: Fieldwork PreparationsC2: Research Objective 1C3: Research Objective 1.1C4: Research Objective 2D1: Research Objective 3

Paper 1

Questions?

Appendix 1:The DSS framework

Some Guidelines1. Water source improvements take precedent over new

water development.2. All participating households are required to pay for

improvements or new developments according to the average level of service achieved at that source.

3. Average Willingness to Pay values for the community are applied to each household

4. Full construction costs are to be recovered during the 2 year duration of fieldwork.

5. WTP take precedence over income generation where feasible.

6. Water standards for 3 attributes can be input into the DSS:

1. Time to Fetch water2. Quantity3. Quality

DSS Flow Chart - RevisedIn

puts

DSS

Proc

esse

sIn

puts

Comparative economic analysis of various policy objectives for any set of environmental parameters, technologies, and other constraints

O

utpu

t

DSS – Example

Households: 11Water sources: Hand dug well (1)

40 minutes

40 minutes30

minutes

20 minutes

15 minutes

10 minutes

40 minutes

2 minutes

10 minutes

5 minutes

20 minutesStep 1:

ImprovementConstraint A: Fetching time standard = 20 minutesConstraint B: Quantity = 200 Liters / household / day

MSY = 3,000 L / dayPumping yield = 1,000 L / day

Constraint C: Quality = drinkable

Water quality: Needs treatment

Feasible improvements:Option 1:

- Slow sand filtration at household

- Rope and washer pumpOption 2:

- Cap well- Rope and washer

pumpOption 3:

- Slow sand filtration at household

- No pump improvementOption 4:

- Cap well- No pump

improvement

Unserved = 4

Unserved = 6

Modes 2-3: Meet Standard,

Recover Costs

DSS – Example

Step 2: New source developmentFetching Time: Determine minimum number of sources required to meet fetching time standardQuantity: For each source, how many households served? How many sources needed to meet quantity standard?Quality: Do the sources need treatment to meet standard?

- New sources- Distribution

DSS – Example Step 3: Payment – for each technological option

Communal Garden

Income Generation Module to predict expected profit from gardening

User WTP for various levels of improved water services – conjoint analysis resultsDoes WTP cover costs?

Which options achieve policy objective (cost recovery, benefit maximization)?

Step 4:Subject to constraints:- Political / legal - Development Impact- Social Acceptability of Technology

Step 5: Final Output: All feasible

options with comparison of policy objectives

Suppose Option 1 costs $900, and yields 3,000 L / day.

Avg WTP = $1 / household / month = $168 in 2 yearsNo.

Income Generation – Example

Income is to be generated through drip irrigation of dry season tomatoes. The income-generation module is used for a garden of a given area. In this example, 500 and 1,000 m2.

A($) = YB1 – (IC1 + NC2 + C3)where A($) = Profit from gardening ($)

Y = Yield (Kg) B1 = Benefit function for tomato ($/Kg tomato)I = Irrigation applied (m3)C1 = Irrigation costing function ($/m3)- Labor component for pumping (hours / week)N = Nitrogen fertilizer applied (Kg)C2 = Fertilizer costing function ($/Kg)C3 = Other inputs (seed, fencing material, etc)

Income Generation – ExampleTo solve, maximize A($) subject to costing

functions. Output of the module will look something like this:

A = $200

A = $100A = 0

A = $-100I = Ir

rigat

ion

Wat

er (m

3 )

N = Nitrogen Fertilizer (Kg)

A = $210

Area = 500 m2 Area = 1,000 m2

A = $200A = $400

A = 0

A = $-200I = Ir

rigat

ion

Wat

er (m

3 )

A = $450

N = Nitrogen Fertilizer (Kg)While User WTP is insufficient to recover costs, income generated

through 2 seasons of gardening is sufficient to recover costs for an improved water source serving 7 households.

Appendix 2: Recent Findings Preliminary Assessment:

Simango, Zambia26 October 2009 – 10 January 2010

Choice-Based Conjoint Analysis Survey Distribution (N = 403) Elicit part-worth utility (and marginal WTP) for various attributes

of water service improvements for Simango, Zambia Attributes include:

Water Quality Water Quantity Time to Fetch Water Water Distribution Financing Method Cost

Recent Findings

Quality Quantity Time to Fetch PumpFinancing Cost

Norm

alize

d Ut

ility

Figure: Relative Utility attributed to various water service attributes for Simango, Zambia

20 L containers / household / day

Minutes roundtrip

Low = Not for drinkingMedium = Needs

TreatmentHigh = Drinking quality

1 = 5,000 K 2 Hrs / wk 2 = 25,000 K 5 hrs / wk3 = 50,000 K 10 hrs / wk4 = 100,000 K 20 hrs / wk5 = 200,000 K 40 hrs / wk

Recent FindingsAttribute CoefficientQuality - Low -1.81Quality - Medium 0.49Quality - High 1.33

Quantity - 10 -0.44Quantity - 50 -0.18Quantity - 500 0.62

TimeFetch - 0 0.25TimeFetch - 5 0.78TimeFetch - 15 0.02TimeFetch - 30 -0.42TimeFetch - 60 -0.62

Pump - Hand 0.03Pump - Tap -0.03

Financing - Cash -0.67Financing - Loan 0.06Financing - Labor 0.6

Cost - 1 0.7Cost - 2 -0.08Cost - 3 0.05Cost - 4 -0.37Cost - 5 -0.3

Multinomial Regression:Utility = Intercept + αX1 + βX2 … + ε

Recent Findings

In order of relative importance, these attributes are valued by the community:- Increasing quality, especially the jump from low (not for drinking) to medium (drinkable with treatment).- Financing: Labor hours as a form of payment are preferred to cash.-Increasing quantity, with greater value placed on going from 50 to 500 containers / household / day.- Decreasing Fetching Time, with a zero value (source at home) of less preference than expected.- Cost appears to be less important compared to other factors, especially above Level 2 = 25,000 Kwacha / month or 5 hours / week labor.- Pump: Whether the water is delivered by a hand pump or in a tap does not appear to elicit a strong preference.

Appendix 3: Proposed Publications - 1

“Using choice-based conjoint analysis to characterize user demand and financing preferences for water services of a rural, underserved basin in Sub-Saharan Africa.”

Goals:1) Determine the marginal WTP for various attributes of improved water services in a typical rural, underserved population of SSA.2) Determine the relationship between user demand (WTP) for improved water services and access to various financing options, including water tariffs (control), a micro loan (alternative 1) and communal labor (alternative 2).3) Provide insights into the feasibility of these options to achieve full cost recovery of rural water improvements

Proposed Publications - 2

“Is Low Cost Drip Irrigation an effective source of income generation for cost recovery of water improvements in rural SSA communities or households? A case study of Beta Site, Africa”

Goals:1) Use DSS to make theoretical predictions on income generation of LCDI systems with various crops, fertilizer applications, scales, sizes and water service packages.2) Implement several recommendations at the beta site.3) Compare income levels of LCDI adoptors and non-adoptors.4) Discuss results, especially in the light of cost recovery.

Proposed Publications - 3

“Appropriate policy approaches to sustainable water development in rural basins of Sub-Saharan Africa”

Goals:1) Use DSS under various scenarios at the beta site for various policy goals to make theoretical recommendations. Compare results, especially in the light of economic sustainability, poverty reduction, and health benefits.2) Implement recommendations at the beta site, providing feedback for the DSS.3) Make recommendations for various environmental parameters common in other parts of SSA.

Appendix 4: Feasible Technologies for Beta Site

4 Feasible

2 Feasible

5 Feasible

= Available in Zambia= Availability Not confirmed

Feasible Technologies for Beta Site

= Available in Zambia= Availability Not confirmed

Appendix 5: Expected Distribution of Interventions

Fieldwork Expected distribution of interventions

User WTP Additional Income

Number of Replications

Total

Appendix 6: Academic Background

Undergraduate:Harvard University, A.B., Environmental Science and Public Policy, 2004Graduate:Albert Katz International School for Desert Studies, MSc in Desert Studies, Specializing in Water

Resources and ManagementRelevant Coursework:HydrologyIntroduction to Arid Land HydrologyGroundwater MicrobiologyField Methods in HydrologyGroundwater HydrologyAgricultureAdvanced Modeling of Water Flow and Contaminant Transport in Porous Media using HYDRUS Software

PackageHydrometeorologyCrop ModelingA Mechanistic Approach to Plant NutritionSoil PhysicsCrop Irrigation Regimes ManagementIntro to Remote Sensing and GIS to Assess DesertificationA Quantitative Approach to Water Resources Management in Desert Areas

Reading Material (on order)DSS:Bendoly, Elliot, Excel Basics to Blackbelt: An Accelerated Guide to Decision

Support Designs, Cambridge University Press, 2008.Albright, S.C., VBA for Modelers: Developing Decision Support Systems Using

Microsoft Excel, South-Western College Pub, 2006.Water Development:Arlosoroff, S. Community Water Supply: The Handpump Option, The World

Bank, 1987.Cortruvo, J, Craun, G. and Hearne, N., ed. Providing Safe Drinking Water in

Small Systems: Technology, Operations and Economics, CRC Press, 1999.Hussey, S and Shaw, R., ed. Water from Sand Rivers: Guidelines for

Abstraction, WEDC, 2007.Lancaster, Brad, Rainwater Harvesting for Drylands and Beyond: Water-

harvesting Earthworks, Rainsource Press, 2007.MacDonald, Alan, Developing Groundwater: A Guide for Rural Water Supply,

Practical Action, 2005. Skinner, Brian, Small-scale Water Supply: A Review of Technologies,

Practical Action, 2003.