Life cycle costing in mozambique agua-san

Mozambique

Applying Life Cycle Costing in Mozambique

Embedding cost analyses

Examples of use of LCCA in Mozambique June 2012Moz

Content1. Background2. Learning alliances and theory of

change3. Data collection – including

sampling4. Obtained information on all

different cost pies5. Linking costing with finance


MOZAMBIQUE

20 million people , 800.000 km2 10 Provinces , 128 provinces GDP (current US$ 418)

Ranked 172 out of 177 countries (Human Development report 07/08)

20 million people , 800.000 km2 10 Provinces , 128 provinces GDP (current US$ 418)

Ranked 172 out of 177 countries (Human Development report 07/08)


National water law (1992) & Water Policy (1995/1997): Service levels according to demand

and economic capacity Tariff for recovery of O &M Decentralisation Privatisation

5

Country context


Launched November 2008Memorandum of understandingHosted by governmentLearning alliance members:

National and provincial gov. International NGOs Some districts and communities Universities

6

WASHCost


RURAL WATER SUPPLY

Community ownershipBorehole (20-70 m) AFRIDEVShallow wellsMini systems starting upMainly domestic use


SMALL SYSTEMS

o Rehabilitated systemso Mainly ground watero Limited coverage of towno Trend towards private operator


SANITATION AND HYGIENEo Traditional latrineso Slab latrineso Institutional latrineso Community mobilisation

(PEC)


PERI-URBAN

• High number Private operators• Public tap stands• Higher sanitation coverage• Unclear admin structure







Theory of change


Theory of change experience

• Redefine LA to country context – GAS group• LA does not validate, only advices• Don´t ask others to do your work....

• Great exposure but don´t overload – work with in much smaller groups 2-5 people






Sample strategyGood aspects1. Working with

Statistics Methodology worked well

2. Credible sampling

Learning lessons1. Poor Urban areas

are actually rural2. Community

boundaries unclear3. Logistics4. Unique situations5. Go to where costs

are

Data Collection


Applying the LCCA in Mozambique

1. Understanding Capital Expenditure - CapEx (Provincial)

2. Capital Maintenance Expenditure CapManEx (District)

3. Visualizing expenditure on Direct Support (District)

4. Cost of Capital (National)


1. Understanding CapEx costs- Borehole construction &

supervision- Average borehole costs- Variance over regions and

years

The use of LCCA in Mozambique



4 times larger lot indicates 20% lower unit ratePer person (500 p bh) Per person (300 p bh)

$ 27 $ 46


The theory of change

Better identification of gaps in planning

Facilitation of the Learning Alliances

Better dissagregated

lifecycle unit costs

Data used in planning

Data from Implementation

• Cost per region• Cost per person• Cost per contractor• Cost per funder• Current cost over

time

How much does a borehole cost?

2011 planning

• 2011 Contracts

• Transparency• Cost reduction


1. Understanding CapEx costsActual Policy Actions:• A transparency & accountability tool• Cycles of yearly updated values for budgetingIn progress:• Influence of donors, procurement (lot Size) • Trends over time – better budgetting



2. Understanding Capital Maintenance Expenditure - What does it include?- How is it different from O&M?




- Costs are high and unclear (>2000 USD)

- Identification of outliers – Transparency and cost drivers


Capital maintenance expenditurePolicy at the momentCapManEx value identical for all districtsDesired policy:District budget realistic for CapManEx (based on

quantity, age and type of infrastructure)


Spending 100.000 USD – example• 10 new boreholes

@ 10.000 USD

100 bhs- 10 bhs breakdown+10 new bhs-----------100 bhs

• 8 new boreholes @ 10.000 = 80.000

• 10 rehabilitations @ 2.000 = 20.000

100 bhs+8 bhs---------108 bhsIncorporate CapManEx

into CapEx


3. Expenditure on Direct Support

- What does it include?

- How it was calculated?



Expenditure on Direct Support

Currently there is a wide varianceDistrict size (thus distance) influences per person costs. A three times larger district

has roughly double the costs.



Expenditure on Direct Support

Actual Policy actions:

The average cost is US$ 1.1 per person per year, and the median is US$ 0.6. Average 100,000 USD per district

Desired actions:Direct support should be based on combination of

coverage, population density and access



4. Cost of Capital

Financing large water and sanitation programs with long term loans

For example:

Loan of 20 million USD for 50 years, with 10 year grace. 0.75% interest



4. Cost of Capital

Policy actions:

- Awareness raising of burden of loans

- Making cost of capital integrated in particular in small town systems.

- Realistic allowable return on equity (for private operators)



Lessons learned• Linking costing with

transparency• Using yearly cycles for

updating values• The strengths and threats of

“quick wins” – working with a learning alliance

• Examples of policy actions







Discussing items• Ideal costs, where are they? Can modelling help?

USD 5USD 5

USD 1

USD 2

1 USD

2 USD


Discussing items

• Sanitation Recurrent cost – what needs to be planned from governament view?

2.2 USD 1.8 USD

51.8 USD

8.8 USD

14 USD

2.9 x

1.7 x

1.5 x


5USD 22 USD 81 USD 160 USD 495 USD


• 10,000 latrines with 2.2 USD per latrine: investment by HH 22,000 USD in sanitation in district

• New latrine 5 USD per latrine: CLTS triggers 10,000 latrines, triggers investment of 50,000 USD


Discussing items

• It is great to understand the current cost but going to “ideal” costs needs alternative (ways of) financing: – Thinking next to your project cycle– “selling” Sustainability packages?


THANK YOU

Date post:	30-Jun-2015
Category:	Business
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Life cycle costing in mozambique agua-san

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