Strengthening the financial base

Given the mandate of the Facility to mobilize resources from donors to to finance water resources development activities in Africa, the Facility will provide support in improving the environment for sustainable financing and availability and access to financing by local governments and sub-sovereign bodies, as well as the private sector. As a result of these types of focused and targeted support, the ground will be prepared for increased public, private sector and donor involvement leading to stronger financial base.

The following areas will be the focus:

1. Improve Cost Recovery and Pricing Policies: The AWF may support any of the the following actions for the effective introduction of pricing for water services:

  • Develop and implement policies for sustainable cost recovery and water resources pricing that promote sound resource management, more effective resource use, and ensure long-term sustainability.
  • Assist the design and establishment of social protection schemes related  to water and sanitation services, such as using incentive-based and access subsidies.
  • Establish mechanisms to ensure effective operation of pricing and changing systems, including the elimination of corrupt practices.
  • Introduce economic instruments such as pollution charges to ensure polluters pay towards the cost imposed on society by pollution.

2. Mobilize Domestic Government Financing: To achieve this, AWF's support may include:

  • Development of water financing action plans and phased investments plans by national and local governments.
  • Prepare resource mobilization strategies at national and regional levels, and assist governments in undertaking associated actions to attract financial support.
  • Improve fiscal relations between central and local governments, and use of fiscal intercepts as backing for local revenue raising.
  • Develop and implement policies aiming at lowering the cost of money and enhancing the duration of loans for water investments by local authorities/operators who do not have the creditwothiness to secure long-term loans at affordable rates.
  • Implement capacity building through institutional reforms, staff developmebnt, public-public and private-public partnerships, peer-group comparisons using benchmarking, and assisting local government in project structuring and development proposals.

3. Attracting and Benefiting from Private Sector Investments: This may include:

  • Catalyze addtional resources from private sector sources through targeted AWF capital investment projects for meeting water needs.
  • Assist countries to develop tools, guidelines, legal and regulatory frameworks to attract private sector investment.
  • Strengthen national institutions to enable countries to benefit from private sector funds; assist communities and small towns in dealing with private operators.
  • Assist in the development of a local cadre of artisans, small scale service providers and local suppliers of equipment and parts.
  • Support efforts to enhance financial risk mitigation and guarantee instruments to catalyze local currency and sub-sovereign lending.
  • Facilitating access to local capital markets and lending institutions. Assisting in establsihing finance access facilities to promote local efforts to provide support to ease access and reduce cost of capital by smaller private enterprises.
  • Establish/support sector market information systems in order to reduce uncertainty and hence lower costs.

4. Strengthening Donor Actions to support Domestic Investment: AWF will join with other donor partners in the following activities:

  • Advocate for and support governments in undertaking policy and institutional reform, and related capacity building programmes. Encourage and support governments to develop country programmes and related investment requirements, along with financing strategies and action plans.
  • Facilitate mobilization of resources at all levels through development of innovative financing mechanisms, and jointly taking actions to secure sustainable financing for tackling urgent water needs.
  • Coordinate efforts to stimulate development of local markets in countries where they are weak or non-existent, making local currency possible and more attractive.
  • Ensure that the poor are benefiting from donor actions, and use financing mechanisms that facilitate this like output based aid, micro-finance and decentralized funding.

5. Increasing Financing Availability and Access: There are a number of other measures to increase financing availability and access which the AWF may support. These include:

  • Encouraging decentralized and solidarity funding: Support activities aimed at establishing decentralized funds for the development of local initiatives, which could be drawn on by local groups such as NGOs, CBOs or community representatives.
  • Facilitating public utility access to financing: Reform and strengthen utilities to improve their credit worthiness and hence facilitate their acccess to capital markets.
  • Supporting micro-credit schemes: Directly support micro-credit schemes for financing community water projects or improved households water and sanitation facilities, through the provision of seed capital, initial reserves and guarantees.
  • Partnering with social investment funds: complement efforts of social development funds in supporting communities and sector related micro-enterprises.
  • Community and households financing: improve community-led and household access for Water and Saniattion Services (WSS) infrastructure through micro-credit schemes, revolving funds, decentralized and solidarity funding, subsidies and more appropriate payment mechanisms. 
  • Financing sources for water for productive uses: mechanisms for financing of IWRM and TWRM through licence fees, consession and royalty fee for use of public assets, pollution charges, fines and penalties, etc.; smallholder farmers with relatively small credit needs, and commercial-scale and "emerging" farmers who need larger amounts of finance; large-scale public infrastructure which often continues to need public support from central government subsidies, loans and guarantees, foreign grants and concessional loans or municipal bond issues.