VII. Financing Proposal
Requesting Authority / Water services TruST FUND (WSTF)
Title / Improving Access to water supply and Basic sanitation for the urban poor
Total cost / Total Costs: EUR 20,750,000
Applicant Contribution: EUR 150,000
EC Contribution: EUR 10,375,000
KfW: EUR 10,000,000
GTZ: EUR 225,000
Aid Method / The project is implemented through the Water Services Trust Fund (WSTF) under the Ministry of Water and Irrigation
The WSTF is an innovative basket funding instrument which aims specifically at the improvement of water and sanitation service provision for the poor and its extension of services to the urban poor. The recently commercialised water and sewerage companies (WSPs) may apply for funding. Under the WSTF, the different proposals of the WSPs are competing for funding. Eligible for funding are investments in low cost infrastructure (i.e. water kiosks and basic onsite sanitation) as well as assistance in implementation and setting up of sustainable management systems. The selection of funding proposals is based on a range of criteria reflecting national priorities (poverty, population growth, current WSS situation etc.) and ensures that the areas most in need are served first. The WSTF was identified as one important building block for the water secgtor SWAP.
identification n°
DAC-code / Sector / Water Supply and Sanitation
1. Rationale
1.1. Strategic framework
The Economic Recovery Strategy for Wealth and Employment Creation (2003 – 2007) is the main national action plan to guide the social and economic developments in the country. The basis of the ERS was the Poverty Reduction Strategy Paper (PRSP, 2001). The Strategy identifies key policy measures and programmes that the Government is committed to pursue over the five year period. Implementation of these measures will create the conditions necessary to achieve the desired rapid economic growth, wealth and employment creation and poverty reduction.
The Government recognizes that adequate quantity and quality of water is a basic requirement for Kenya’s economic growth and performance. In order to address some of the issues or problems identified in the water sector the government is currently undertaking major reforms in the sector that are aimed at streamlining the delivery of water services to Kenyans. To this end the government has established a number of key institutions, key among them being the Water Services Trust Fund intended to facilitate the financing of water development in rural and low income areas of the country. In contrast to the past, the government is adopting a programme approach to sector development by formulating a sector investment programme as the main vehicle for implementing the institutional reforms and infrastructure investment. The sector investment programme will be implemented over a 10 year period, based on the 3 year MTEF budget cycle. This programme will have a strong focus on providing services to the poor while ensuring availability of adequate water for the various competing demands.
Among the key institutions established under the water sector reforms are the Water Service Regulatory Board (WSRB), the sector regulator for WSS and the seven Regional Water Services Boards (WSBs). These Boards are charged with the responsibility of coordinating water and sanitation provision within their areas of jurisdiction. The Boards are, however, not required to provide the services directly but instead are required to engage the services of autonomous Water Services Providers. These WSPs are commercialised water services providers. A number of these commercialised services providers have been established and have commenced operations throughout the country – the most visible ones being those established by the various Municipalities that have hitherto been providing water services within their municipality areas. These WSPs lack adequate resources to extend services to the peri-urban areas in the short-term. The Government’s strategy in increasing access to WSS services has been the establishment of the Water Services Trust Fund (WSTF) to finance interventions in the areas of the poor (country wide) including peri-urban areas which constitute approximately 50% of the urban population. These commercialised Utilities and other formal providers operate in the framework of a regulatory regime which shall ensure the balancing of social and economic goals in the sector.
In accordance with the National Water Policy (1999) and the Water Act, 2002, which is the legislative framework to operationalize the policy, the government through its regulator has put in place guidelines and incentives to ensure that the service providers develop plans for servicing the urban poor. The urban poor are a key target in the UN Millennium Development Goal (MDG) of halving the percentage of people without access to safe water and adequate sanitation.
1.2. Lessons learnt
Since its start of operation in 2004, the WSTF carried out a number of projects with funding from the Kenyan Government (GRZ), Sida Sweden and Danida.
These projects were able to demonstrate that the implementation approach of the WSTF works very well. Additionally, kiosk systems have been put in place with the support of the German Cooperation (KfW and GTZ) long before the sector reform. They showed that well designed and operated kiosk systems represent the most appropriate, sustainable and acceptable WS solution from a social, technical, commercial and economical point of view for peri-urban and low cost areas. Water from the kiosks is considered to be affordable and the professional input of the WSPs guarantees the sustainability of the kiosk systems.
Some of the water kiosks have been operated successfully by the WSPs for over 10 years. The evaluation of the such projects have shown that the poor are very much in favour of this concept. There is a wide spread apprehension that a sustainable water service cannot be for free. For the poorest 1% of the population, pilot social schemes have been tested which allow them to fetch the necessary minimum of water from the kiosk for free.
Main lessons learnt:
• The WSTF has proven that it can implements successfully projects with a total amount of EUR 8 Mio.
• The kiosk system has proved that it is the most cost effective way of providing water supply services to the urban poor.
• The Commercial Utilities are capable of implementing water supply projects in the Peri-Urban areas but require monitoring.
• There is need to implement projects on demand driven approach so as to accommodate higher service levels (i.e. mixed systems).
1.3. Complementary actions
The WSTF in terms of implementation mechanism is a basket fund to which the Kenian Government as well as all donors active in the sector can contribute. Currently, funds have been provided by Sweden and Denmark. In addition, there are NGOs promoting community run schemes in peri-urban areas. These however, have proven to be not sustainable in the long run in a number of cases.
1.4. Donor coordination
National Level Coordination
A number of regular coordination meetings takes place within the top management of the GoK some of which in relation to the water sector are:
- Monthly meetings of the Permanent Secretaries (PSs) chaired by the Head of the Civil Service;
- Kenya Food Security Committee with monthly meetings between PSs and senior staff of relevant ministries related to food security;
- Committee on Agriculture and Natural Resources with monthly meetings between PSs from ministries related to agriculture and natural resources;
- East Africa/ Lake Victoria Infrastructure Committee with quarterly meetings between PSs from countries bordering the Lake Victoria;
- Lake Victoria Environmental Management Programme meetings;
- Nile Basin Commission with regular bi-monthly meetings between countries in the Nile Basin;
- National Economic and Social Council (NESC).
Within the Physical Infrastructure Sector, coordination takes place in the Sector Working Group as part of the MTEF budgeting process. The Physical Infrastructure Sector does not include key line ministries linked to water such as MoA and MoLFD, MoEST and MoH and is therefore not very effective in the coordination between MWI and the water related ministries.
The overall coordination in the water sector between the GoK and DPs take place in the ‘Water Sector Working Group’ (WSWG) that has membership from the water sector institutions, other ministries with links to the water sector and the DPs active in the sector. The WSWG meetings are chaired by the PS of MWI and the group meets regularly on a bi-monthly basis.
Members of the Water Sector Working Group (WSWG)MWI and Water Sector Institutions / Development Partners
MWI Principal Secretary (Chairman) / Agence Française de Développement (AFD)
MWI Director Water / German Financial Cooperation (KFW)
MWI Deputy Director / German Technical Cooperation (GTZ)
MWI Head of Water Sector Reform Secretariat / Swedish International Dev. Assistance (Sida)
CEO of WSRB / Danish International Dev. Assistance (Danida)
CEO of WSTF / World Bank (WB)
CEOs for the 7 WSBs / Water and Sanitation Programme - Africa (WSP-AF)
CEO of WRMA / United Nations Children’s Fund (UNICEF)
CEO of NWCPC / Netherlands Development Assistance
CEO of National Irrigation Board / Japan International Cooperation Agency (JICA)
Ministries related to the water sector / Department for International Development (DFID)
Ministry of Environment and Natural Resources / German Agro Action
Ministry of Livestock and Fisheries Development
Ministry of Health
Members of the Water and Sanitation Technical Group (WSTG)
Agence Française de Développement (AFD) Present Co-chair
German Financial Cooperation (KFW) Present Co-chair
German Technical Cooperation (GTZ)
French Embassy
Austrian Development Agency
Swedish International Dev. Assistance (Sida)
Danish International Dev. Assistance (Danida)
World Bank (WB)
Water and Sanitation Programme - Africa (WSP-AF)
United Nations Children’s Fund (UNICEF)
United Nations Centre for Human Settlements (UN-HABITAT)
Netherlands Development Assistance
Japan International Cooperation Agency (JICA)
Department for International Development – United Kingdom (DFID)
Coordination between the DPs also takes place through meetings in the Water and Sanitation Technical Group (WSTG) that is a forum of the DPs active in the water sector that meets every 2 months in between the WSWG meetings to discuss issues and share information on activities in the W&S sector. The WSTG and WSWG meetings are purposely alternating so that the frequency is regular and high. Coordination in the sanitation sub-sector between national and international stakeholders is not developed and needs to be improved.
The WSWG and WSTG are part of an overall coordination system in the foreign aid structure for Kenya consisting of the HAC-Group[1] which assists the Development Counsellors Group (DCG). These are all working on the preparation and implementation of a Kenya Joint Assistance Strategy (KJAS) which should help focussing foreign and national aid to enhance implementation of the ERS. The water sector is represented in the coordination fora and the sector’s role can be enhanced through the establishment and consolidation of a SWAP.
Joint funding with GoK is provided to the water sector from Sida and Danida through the KWSP. Coordination of funding through GTZ is documented in Joint Financing Agreements (JFAs) and similar agreements between the KWSP and UNICEF for the funding to RWSS from the Netherlands Government are in the process of being established.
A regular exchange of experiences with other stakeholders takes place at the Forum for peri-urban WSS which is organised by the Water & Sanitation Programme (WSP) of the World Bank once every two months. A close cooperation with NGOs is foreseen in particular with regard to sanitation. The main bilateral co-operating partners in the sector (Sweden, Denmark and Germany) are already directly working with the WSTF, while AfDB is also coming ob board soon. UNICEF has also given strong indications of working closely with the WSTF in a 5 year programme that is intended to take off in January 2007.
2. Country (or regional) context
2.1. Economic and social situation
Kenya’s economic performance during the last two decades has been far below its potential. Consequently, per capita income in constant 1982 prices declined from US$271 in 1990 to US$239 in 2002. The number of people openly unemployed currently stands at over 2 million or 14.6 per cent of the labour force, with the youth accounting for 45 percent of the total. The majority of the unemployed, though educated, do not have necessary skills. In addition, the number of the working poor is staggering comprising primarily subsistence farmers, femaleheaded households and slum dwellers. Disguised unemployment is also a serious problem, especially in the public sector.
The persistent poor economic performance worsened the poverty situation. The number of people living in poverty is estimated to have risen from 11 million or 48 per cent of the population in 1990 to 17 million or 56 per cent of the population in 2001. Welfare monitoring surveys conducted by the Kenyan Government indicate that three quarters of the poor live in rural areas while the majority of the urban poor live in slum and peri-urban settlements. In a number of Participatory Poverty Assessment (PPA) surveys carried out in the 1990s, the poor attribute their poverty to natural calamities, and traditions and cultural beliefs that deny women access to productive assets. The deterioration in the standard of living in Kenya is demonstrated well by the worsening in key social indicators over the last two decades. Illiteracy rates increased as enrolment rates in primary school declined while life expectancy and child mortality worsened.
This disappointing development has further been complicated by the upsurge of the HIV/AIDS pandemic.
2.2. Development policy of beneficiary country
Driven by the need to rapidly reduce poverty, the region has embarked on the implementation of a number of reform measures aimed at promoting macroeconomic stability and higher growth combined with the improvement in the delivery of social services. The initiatives aim at helping the poor so that they benefit from growth by expanding their opportunities with focus on pro-poor economic growth, employment creation, building human, physical and other capital assets for the poor.
2.3. Sector Institutional Framework
2.3. Sector Ins
On the basis of the National Water Policy, 1999 and the Water Act 2002, the water sector reform has been implemented since 2003. The whole process is at an advanced stage with all the institutions established and have commenced operations. The following changes mark the cornerstones of the Kenyan Water Sector Reform for urban WSS: