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Sound finance and smart metering to get Kenyan water supply out of vicious circle

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Kenya’s water supply is caught in a vicious circle. Investors are reluctant to invest in expansion projects when water utilities do not perform good enough. However, without proper financial resources, the water utilities are unable to improve their performance. To get out of this circle, the Kenyan and the Dutch water sectors team up on blended financing and smart metering. In this article two prominent Kenyan water professionals, Robert Gakubia of WASREB and Charles Kaloki of KAPS, share their views on how to break out. Both participated in the Kenyan delegation that visited the Amsterdam International Water Week in November last year to learn more about blended financing and new water technologies.

 

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Photo: Mr. Gakubia speaking during the Kenyan-Dutch Networking Reception in the Netherlands Pavilion at Aquatech trade fair, part of the Amsterdam International Water Week


Huge ambitions

Kenya has committed itself to achieve a full coverage of water supply to all households by 2030. The realisation of this huge ambition is complicated by the fact that water demand is increasing because of population and economic growth, but at the same time available fresh water resources are shrinking because of increasing droughts, water pollution and over abstraction. Estimations of up to 1 billion dollar annually are mentioned for the Kenyan water sector to be able to meet this ambition. However, regular financial institutions are reluctant to lend money as many water utilities are weakly managed by often understaffed boards. And without sound investments, the companies are unable to provide reliable water services, leaving them with insufficient income for the intended expansion.

 

Responsibility

‘Traditionally water is regarded as a social good in Kenya and it is supposed to be available for free. As a result, our fresh water is wasted everywhere’, explains CEO Robert Gakubia of the Water Services Regulatory Board (WASREB). ‘I believe a right comes with a responsibility. Water is not an infinite resource and we have to deal with it sustainably. Pricing water is a means to get everybody more aware of the finite nature of water and the need therefore  to improve our water management’.

As CEO of WASREB, Gakubia oversees the regulatory board of the Kenya water sector and is therefore in charge of the national benchmark for all water utilities. As such he is strongly involved to raise the bar for the 100-plus water supply companies to expend their distribution from the current 55 percent of the population having access to water, to 100 percent by 2030. Gakubia sees costs recovery as a crucial driver for improvement, taking non-revenue water as an example. ‘Currently, our non-revenue water losses average around 42 percent, mainly because of commercial losses and leakages from the aging infrastructure. The water infrastructure is badly managed as boards of our water companies are understaffed and non-revenue water gets little attention; it is not politically attractive to deal with. By introducing, for instance, a tax on the abstraction of groundwater or surface water, there is a financial incentive to reduce water losses and take technical measures.’

 

Metering

According to Gakubia the Kenyans understand very well that there is a price for quality water services. But it is not only that. He also links the issue of the non-revenue water to the over abstraction of water resource. ‘If we can reduce the leakage, we can do the same supply with less intake. This would contribute to reduce the current over abstraction of our water resources’, Gakubia explains. ‘We must get the abstractions in line with the permits otherwise our resource will run out of water. And for that we need to improve and update the nationwide monitoring system. We need to know how much fresh water is being abstracted.

In close cooperation with Dutch companies and non-governmental organisations, a pilot is conducted by Kenya Airports Parking Services (KAPS) to monitor the abstraction of groundwater wells around Greater Nairobi. ‘For three years we monitored the real time abstraction with smart meters. The data is passed on to the national authorities that are responsible for the water resources’, tells Charles Kaloki who is Business Development Director of Earthview Management Ltd. This company - a subsidiary of the leading revenue collection and ticketing technology company KAPS Ltd - is specializing in revenue collection and reducing non-revenue water for Water Service Providers (WSPs) using smart meters and other sensing technology objects. Nobody knows what is really abstracted from our ground and surface water, Kaloki states. We know that much more is abstracted than allowed in permits and this over abstraction will only increase as the water demand grows. That makes our pilot so important. The data we generate gives the responsible water authorities insight in what is really happening.’ According to Kaloki the results of the pilot are promising and the service is ready for a scale up with abstraction permits for the whole Mara river basin and eventually for a national roll out.

 

Business Opportunities

The metering pilot by KAPS is financially supported through the Kenya Innovative Financing Facility for Water (KIFFWA), an initiative that has been set up by the Netherlands Water Partnership (NWP) with funds provided by the Dutch embassy in Kenya. ‘KIFFWA does not provide traditional donor money, but it is a loan that we have to pay back’, explains Kaloki. ‘It forces us to create a business case out of smart water metering.’ Kaloki is a strong believer in this concept. ‘We cooperate with Dutch suppliers of water meters and we both learn from the local implementation in Kenya. If we can develop a business case which can get funded by increased revenues from smart meters, we can install more water meters, giving a continuity to the roll out.’ His company is now studying, with Dutch partners, to develop a control room to monitor the real time abstractions. His company is also involved in the roll out of smart water meters for households. Smart meters are expensive and most WSPs in Kenya cannot afford to replace their existing infrastructure because of limited resources. Private sector investment in smart metering is needed as  from  experience it can pay back . ‘If we are able to develop smart and cheaper meters for the African market, we could both benefit,’Kaloki adds.

The NWP (in the Netherlands) and the Netherlands Business Hub (in Kenya) can facilitate the right connections and contacts between the Dutch and Kenyan water sectors.

 

Financial pioneers

National regulator Gakubia acknowledges the need for cheaper, appropriate water metering technologies. ‘With better data we can get more grip on water supply and improve the management of our water resources and the drinking water distribution. For that we need cutting edge technologies that are affordable’, says Gakubia and reflects on his visit to the Amsterdam International Water Week (AIWW) where he talked with the meter suppliers at the Aquatech trade fair. But even more enthusiastically he recalls the AIWW-conference and the session on financing. ‘The Dutch government announced to end its development aid to Kenya by 2020 and instead, they support us in finding new ways for financing our ambitions. The Dutch are real pioneers in blending public and private finances for water infrastructure’. Gakubia refers to the Kenya Pooled Water Fund (KPWF) that is about to issue its first bonds to attract private money for investments in water projects. The Dutch government has supported the start of that fund through KIFFWA and through the Water Finance Facility (WFF). Gakubia underlines the importance of the Kenya Pooled Water Fund. ‘Compared to the donor grant money, this fund forces us to deliver our water services with better financial results. This will improve the  management of the water companies and eventually benefit the consumers, as well as the sustainable use of our water resources.’ According to Gakubia the introduction of this type of blended financing is unique in the world and deserves a worldwide follow-up, even though private money suppliers are still wary of the water sector. He is looking forward to visiting the next Amsterdam International Water Week in November 2019 and exchange experiences on blended financing for water infrastructures.

More information on KIFFWA and the Kenyan-Dutch cooperation, please contact Don Offermans, d.offermans@nwp.nl and Annemarie Mastenbroek, a.mastenbroek@nwp.nl, Netherlands Water Partnership (NWP)

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