What does rapid urbanisation mean for utility service provision? Our takeaways from the AfricaWorks! conference

On 8 and 9 April 2019, the GSMA Mobile for Development Utilities team was thrilled to co-host a workshop on ‘Digital and IT for Water, Sanitation and Hygiene (WASH)’ at the AfricaWorks! conference on the future of African cities, in Rotterdam. AfricaWorks! is the flagship event of the Netherlands-African Business Council. On top of hosting our workshop and tapping into the expertise of a plethora of Dutch water and renewable energy stakeholders, we also aimed to discuss what rapid urbanisation means for the future of urban utility service provision. Here are our main take-aways.

Utility service provision has to be placed in the context of rapid urbanisation

The pace of urbanisation in Africa is unprecedented. Just consider these projections on two of Africa’s fastest growing cities, Lagos and Kinshasa. Lagos’ population will grow by the entire population of Rotterdam every year from now until 2030, while Kinshasa’s population is likely to almost double in the next 15 years. Africapolis, a geospatial database on cities and urbanisation dynamics in Africa developed by the OECD, projects that by 2050, Africa’s cities, including ‘new’ secondary cities, will be home to an additional 950 million people.

This unprecedented growth represents an immense challenge for urban governance, and utility service provision across Africa. According to UN-Habitat, slum dwellers account for over 70 per cent of Africa’s urban population (see the figure below).

Source: UN Habitat, World Bank

This can be partly explained by ‘urbanisation without structural transformation’. In many resource-rich African countries such as Angola, the Democratic Republic of Congo, or Zambia, the growth of cities such as Luanda, Kinshasa, or Lusaka is driven by resource rents instead of job-creation. Since the urban poor cannot afford live in dense, well-connected neighbourhoods, many African cities are exemplified by low-rise informal housing and great urban sprawl.

For city authorities, this trend poses unique challenges such as water shortages, lacking sanitation, unreliable power provision, traffic congestion, and a lack of affordable housing. For centralised utilities, it presents an affordability-coverage trade-off, as utilities have to juggle the sometimes competing objectives of proving their financial viability to investors and the government, while needing to mobilise substantial investments to extend and improve utility services to the urban poor. This challenge is often compounded by precarious property rights and lacking density that define many informal urban settlements. The infrastructure capex requirements to provide basic services such as water are “acutely sensitive to the density at which urbanisation occurs.” This has had profound implications for their ability to extend access to basic public goods such as water. As we stressed in our workshop, the proportion of urban residents in African cities with access to piped water decreased from 43 per cent in 1990, to less than 35 per cent, currently.

These structural challenges are compounded by climate change. This was highlighted by Henk Ovink, the Dutch Special Envoy for Water Affairs, in his keynote address at the conference, when he said that Africa’s fastest-growing cities are the most vulnerable to climate change globally. Urban utility service provision systems thus do not only have to respond to the demands of rapidly growing populations, but also have to be designed to be resilient to the effects of climate change.

In this context, the need to invest in innovative and sustainable solutions has never been stronger. A 2016 African Development Bank study states that “two-thirds of the investments in urban infrastructure to 2050 have yet to be made” and decisions taken now will affect generations of city dwellers well into the twenty-first century.

Digital solutions can unlock sustainable urban utility service delivery models

As stressed above, water-related problems in African cities are growing and are affecting the health and well-being of an increasing number of urban residents. A key constraint to more inclusive water service delivery among urban utilities in developing countries is non-revenue water (NRW), water that has been produced but ‘lost’ before it reaches the customer. These commercial losses are estimated to cost utilities in developing countries $3 billion per year. As we pointed out in our workshop on ‘Digital and IT for Water, Sanitation and Hygiene (WASH)’, mobile solutions such as prepaid smart meters coupled with digital payments (mobile money) can be critical to tackling the negative NRW cycle.

In our study with CGAP, in which we explored the impact of digital payments on 25 water service providers across Africa, Asia, and Latin America, we revealed that the introduction of digital payments increased water service provider revenues by 15 to 37 per cent, while decreasing collection costs by 57 to up to 95 per cent. With the support of the GSMA Mobile for Development Utilities Innovation Fund, CityTaps has successfully scaled their prepaid water service platform to enable the urban poor in Niamey to access affordable and safe running water at home. Their prepaid smart meter incorporates machine to machine (M2M) technology, which allows households to make micro-prepayments for their water at any time using mobile money.

As our recently published annual report demonstrates, mobile technology also has a critical role to play in addressing sanitation challenges in cities, where most residents rely on non-sewered sanitation. Mobile technology plays a critical role in ensuring the linkage between different stages and stakeholders along the sanitation value-chain. In Madagascar’s capital, Antananarivo, GSMA Mobile for Development Utilities Innovation Fund grantee, Loowatt, a start-up providing a waterless toilets solution, has developed a suite of mobile services to track its waste collection processes, collect payments with mobile money and communicate better with its customers.

Meanwhile, our workshop co-host 52Impact, which pioneers satellite monitoring and mapping applications, underlined the potential of new data sources. Weak data collection systems limit our knowledge of African urbanisation and poverty. New data sources such as satellite images of night lights, daytime satellite pictures, and mobile phone networks can increasingly be leveraged to inform evidence-based policy and plan for the future.

Our workshop co-host IW+, a new initiative by multiple water sector stakeholders, which seeks to unlock private investment in urban water service delivery models by facilitating the scaling and replication of proven use cases through equipment leasing and the integration of digital payments. 

Investing in innovative sustainable urban projects can pay off

On day 2 of AfricaWorks!, a particular emphasis was placed on energising and financing Africa’s urban development.

WASTE, a cooperative dedicated to improving urban sanitation and waste-management, and Take a Stake Fund, a newly launched WASH impact investor, hosted a thought-provoking panel on, ‘Achieving SDG synergies through innovative financial instruments’. According to Kajetan Hetze, the Executive Director of the Take a Stake Fund, WASH financing will need to triple from its current levels in order to achieve SDG 6 by 2030. Both public and private sectors will have to step up. The investment gap is particularly acute for small-growing businesses (SGBs), who play an important role in urban water-and sanitation service delivery. As Hetze stressed, only 0.03 per cent of total SME-related disbursements from donors currently go to the WASH sector. To address this gap, WASTE partners with MFIs to extend loans to sanitation service providers, while Take a Stake Fund aims to combine capital and capacity building to address the ‘missing middle’ financing gap.

Bilateral development finance institutions, whose assets under management increased by 57 per cent over the last five years, also have a crucial role to play. During his keynote address, Peter van Mierlo, the CEO of FMO, a Dutch development finance institution, pointed to FMO’s over $1 billion investments in energy across Africa including a significant focus on off-grid solar. Given unreliable grid connections in many African cities, investing in renewable urban energy will be vital to reach SDG 7, and drive down production costs in African cities.

During his keynote address, Samuel Z. Alemayehu, the Managing Director of Cambridge Industries Ltd, which operates Africa’s first waste-to-energy plant in Addis Ababa, has proven that bold investments into innovative use cases can pay off, while delivering social impact. By transforming over 1400 tons of waste into energy every day, it generates over 25 MW, leveraging a circular economy approach, which tackles both the cities’ energy and waste management needs.

The time to turn the challenges of rapid urbanisation into opportunities is now. As Arthur Minsat from the OECD emphasised, there are several positive examples throughout the continent that show that African cities have the potential to become engines of structural transformation and productivity growth.

We would like to end this blog by thanking AfricaWorks! for the opportunity to host our workshop, and our great workshop co-hosts Aqua for All, 52Impact, and the Netherlands Water Partnership.

The GSMA Mobile for Development (M4D) Utilities programme is funded by the UK Department for International Development (DFID), USAID as part of its commitment to Scaling Off-Grid Energy Grand Challenge for Development and supported by the GSMA and its members.

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