Two water supply projects in Malawi

NUMBER 146 * ED Precis FOperations Evaluation Department May 199 Two Water Projects in Malawi Two Bank-funded water supply projects designed to pave the way for the Outcomes in the city of Lilongwe, Malawi, have second by developing a long-range shown that a small utility, operating sector program for the capital, Water availability. The new dam under difficult circumstances, can be Lilongwe. The project's goal was and the treatment facility built by managed effectively. An OED audit* to strengthen the Lilongwe Water the second project have allowed found that the projects increased water Board, the city's commercially water supply to keep up with availabilityfor the poor, established an run utility responsible for water population increases, although re- expanding sanitation program, and im- supply and sanitation services. The cent droughts and an unexpect- proved management at the local water second project, for a credit of $20 edly high population increase have utility. Thefirst project included care- million, implemented the new in- forced the utility to ration water. fully designed preparation for the sec- vestment phase and sanitation ond project, andfocused primarily on program, and continued the institu- Access to water improved signifi- building institutional capacity. tional support begun under the cantly in new housing areas, but engineering project. coverage was poor in low-income Both projects were completed suc- areas until the second project de- cessfully, the second ahead of schedule. The projects were a success, veloped an effective network of Their accomplishments included an especially from the point of view water kiosks in traditional housing increase in the efficiency of operations of institution building, and they areas and villages in Lilongwe's and the creation of a network of local provided the model for a national outskirts. The water board and the consumer committees to operate water approach to managing water in city council strongly promoted the kiosks for the poor. Many of the com- cities and larger towns. One key to creation of consumer committees mittees are run by women. their success was the well-targeted to run the kiosks. Today, most and thorough technical assistance kiosks are privately operated and An abrupt devaluation of the local of the first project. The extensive managed by these committees, and currency has made it very difficult for groundwork done by the Bank in the vast majority of them are run the utility to service itsforeign debt the first project to prepare the by women. The Lilongwe Water and cover supply costs, threatening the larger investments of the second Board appears to manage the projects' long-term benefits. While tar- project helped identify training kiosk operator contracts in a trans- iffs can and should be increasedfurther, needs and established a twinning foreign exchange risk relief should be arrangement for a comprehensive considered as part of a program to training program. restore and sustain the utility'sfinan- *Pertbrinance audit report: cial viability. The engineering project produced "MalaUwi: Lilongwe IVater Sup- a master plan, a feasibility study, plv Eng.ineering Project and For over a decade the World engineering designs, and contract Second Lilongwe WVater Supply Bank has been helping Malawi ex- documents for the second project. Project," byV Taunio Skidta. Report pand its water resources, funding It financed experts and computers. No. 16430. April 1997. Available five operations in the water sector. The second project included con- to Bantk executive directors and Two of these were the Lilongwe struction of a new earth-fill dam, a stafffrom the Internal Documents Water Supply Engineering Project water treatment plant, and water Unit andfrom regional informa- (1982-87) and the Second Lilongwe mains. It expanded the distribution tion service centers. Precis writ - Water Supply Project (1986-93). The system and strengthened the capac- te'n by Ste/Imo Petrucci. first, for a credit of $4 million, was ity of the water board.  parent and effective manner, and ments. City health officials report water prices have not kept up with the village consumer committees that the incidence of water-borne the rise in the consumer price in- have encouraged discipline and diseases has dropped since the dex. But affordability should not efficiency in kiosk management. program began. be jeopardized, or consumers may stop using and paying for Institutional development. The Financial risk the service. projects helped develop an effec- tive management support and After a promising start in the Under financing agreements training program through a twin- late 1980s and despite a 29 percent later made under a Bank-funded ning arrangement with a British average yearly increase in water follow-on national water develop- water authority. After the program sales since 1989, the finances of ment project, water boards were was completed in 1994, the water the Lilongwe Water Board have protected from portions of their board successfully took over the abruptly deteriorated in recent foreign exchange risk, and the gov- functions of expatriate advisers. years, and profitability disap- ernment assumed responsibility All senior level management posi- peared in 1994. The main reason for servicing part of the Lilongwe tions are now filled by local offic- has been the impact of the local Water Board's foreign debt. As a ers, and staff productivity has currency's devaluation on the result, the board's financial posi- increased above target levels. utility's foreign debt. tion improved in 1996. The efficiency of operations has In fiscal 1995, foreign exchange Lessons increased considerably, and the losses amounted to three times current level of unaccounted-for the water revenues. Between 1994 * Providing adequate and well- water-16 percent-is among the and 1995, foreign exchange losses targeted technical assistance before lowest in any African city. Labor erased almost five years' worth an agreement is reached on a major costs were reduced (from 43.3 per- of sales; as a result, the return on investment program is the correct cent of operating expenses in 1990 fixed assets was negative. Foreign approach in countries where insti- to 37 percent in 1995), while re- exchange losses were charged en- tutional capacity is weak. sponse time to new service appli-. tirely to the income statement, a cations and customer complaints practice that further damaged the * Extending the network of water has improved. board's creditworthiness and dis- kiosks and handing over their op- torted the picture of its operating eration to private individuals or Sanitation. About 6,000 latrines finances. community groups can be an effec- were built under the projects, and tive way of improving access to the sanitation program continues The water board has increased water for the poor. under local supervision. The deliv- its rates to cover rising costs. Even ery of sanitation services is now many middle- and higher-income * When a utility has limited community based, with the city households, consuming about 100 scope for efficiency gains, the ad- council providing coordination liters per capita per day (lpd), now verse consequences of a currency and supervision. The projects de- pay 5 percent of their income for shock should be passed on prima- veloped technological options as water. Lower-income households rily to consumers in the form of well as health education materials consuming 20 lpd pay about 10 tariff increases at least equal to and manuals for construction and percent of their income. Water the consumer price index. But training. The same training and costs still compare favorably with when affordability becomes an education materials developed by the average in developing coun- issue, foreign exchange relief to the first project are now being used tries, however, and there is still restore the utility's viability should for continued sanitation improve- room for tariff increases because be considered. OED Precis is produced by the Operations Evaluation Department of the World Bank to help disseminate recent evaluation findings to development professionals within and outside the World Bank. The views here are those of the Operations Evaluation staff and should not be attributed to the World Bank or its affiliated organizations. This and other OED publications can be found on the Internet, at http:// www.worldbank.org/html/oed. Please address comments and inquiries to the managing editor, OED, tel: 1-202/458-4497, fax: 1-202/522- 3200, e-mail: eline@worldbank.org May 1997