Compact Sustainability

The Zambia Compact took a systemic approach to strengthening Lusaka’s water sector: infrastructure improvements paired with institutional strengthening and conditions precedent sought to address not only the water supply, sanitation and drainage challenges, but also the sustainability of the sector. At MCC, the idea of sustainability refers to the persistence of targeted results or outcomes after the five-year implementation period and out over the expected life of a project. As the cost-benefit analysis for compact investments is calculated for a 20 year period, this time horizon frames sustainability considerations even in the case of infrastructure that should last beyond two decades. It is helpful to frame a discussion of compact sustainability around five pillars: financial, institutional, policy/legal, social/behavioral, and environmental.

Financial and Institutional Dimensions

The long-term financial and institutional health of LWSC is critical to realizing and sustaining the improved water and sewer services that underpin the inclusive economic benefits the compact aimed to provide. The Government had engaged in a Water Sector Performance Improvement Project with the World Bank (2007-2013) that bolstered the financial performance of LWSC. MCC built on that engagement by leveraging an agreement developed between the Government and LWSC as part of the World Bank project. This agreement—the LWSC Sustainability Agreement—set forth operational and financial performance milestones for LWSC and the sector. MCC required the GOZ and LWSC to finalize and enter into that agreement as a condition for the start of the compact. The continued effectiveness of, and compliance with, the LWSC Sustainability Agreement, including satisfaction of the applicable performance milestones, was also a condition precedent to the disbursement of MCC funding each quarter.

Improved financial health allows a utility to sustain and improve the services it provides by funding maintenance, asset renewal, and expansion, thus ensuring the continued benefits of previous investments. The compact incorporated conditions requiring LWSC to devote a minimum of 50 percent of its annual retained earnings to asset renewal and capital expansion and to devote an “appropriate amount” of funding for the repair and maintenance of water supply and sanitation infrastructure. But earnings must first be realized before they can be put to use. The compact-funded technical assistance to strengthen asset management and reduce non-revenue water was therefore designed to further develop the financial and institutional capacity of LWSC, thus promoting the sustainability of MCC’s infrastructure investments. As previously discussed, LWSC’s financial situation was weaker than originally thought, underscoring the importance of the institutional strengthening activity to compact sustainability.

In light of LCC’s responsibilities managing drainage and solid waste for the city of Lusaka, the financial and institutional health of LCC is likewise critical to sustaining the benefit of compact investments in drainage infrastructure. Here, MCC once again leveraged conditions precedent to design sustainability considerations into the compact: LCC was required to allocate a minimum of $1.5 million annually for four years during the compact period exclusively for the repair and maintenance of drains. 67  The technical assistance provided under the Institutional Strengthening Activity sought to improve LCC’s ability to manage and maintain its assets. The compact had also planned assistance for LCC on solid waste management, since keeping MCC-funded drains clear of solid waste is essential for reducing flooding each rainy season. However, the creation of an autonomous solid waste management company was an unforeseen approach to address institutional sustainability challenges that became clear only as the project progressed. By securing dedicated staff and ringfenced funding, the separate company developed both institutional and financial capacity for ongoing solid waste management. The approval of this approach by LCC, the Minister of Local Government, the Cabinet, and Parliament was an indicator of the GOZ’s commitment to the compact.

The time horizon and strategic nature of the various master plans developed with MCC support also serve to promote the sustainability of compact investments in Lusaka’s water sector infrastructure. In particular, the master plans for water supply investments and sanitation investments are tools to guide the sector’s development in a way that fully integrates and complements the MCC-funded project. By identifying priority projects and mapping out an investment strategy, the master plans coordinate future investments. Indeed at compact closure these plans had already attracted approximately $500 million in additional investments from the donor community (see more details in the Coordination and Partnerships section of this report). Ironically, strong donor interest and well-developed master plans that outline more than $2.7 billion in water and sanitation investments may in some ways threaten the sustainability of Lusaka’s water sector. Should these projects be realized rapidly with donor money, there is a risk that LWSC and the GOZ could be left with more infrastructure than they have the capacity to manage. While there is no corresponding investment master plan for institutional strengthening, LWSC’s Strategic Plan for 2018–2022 includes reducing water losses, strengthening operations and maintenance as part of asset management and organizational efficiency, improving human resource productivity, and attaining financial viability as part of business sustainability.

Water tariffs are the utility’s primary means of cost recovery. Zambia’s water tariffs, however, were set below cost recovery levels, likely in order to subsidize poor users. While the Zambia Compact did not include water tariff reforms, the program’s structure provided opportunities other than tariff subsidization to provide targeted assistance to the poor. For instance, the compact offered financial assistance to poor customers who faced one-time fees to connect to the newly constructed water supply and sewerage infrastructure. Although subsidizing connections may be more effective than subsidizing tariffs in addressing affordability for the poor, MCC nonetheless encountered some difficulties in implementation of this approach. For example, the subsidy for sewerage connections was based on an engineering estimate of connection costs plus (for houses lacking a toilet) the costs of building a toilet. Toilet designs can vary, however, from a simple hole in the ground to elaborate finished water closets. The cost estimates received for toilets were for a very expensive option, such that the total subsidy required to cover all new connections exceeded the available budget. In the future, instructing cost engineers charged with estimating required subsidies to work within available budgets will be key.

Policy and legal dimensions

LWSC and LCC received technical assistance to develop and implement policies and procedures that will help them more effectively maintain and deliver inclusive services. In addition, LWSC can exercise its newly granted legal authority to collect arrears directly from government agencies. The implications of this legal change for the utility’s balance sheet, its ability to make new investments, and the sustainability of assets illustrate linkages between different dimensions of sustainability. Although there was no clear “champion” within the GOZ for the sustainability of the compact or Lusaka’s water sector more generally, MCC enjoyed excellent access to GOZ partners. Finally, GOZ contributions to the compact totaling $52 million provide further evidence of political will. 

Social and behavioral dimensions

Several social and behavioral components are essential to achieving lasting health and economic benefits from the compact-funded infrastructure. To avoid waterborne disease, people need to choose the treated municipal drinking water supply (whether from a kiosk or a household connection) over untreated and potentially contaminated sources like shallow wells or the informal water sector. To safeguard Lusaka’s vulnerable groundwater and reduce unsanitary overflows during the rainy season, the city needs a wholesale shift away from unlined pit latrines and towards sewer connections. 68  And to keep the drains clear of blockages so that they can evacuate stormwater and reduce flooding during the rainy season, residents throughout the city—especially in peri-urban areas—need to have and actually take advantage of appropriate solid waste management options. In short, uptake of water, sanitation, and solid waste services is critical to realizing benefits and therefore to the sustainability of the MCC’s investments. Furthermore, uptake of services and an increase in the number of connections will support the financial sustainability of the utility.

In addition to working to increase the number of utility connections, as noted above, the compact included a requirement to develop and implement a Sanitation Connection Action Plan (SCAP) to address affordability challenges that could prevent poorer residents from connecting to sewer services. Technical assistance on social inclusion aimed to help LWSC make water and sanitation services more accessible, and billing and payments more manageable, particularly for poorer and more vulnerable residents. Information, education, and communications campaigns promoted water, sanitation, and hygiene behavior change and uptake of services. By orchestrating and coordinating all of these efforts through capacity development and incentives at LWSC and LCC, the compact aimed to ensure that inclusive service provision and social and behavioral change would be sustained so that the projected benefits would be realized. Furthermore, sustainability was an evaluation criterion during competitive selection for the Innovation Grant Program, and several of the funded projects reinforced sustainable change at the community level in Lusaka’s water sector.

Environmental dimensions

Only through good stewardship and responsible management of water resources can Lusaka safeguard the sustainability of its water supply. The compact addressed this environmental dimension from several angles that overlap and complement the other aspects sustainability discussed above. The Water Supply Investment Master Plan incorporated estimates of how much groundwater could be safely pumped from Lusaka’s aquifer, 69  the Sanitation Investment Master Plan incorporated investments necessary to protect Lusaka’s aquifer, and MCC’s infrastructure investments to fix leaks will reduce water waste to help ensure the resource is used efficiently. The creation of a Ministry of Water Development, Sanitation, and Environmental Protection in 2016 was a policy/legal measure that has the potential to reinforce the environmental sustainability of the sector through improved water resource management. MCC’s commitment to the performance standards of the International Finance Corporation also ensured that construction activities under the compact met environmental standards. However, challenges remain. Safeguarding water quality in the vulnerable aquifer underneath the city is critical to the long-term sustainability of the water supply and health benefits, since this aquifer provides approximately half of the city’s drinking water. The success of social/behavioral sustainability initiatives to promote uptake of water and sanitation services and shift away from unlined pit latrines is therefore of great importance to the environmental sustainability of the sector. 70

MCC incorporated many measures to ensure sustainability of compact investments; however, risks remain. For example, rain events that are more extreme during the wet seasons could strain drainage infrastructure, and drought during the dry seasons could limit water availability, straining LWSC’s delicate finances and making it difficult for the utility to provide enough safe water to meet the city’s needs.

The Zambia Compact is being independently evaluated by three separate evaluations:

Overarching Performance Evaluation with Emphasis on the Institutional Strengthening Activity

An independent performance evaluation will assess the performance of the entire Lusaka Water Supply, Sanitation, and Drainage project in contributing to the water, sanitation, and drainage sector sustainability through its effect on institutions (LWSC and LCC). This evaluation is expected to be completed by 2022.

Key research questions that this evaluation attempts to answer are:

• Was the project as a whole effective at increasing the operational efficiency and sustainability of LWSC as measured by non-revenue water, collection ratio, and tariff adequacy?
• How successful is LWSC in implementing and maintaining a life-cycle centric approach to asset management?
• Did the technical assistance to LCC catalyze improved waste management and collection, improved capacity, or long-term sustainability of waste management and drainage operations? 
• How did the social inclusion and gender mainstreaming and IEC technical assistance contribute to changes in LWSC and LCC policies, structures, planning, staffing, capacities and budgets to i) provide gender-responsive, appropriate, affordable and sustainable services for the poor and ii) to plan, develop and manage IEC and sanitation marketing campaigns that promote behavior change, uptake of services and care of physical assets in low-income peri-urban areas? Do the achieved outputs contribute to project-level outcomes and compact objectives?

Evaluation Results

An interim report with the first set of findings from this evaluation will become available in 2020.

Infrastructure Activity Impact Evaluation

This randomized impact evaluation is designed to measure impacts on water‐related diseases and time savings for households and businesses, including the beneficiary populations in the peri-urban neighborhoods of Lusaka where water and sanitation networks have been extended for the first time. The key questions this impact evaluation intends to answer are:

• What are the attributable health and economic impacts on beneficiary households of having access to piped water in their home?
• What are the attributable health and economic impacts on beneficiary households of having both piped water and networked sanitation in their home?
• What are the time savings attributable to relevant compact activities for the beneficiaries?
• What is the quality of the water that beneficiaries have access to at the tap and within the household? Does it change due to compact activities?
• What are the current consumption rates of safe versus un-safe water consumption and usage? Do compact activities lead to an increase in safe water consumption?

Evaluation Results

An interim report with the findings from Monitoring of Water Quality in the LWSC Distribution System component will be available in 2020.

Innovation Grant Program (IGP) Sub-Activity Evaluation

This sub-activity is being evaluated separately to examine the overall performance of the IGP in relation to key programmatic and compact objectives, potential gaps or inefficiencies in IGP implementation, areas in which implementation can be improved, and positive aspects of the IGP that could potentially be expanded or replicated in other contexts. The evaluation addresses the following overarching questions: 

• Did the program achieve its objectives following the implementation model envisioned in program documentation?
• Did the program achieve the outcomes envisioned in key peri-urban areas of Lusaka?
• Did the grant selection process prioritize interventions based on its key objectives, and was the process an efficient and effective way to identify the “best” projects?
• Is grant oversight sufficient? Is it cost-effective?
• How can the IGP better mobilize private-sector resources?
• Based on the degree of success of the IGP, what are the key lessons learned related to program design and the implementation model?

Evaluation Results

The interim and final evaluation reports are expected to be released in 2020. The performance evaluation will continue to analyze and uncover results through the completion of both grant cycles, based on an additional round of data collection that was conducted in September 2018. All reports from this evaluation are located on the MCC’s public Evaluation Catalog.