Scale required in funding SADC water projects, says Genesis economist
6 June 2017
Genesis manager Kim Adonis tells WASA's journal Water & Sanitation Africa (Volume 12 Number 2) that economies of scale are required when looking to unlock funding for water projects in SADC.
Adonis, who also worked on the Climate Resilient Infrastructure Development Facility (CRIDF), said that funding organisations such as the one she represents make finance available, but when funding proposals are too narrow in scope they miss out on funding earmarked for large-scale projects.
“CRIDF has a project pipeline of about 25 different infrastructure projects, all of which are multidisciplinary in nature and drawn from SADC’s priority lists. Most of the projects are drawn from the SADC Regional Infrastructure Development Master Plan projects, and that amounts to about $15 billion for 24 projects. CRIDF has been operational for nearly four years and, in assessing these different projects, there have been a range of lessons learned,” Adonis explains.
Adonis stresses the need to tap into economies of scale as one of the crucial lessons CRIDF has learned on its financing journey.
“Implementing agents need to package projects so they can be scaled up and replicated. This is something we learned relatively late in the life cycle of CRIDF but it is so crucial to tap into these economies of scale.
"The example that we have at CRIDF is a trans-frontier conservation area called the Kavango Zambezi Transfrontier Conservation Area. It’s the world’s largest conservation area, with 36 national parks, game reserves, game management areas and community conservancies. It spans five different SADC countries and CRIDF initially started off with three to five pilot projects in the area. Essentially, the intervention was structured around ‘livelihoods’ funding, because it provides water supply to rural communities.
"What we discovered is, if you look at these projects in and of themselves, there is limited ability to tap into alternative types of finance to move beyond purely grant-based finance as there is very little return on an individual-project basis,” explains Adonis.
“However, when we scaled up our approach to incorporate all five countries and implement a much larger and more holistic project, we were suddenly able to unlock different types of finance – for example, climate funds. These require projects to be of a certain magnitude and economies of scale need to be achieved in order to tap into these funds. Additionally, project implementers are now able to approach potential commercial investors and private equity funds that have a focus on, for example, livelihoods projects,” she adds.
Other lessons learned include the need to build relationships with financiers in order to understand what their criteria for project funding actually are. Also important is starting to work with potential funders from the outset of a project rather than only after the scope has been established.
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