Investing in Africa’s water sector

At least half of people living in Sub-Sahara Africa lack access to water and proper sanitation utility services, a situation that continues to pile pressure on the continent’s urban cities. CNBC Africa’s Aby Africa spoke to Ed Mitchell, CEO of WSUP (Water and Sanitation for Urban Populations), on how private sector investments can help bridge this huge financing gap. WSUP collaborates with utilities across Africa and South Asia to enhance their ability to meet the needs of their customers, particularly those in low-income communities. Mitchell emphasized the significant economic benefits of improving water and sanitation services, especially in urban areas where a quarter of the population lacks access to decent toilet facilities and half do not have clean drinking water. With the challenges of rural-urban migration and climate change exacerbating the issue, utilities face a daunting task in addressing the growing water and sanitation needs of the population. WSUP helps utilities improve customer service and operations to offer a more affordable and quality service, contributing to both customer satisfaction and the financial sustainability of utilities. The potential for water, sanitation, and hygiene (WASH) services to drive economic growth in Africa is immense, considering the ongoing population booms and the economic advantages at the individual, company, and economy levels. Strengthening institutions and creating an enabling environment are crucial for the growth of the WASH sector in Africa. Research indicates a positive correlation between having a strong independent regulator and the equitable provision of water and sanitation services. WSUP works with regulators and governments to establish frameworks that allow both public and private sector operators to thrive. For example, in Kenya, collaborating with the economic regulator of the water sector has led to significant improvements in service provision to low-income communities. Financing remains a major challenge in the water and sanitation sector in Africa, with an estimated annual financing gap of $20 billion. While much of the current funding comes from grants and philanthropy, there is a growing need for sustainable financing models. Mobilizing domestic finance is crucial to attract the right investments in the sector. By formalizing water services through modern utilities with good customer service, the financial viability of utilities can be enhanced, benefiting both the utility and the wider economy. Local entrepreneurs and private sector operators also have a role to play in building sustainable businesses in the sector. Climate change is adding another layer of complexity to water, sanitation, and hygiene operations, as it contributes to rapid urbanization and strains water resources. However, improving wash services can also have a positive impact on reducing climate change, as better waste management practices can lead to lower methane emissions. Tackling both the risks of climate change and the challenges in WASH services is essential for building resilient systems and ensuring sustainable development in Africa.