Is slum sanitation likely to require major subsidy?

Themes: Container-based sanitation Faecal sludge management Finance Public finance Research Sanitation Sewerage Urban Sanitation Research Initiative
Countries: Bangladesh Bangladesh-local Ghana Ghana-local Kenya Kenya-local

Improving sanitation in slum communities is a complex challenge. Particularly challenging is working out how it can be financed.

By Guy Norman, WSUP’s Director of Research and Evaluation

Now if you believe that subsidy is a Bad Thing or just ain’t ever gonna happen, you might approach slum sanitation by first assessing what slumdwellers are willing to pay, then identifying some solution that can be provided for that amount of money (no need for subsidy). Trouble is, you may end up with a solution which is affordable, but which doesn’t really improve things much. For example, you could encourage slumdwellers to install a ceramic or concrete squat-plate (a SanPlat) over their existing latrine: but on its own, it doesn’t seem likely that this would have much impact on health.

An alternative approach is to work out a) how much high-quality sanitation solutions cost, b) how much low-income people would be willing to pay for them, and then c) identify any gap that will need to be covered essentially by some form of subsidy.

SWEEP operators at work, Bangladesh

Mechanical emptying operators at work, Bangladesh

This alternative approach is that taken by the SanCost project, one of the major projects under WSUP’s Urban Sanitation Research Initiative. This research is looking at slum sanitation costs in relation to slumdweller willingness-to-pay, in cities in Kenya, Ghana and Bangladesh. It’s being led by the Aquaya Institute: they’ve been working on this for about 18 months, and early findings are now beginning to emerge.

So let’s get straight to the most interesting initial finding, which is that slumdweller willingness-to-pay appears to be waaaaay lower than cost. Consider a simple but safe sanitation option: a pour-flush toilet with a lined pit, and associated pit-emptying services. In the Kenyan city of Nakuru, initial estimates indicate that the average amount households would be willing to pay for a high-quality pour-flush toilet is $194, versus capital cost of $871. So willingness-to-pay is less than 25% of cost. And that’s just capital cost, with no consideration of subsequent recurrent expenses for flushing, emptying and maintenance. If this initial finding is ballpark-confirmed by more extensive data and more detailed analysis, the message is clear: a big chunk of the cost of slum sanitation is going to have to come from subsidy.

Of course, initial findings may not be confirmed by more extensive data and more detailed analysis. Or the cost-versus-WTP relationship for pour-flush-to-pit in Nakuru may be very different in other cities, or very different to that observed for other sanitation solutions. So please take this as an interesting initial finding, certainly not as a definitive statement. Full findings expected December 2019…

A worker from NAWASSCO connecting a pipe into the main sewer line in Githima, Nakuru.

Meanwhile, let’s explore some of the complex detail required to do a study of this type.

First, the researchers needed to make a decision about what sanitation options to include in the study: that required detailed analysis (specific to each city) about which solutions can be considered realistic in each location, and which of those can be considered high-quality with respect to public health and user experience. It was also important to consider which comparisons would be useful to decision-makers: hence inclusion of sewerage. Second, the researchers needed to make a judgement about what proportion of total sanitation chain costs should be considered “household-facing costs” (i.e. plausibly covered by the slumdweller), and what should be considered “wider costs” to be covered by government. So here’s a summary of how Aquaya have framed this study in Nakuru:

  • The capital cost of $871 cited above refers to estimated User Interface and Containment costs nominally borne by the user: in the case of Option 1, that’s [superstructure] + [slab with pour-flush pan] + [lined pit].
  • However, more detailed analyses are looking at both upfront capital costs directly payable at household level, and annualised lifecycle costs across the whole “household-facing costs” part of the sanitation chain (CAPEX + OPEX over a conservatively assumed 7-year infrastructure lifespan).
  • All of these analyses involve a series of assumptions that are too complex to describe in a blog post, and these may change as the analysis proceeds: you’ll have to read the eventual full reports!

It’s worth noting that this “modular” approach to costing is closely mapped to the approach being used by the CACTUS project led by University of Leeds, such that the findings of these two studies will be readily comparable.

At this stage Aquaya’s cost data collection and cost modeling is near-final, and this allows us to compare cost estimates for different options within any of the study locations. Again taking the example of Nakuru, this graph shows estimated annualised lifecycle costs (“household-facing costs”), in $ per annum per toilet, for 5 possible solutions:

Notes: costs for one-door toilet, pour-flush to lined pit option shows manual emptying costs under best case scenario.

The two estimates for container-based sanitation (CBS) are assuming current service delivery costs (“worst-case”) and lower per-toilet service delivery costs projected if scale-up is achieved (“best-case”). This has no impact on capital costs (CAPEX), but has some impact on subsequent recurrent costs (OPEX).

It’s important to note that these findings are for Nakuru, and are not generalisable to other locations: Aquaya’s data is indicating differences in cost rankings between the five cities (Nakuru, Kisumu and Malindi in Kenya; Accra in Ghana; and Rangpur in Bangladesh). For example, in Kisumu, sewerage options are much more costly than in Nakuru, because the existing sewer network is much less developed.

While the cost data collection and modelling is well-advanced, the researchers are still in the middle of data collection on willingness-to-pay (WTP). They’re using two approaches to this: with large samples and across all cities, they’re assessing stated WTP for each option, using an approach known as “contingent valuation”. But in a subset of the sample, they’re also using real-money experimental methods to assess revealed (i.e actual) WTP. This is generally considered a more reliable method, and will allow validation of the stated WTP findings. Unfortunately, assessing revealed WTP is very expensive for high-cost items like toilets and sewer connection (because you’ve got to offer different levels of actual subsidy): this is why we haven’t been able to apply this method across the whole study.

Staff from Clean Team Ghana explain their container-based toilets.

So this research – expertly designed and delivered by the Aquaya team led by Ranjiv Khush, Rachel Peletz and Caroline Delaire – is generating detailed and fascinating findings, which we hope will make a very significant contribution to the state of knowledge around the costs and financial viability of different slum sanitation solutions. Here I’ve presented just a tantalising taster of what’s emerging: it’s frustrating to have all this fascinating data and analysis just sitting on our hard drives, we want to get it out there!

But we put it out there with a warning attached: these are just preliminary findings, more data is coming in, the analysis is incomplete and continues… anything reported here might change by the time the final reports come out in December 2019.

So please don’t plan any multi-billion dollar investments on the basis of this. Not just yet!

Blog written by Guy Norman (WSUP Director of Research and Evaluation), with thanks to Ranjiv Khush, Rachel Peletz and Caroline Delaire (all Aquaya) for their inputs.