I came across this Water Alternatives blog post by Maria Rusca and Klaas Schwartz. I am a sucker for 
anything related to Sustainable Development Goal (SDG) 6:
Ensure availability and sustainable management of water and sanitation for all.
My six years' service on the Steering Committee of the Global Water Partnership and the struggle to get a water SDG made quite an impression on me.
Here is the entire post (I did not include the references/comments - go here) by Rusca and Schwartz:
The Sustainable Development Goals (SDGs) Agenda is considered by many to be truly global, inclusive and ambitious. However, are these global aspirations translating into progressive change and moving the water sector in the right direction?
On paper, the targets set by SDG6 - water and sanitation for all by 2030 - are far more ambitious than those set by MDG-7c, which aimed at halving the population with no access to water and basic sanitation by 2015. With the SDGs, universal access to water and sanitation has become a stand-alone goal. Some of the critiques raised against MDG-7c were addressed by including indicators on water quality, availability, affordability and accessibility. Moreover, for the first time, the UN acknowledged that transformative change is necessary to meet these ambitious goals. It recognizes the need for "structural changes in the world economy" and calls for "new models" (United Nations, 2013:5). Yet, if SDG-6 is more comprehensive and its goal is more ambitious, it remains completely silent on effective pathways or strategies to achieve its ambitious targets. In other words, SDG-6 sets the targets – what to achieve – and indicators – what is monitored – but does not engage with the question of how to transform the sector and achieve sustainable and universal access to water and sanitation.
In doing so, it conceals some of the great challenges that have long constrained water providers' ability to achieve universal service provision. One of the main challenges confronting water service providers, particularly in the Global South, is the mixed mandate of having to manage their own finances (i.e. recover all service costs), whilst also ensuring the universal provision of a basic service. On the one hand, utilities need to operate on the basis of commercial principles, including full-cost recovery. On the other hand, these same utilities are the main instrument for national governments to achieve the universal service coverage stipulated in SDG6. These conflicting mandates have been referred to as the schizophrenia of water providers.
The tension of the mixed mandate is particularly visible when it comes to financing service extension. Meeting SDG-6 is expensive: the World Bank (2017) estimated the cost at 150 billion US$ per year. How will this be financed and by whom? There is a tendency to turn to private equity, but the water sector is a risky business, with limited and slow returns on investments. Moreover, the contribution through loans and grants from development agencies remains small. Apart from sourcing funds for future investments in water infrastructure, many utilities also struggle to service debts that were incurred in the past. Kathryn Furlong (2020) suggests that debt servicing forms a major part of the cost structure of water utilities.
The policy prescription for commercialization is quite clear: utilities are to pursue efficiency gains to reduce costs and raise tariffs to cover the remaining costs. Subsidies, in so far as needed, are to be limited to transitioning the utility towards operating as a commercial public utility. However, the practice of commercialization is much more complex. Most water utilities do not have control over their tariffs, which are set externally. These tariffs often do not reflect actual costs faced by the utility. Without control over the revenues, a utility can only strive for cost-recovery by reducing costs. Water utility managers, forced to pragmatically address conflicting objectives, subsequently opt for sub-optimal solutions in the attempt to achieve the very ambitious goals set by SDGs.
One way in which this is pursued is by seeking efficiency gains well beyond what is desirable. Cost savings achieved by reducing or foregoing maintenance or reducing treatment processes inevitably lead to deteriorating assets and declining service levels. A second consequence is that utilities will base decisions to extend services to unserved areas on the ability to generate revenue streams from potential consumers. As low-income areas are considered a commercial risk, they are often excluded in extension plans. Thirdly, all costs incurred by the utility are transferred to consumers. This also includes servicing debts that have been incurred by the utility a long time ago and that may not reflect the current costs of providing water services.
In order to service low-income areas in a cost-effective manner, water utilities have increasingly opted to engage with intermediary providers. These intermediary providers (water kiosk operators managing single kiosk facilities, small-scale providers operating small decentralized networks, water user associations managing a larger number of kiosks, or landlords) receive bulk water from the utility, which they then use supply to consumers. In this way, the water utility reduces commercial risks of supplying water in low-income areas but is still able to claim it is contributing to achieving universal service provision. Much of our research, however, suggests that service differentiation frequently results in low-income consumers paying more for poorer quality water and services (Hadzovich et al., forthcoming; Rusca and Schwartz, 2018; Schwartz et al., 2017). These intermediary providers are run like businesses and therefore need to recover their costs and ensure a profit margin. In order recover these costs as quickly as possible and achieve their profit margins, these costs are passed on to consumers in the form of relatively high tariffs. Operations of these intermediaries are difficult to regulate, leaving open the possibility of abuse of market power and of exploiting consumers. This is especially a concern as the areas served by these intermediaries are primary targets to meet the SDGs and are very often characterized by high poverty levels.
Through a focus on commercialization, governments have transferred financial responsibilities for ensuring universal service provision to water utilities. This transfer of responsibilities effectively signals a withdrawal of government from its obligation to ensure universal service provision. Under these circumstances, the global aspiration of universal access to water will not be fulfilled. Meeting this goal requires, first of all, recognizing that governments that have committed to the SDGs are ultimately responsible for their implementation. Water providers may be delegated this responsibility, but governments need to provide the tools to resolve conflicts created by clashing mandates. This should include a commitment to debt relief measures and subsidy mechanisms to enable the water sector to move in the right direction and meet the obligation to ensure universal service coverage. This entails subsidy mechanisms, which are not only geared towards leveraging additional financial resources (blended financing), but that also structurally support safe water service provision in low-income areas. For utilities to realistically have a chance to achieve SDG-6, they are dependent on the institutional environment in which they operate. Commercialization, without such support from the public sector, will not lead to universal service coverage.
This is a thoughtful post. My take on SDG6 is that it is aspirational. I am not a pessimist, but it is a tall order, and as one commenter noted, there are only ten years left to achieve success, i.e., total elimination lack of safe drinking water and sanitation for anyone. I just don't think we can do. One estimate put the annual cost to do this at about US $150B. I don't see that at all. We did not meet MDG Target 7c in 10 years and that was more modest than SDG6. But a valid question is: will we keep funding WatSan after 2030, when the SDGs have failed to deliver total access to clean water and sanitation for the second time in a row, after 25 years (MDGs + SDGs) of trying? Some felt that after the MDGs, the world would not buy into another such program.
We have a moral responsibility to provide clean water and sanitation to everyone on this planet, whether it takes 10 more years or 50 more years.
Enjoy!
"Remember your humanity; forget the rest." - Bertrand Russell
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