1 Dr. Doulaye Koné Eawag/Sandec Financial and Economic Aspects of Faecal Sludge Management Faecal Sludge Management in Developing Countries

2 1 Cost for whom ? 5 Savings + benefits of iFSM 2 How to make cost comparable 3 Costing examples 4 Financing mechanism 6 Agronomic aspects Contents

3 4 Which financing mechanism ?  Indiscriminate and illegal dumping  Health risks and water pollution The challenge

4  All FS to designated treatment or disposal site The challenge  Septic tanks emptied at shorter intervals  Pit emptying affordable 4 Which financing mechanism ?

5 1Cost for whom ? Household: cost for pit emptying (and re- construction) Collector/hauler: Cost of vehicles and their O+M (incl. salaries)

6 1Cost for whom ? FSTP holder/operator: cost for treatment plant construction, O + M Farmer: Cost of organic fertilizer and organic fertilizer transport

7 2 How to make cost comparable e.g.: Price charged to household for pit emptying Cost shaped to allow for comparison of treatment or management systems ? Financial costEconomic cost

8 2 How to make cost comparable Cost elements: Capital (or investment) cost $ Annual O + M cost $ p. year Systems not comparable Cost elements: Annualised capital cost $ p. year (~ “amortization”) Annual O + M cost $ p. year Systems still not comparable Cost elements: Annualised capital cost $ p. ton TS per unit FS treated Annual O + M cost $ p. ton TS Systems now comparable !

9 3Costing examples 100,000 inhabitants 20,000 m 3 /yr t TS/yr 20 % uncertainty range Comparing cost of FS treatment alternatives

10 3Costing examples Comparing cost of FS treatment alternatives for Nam Dinh (2,500 m3 septage/yr ~ 50 t TS/yr) Treatment option A Constructed wetlands B Drying beds + C Settling / thickening + ponds Investment cost * O+M cost p. year Cap $ 23,200 O+M 1,400 Cap24,350 O+M2,010 Cap24,100 O+M6,180 Land required 200 m2 290 m2 245 m2 (* Note: Cost of one mini tug = $ 24,000 !) Other “Best” products O+M need low Plant care Polishing treatment required O+M high Less pumping organic fertilizer volumin. O + M high

In general, funds can originate from:  General tax revenues  Subsidies and transfers  Direct user charges  Sanctions  Advance disposal fee  Income from sales or recyclables and recovered resources  Donor money  Tipping fees  License fees Which financing mechanism? 4 Which financing mechanism ?

Taxes  Centralized tax collection and distribution  Lack of transparency  Weak financial base and poor collection rates  Strong competition for budget shares “User charges give the solid waste agency some autonomy by eliminating the need to compete with all other government agencies for their share of general revenue. User charges also may render the solid waste agency more directly accountable to residents for the cost and value of services that they provide.” (Cointreau-Levine 1995) Which financing mechanism? 4 Which financing mechanism ?

Principles of tariff calculation Process of service provision (Public) Service provider charge / fee service Principle of Cost Recovery Which costs should be included/ considered? calculation base: provided by Total cost Scope and type of service Beneficiary Principle of Equivalence provided to calculation base: Beneficiary 1 Beneficiary 2 Beneficiary 3 Beneficiary n How should costs be distributed amongst beneficiaries? 4 Which financing mechanism ?

Principles of cost recovery BUT: Which costs should be included/considered in a charge or fee? AND: Which costs or which handling stages should be covered through taxes? Treatment of FSDisposal Haulage Primary collection / Emptying cost componentshandling stages Operation and Maintenance cost Investment cost External Cost  Appropriate Technologies to adjust overall cost to ability-to-pay!  What are lessons learnt from solids waste management? Replacement cost 4 Which financing mechanism ?

Service Money Flux Leasing Control Fees Cooperation Farmers Households Manual Emptiers Waste Collection (NEERE) Mechanical Emptiers (ADSI) National Water & Sanitation Office (ONEA) Municipality Engineering Departments Donors Agencies Women’s Coordination NGO Stakeholders analysis 4 Which financing mechanism ?

Secondary Stakeholders E1 : Official Engineering departments E2: ONEA E3 : NEERE E4 : women’s Coordination E5: Donors agencies C E1 BA Secondary Stakeholders E1 : Official Engineering departments E2: ONEA E3: NEERE E4 : women’s Coordination E5 : Donors agencies C E2 E5 B A1 D1 A B1 B2 C1 E3 E4 Secondary Stakeholders E1 Engineering departments E2: ONEA E3: NEERE E4 : Women Coordination E5 : Donors agencies E 1 Influence Importance Stakeholder analysis Primary stakeholders A1 Municipality B1 Mechanical emptiers B2 Manual emptiers C1 Farmers D1 Households D 4 Which financing mechanism ?

17 stakeholdercost money flow Legend revenue Pit emptying fee Sanitation tax Subsidy External Funds Household (pit owner) Municipal authority Administration, office cost, etc. Profits Collection company Vehicle capital and O+M cost Biosolids sale O+M cost Capital cost FS treatment plant Licensing Discharge premium “Reversing the money flux” A planning tool helping to create the MARKET for a sustainable business 4 Which financing mechanism ?

18 Bamako, Mali % 25% 11% 20% 2% 1% 15%2% Fuel+Oil O&M Police Wages Insurance Parking License Administration Fuel+oil Admin O&M Wages Ouahigouya Bukina Faso 2006 Financial sustainability of FS emptying service providers Performance is largely influenced by :  Trucks status (2 nd -3rd hand)  O&M skills and teams efficiency at work  Distance to disposal site  Police harassment  … 4 Which financing mechanism ?

Mechanical Emptier National Water & Sanitation Agency (ONEA) Households Farmers Municipality Capital cost 0 € O & M Costs 11.5 € Profit € Current money flow Invest. 14 € ? Pit emptying fee FS sale Licence 12 € 14 € 1.5 € Mechanical Emptier National Water & Sanitation Agency (ONEA) Households Farmers Municipality Capital cost 0 € O & M Costs 11.5 € Profit € need for improvement and innovation Invest. 14 € ? Pit emptying fee FS sale Licence 12 € 14 € 1.5 € Sustainability of mechanical emptying

20 Jeuland (2002) and Steiner (SANDEC) 2002 The solution: incentives and “sanctions” “Reversing the money flux ?” Household (pit owner) FS treatment plant operator Transport and Truck capital cost Administration, office cost, etc. O+M costCapital cost stakeholder cost money flow Legend revenue ? 2127 ~30 FS delivery remuneration ~15 Authority Subsidy Sanitation tax ~50 ~45 Pit emptying fee ~30 Collection company License charge ~5 organic fertilizer sale ~13 (~10) (based on Kumasi, Ghana, 200 m 3 /d) Based on costing data from Ghana 4 Which financing mechanism ?

If the dumping of FS is remunerated (Blue line), how much external money (i.e. sanitation tax) is needed to finance a treatment plant and what is the correspondent emptying fee or WTP? Money flux model for decision making (Ouahigouya) 4 Which financing mechanism ? Critical tariff WTP

22 5Health savings and benefits Defining impacts and benefits Focus on health

23 5Health savings and benefits Uncertainties How much does i - FSM reduce diarrhoea incidence ? How to value gained productivity ? Reliability of input data (e.g. cost of 1 diarrhoea case) ? Are there additional important cost and benefits ?

24 5Health savings and benefits Estimating impact and benefits from reduced diarrhoea incidence Assumption: improved FSM (i-FSM)  3 % reduction of morbidity from diarrhoea Savings and benefits in $ / ton TS

25 5Health savings and benefits Benefit-cost ratio Benefits and cost in $ p. ton TS: GhanaThailandArgentina Settling + stab. ponds Constr. wetlands + stabilization ponds Settling ponds + co- treatment with wastewater in ponds FS treatm. cost Haulage cost Disposal Total cost Total benefit Benefit-cost

26 6Agronomic aspects Ability and willingness-to-pay for the hygienically safe organic fertilizer Where and in what form do the farmers want to buy the organic fertilizer ? How much would the organic fertilizer cost ? Where can I buy organic fertilizer ? Main questions What is the agronomic value of the organic fertilizer ?

27 6Agronomic aspects Nam Dinh study (2001): -Farmers indicating that they do need organic fertilizer -Organic fertilizer from FS and org. MSW accepted -WTP depends on potential agron. benefit and distance to sales outlet -Tentative WTP max. 15,000 VND (~ $ 1) / 50 kg Willingness-to-pay (WTP) Kumasi (Ghana) study ( ): -Peri-urban veg. farmers wtp $ 3.0 / bag of 50 kg or $ 84 p. year -Urban staple crop farmer wtp $ 2.0 / bag of 50 kg or $ 10 p. year

28 6Agronomic aspects Nam Dinh study (2001): -Preferred: sale of organic fertilizer in 50 kg bags at coop outlets Agron. value: % of dry solid (recent field studies): -N:Ghana 0.5 – Argentina 1.0 – Thailand 3.0 -P 2 O – 0.4 – 1.2 -Org. matter: 23 – 27 – 60 Willingness-to-pay (WTP)

Dr Doulaye Koné Eawag/Sandec – Switzerland Tel Photo: toiletmuseum.com/techno.html Thanks !