By Yaa Agyare-Dwomoh, (Frost & Sullivan Africa)
Water is an essential human need, and access to clean water and proper sanitation is a fundamental human right. Yet, millions of people in Africa lack access to these basic services.
In 2020, the World Bank reported that over 300 million Africans do not have access to clean drinking water, over 700 million live without good sanitation, and more than 800 million lack or have limited access to basic hygiene services.
Africa’s already limited water infrastructure will likely face increased strain as the continent experiences rapid urbanisation.
By 2030, more than 350 million Africans will be living in cities, yet currently, cities are already running dry, with the liveability of major cities compromised as bulk water supply runs short.
Water insecurity is a major developmental challenge in Africa, exacerbated by the climate emergency and the lack of infrastructure development.
For Africa to achieve its Sustainable Development Goals for water and sanitation (which means universal access to safe and affordable drinking water, and equitable sanitation and hygiene, by 2030), it will require improved operations and maintenance, efficient management of water resources, strengthened policy and regulatory frameworks and most importantly, consistent investment into water infrastructure.
The investment gap for water and sanitation infrastructure to achieve water security and sustainable sanitation by 2030 is estimated to be about US$ 50 billion annually.
However, the current foreign direct investment (FDI) inflow for water and sanitation ranges between US$ 10 billion and US$ 19 billion a year, well below the amount needed, leaving financial deficits between US$ 11 billion and US$20 billion annually.
This deficit has caused significant economic and human development costs, resulting in sub-Saharan Africa losing an estimated 5% of its GDP annually due to water shortages or poor sanitation.
If this trend continues, African nations could lose up to US$ 50 billion annually due to climate effects caused by water-related hazards.
As governments play an integral role in repositioning the region’s water security and sanitation, a cross-sectoral political leadership at the highest level of governance should be created with a commitment to increase budgetary allocations for water and sanitation activities.
Government funding remains the chief and most important source of funding for these projects and, therefore should be centred around efficient sector management.
Therefore, governments will need to establish national investment programs which mobilise domestic resources and create predictable and transparent revenues that are backed by strong and credible institutions.
By leveraging private and partner financing, governments can further attract private sector capital where opportunities exist to bridge the accessibility gap.
Additional strategic actions to close the funding gap include exploring innovative financing mechanisms that support climate resilience, impact investing and social impact bonds, and blended public-private financing options to attract private capital.
Stronger institutional regulations for water investment will also trigger more incentives besides outlining penalties which will boost water efficiency across various industries.
Investment programs should be based on solid institutional policies and regulatory frameworks whereby national investment programs can be effective vehicles to scale up accessibility.
These programs can be built if anchored in a stable institutional framework with strong government participation, improved intergovernmental coordination, and strengthened oversight, regulation, and reporting.
With a renewed commitment to water and sanitation, the outlook for infrastructure investment in this sector is positive, with an increase in large-scale private investment expected in the next 2 years.
Ultimately, development partners, donors, and the private sector have a unique opportunity to provide technical and long-term financial commitments through public-private partnerships and innovative co-financing mechanisms that support sustainable water and sanitation investments.
By working together to transform the investment outlook and improve water and sanitation throughout the continent, there is an opportunity to ensure a peaceful, prosperous, stronger, and equitable Africa, now and in the future.
With a positive outlook on investment trends in water and sanitation, Frost & Sullivan Africa tracks major infrastructure investments throughout the continent.
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