The water and sanitation sector faces significant investment needs globally, with billions required to improve infrastructure, enhance service delivery and expand access to clean water and sanitation facilities. These investments are critical to achieving the Sustainable Development Goals and ensuring that communities have the resources they need to thrive. However, funding alone is not enough; the effective implementation of these investments is paramount.
Funding for Water Operators' Partnerships
Water Operator Partnerships (WOPs) play a vital role in this context by strengthening the capacity of water utilities to manage and operate their systems efficiently. WOPs facilitate the exchange of knowledge and best practices between utilities, helping them enhance operational performance and financial sustainability. They require various funding sources to cover both direct and indirect costs, which can be classified as in-cash or in-kind contributions. Notably, staff time often constitutes the largest expense and is typically provided as in-kind support from both mentors and mentees.
The budgets for WOPs can vary significantly, from a few thousand euros for short-term initiatives to millions for long-term projects. Factors influencing these costs include the duration of the partnership and the type of collaboration, whether North-South, South-South or Triangular. Funding usually comes from a mix of bilateral and multilateral development agencies, water operators and third-party facilitators, with some operators leveraging their resources to enhance partnerships.
Synergies between WOPs and investment programmes
There are substantial synergies between WOPs and utility investments. While WOPs primarily focus on enhancing the capacity of utilities, the impact of this capacity-building is limited without the necessary infrastructure and equipment. Conversely, investments in infrastructure without the accompanying operational capacity can lead to short-term gains that eventually decline, wasting valuable resources. Fortunately, an increasing number of WOPs are demonstrating how improved capacity and targeted investments can work together to create lasting benefits.
Currently, many WOPs operate independently from investment programmes, often on an informal and ad-hoc basis. While development finance institutions have expressed a reluctance to fund comprehensive WOPs within their investment frameworks, they acknowledge the importance of coordinating efforts to create synergies between capacity-building initiatives and capital investments.
To better understand the role of WOPs in relation to investment programmes, we invite you to explore the following sections, which detail how WOPs can effectively precede, accompany and follow investment initiatives, as well as their potential to leverage additional funding for investments:
WOPs often serve as a preparatory phase for utilities seeking investment. The peer-to-peer collaborations improve operational performance, making utilities more attractive to potential funders by enhancing their creditworthiness and creating viable investment plans. While WOPs do not always directly influence investment decisions, they help utilities position themselves to secure funding.
The Asian Development Bank funds small WOPs as part of their knowledge-sharing efforts, often ahead of larger investments. Similarly, the Urban Water Catalyst Initiative (UWCI) is a new funding mechanism, linking technical assistance and finance with utilities committing to improvements supported by WOPs. Though in its early stages, UWCI aims to integrate WOPs into investment programs. WOP programmes like WaterWorX and EU-WOP also combine operational improvements with efforts to mobilize investment, with several projects progressing towards securing funding.
WOPs can be integrated into or run alongside large investment programmes to build capacity for preparation, procurement, supervision and infrastructure management. While WOPs are not typically part of investment loans, the Asian Development Bank for example supports them separately with $50,000 grants. Other development finance institutions have faced challenges incorporating WOPs into formal loan processes due to procurement rules. A more feasible approach is to run WOPs as grant-funded activities, closely coordinated with planned investments, as encouraged by some development finance institutions.
WOPs can enhance the long-term sustainability of investments, addressing the critical challenge of operations and maintenance that many development finance institutions face. By fostering collaboration between water operators, WOPs help build the necessary skills and knowledge for effectively managing and maintaining newly implemented infrastructure. This support ensures that investments in water and sanitation are not only established but also remain functional and sustainable over time, ultimately benefiting communities and enhancing service delivery.
WOPs can effectively trigger additional funding for mentee utilities, supporting operational and large-scale investments. Through knowledge sharing and collaboration, WOPs help utilities identify financing opportunities and enhance their capacity to attract investment. By fostering relationships with financial institutions and demonstrating improved operational performance, mentee utilities can leverage WOPs to secure grants and loans, ultimately facilitating the implementation of vital water and sanitation projects.
Utility Investments and WOPs are linked through the following channels
GWOPA in the Urban Water Catalyst Initiative
Launched at the UN 2023 Water Conference by the European Union, Germany and the Netherlands, the Urban Water Catalyst Initiative (UWCI) aims to accelerate urban water utility reforms globally. It focuses on mobilizing finance for performance improvements, climate-resilient infrastructure and enhancing access for underserved populations. The UWCI has been established to provide tailored technical and financial assistance through a global grant facility, alongside a loan and guarantee window for infrastructure investments.
GWOPA is represented on the Sounding Board by its Head, Åsa Jonsson, who, along with other members, will contribute critical insights to guide the initiative’s scaling and alignment with global discussions on water utility reforms.
