panel discussion on african clean cities platform as a ... · access to commercial finance. access...

Panel Discussion

on African Clean Cities Platform

as a Vehicle to Promote Investment

in Waste Management in Africa

28th June 2018

1st ACCP Annual Meeting

Rabat, Morocco

Speakers

2

Moderator: Dr. Megumi MutoDirector General, Global Environment Department, JICA

Panelists: Mr. Ousseynou GueneChief Sanitation Specialist, AfDB

Ms. Naoko YokoboriSenior Representative, Representative Office in Paris, JBIC

Prof. Abdouraman BaryRegional Subprogramme Coordinator (Chemicals, Waste & Air Quality), Africa Office

UNEP

Mr.Thomas ChirambaSenior Human Settlements Officer, Regional Office of Africa, UN-Habitat

Mr.Bantihun, Kassahun TsegayeSolid Waste Re-Use & Re-Cycling Director, Addis Ababa City Solid Waste Recycling &

Disposal Project Office, Ethiopia

Moderator:

Dr. Megumi MutoDirector General, Global Environment Department, JICA

Dr. Megumi MutoDirector General,

Global Environment Department, JICA

Prior to her appointment as the Director General of JICA’s Global Environment Department in April 2018, Ms Muto has held positions such as Chief Representative in France and Deputy Director General for the Philippines and the Pacific.

She has written extensively in the area of impact evaluation. Co-led books include: Climate Risks and Adaptation in Asian Coastal Megacities with the World Bank and the Asian Development Bank; Industrial Clusters and Micro and Small Enterprises in Africa with the World Bank.

She holds Ph.D. in development economics from GRIPS, MPA from Princeton University, and EMBA from HEC Paris.

Source: WB&JBIC (2005) Connecting East Asia

Panelists:

Mr. Ousseynou GueneChief Sanitation Specialist, AfDB

Mr. Ousseynou GueneChief Sanitation Specialist, AfDB

Ousseynou Guene joined the African Water Facility (AWF), administred by the AfDB in 2012 as a Principal Sanitation Specialist and a Task Manager of the Urban Sanitation Programme. Recently, he has been instrumental in the preparation of the newly launched Africa Urban Sanitation Investment Fund Programme (AUSIF). He is appointed as Chief Sanitation & Hygiene Officer in the Water and Sanitation Department (AfDB/AHWS2).

From 2001 -2012 Ousseynou founded and managed a Consulting firm “Cabinet d’Ingénerie et de Management de l ’Environment (CIME)” in Dakar, Senegal. In his capacity, he has carried out various assignments in Francophone Africa countries and in Haiti on wide-ranging issues. From 1989 – 2001 he has worked as a sanitary engineer in CREPA, a Regional Water & Sanitation Organisation.

Ousseynou holds a Ph.D. in Sanitation & Hygiene, from the Ecole PolytechniqueFederale de Lausanne (EPFL), Switzerland, a Master’s degree in Environmental Engineering from the European Polytechnic Environmental Association (EPEA) & EPFL, and a Water Engineer Degree from Ecole Nationale d’Ingénieur de Tunis (ENIT), Tunisia.

Q3: What is a compelling and financially viable project?

3.1 key requirements for project to be approved by AfDB

1. Public Sector Operations

• Target = Governments• Project in line with the Country Strategy Paper• Financial windows : AfDB, FAD, FSN, TFs, BF• Financial instruments: Lending, Grant,

2. Non Sovereign Operations

• For Private sector• Financing windows : ADB• Financial instruments : Lending, Guarantee, Equity,

Risk management• Funding structuring : Debt (75% max)+ Equity

(25% min). AfDB provide up to 33% of the Debt and the remaining 42% (Commercial Banks)


3.2 Compelling and financially viable project :

• Enabling environment (institutional, financial mechanism tailored to the various geographic categories (socioeconomy)

• City-wide project, • Mix-solutions along the SW value chain, • Reuse aiming at reducing quantity to be transported and

disposed at landfill, and to generate additional revenues• Private sector/CBEs involvement

3.3 Capacity building needed: Central Government : Policy & Strategy Development, case

studies, Benchmarking Local Governments : Project/Programme Ownership, PPP,

Financing opportunities Private sector : Technologies, Reuse, Funding opportunities,

O&M

Q4: Future activities expected of ACCP?

4.1 Knowledge sharing: • Key success drivers : policies, strategies, technologies, financing

mechanisms• Funding sources• Funding structuring• SW Reuse options prior to landfilling/dumping –New paradigm • Recording & disseminating lessons learnt• Promoting a learning alliance & Networking

4.2 Investment Promotion: Leveraging more funding for the sector Supporting pilot innovative projects/Catalytic Project that can

attract additional funding from Private Sector, Governments, Development Partners, etc.

Promoting Project Preparation for downstream investment Advocacy at Regional Political and Economical Institutions

highlighting the economic benefits of SWM : jobs, climate, human development, food security, land protection, etc.

Nomination of Champions (Leaders), Reference Persons,

Q4: Future activities expected of ACCP?

4.3 Potential partners

• Chambre de commerce to influence and attract potential local investors• Universities, training centres• Local Government Associations at country and regional levels • Regional/national NGOs associations [Expanding lessons learnt in the

un served areas]• Journalists/Communication specialists at local/national/ regional levels • African Water Association (the birthing Africa Mayors Forum)• Africa Urban Sanitation Investment Fund (AUSIF) Programme [Funding

project preparation,• AfDB [Yearly Learning Week to update TMs on new developments and

trends in the sector]

Panelists:

Prof. Abdouraman Bary Regional Subprogramme Coordinator (Chemicals, Waste

& Air Quality), Africa Office UNEP

Source of financing

Description and key features Potential problems Opportunities

Taxes

Taxes, including general taxes, taxes for other

municipal services, and local taxes such as a

property tax.

Property tax: A percentage of the property tax is

used for solid waste services.

Taxes on importers and producers of waste.

Property tax: Assessments may not be done regularly.

Underassessment can occur and collection is

inadequate. Increases are not proportional to

economic activity, unlike for a sales tax or income tax.

Estimating the actual cost of waste management is

difficult, as most of the labour costs for sanitation,

street sweeping and related activities are considered

as salary.

Import taxes used to protect local producers.

Some municipalities hope to improve the

collection of taxes through computerization and

self-assessment.

Tax exemptions or rebates.

Proposed tax in Kenya on imported tyres.

Proposed tax in Togo on industries, hotels and

other large enterprises.

Tax on tyres in South Africa.

Proposed tax on paper and packaging, electrical

and electronic equipment, and lighting in South

Africa.

User

charges

Households pay a monthly fee for the waste to be

removed from their premises.

Charges by industrial users or polluters

Landfill taxes and gate fees

Affordability for African households: There are many

poor households who cannot afford to pay the user

charge.

Requires an equitable tariff policy with cross

subsidization of poorer households.

Gate fees are manipulated by accounting various

times for the same waste disposed, thereby

exaggerating the amount of waste produced.

High gate fees can result in diversion of waste to

informal dump sites or fly-tipping.

In cities where solid waste collection is franchised

to private operators, households pay the fee

directly to the operator but the fee is set by the

local government. Successfully implemented by

the local government in Lagos.

In some countries, the fee is based on waste

volume or weight, creating an economic incentive

to reduce waste generation and encouraging

recycling (pay-as-you-throw).

Subsidies Some government agencies provide subsidies for

composting/WtE facilities to generate revenue

from the sale of compost or power.

Subsidies are subject to political interference.

Subsidies may distort market mechanisms.

Subsidies are used to promote technologies that

might not be taken up on purely financial grounds.

Loanso

Commercial loans may be provided for resource

recovery or WtE plants.

Segregating recyclables like paper, plastics, metals

and glass allows plant owners to generate some

revenue by selling to recyclers.

The main purpose of WtE plants is not to produce

power per se but to dispose of solid waste. Hence,

there is no point in comparing the cost per MW

with fossil fuel plants.

The social benefit of a WtE plant is the opportunity

cost of not having to incur the cost of disposal in a

sanitary landfill, an expensive option in urban areas

where the cost of land is escalating.

The power supplied to the grid, merely decreases

the cost and provides a source of revenue when

loans must be repaid.

The revenue from the by-products of waste projects

does not always cover the capital investment

(negative-value products).

Solid waste management, without engaging into the

resource recovery business, is an expense with limited

or no financial return.

Revenue generation is possible only if the

municipality charges a user fee or an earmarked

conservancy tax that is high enough to cover the

interest cost.

The government and/or municipality may be

considered a poor credit risk, leading banks and

investors to ask for government guarantees or other

security rights.

There are many recycling businesses in Africa that

are commercially viable without any subsidy,

where the value of the recovered resource covers

capital and operational costs.

Many African cities have grown rapidly, resulting

in landfills now being located in the middle of the

city (e.g. Abidjan, Côte d’Ivoire).

Recovering the land is not only a tremendous

improvement to public health and the

environment but also an economic opportunity for

the municipality to develop/sell the land, and

subsequently for real estate developers.

Sources of waste management financing: Potential problems and opportunities

Grants

The primary objective of grants is to

improve urban governance through

various reform measures that also

seek to create accountability at the

grass-roots level.

Grants may include providing land

and technology support.

Lack of financial sustainability.

Grants from development

institutions are often an excellent

opportunity to fund feasibility

studies to build bankable projects to

invite private sector finance at a

later stage.

International development

institutions have access to ample

expertise from around the world

Public-

private

partnerships

Private sector participation in waste

management has been sought to

improve efficiency and effectiveness

through better management, new

investment and better technologies.

Models include service contracts,

BOOT (build, own, operate, transfer)

for waste treatment and privatization

of disposal.

Complexity of developing a working

stakeholder model.

Conflicting interests of private and

public partners. Financial viability

may be questionable.

Institutional arrangements among

private actors, foundations, NGOs

and municipalities need to be

clarified to reduce the potential for

conflict.

Lengthy negotiations

Use of blue prints available from

development institutions.

Access to commercial finance.

Access to private sector technologies

and service efficiency.

Project de-risking.

Feed-in tariffs for energy-from-waste.

Carbon

financing

Carbon trading: reducing GHG

emissions from solid waste by

capturing methane generates

certified emission reductions that can

be sold in the carbon market.

Clean Development Mechanism:

Investing in solid waste disposal may

allow for emission reduction which

can be sold to a polluter to offset its

GHG emissions -effectively.

Lengthy administrative application

process.

Can be used for cost recovery but not

for waste management finance.

Use of blue-prints available from

development institutions.

The Paris Agreement calls for the

decarbonization of Western and

Asian economies.

Sources of waste management financing: Potential problems and opportunities

Q2: What is the financing approach to improve SWM in Africa? Obstacles and solutions?

Financing approach

1. Private sector financing: The private sector can be involved through investment, construction of waste management facilities, waste management logistics or operation of waste management facilities.

2. Public-Private Partnerships: To attract private sector investment it is imperative for local authorities to establish strategic frameworks tailor-made to local conditions and based on local stakeholder consultations.

3. Innovative financing models: Carbon finance:

Q2: What is the financing approach to improve SWM in Africa? Obstacles and solutions?

Constraints of waste management in Africa

Waste management project finance and implementation face a number of constraints in Africa, and are often considered high risk owing to:

• Insufficient future cash flow

• Improper evaluation of project life-cycle costs

• Low probability of success during appraisal

• Lack of ability to pay back loans

• Lack of cost control, operational expertise and risk management

• Lack of or inadequate cost recovery options

• Lack of effective governance frameworks

• Administrative and operational flaws, suggesting that even with suitable finance from the central government or funding bodies with no repayment requirements, a project will fail owing to unsuitable institutional, policy and service


Addressing local conditions through capacity and institution building is paramount to guarantee the financial viability of the waste sector in Africa. The complexities involved in developing and implementing a waste management project in Africa require developers to adopt an approach that includes a variety of different stakeholders. The need to involve all stakeholders from planning through to implementation and execution of waste projects is key to project success.


Recommendations for future action

• Extended Producer Responsibility: Adopting the “polluter pays” principle for payment of full costs for waste management services is central to the financial viability of a waste management project and the affordability of the costs involved for the communities or individuals concerned, in particular when other cost recovery methods, such as recycling or energy recovery, are uncertain.

• Financial viability. Benchmarking, cost control and adequately determining project life-cycle costs for waste management projects are key to guaranteeing financial sustainability. Special attention should be paid to operation costs options in evaluating the viability of waste management services. Too much focus on recovery costs as the sole means of meeting the expectations of service providers should be avoided.

• Contracting. Contracts should be medium- to long-term (some authors recommend a minimum of seven years), with shared responsibilities stated explicitly, thus allowing room for customizable and improved services within the private sector. Financial and legal stipulations such as penalties and termination of contracts based on performance are also recommended. Performance-based contracting reduces finance and project management risks, but requires monitoring and enforcement.


Recommendations for future action (continued)

• Holistic approach: a holistic approach to waste recovery should be established across the full value chain, from importers/manufacturers and retailers through to private/corporate consumers, authorized dealers, repair and refurbishing, large and small recyclers, smelters and refineries, and finally, a controlled landfill.

• Informal sector: Gradually moving resources from the informal sector into the formal sector through contracting out services or offering employment is paramount if social backlash is to be avoided. Special attention should be paid to the role of women working in the informal sector as they are likely to be marginalized when the informal waste management activities become formalized

Panelists:

Ms. Naoko YokoboriSenior Representative, Representative Office in Paris,

JBIC

Waste CollectionAgent

21

Key Points of WtE PPP Projects

Structure of WtE PPP Projects

Equity Investment（20～30%）

Loan（70～80%)

OperatorＥＰＣ Contractor

EPC Contract O&M Contract

LendersEquity Participants

Waste Supply Agreement

Power PurchaseAgreement

Government

Guarantee

Tipping Fee

Project SPC

Revenue from Electricity sales Electric Power

CompanyMunicipality

22

Key Points of WtE PPP Projects in Particular

Quantity of Waste

Revenue Structure of WtE : Tipping Fee (60～70%), Sale of Electricity (30～40%)

Need to secure and control the amount of waste (not too little, not too many)

Waste collection limited in / near the district (economically / logistically difficult to collect

waste from outside the district)

Tipping Fee Sale of Electricity

Secure and control the amount of waste

Guarantee for minimum / maximum amount of waste

by municipalityRoom for collecting waste from private companies

23


Quality of Waste

Calorific Value affects the production efficiency of electricity and therefore the sale of electricity

Quantity of waste could be changeable with the development of the economy, so support such

as guarantee is required from the PPP contract counterparty (sovereign, municipality etc.)

BasisLow Quality High Quality

Guarantee for the quality of waste by municipality Room for collecting waste from private companies

Sale of Electricity

Secure the quality of waste

24


Tipping Fee from Municipality

Careful credit analysis required in respect of the PPP contract counterparty (sovereign,

municipality etc.)

Tipping Fee adjustment mechanism required

Mechanism for dialogue with local communities is key as WtE is social infrastructure

Secure solvency of the PPP contract counterparty Secure Tipping Fee adjustment mechanism

Credit of PPP contract counterparty Revision of Tipping Fee under specific event

Tipping Fee

25

Japanese Government Policy in ESG Investment

“Partnership for Quality Infrastructure” – Investment for Asia’s Future (21 May 2015) Japan promotes “quality infrastructure investment” through “Partnership for Quality Infrastructure:

Investment for Asia’s Future”, which consists of four pillars, in collaboration with other countries and

international organizations.

To that end, Japan, in collaboration with the strengthened Asian Development Bank (ADB), will provide

approximately USD 110 billion (about a 30% increase) for “quality infrastructure investment” in Asia over

the next five years.

1st Pillar Expansion and Acceleration of Assistance through the Full Mobilization of Japan’s Economic

Cooperation Tools

2nd Pillar Collaboration between Japan and the Asian Development Bank (ADB)

3rd Pillar Measures to double the supply of funding for projects with relatively high risk profiles by such means

as the enhancement of the function of the Japan Bank for International Cooperation (JBIC)

4th Pillar Promoting “Quality Infrastructure Investment” as an international standard

“Quality Infrastructure Investment – ESG (QI - ESG)”

Japanese Government announced a new vision to further promote “quality infrastructure investment” in

terms of ESG at the meeting of ADB in May 5, 2018

Provides support for a variety of infrastructure projects that contribute to global environmental preservation,

including renewable energy projects

Japan will closely cooperate with the international community, for example by co-financing with MDBs

→ JBIC will establish a new financing facility to provide support for infrastructure projects that contribute

to global environmental preservation

Panelists:

Mr.Bantihun, Kassahun

TsegayeSolid Waste Re-Use & Re-Cycling Director, Addis Ababa City

Solid Waste Recycling & Disposal Project Office, Ethiopia

General information about Addis Ababa, Ethiopia

General information about Addis Ababa, Ethiopia

Ethiopia is the origin of human kind, the origin of coffee,

own alphabet and calendar.

Addis Ababa the capital city of Ethiopia

Being the home of the African Union,

More than one hundred diplomatic missions live in the city

Addis Ababa Population：3,238,000（2007）

Area：527km2

Waste generation in the city ; 3,200 tone /day

Waste composition 65% is organic

What is the prioritized large investment areas

in Addis Ababa SWM sector?

The city still uses 50 years old open dumping landfill. In March 2017, a waste

collapse accident occurred at the disposal site, killing more than 130 people.

June 2018 by financial support of Japanese government &

by techniqual support of UN-habitat the rehabilitation of

this open dumping site using Fukuoka method is launched.

Gas flaring system On open dumping landfill by the aid

of AFD

Addis Ababa city constructs a waste to energy plant.

It takes 1,400 ton waste/day and generate 50 MW electricity.

Under bidding process highly advanced integrated compost,

biogas and electricity plants at four site of the city.

What is the financing approach to improve SWM

in Addis Ababa? Obstacles and solutions?

The city government establish solid waste policy, based on this there is a

regulation to collects waste fee from beneficiaries through water bill.

But there is a limitation on collection of this fee.

To strengthen the waste management system financially the city

government newly establish polluters pay directive in this year.

Construction of transfer stations, disposal sites, incineration facilities, etc.

is funded by direct investment by the Government or the city.

The French Development Agency (AFD) supports construction of new

sanitary landfill and flaring

Japanese government funding disposal site rehabilitation by the Fukuoka

method

What is the expected role of ACCP for

investment promotion?

Lack of skilled personnel to operate integrated solid waste management is

one of the problem in my country, there is no expertise that graduate or

getting training on solid waste management. To fill this gap JICA tries to

train experts by taking them in to Japan. This should be continue for the

future.

Training program on proposal writing and how to find project supporters is

crucial for the improvement of solid waste management in Africa.

Posting project supporter organization through the web site.

UN- habitat, JICA, AFD, world bank, etc are potential organization

DÖmo ArigatÖ gozaimasu

Panelists:

Mr.Thomas ChirambaSenior Human Settlements Officer, Regional Office of

Africa, UN-Habitat

No presentation

Guiding Questions

38

Q1 . What is the prioritized large investment areas

in African SWM sector?

Q2. What is the financing approach to improve

SWM in Africa? Obstacles and solutions?

Q3. What is a compelling and financially viable

project?

Q4. What is the expected role of ACCP for

investment promotion?

Q1 .

What is the prioritized large

investment areas in African

SWM sector?

Q2.

What is the financing approach

to improve SWM in Africa?

Obstacles and solutions?

Q3.

What is a compelling and

financially viable project?

Q4.

What is the expected role of

ACCP for investment promotion?

panel discussion on african clean cities platform as a ... · access to commercial finance. access...

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