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TRANSCRIPT
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)
Q3: What is a compelling and financially viable project?
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
Q3: What is a compelling and financially viable project?
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.
Q3: What is a compelling and financially viable project?
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.
Q3: What is a compelling and financially viable project?
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
Key Points of WtE PPP Projects in Particular
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
Key Points of WtE PPP Projects in Particular
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?