International African Water Congress & Exhibition

March 16, 2010

Morocco:

Output-Based Aid (OBA) Subsidies

for Water & Sanitation Connections

in Poor Peri-urban Areas

Xavier Chauvot de Beauchêne

Sr. Water & Sanitation Specialist

Middle East and North Africa

Morocco OBA Pilots – Project Background

Morocco: A lower MIC,

11 km from the EU

Growing informal peri-urban settlements, with no water and sanitation service.

Unaffordable service connections, priced to cover network expansion.

National Human Development Initiative (INDH) to promote basic services in poor communities.

Broad water sector reform program, supported by a Bank DPL.

Output-Based Aid (OBA) as potential tool to promote

access to service.

Morocco OBA Pilots – Scheme design

Water Supply Sanitation

LYDEC 6 218 6 218 3.5

RADEM Urban Areas 602 794

RADEM Rural Areas 1 209 -

Amendis – Tangiers 3 200 3 200 2.0

TOTAL 11 229 10 212 7.0

Number of Connections Grant Amount

(USD million)

1.5

Objective: Test OBA to enable WS&S service connections

in poor peri-urban areas of Casablanca, Meknes and

Tangiers.

Outputs: Household water & sewerage connections.

OBA subsidy: Gap between optimized connection costs

and estimated maximum affordable household

contribution.

Grant Agreement: Signed Jan 2007 for 3 years.

Morocco OBA Pilots – Subsidy Amounts & Disbursement

water supply Sanitation

LYDECMAD 1 458

(USD* 162)

MAD 3 609

(USD* 401)28% MAD 4 000 W&S

Amendis - TangiersMAD 1 467

(USD* 163)

MAD 4 158

(USD* 462)24% MAD 12 000 W&S

RADEM Urban areasMAD 1 422

(USD* 158)

MAD 7 821

(USD* 869)53% MAD 9 240 W&S

RADEM Rural AreasMAD 5 319

(USD* 591)

Ineligible to

GPOBA funding74%

MAD 4 620

(water supply only)

Subsidy levels MAD

(USD)

Subsidy level

(% of combined

connection cost)

* MAD/USD exchange rate as defined in the Grant Agreement. Disbursements are made in MAD.

Per connection toBeneficiary

Contribution to

Connection Cost

Subsidy disbursement in two tranches:

60% of subsidy amount upon verified working connection; and

Remaining 40% upon satisfactory service provision for six months

4. Verifies outputs

reached and makes

recommendation on

subsidy payment

GPOBAMinistry of Interior / Ministry of Finance

Operator

(Amendis Tanger, LYDEC, RADEM)

Poor household living in peri-ruban

area without access to service

1. Requests

connection

and provides

discounted

contribution

2. Pre-finances

connection to

requested water

supply and/or

sanitation and

provides service

5. Makes

subsidy

payment per

connection to

pre-financing

operator

Fund flow

Municipalities or delegating authority

Independent technical

reviewer

Information flow Contractual relationship

Operational

responsibility

3. Reports to

authorities

and GPOBA

Grant agreement with

operators and

government

Institutional Framework: Roles and Responsibilities

World Bank supervision

Operator’s Water and Sanitation Service Area

Legal

Mandate

Output Delivered =

Connection to piped

water supply and/or

sanitation services

installed and providing

good quality service

Progress to date

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Casablanca/LYDEC

Meknès/RADEM -Water

Meknès/RADEM -Sanitation

Tanger/AMENDIS

Operator (City) Grant size Connection

target Progress as of

December31, 09 Progress rate

Progress in 2009

Service USD million Water Sewerage Water Sewerage Water Sewerage Water Sewerage

LYDEC (Casablanca) 3.5 6 218 6 218 1 401 1 401 22,5% 3% 3%

RADEM (Meknès) 1.5 1 811 794 717 498 39,6% 62,7% 26% 19%

AMENDIS-TANGER 2.0 3 200 3 200 2 856 2 856 89,3% 50% 50%

TOTAL 7.0 11 230 10 213 4 974 4 755 48,7% 46,6% 25% 19%

Delivery progress per operator

Key lessons learned and next steps

Next Steps: Operators, local governments, and GOM interested scaling up at the national level.

• Improvement of operators’ internal processes (e.g. monitoring, filing)

• Obstacles faced independent of the OBA approach, linked to the involvement of third parties.

• Demand exceed expectations

• Recovery level often exceed averageof the operator

Key lessons learned include:

• Strengthened local partnerships led to local governments’ involvement to develop pragmatic solutions, including

• Countersigning beneficiaries’ lists;

• LG-backed guarantee scheme for householdwith no legal status;

• Revolving fund for 0% interest loans.

• Operators developed proactive and dynamic client relations approaches to integrate their new clients