Water purification
Water purification
Business Model Description
Establish water purification points (UV or reverse osmosis) and provide affordable drinking water to informal settlements and rural communities.
Expected Impact
Increase access to clean and affordable water for Kenyans, especially in rural areas and urban informal settlements.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Case Studies
Country & Regions
- Kenya: Countrywide
Sector Classification
Infrastructure
Development need
Kenya’s progress towards SDG 6 - Clean Water and Sanitation, SDG 7 - Affordable and Clean Energy and SDG 11- Sustainable Cities and Communities demonstrate major problems. The most important issues lie in access to clean water and sanitation, reliable energy transmission and last mile energy connections.(1)
Policy priority
Infrastructure is a main policy pillar for Kenya. Key policy documents/ initiatives such as the Third Medium Term Plan and Kenya Vision 2030 set the goal of providing an equitable access to utilities such as clean water and sanitation. The government also has plans to undertake affordable housing projects in partnership with the private sector.(2)
Gender inequalities and marginalization issues
Almost 46.5% of the Kenyan population lives in slums.(27) Informal settlement dwellers often have to pay high rates for low quality services. Informal settlements tend to lack basic amenities such as sewage disposal, water/sanitation and electricity.(28) Although the necessary laws were established, land ownership in Kenya is also disproportionately geared towards men.
Investment opportunities introduction
Kenya provides several incentives for infrastructure sector investors such as tax reduction rates, regional investment allowances, and wear and tear allowances on machinery for investors. There are also opportunities for public-private partnerships (PPPs) in this area. This is a policy priority for the country, and therefore high investment momentum is expected.
Key bottlenecks introduction
Some infrastructure sector bottlenecks include inequalities in the regional penetration of essential sanitation services/ facilities and housing, affordability issues for the local population, the high costs of inputs/machinery/technology for investments, high logistics costs and low levels of financial inclusion preventing the purchase of houses.
Utilities
Development need
Kenya has low water reserves of around 500 cubic meters per person. Rapid population growth and urbanization pose risks for access to clean water and sanitation. Providing equitable access to clean water will cost USD 14 billion over the next 15 years. Kenya has committed to provide universal water and sanitation by 2030 with the support of the private sector.(5)
Policy priority
The government emphasizes the need to invest in sanitation in multiple policies and strategies, such as the Kenya Environmental Sanitation and Hygiene Policy 2016-2030, the Third Medium Term Plan, Kenya Vision 2030, Kenya Health Policy 2014-2030 and the Kenya Environmental Sanitation and Hygiene Strategic Framework 2016-2020.
Gender inequalities and marginalization issues
Almost 46.5% of the Kenyan population lives in slums.(35) Slum dwellers often have to pay high rates for low quality services. Slums tend to lack basic amenities such as sewage disposal, water/sanitation and electricity.(36)
Investment opportunities introduction
Infrastructure is a sector with high policy momentum, and prioritized by the government. Investments in public infrastructure and utilities attract fiscal incentives. There are several opportunities for public-private partnerships (PPPs) in this sector.
Key bottlenecks introduction
Household water and wastewater tariffs might exceed affordability limits in many provinces. It is essential to finance new investments without harming the poorest households.
Water Utilities and Services
Pipeline Opportunity
Water purification
Establish water purification points (UV or reverse osmosis) and provide affordable drinking water to informal settlements and rural communities.
Business Case
Market Size and Environment
60% of Kenyans do not have access to safe drinking water.
United Nations forecasts show Kenya's population growth will continue at a rate of 1 million people per year over the next 30 years, reaching approximately 85 million by 2050.(6) 60% of Kenyans do not have access to safe drinking water and there is an investment need of USD 14 billion for water demand.
Less than 60% of Kenyans have access to basic drinking water, a situation that with the expected population growth will increase pressure on an already stressed system.(7)
An estimated USD 14 billion of investments in water supply infrastructure is necessary over the next 15 years to cover increasing demand.(7)
Indicative Return
20% - 25%
Water Health International, a company providing water in emerging countries (India, Ghana, Bangladesh, Liberia and Nigeria) expects an internal rate of return (IRR) on water purification to be 20% or higher in a 5-year timeframe.(8)
A case study from another emerging market (Indonesia) reported a project providing water in a country should generate an IRR of approximately 20% in the baseline scenario.(9)
Investment Timeframe
Medium Term (5–10 years)
According to an active investor in the sector in Kenya, the estimated timeframe is 5 to 10 years, depending on the size of the project and business model.(10)
Investments in water purification projects suggest positive returns in around 5 years.(8)
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Business - Supply Chain Constraints
Market - Volatile
Impact Case
Sustainable Development Need
With a population of 52 million (2019), 16 million of Kenya's inhabitants (32%) are lacking access to safe water sources, having to rely on unimproved water sources (ponds, shallow wells, rivers).(14)
In rural Kenya, the average cost of an unreliable and distant water supply is around USD 38 per month. At the same time, the average water bill of a piped system for household in Nairobi is only USD 4.45 per month.(14)
Access to improved water and sanitation are fundamental human rights and represent an important element for good health and wellbeing. Lack of access to clean drinking water presents a serious threat of disease and contagion among the population of Sub-Saharan Africa.(15)
Gender & Marginalisation
Almost 46.5% of the Kenyan population lives in slums.(27) Informal settlement dwellers often have to pay high rates for low quality services. Informal settlements tend to lack basic amenities such as sewage disposal, water/sanitation and electricity.(28)
Expected Development Outcome
Increased access to water, reduced water prices
Decreased rate of communicable diseases and infections among the population, improved health and wellbeing
Reduced inequality in access to clean water among the Kenyan population
Gender & Marginalisation
Increased access to safe water for informal settlements and rural areas
Primary SDGs addressed
1.4.1 Proportion of population living in households with access to basic services
Based on 2015 data: 63.20% - improved water source 41.60% - electricity 30.10% - improved sanitation services 12.76%- clean cooking fuels and technologies (29)
100%
3.9.2 Mortality rate attributed to unsafe water, unsafe sanitation and lack of hygiene (exposure to unsafe Water, Sanitation and Hygiene for All (WASH) services)
3.9.3 Mortality rate attributed to unintentional poisoning
253.5 deaths per 100,000 people (29)
1.86 deaths per 100,000 people (29)
6.1.1 Proportion of population using safely managed drinking water services
6.4.2 Level of water stress: freshwater withdrawal as a proportion of available freshwater resources
N/A
15.55% of internal resources (freshwater withdrawals as a share of internal resources) (29)
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Indirectly impacted stakeholders
People
Public sector
Outcome Risks
If chemical water filtration method is applied, disinfection by products may contaminate the environment.(16)
Increased water production costs (16)
The entire lifecycle of a new water purification system (production, testing, transportation, use and disposal) may have a significant, negative environmental impact.(17)
Gender inequality and/or marginalization risk: Negative environmental effects and health outcomes will disproportionately affect informal settlements and rural communities.
Impact Risks
Unexpected impact risk: probability of producing negative environmental effects
Impact Classification
What
Construction and operation of water purification points is likely to have a positive impact because it increases access to water and lowers the price.
Risk
Although the model is market proven, the decreasing water level in Kenya and existence of water cartels may threaten the future development of business model.
Impact Thesis
Increase access to clean and affordable water for Kenyans, especially in rural areas and urban informal settlements.
Enabling Environment
Policy Environment
Kenya Vision 2030: This strategy identifies the need for increased access to safe water and sanitation in both rural and urban areas.(18)
Kenya Environmental Sanitation and Hygiene Policy 2016-2030: This policy recognizes household water treatment and safety is crucial to minimize the disease burden in Kenya. It recommends promoting appropriate technology options for household water treatment and safety.(19)
Kenya Health Policy 2014-2030: This policy emphasizes that each person has a right to adequate access to clean and safe water. It identifies unsafe water, sanitation and hygiene as a leading risk factor for mortality and morbidity.(20)
Kenya Environmental Sanitation and Hygiene Strategic Framework 2016-2020: This framework identifies promoting household water treatment and safety as a strategic intervention for scaling up sustainable access to improved rural and urban sanitation.(19)
Ministry of Water and Sanitation Strategic Plan 2018-2022: This plan states that guaranteeing a universal access to water is a challenging task that must be performed in the next few years.(15)
Financial Environment
Financial incentives: The Water Sector Trust Fund provides grants for water and sanitation services for undeserved areas.(21) Kenya has a number of grants available for water providers. One of the providing institutions is the Kenya Integrated Water, Sanitation and Hygiene (KIWASH).(22)
Fiscal incentives: The Kenya Revenue Authority (KRA) implements the issuance of the fiscal incentives in collaboration with other authorities. A comprehensive list of the incentives can be found on the Kenya Investment Authority and KRA webpages.(23), (24)
Other incentives: If willing to engage in water sales, a business permit from the city councils is required and cost between USD 70 - 180 a year. All bottlers of water must register with the Kenya Revenue Authority (KRA) and charge customers16% value added tax, and pay excise tax and corporate income tax.(25)
Regulatory Environment
Water Act, 2016 (No. 43 OF 2016): This Act provides frameworks for regulating, managing and developing water resources, and water and sewerage services.(17)
Kenya Bureau of Standards: This agency administers the Guidelines on drinking water quality and effluent monitoring 2008. The guidelines establish a regular monitoring mechanism, ensuring the quality of water provided meets the standards set by the Kenya Bureau of Standards (KEBS).(18)
Environmental Management and Coordination Act (Revised Edition 2012): This Act identified a need to introduce minimum water quality standards for all the waters of Kenya and for different uses, including drinking water.(19)
National Environmental Health and Sanitation Bill (2019): This Bill has been drafted and is waiting to be approved by the Parliament.(20)
Ministry of Water and Sanitation, Water Services Regulatory Board (Wasreb), Water Resources Authority (WRA)
Marketplace Participants
Private Sector
Hydrolink Technologies Ltd, Impact Water Ltd, Aquatreat Solutions Ltd, Jibu
Government
Ministry of Water and Sanitation, Water Resources Authority (WRA), Water Services Regulatory Board (Wasreb)
Multilaterals
World Bank (WB), European Investment Bank (EIB), African Development Bank (AfDB), KfW Development Bank, International Finance Corporation (IFC), US Agency for International Development’s Development Credit Authority
Non-Profit
Water Sector Trust Fund (WSTF), Kenya Water Institute (KEWI), Water.org., Water Project Inc., Kenya Innovative Finance Facility for Water (KIFFWA).
Target Locations
Kenya: Countrywide
References
- (1) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press.
- (2) Republic of Kenya (2018). Third Medium Term Plan 2018 – 2022 Transforming Lives: Advancing Socio-economic Development Through The 'Big Four'.
- (3) World Bank database. https://data.worldbank.org/
- (4) Word Bank (2018). Kenya: Using Private Financing to Improve Water Services.
- (5) Office of the United Nations High Commissioner for Human Rights (2020). Right to Water in Kenya: Assessment of Access to Water in Informal Settlements. https://www.ohchr.org/Documents/Countries/KE/Assessment_right_water_Kenya2020.pdf
- (6) Fengler, W. (2010). Demographic Transition And Growth In Kenya. World Bank. https://www.worldbank.org/en/news/opinion/2010/04/28/demographic-transition-growth-kenya
- (7) Globalwaters.org. (2020). Kenya. https://www.globalwaters.org/wherewework/africa/kenya
- (8) Bertha Centre (2019). Investment Theme: Water, Sanitation & Hygiene. https://www.sbs.ox.ac.uk/sites/default/files/2019-01/impact-theme-wash-pdf.pdf
- (9) Miranti, K.A. and Nugroho, A.B. (2014). 'Economic Internal Rate of Return in Water Treatment Plant Project', Journal of Business and Management, 3(6), 698-704. https://journal.sbm.itb.ac.id/index.php/jbm/article/download/1253/795
- (10) UNDP/PwC Stakeholders Interviews, 2020.
- (11) Wang, H., Li, F. and Zhang, B. (2014). 'Water and Wastewater Treatment in Africa – Current Practices and Challenges', CLEAN - Soil, Air, Water. https://www.researchgate.net/publication/259536701_Water_and_Wastewater_Treatment_in_Africa_-_Current_Practices_and_Challenges
- (12) Andiva, Y. (2019). Challenges and Solutions in the Water and Wastewater Treatment Industry in Africa. Construction Review Online. https://constructionreviewonline.com/2019/04/challenges-and-solutions-in-the-water-wastewater-treatment-industry-in-africa/
- (13) C. Crellin (2018). Kenya: Nairobi’s Water Cartel Woes. https://www.futuredirections.org.au/publication/kenya-nairobis-water-cartel-woes/
- (14) Water.org. (2020). Kenya's Water Crisis - Kenya's Water In 2020. https://water.org/our-impact/where-we-work/kenya/
- (15) Ato Armah, F. and Ekumah, B. (2018). Access To Improved Water And Sanitation In Sub-Saharan Africa In A Quarter Century. Helion. https://www.sciencedirect.com/science/article/pii/S2405844018349132
- (16) Barjoveanu, G. and Teodosiu, C. (2019). Environmental Performance Evaluation of a Drinking Water Treatment Plant: a Life Cycle Assessment Perspective. Environmental engineering and management journal. https://www.researchgate.net/publication/332268536_Environmental_performance_evaluation_of_a_drinking_water_treatment_plant_a_life_cycle_assessment_perspective
- (17) Whitehead, P. (2020). Minimizing Environmental Impacts of Water Purification | ELGA Labwater. https://www.elgalabwater.com/blog/minimizing-environmental-impacts-water-purification
- (18) National Treasury and Planning (2016). Kenya Vision 2030. https://kfcb.co.ke/wp-content/uploads/2016/08/vision_2030.pdf
- (19) Ministry of Health (2016). Kenya Environmental Sanitation And Hygiene Policy 2016 – 2030. Republic of Kenya. http://extwprlegs1.fao.org/docs/pdf/ken179039.pdf
- (20) World Health Organization (2019). Kenya: Sanitation Policy And Planning Framework Case Study For Discussion. https://www.who.int/water_sanitation_health/monitoring/investments/kenya-sanitation-policy-and-planning-framework-case-study-for-discussion.pdf?ua=1
- (21) Water Sector Trust Fund. https://waterfund.go.ke/
- (22) Globalwaters.org. (2020). Kenya. https://www.globalwaters.org/wherewework/africa/kenya
- (23) Eregulations.invest.go.ke (2020). https://eregulations.invest.go.ke/menu/322?l=sw#
- (24) Kenya Revenue Authority (2020). Incentives for Investors. https://www.kra.go.ke/en/ngos/incentives-investors-certificate/investing-in-kenya/incentives-investors
- (25) Aquaya and International Finance Corporation (2013). Water Business Kit Kenya: A Guide To Starting Your Own Water Treatment And Vending Business. Sanitation and Safe Water for All program. http://www.zaragoza.es/contenidos/medioambiente/onu/1114-eng_Water_Business_Kit_Kenya.pdf
- (26) Water.org. (2020). Kenya's Water Crisis - Kenya's Water In 2020. https://water.org/our-impact/where-we-work/kenya/
- (28) The Conversation (2018). Nairobi's slum residents pay a high price for low quality services.
- (29) SDG Tracker (2021). End poverty in all its forms everywhere. https://sdg-tracker.org/no-poverty
- (30) AquaTreat (2021). http://aquatreat.co.ke/about-us/