Opportunities for market shaping in West and Central Africa

(Figure 1: Private sector showcase at West and Central Africa sanitation industry consultation)

Last November UNICEF’s West and Central Africa Regional Office, Supply Division and WASH Programme Division convened a regional sanitation industry consultation in Abuja, Nigeria. The consultation brought together 100+ representatives from industry, financial institutions, governments and development partners. This blog is part of a series focused on the discussions held on market shaping – including the current thinking, how it can increase uptake of improved sanitation facilities amongst the poorest households, and how it is being considered at the country level. The series is being released in the run up to AfricaSan 5 where the African sanitation community will come together to assess progress against the Ngor commitments on Sanitation and Hygiene. It is hoped that these discussions can be continued there. This story was originally published on the CLTS Knowledge Hub blog. To view the original story, click here.

Progress needs to be accelerated 3x the current rate of change to end open defecation by 2020 (1). As of 2015, 2.3 billion people lacked access to a basic level of sanitation services – defined as a non-shared, improved sanitation facility (2). This provides an enormous business opportunity for the private sector to supply improved sanitation facilities. In the West and Central Africa region alone, there are 351 million potential users of improved sanitation facilities who have yet to be reached (3).

Along with other partners, UNICEF is rising to the challenge, recognizing the need to expand market-based approaches to sanitation to fulfil the SDG ambition to improve the quality and sustainability of services. This area of attention complements UNICEF’s continued focus on community-based approaches that create demand for sanitation, as outlined in UNICEF’s Strategy for WASH (2016-2030).

As a first step, UNICEF launched a market shaping strategy describing one of UNICEF’s approaches to creating healthy and sustainable local sanitation markets.

“Sanitation market shaping is a combination of carefully-targeted catalytic actions, selected on the basis of in-depth market analysis, designed to stimulate a diverse range of appropriate sanitation services, products and suppliers, and ensure the market as a whole remains healthy and sustainable.” (4)

Market shaping focuses primarily (but not entirely) on strengthening the business environment for sanitation enterprises to scale, by addressing issues of government policy, availability of financial services and raw materials, and business development services for enterprises, among others.

A better business environment has potential to increase the scale of private sector engagement in sanitation by increasing market participation and accelerating transactions between sanitation enterprises and families who want better toilets (5). Similarly, laws and regulations that make it easier to do business, easily accessed public information about the sanitation market, and further-reaching supply chains for sanitation related commodities can also enable people to improve the quality of their services. This in turn can create incentives for existing and new enterprises to deliver appropriate and affordable sanitation products and services to people who need them.

This wider focus on strengthening the business environment complements sanitation marketing, which often looks to strengthen the core sanitation market – the sanitation businesses, the entrepreneurs themselves and the target consumers.

Market shaping strengthens sanitation market systems through various actions, applied as appropriate based on the context (see table 1). These actions were developed through consultation with market-based sanitation experts, as well as UNICEF’s previous experience in shaping markets in other sectors such as health (e.g. for drugs and vaccines). However, distinct differences exist between sanitation markets and other markets, specifically in relation to the consumers, the product and the market characteristics.

  • Consumers: main purchaser/investor (as opposed to governments/development partners), with wide variation in preferences, and willingness and ability to pay
  • Product: toilets are composed of multiple components and materials, design preferences are diverse, repeat purchases are rare, and there is limited aggregation in the product system delivery model
  • Market characteristics: limited quality assurance and standards, and diverse distribution systems

These key differences must be taken into account when engaging in market shaping actions.

Diagnosing barriers in the business environment is a critical first step towards understanding the market shaping actions that might be appropriate for a specific business context. Within UNICEF, the West and Central Africa Regional Office took the lead by commissioning a sanitation market assessment in Ghana, Nigeria and Cote d’Ivoire.

Information sharing and collaborative planning is as critical for market-based approaches as it is for community-led approaches to sanitation. To validate the market assessment, UNICEF convened a three-day sanitation industry consultation (see report here), bringing together over 100 participants from governments, development agencies, academia, and around 30 private companies from the region and abroad. The participants built on the assessment by identifying additional barriers and opportunities for private sector engagement in sanitation.

Specific opportunities for strengthening sanitation market systems included:

  • Increasing sanitation market information and demand, such as packaging data gathered from MICS and DHS surveys for enterprises to use when determining where their businesses might be most successful;
  • Improving the link between ‘traditional’ demand creation programmes (e.g. CLTS) and sources of sanitation products and services, including through engagement of chambers of commerce;
  • Strengthening sanitation supply chains, including through potential integration of distinct parts of the sanitation supply chain and reviewing the need for stronger retail and distribution networks;
  • Stimulating market entry, and active engagement of current sanitation enterprises, including exploring local financing solutions (e.g. revolving funds or guarantee funds, risk sharing mechanisms, and interventions to reduce transaction costs), and providing support for local businesses for registration, capacity building, and development of new business models;
  • Advocating for a more conducive business environment, including establishing and regulating standards, and supporting changes in the regulatory environment such as policies on toilet ownership; and,
  • Increasing consumer financing options for affordability and to create incentives to prioritise the purchase of sanitation products and services.

The industry consultation concluded by identifying priority actions for shaping sanitation markets, to be followed by national consultation and planning in the three participating countries. These countries will serve as learning laboratories for shaping healthy sanitation markets in the region.

Market based sanitation alone will not reach everyone. Community-based approaches remain central to the fulfilment of the human right to water and sanitation, and to the achievement of the SDGs. Similarly, governments, as duty bearers, have accountability to facilitate or directly provide these services. These actors – users, service providers, and governments – form the accountability triangle for sanitation, just like for water services.

Even within the market system, regulation can create safeguards and incentives to ensure the poorest of the poor access improved sanitation facilities. Market-based sanitation combined with financing options for households such as loans, instalment payments, or targeted, so-called ‘smart’ subsidies that don’t distort the market could be one approach to address this (see forthcoming Blog 2 for Nigeria’s experience on combining financing with market-based sanitation).

(Figure 2: UNICEF’s context-specific sanitation programming (Source: UNICEF WASH Strategy 2016 – 2030)

In its Strategy for WASH, UNICEF promotes a mix of context specific approaches in its sanitation programming. This includes elements of demand creation, supply development (of which market shaping is a part of), and financing options. More details on this approach to context-specific programming can be found in the forthcoming Blog 3 of this series on sanitation markets, and at the Pre-AfricaSan IDS learning and sharing workshop on February 17th. UNICEF is also convening a side-session on market-based rural sanitation at AfricaSan 5 on February 22nd with USAID under the WASH Partnerships for Learning and Sustainability (WASHPaLS) project and the Bill and Melinda Gates Foundation. We hope you can join us for these events and continue the discussion!
References
1. UNICEF. UNICEF’s Gameplan to End Open Defecation New York: UNICEF Headquarters; 2018. Accesible at: https://www.unicef.org/wash/files/UNICEF_Game_plan_to_end_open_defecation_2018.pdf
2. WHO/UNICEF. Progress on drinking water, sanitation and hygiene: 2017 update and SDG baselines. Geneva: WHO and UNICEF 2017. Accessible at: https://washdata.org/sites/default/files/documents/reports/2018-01/JMP-2017-report-final.pdf
3. WHO/UNICEF. A snapshot of Drinking Water, Sanitation and Hygiene in the UNICEF West and Central Africa Region. Geneva: WHO and UNICEF; 2017.
https://washdata.org/sites/default/files/documents/reports/2018-01/JMP-2017-Regional-snapshot-UNICEF%20WCARO.pdf
4. UNICEF. Sanitation Market Shaping Strategy Brief. Copenhagen: UNICEF Supply Division 2018. Accesible at: https://www.communityledtotalsanitation.org/sites/communityledtotalsanitation.org/files/UNICEF Sanitation Market Shaping_Strategy BriefFINAL.pdf
5. USAID. Scaling market-based sanitation. Desk Review on Market-Based Rural Sanitation Development Programs. Washington, DC: USAID Water, Sanitation, and Hygiene Partnerships and Learning for Sustainability (WASHPaLS) Project; 2018. Accessible at: https://www.communityledtotalsanitation.org/sites/communityledtotalsanitation.org/files/Scaling%20Market%20Based%20Sanitation%20JUNE2018.pdf