Capital Expenditure (CapEx)
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Capital Expenditure is the costs of providing a water or sanitation service to users where there was no service before; or of substantially increasing the level of services received by users. It includes the capital invested in first time construction or purchase of fixed assets such as concrete structures, wells, pumps, pipes or toilets prior to implementation of the service and to improve or expand existing water or sanitation systems. Costs for rehabilitation or replacement of major parts of a water or sanitation system, such as replacing a pump, are considered expenditure on capital maintenance (CapManEx). Capital expenditure (CapEx) consists of expenses on hardware and software (see figure 1). Capital expenditure hardware (CapEx hrd) includes expenditure on fixed assets as pumps, pipes, etc. and required equipment such as vehicles or offices to support the construction of water and sanitation systems prior to implementation of the service. Capital Expenditure software (CapEx Sft) includes the costs of one-off work with stakeholders prior to construction or implementation or extension of the service such as one-off training of pump mechanics or caretakers, community mobilisation or hygiene education.
Source: Smits et.al, 2011, 7.
ContentsExamplesAccording to the 2012 GLAAS report (WHO and UN-Water, 2012, 29), 69% of funds for water and sanitation expended in 11 respondent countries were directed towards Capital Expenditure (see figure 2). Figure 2. Capital expenditure versus operational and maintenance expenditure Capital expenditure water service deliveryBased on research from the #WASHCost project, Capital Expenditure (CapEx) to provide a basic level of water service with a borehole and handpump (at 2011 prices) range from US$ 20 per person to just over US$ 60 per person (see figure 3). For small schemes, including mechanised boreholes and piped supplies, the costs range from US$ 30 to just over US$ 130 per person. For intermediate and larger schemes benchmark capital costs vary widely from US$ 20 to US$ 152 per person. Figure 3. Total Capital Expenditure per person for borehole and handpump, small schemes and intermediate to large schemes required for a basic level of service
Source: IRC, 2012a, 1. The costs as shown in figure 3 (above) are based on the provision of a basic level of water service, as defined by WASHCost, it implies that the following criteria have been realised by the majority of the population in the service area: People access a minimum of 20 litres per person per day, of acceptable quality (judged by user perception and country standards) from an improved source which functions at least 350 days a year without a serious breakdown, spending no more than 30 minutes per day per round trip (including waiting time). Capital expenditure sanitation service deliveryBased on research from the #WASHCost project, the minimum Capital Expenditure required to provide a basic level of sanitation service ranges from US$ 7 for a basic pit latrine to US$ 36 (2011 prices) for a Ventilated Pit Latrine (VIP) (see figure 4). Figure 4. Total Capital Expenditure per facility for traditional pit latrines, pit latrines pour- flush or septic tank required for a basic level of service
Source: IRC, 2012b. The costs as shown in figure 4 (above) are based on the provision of a basic level of sanitation service, as defined by WASHCost, which implies that all the following criteria have been realised by the majority of the population in the service area: At least some members of the household use a latrine with an impermeable slab at the house, in the compound or shared with neighbours. The latrine is clean even if it may require high user eff ort for pit emptying and other long term maintenance. The disposal of sludge is safe and the use of the latrine does not result in problematic environmental impact. #WASHCost research indicated that in both Burkina Faso and Mozambique, higher levels of capital expenditure on sanitation services are found in the more densely populated peri-urban areas in comparison with rural areas (see figure 5) (Burr and Fonseca, 2011). A slab latrine in Burkina Faso costs over three times as much in peri urban areas than in rural areas. All latrines costed in rural Mozambique are two to three times cheaper than their peri-urban equivalents. Figure 5. Median capital expenditure on latrines in Burkina Faso, Ghana and Mozambique ( current cost US$ 2009) In contrast, Ventilated Pit Latrines (VIP) in Ghana are approximately 10% more expensive in rural areas than in small towns (see figure 5). Ventilated Pit Latrines (VIPs) costs in Burkina Faso are much higher than the found costs in neighbouring Ghana as well as in Mozambique. Ventilated Pit Latrines (VIPs) consistently cost between US$ 300 and US$ 600 to construct in Burkina, compared with average costs of between US$ 100 and US$ 250 in the other two countries. The occasional VIP in Ghana and Mozambique is of a comparable cost to those in Burkina Faso, but the majority cost three to four times less. The proportionally higher slab latrine costs in Burkina Faso reinforce the findings that the construction of latrines is generally more expensive here than in Mozambique. Key Documents and References
In partnership with IRC and the Rainwater Harvesting Implementation Network, WASHCost studied the historical trends and drivers of adopting Rain Water Harvesting (RWH). Detailed comparisons are made between life-cycle costs of RWH systems and the life-cycle costs of other water supply systems.
This briefing note presents an application of the life-cycle costs (LCCA) approach to sanitation in rural and peri-urban areas in four different countries— Andhra Pradesh (India), Burkina Faso, Ghana, and Mozambique. The document compares the differences between the financial costs of traditional and improved latrines, and the quality of service delivered to users.
This briefing note describes the life-cycle costs approach and why it was developed. It explains the main cost components for water and sanitation in rural and peri-urban areas.
Information sheet provides an overview of the minimum benchmarks for costing sustainable basic services in developing countries. The benchmarks have been derived from the WASHCost project dataset and the best available cost data from other organisations all over the world. The benchmarks are useful for planning, assessing sustainability from a cost perspective and for monitoring value for money.
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