Comparative Financial Analysis of Water Utilities in West Africa

Abstract

Access to drinking water is a major issue in large cities of West Africa. Governments have a difficult equation to solve. They obviously want to offer their people the cheapest cubic meter. But they are constrained by an ambition to extend the water systems to less wealthy neighbourhoods as well as to provide sanitation services, in a context of very limited public funds. How to fix an acceptable tariff, taking into account the necessary required investments? The study presented in this paper provides a financial analysis of water utilities in West Africa. It allows a comparison of performances on a number of key financial ratios related to operations, investment, bank financing and economic and financial returns. It ends with a comparison of tariff. The conclusion focuses on the growth opportunity the water sector could represent in these countries. But this opportunity may only materialize if the EBITDA margin on water sales remains high. The options are limited: a periodic re-evaluation of tariffs or an improvement of technical performances. The comparative financial analysis attempts to highlight which is the most appropriate for each country.