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Most of the rapid expansion in urbanization is taking place not in megacities, but in small and medium sized cities with populations of less than 500 000 (UNFPA, 2007). Growth is often unplanned and attracting government and private investment to infrastructure development in areas that lack the economic clout of the megacities is difficult. In addition, an estimated one billion people currently live in urban slums without even the most basic services (UN-HABITAT, 2009). Because these informal settlements lack land tenure, provid-

Centralized or decentralized? Uganda. A study case

Centralized sewage and wastewater connection

US Dollars, 2006 Present Net Value

0 -200

-400 -600 -800 -1 000 -1 200 -1 400 -1 600

1 000

Financial NPV Economic NPV

200 300 400

100 0

Note: the Present Net Value (PNV) measures the resultant financial and economic benefit of goods or services when all costs and benefits are taken into consideration. A positive NPV indicates a net benefit and a negative NPV a net loss.

2 500 5 000 Population connected to the sewer Source: WSP, Study for Financial and Economic Analysis of Ecological Sanitation in Sub-Saharan Africa, 2006.

Figure 7: Looking at the costs and benefits, centralized systems may not be the answer in terms of best result for the investment. The chart on the left shows that the financial NPV does not change with increasing population size for centralized sewage and wastewater connection, however the economic NPV (which includes benefits to health and the environment) shows a positive trend with increas- ing populations. Centralized systems therefore generate a greater benefit as population increases, but show a significant loss with small community size. The chart on the right shows the situation where decentralized latrines have been installed, and where the excreta is reused for food production, and hence the overall benefits returned will depend on the current market price for food. With a good market, the reuse benefits of low-cost latrines can be realized by the households into a positive NPV, however those requiring greater investment, do not offer a return on the investment (WSP, 2006).

25 10 000

-100 -200 -300 -400 -500

-30 -20 -10 0 10 Change in food price, percentage 20 30 Decentralized latrines with excreta reuse

US Dollars, 2006 Economic Present Net Value

Using low price latrines Using high price latrines

ing water and sanitation services through investment in large infrastructure is extremely difficult.

Water and wastewater services are often controlled by multiple authorities operating at a local, regional or national level. The infrastructure may be state-owned or include private sector involvement. The reliance of traditional wastewater-treatment systems on large-scale infrastructure generally results in a natural monopoly and hence a lack of market competition.

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