The Financial Planning study was conducted in four phases including data collection, development options, financing strategy and integration of findings. The methodology used consisted of three interrelated processes; an expenditure forecast, a derivation of available sector finance and a derivation of financing gaps including a process for adjusting demand and supply factors for managing the gap in finance.
The idea behind the method is that the difference between the expenditure forecast to meet targets and the projection of available finance together result in a finance gap (or surplus). This gap could then be managed by changing variables such as coverage targets, the technology mix or new sources of funds (e.g. from tariffs or taxes) within the demand and supply side.
The methodology used in the study allowed for different scenarios to be developed and provides evidence-based policy decision support. In the case of Lesotho four development scenarios were analysed based on the poverty reduction strategies (PRSP), the Vision 2020 and the MDG targets.
The planning tools used in the project were “FEASIBLE” and the “Strategic Financial Planning Model” (SFPM).
FEASIBLE is a computerized decision support tool which enables analysis of water supply, waste-water collection and treatment, and municipal solid waste management. FEASIBLE calculates the projected expenditure need based on data on the existing situation and targets, and the expenditure needs for a number of variables incorporated in the model.
The SFPM is a tool for estimating the financing needs versus available funding in the water and sanitation services for different development and policy scenarios. In the Financial Planning study the SFPM was designed to specifically describe the water sector in Lesotho and is now used as a guide for developing sector strategies. The methodology and tools used have been designed for the water supply and sanitation sector and would need to be modified to cover financing for water resources management.
To ensure that the planning tools and methodology became an integrated part of the planning process in the water sector, capacity development was an important part of the project. The project was carried out in cooperation with several stakeholders and capacity development activities were numerous, including workshops and training sessions on the design and use of the planning tools.