The sanitation and hygiene challenge in Ethiopia is an important task, and daunting in scale.
Published on: 29/09/2019
Only about 7% of Ethiopia's population of 100 million currently has access to an improved toilet – a situation that impacts health, safety, finances, and living conditions. And 27% of the country still has no access to a toilet facility at all, practising 'open defecation'. Diarrhoeal diseases remain the third leading cause of death for children under five years of age, resulting in 70,000 deaths per year (JMP 2017; and UNICEF 2019).
Nevertheless, Ethiopia actually has made rapid progress in sanitation. In 1990, 92% of the country practised open defecation (JMP, 2014). Ethiopia's Health Extension Programme and heavy investment in Community Led Total Sanitation and Hygiene (CLTSH) campaigns are given much of the credit for this dramatic change. But, most of the toilets in use in the country are still 'unimproved', meaning they do not hygienically separate the waste from the environment. In practice, this means most of these facilities are just pit toilets with no cover, and sometimes no cleanable slab or squatting area.
The sanitation challenges the country faces include:
Recognising that this enormous task will require not only government-led campaigns, but also strong participation from the private sector, the Federal Ministry of Health issued a National Sanitation Marketing Guideline in 2013, to help accelerate the growth of the private sector sanitation market. The guideline aims to facilitate increased participation of the private sector in the supply of appealing and affordable sanitation products, by capitalising on demand-generating approaches conducted by the government such as CLTSH.
The USAID Transform WASH Project has been working since 2017 on strengthening the government's push in the sanitation market development arena. Building on previous work by other programmes, the project has helped improve the available products and services – including easier access to concrete slabs equipped with the SATO pan, and access to plastic toilet slabs. These products are proving appealing to consumers. However, affordability remains a major constraint for many, if not most, households since the products are currently imported.
Ensuring that these and other sanitation products and services remain affordable is critical to ensuring national scale-up of the much-needed improvement of the sanitation ladder. This is where the issue of taxation comes into play. The USAID Transform WASH project has been assessing potential bottlenecks to expansion of the private sector sanitation market in Ethiopia since 2017. Taxation policies have emerged as one of the most critical challenges to scaling up.
The taxes imposed on sanitation products and services include:
For a basic product like a concrete slab (without a SATO pan), the approximate cost to a consumer is about 450 Ethiopian Birr (ETB), or US$ 16.30. Of this, about 9% is taxes (15% VAT) paid on various inputs like cement and iron reinforcing bars. For an imported product like the SATO pan, taxes can become a much bigger cost factor. At import, it costs just under 100 ETB, or about US$ 3.40. However, after customs duties (30%), VAT (15%), surtax (10%), and withholding tax (3%) are applied, plus costs of handling and transport, plus profit – the cost to consumers increases to 390 ETB, or about US$ 13.40. Of this amount, 182 ETB are taxes, meaning 47% of the retail price paid is made up of taxes. The price increases due to application of taxes and other costs are shown graphically for the SATO pan below:
Similarly, menstrual products like disposable sanitary pads are also subject to similar levels of taxation, including customs duties on finished pads as well as imported raw materials used to manufacture pads in Ethiopia. Affordability and access, especially in rural areas, is a major issue for women and girls.
The potential Ethiopian market for improved hygiene products like menstrual pads, and sanitation products like the SATO toilet pan, are enormous. But, applying existing taxes to sanitation products in Ethiopia could increase the cost of those products by nearly 70% to consumers and discourage affordability. It is also weakening participation and involvement of the private sector in the market.
To ensure inclusive and balanced growth, the government of Ethiopia applies fiscal policies that provide exemptions or favourably low tax rates for a range of products and services. These include health services, medicines, certain health-related products such as insecticide-treated bed nets, as well as certain agricultural equipment and technologies, solar energy products, staple foods, and more. These exemptions and/or low tax rates ensure that these products remain affordable and accessible.
The same can be said about sanitation and hygiene-related products and services – tax exemptions and/or low tax rates are essential to ensure affordability and widespread uptake. By eliminating (or greatly reducing) import duties and other taxes on sanitation and hygiene products, their markets can continue to expand at a more rapid rate. And in so doing, to bring about a healthier and more productive future for Ethiopia.
USAID TRANSFORM WASH sets out to improve water, sanitation and hygiene (WASH) outcomes in Ethiopia by increasing access to and sustained use of a wide spectrum of affordable WASH products and services, with a focus on sanitation. It does so by transforming the market for low-cost, high quality WASH products and services: stimulating demand at community level, strengthening supply chains, and building the enabling environment for a vibrant private market.
USAID TRANSFORM WASH is a USAID-funded project implemented by PSI in collaboration with SNV, Plan International, and IRC. The consortium is working closely with government agencies including the Ministry of Health, the Ministry of Water, Irrigation and Electricity, the National WASH Coordination Office and regional governments.
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