Peer Review of Water Services Regulatory System in Mozambique
EASTERN AND SOUTHERN AFRICA WATER AND SANITATION REGULATORS ASSOCIATION
Peer Review of Water Supply and Sanitation Services
Regulatory System In Mozambique
Final Report, 12th October 2016
Prepared by: Adrian Wilson of A J Wilson and Associates International and Manuel Carilho Dias, for ESAWAS
Acknowledgements
The authors would like to acknowledge the key inputs of the following organisations and
individuals:
The range of stakeholders interviewed who gave freely of their time (see Annexure 2).
The Peer Review Team (see Annexure 1), each of whom contributed significantly to the end
product.
CRA as the hosts and for all of the logistical arrangements
Dr Rolf Eberhard (et al) who developed the original Peer Review methodology used for this
and the three previous Peer Reviews that were carried out.
Peer Review of Water Services Regulatory System in Mozambique
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Contents List of Tables ......................................................................................................................................... ii
Table of Figures ..................................................................................................................................... ii
Abbreviations ....................................................................................................................................... iii
1. Introduction ...................................................................................................................................... 1
1.1 Peer Review framework .............................................................................................................. 1
Regulatory governance ................................................................................................................. 2
Regulatory substance .................................................................................................................... 3
Regulatory impact ......................................................................................................................... 5
1.2 Stakeholder Meetings: Approach to Diagnostics ........................................................................ 5
2. Key Findings ...................................................................................................................................... 6
2. 1 Regulatory Governance.............................................................................................................. 6
2.1.1 Context ................................................................................................................................. 6
2.1.2 Legislative ............................................................................................................................. 9
2.1.3 Independence .................................................................................................................... 12
2.1.4 Accountability .................................................................................................................... 14
2.1.5 Transparency and Participation ......................................................................................... 14
2.1.6 Predictability ...................................................................................................................... 15
2.1.7 Proportionality ................................................................................................................... 15
2.1.8 Internal Governance .......................................................................................................... 16
2.2 Regulatory Substance ............................................................................................................... 18
2.2.1 Context ............................................................................................................................... 18
2.2.2 Licencing ............................................................................................................................. 22
2.2.3 Tariffs and Pricing............................................................................................................... 22
2.2.4 Reliability, Quality and Customer Service .......................................................................... 25
2.2.5 Pro-Poor Regulation ........................................................................................................... 26
2.2.6 Environment/Water Demand Management ...................................................................... 27
2.3 Regulatory Impact ..................................................................................................................... 27
2.3.1 Context ............................................................................................................................... 27
2.3.2 Access and Consumption ................................................................................................... 30
2.3.3 Safety and Continuity ......................................................................................................... 31
2.3.4 Pricing ................................................................................................................................. 32
2.3.5 Financial Performance ....................................................................................................... 33
Peer Review of Water Services Regulatory System in Mozambique
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2.3.6 Efficiency ............................................................................................................................ 34
2.3.7 Capacity, Investment and Maintenance ............................................................................ 34
3. Recommendations .......................................................................................................................... 36
3.1 Regulatory Governance ............................................................................................................ 36
3.2 Regulatory Substance ............................................................................................................... 37
3.3 Regulatory Impact ..................................................................................................................... 38
4. Conclusions ..................................................................................................................................... 39
Annexure 1 – Participants ................................................................................................................... 40
Annexure 2 – Programme for Peer Review of Water Regulation in Mozambique ............................. 41
Annexure 3 – Peer Review Process ..................................................................................................... 45
List of Tables Table 1. Schedule of Tariffs ................................................................................................................. 24
Table 2. Summary of the Regulatory Performance of Primary Systems ............................................. 29
Table 3. Projected Costs and Tariffs for Major Systems ..................................................................... 33
Table of Figures Figure 1: Evaluating Infrastructure Regulatory Systems ....................................................................... 2
Figure 2: Regulatory Governance ......................................................................................................... 3
Figure 3: Regulatory Substance ............................................................................................................ 4
Figure 4. Institutional Landscape in the Water Sector in Mozambique ............................................... 7
Figure 5: Organisational Structure of CRA .......................................................................................... 17
Figure 6. Growth of Systems ............................................................................................................... 18
Figure 7. Regulatory Regimes ............................................................................................................. 19
Figure 8. Map of the Areas Covered by the Water and Sanitation Utilities in Mozambique ............. 21
Figure 9. Water Service Coverage ....................................................................................................... 30
Figure 10. Reliability of Supply ............................................................................................................ 31
Figure 11. Water Quality Compliance ................................................................................................. 32
Peer Review of Water Services Regulatory System in Mozambique
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Abbreviations AdeM Aguas da Região de Maputo
AIAS Administração de Infra-estruturas de Águas e Saneamento ALCs CRA Local Agents or Local Delegates AREEM Agence de Régulation des Secteurs de L'eau Potable, de L'électricité et des
Mines Capex Capital expenditure CEO Chief Executive Officer CORALs Local Regulatory Commissions CRA Conselho de Regulação de Águas DMF Delegated Management Framework ENASU National Water and Urban Sanitation Strategy 2011-2025 ESAWAS Eastern and Southern Africa Water and Sanitation Regulators Association EWURA Energy and Water Utilities Regulatory Authority FIPAG Water Supply Investments and Assets Fund ICP International Cooperating Partner LEWA Lesotho Electricity and Water Authority NRW Non-revenue water NWASCO National Water Supply and Sanitation Council O and M Operations and Maintenance OPEX Operating expenditure PRT Peer Review Team PTA Water Tariff Policy RF Regulatory Framework RURA Rwanda Utilities Regulatory Authority SLA Service Level Agreement VAT Value Added Tax WASREB Water Services Regulatory Board
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1. Introduction
A Peer Review of the water services regulatory system in Mozambique was undertaken from 21st to 26th August 2016 under the auspices of the Eastern and Southern Africa Water and Sanitation (ESAWAS) Regulators Association that comprises the following agencies that are responsible for water and sanitation services regulation in their respective countries:
Conselho de Regulação de Águas 1(CRA) --‐ Mozambique
Energy and Water Utilities Regulatory Authority (EWURA) --‐ Tanzania
Lesotho Electricity and Water Authority (LEWA) --‐ Lesotho
National Water Supply and Sanitation Council (NWASCO) --‐ Zambia
Rwanda Utilities Regulatory Authority (RURA) --‐ Rwanda
Water Services Regulatory Board (WASREB) --‐ Kenya
Agence de Régulation des Secteurs de L'eau Potable, de L'électricité et des Mines (AREEM) --- Burundi
The Peer Review of the water service regulatory system in Mozambique was carried out in partial fulfilment of the objectives of the ESAWAS Regulators Association that are two‐fold: firstly capacity building and information sharing through the facilitation of information sharing and skills training at national, regional and international level to enhance the capacity of members in water supply and sanitation regulation; and secondly regional and regulatory cooperation through the identification of best practices to improve effectiveness of water supply and sanitation regulation in the region. The Conselho de Regulação de Águas hosted the Peer Review. The Peer Review Team is given in Annexure 1, the programme in Annexure 2 and the process is described in Annexure 3.
1.1 Peer Review framework The Peer Review of Mozambique’s water supply and sanitation sector (water sector2) regulatory system was premised on an adaptation of the framework detailed by Brown et al. in the Handbook for Evaluating Infrastructure Regulatory Systems3 and on the experience of the African Electricity Regulator Peer Review and Learning Network4. Brown et al. define the regulatory system as ‘the combination of institutions, laws, and processes that give government control over the operating and investment decisions of enterprises that supply infrastructure services. It is argued that the evaluation of such a system should take into the account three interrelated dimensions as depicted in Figure 1, that is, regulatory governance, regulatory substance and regulatory impact. Regulatory performance was assessed in terms of three concepts: regulatory governance, regulatory substance and regulatory impact.
1 Water Regulatory Council. 2 In this report references to the “water sector” unless otherwise specified implies the “water supply
and sanitation sector”. 3 Brown, AC, J Stern & B Tenenbaum with D Gencer (2006). Handbook for Evaluating Infrastructure Regulatory Systems.
New York: World Bank. 4 The African Electricity Regulator Peer Review and Learning Network is an initiative of the
Management Programme in Infrastructure Reform and Regulation (MIR) at the University of Cape Town (UCT) Graduate School of Business (GSB).
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Regulatory Governance Regulatory Substance
Policy – The intent Legislation – The rules Institution – The enablers
Of regulatory system and processes of decision making.
Tariff - Setting method & Practise Quality - Of service standards Access - Pro – poor issues
Decisions are: Credible, Legitimate & Transparent
Decisions are: Sound & Robust
Figure 1: Evaluating Infrastructure Regulatory Systems
Regulatory governance
It can be argued that the key issue for water sector regulators is to ensure that the utilities under their purview are rewarded sufficiently, but not excessively, while resisting populist pressure to reduce prices. Rewarding utilities sufficiently enables them to maintain existing assets in as-designed functional condition and to raise funding for infrastructure expansions which are a pre-requisite for the provision of safe and quality water supply and sanitation services to all. Achieving this requires an institutional and legal environment through which independent regulatory decisions can be made. It is the characteristics of such an environment that defines regulatory governance – the ‘how’ of regulation. In essence, regulatory governance should limit arbitrary decision making through5: (a) substantive restraints on the discretion of the regulator, (b) formal or informal constraints on changing the regulatory system, and (c) institutions that enforce the above formal--‐substantive or procedural--‐constraints. This does not imply that regulators should have no discretion whatsoever, but that it is important for procedures to be established that define how discretion will be exercised. To achieve this, regulatory governance should provide for accountability, transparency, predictability and proportionality as depicted in Figure 2, and it is these features, in addition to independence, that lend regulatory decisions their credibility and legitimacy.
5 See: Levy B & P Spiller (1994). ‘The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of
Telecommunications Regulation’ Journal of Law, Economics, & Organization 10 (2): 201–246.
Regulatory Impact
• Reliable and cost = effective services. • Financially viable utilities. • New investments & increasing access
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Figure 2: Regulatory Governance
The assessment of regulatory governance therefore raises some important questions:
To what extent does the national policy, legislation, institutional design and governance structures of the regulator support the desirable characteristics of independent regulatory decision-making and thus engender credibility and legitimacy?
To what extent have the decisions made by the regulator been perceived by stakeholders as independent? Is the regulator viewed as credible by utilities and funders to the sector? Is the regulator seen as legitimate by consumers?
In addition an important consideration is also regulatory effectiveness. How has the regulator prioritised its activities and how effectively has it used its resources to achieve its intended goals. Does the regulator have a coherent regulatory strategy and how well is it implementing this strategy?
Regulatory substance
Regulatory substance is the content of regulation. It is also referred to as the ‘what’ of regulation. Much of the literature on the rationale for regulation is premised on the theory of natural monopoly. Infrastructure industries, such as the water sector, are highly capital intensive and are characterised by large sunk and specific investments with lifespans of 20 years or more. These characteristics lead to decreasing average cost as output increases. It is therefore less costly to have a single water reticulation system as opposed to multiple systems supplying the same number of customers. Competition and its promise of social welfare optimisation is not applicable under these circumstances. As a result, a firm with natural monopoly power could extract economic rent
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and price its services at a profit maximising level. For this reason, regulation is viewed as a justifiable intervention through which prices can be administered by a government agency. Regulators in Africa are however not only concerned with bringing prices down, in fact, in many cases, services are priced below cost and regulators are confronted with the challenge of raising prices to ensure that assets are adequately maintained and that new investment can be funded. Typically, regulators also allow market access through licensing and also set and enforce quality, safety and reliability standards. In addition water sector regulators should be concerned with ensuring universal access to safe water, bearing in mind the special requirements of low income households. As Figure 3 shows, regulatory substance determines the quality and robustness of regulatory decisions.
Figure 3: Regulatory Substance
In the case of the water sector there are three principal areas of concern that relate to regulatory substance:
Quality of service: Has the regulator developed standards that relate to drinking water quality, reliability of supply and the quality of wastewater effluent after treatment? Do utilities meet these standards and how does the regulator go about enforcing them?
Financial viability and efficiency: How are water supply and sanitation services tariffs determined? Is this in accord with best practice? Do utilities have sufficient financial resources to operate, maintain and invest in the service? Does the regulator incentivise efficiency improvements in the operation of utilities?
Affordability and equity: Are there mechanisms to promote affordable services for low-income households? Do other users of the service/pay their fair share? Quality of service, financial viability, affordability and equity are all inter‐related. For example, the imposition of higher standards means higher costs for the provision of the service. This in turn could imply a higher level of subsidy for low income consumers and if this is not well targeted, even those with sufficient means could benefit at the expense of the financial viability of
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the utility or social welfare as a whole. The regulator should therefore attempt to balance these and other concerns in reaching regulatory decisions.
Regulatory impact
Regulatory impact is a consequence of regulatory governance and regulatory substance. As stated earlier, the central challenge for water sector regulators is to ensure that the utilities under their purview are rewarded sufficiently, but not excessively, while resisting populist pressure to reduce prices. The key stakeholders in the regulatory system are consumers and utilities. Regulatory impact should therefore strike a balance between the expectations and interests of these two groups. Consumers are ultimately concerned about having access to safe, quality, reliable and competitively priced service. This is however only possible if utilities are financially viable and are able to source funding for refurbishments and new investment. Put differently, the ‘key objective of economic regulation of infrastructure industries is to ensure the continuous supply, over the long‐term, of specified infrastructure services of defined quality at the minimum necessary cost (and prices) to the population and industry of the country6.
1.2 Stakeholder Meetings: Approach to Diagnostics
An exploratory approach was adopted where the different regulatory areas are interrogated through structured discussion in terms of prepared diagnostic checklists and identified areas for discussion. This approach was facilitated by requesting key documentation from CRA including, policy documents, relevant legislation, licenses, methods used and guidelines. Secondly, a list of the pertinent issues was developed (diagnostic sheets) and a checklist of the key issues to be covered was provided for each meeting with stakeholders.
6 Stern J (2009). The Regulatory and Institutional Dimension of Infrastructure Services. Department of Economics Discussion Paper Series, City University, London.
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2. Key Findings
2. 1 Regulatory Governance
2.1.1 Context
In 1995, as a result of the approval of the National Water Policy (Resolution No. 7/95), the
Mozambican Government began the liberalization of the urban water supply sector. In 1998, the
reform of the urban water supply sector began after a long period of insufficient investment, as
well as technical, economic and financial downturn among companies within the sector, which had
been fully controlled by the state. The reform sought to establish a clear institutional delineation of
the different roles within the sector. One of its core features was the liberalization of the water
supply market, that is, the entry of private operators. As part of this process of liberalization, two
new bodies emerged, the Water Regulatory Council (CRA) and the Water Supply Investment and
Assets Fund (FIPAG). Later, another player was setup: Administração de Infra-estruturas de Águas e
Saneamento (AIAS).
The new governing structure within the sector, the Delegated Management Framework (DMF),
aimed to distinguish the following roles:
1. Government: definition of policies;
2. CRA: regulation of the sector;
3. FIPAG: asset owner/management/lessor, responsible for infra-structure investment and
financing, now covering the 11 water main systems;
4. AIAS: asset owner/management/lessor, responsible for infra-structure investment and
financing covering the sanitation and water secondary systems and
5. Private: system operations concessionaires, established through various forms of contracting.
The overall institutional landscape, as it currently stands, is illustrated in Figure 4 below:
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Figure 4. Institutional Landscape in the Water Sector in Mozambique
In 1999, the first real step towards liberalization of the sector took place. FIPAG signed a leasing
contract with a private operator to supply water to the city of Maputo for a period of fifteen (15)
years, and another four (4) management contracts for water supply systems to Pemba, Nampula,
Quelimane and Beira.
Conceptually, the DMF embraced best practices and anticipated a bright future. The reality,
though, has shown that those expectations were not achievable. The gradual withdrawal of the
international private sector, as a result of the difficulty of renegotiating the concession
agreements, for several reasons, also inhibited the performance of the operator and affected the
pace of contract implementation. This, together with changes to internal processes within the
operators' shareholders, meant that more pragmatic alternatives had to be found.
Also apparent was that the water supply and sanitation sector was unfortunately not attractive
enough to large international players.
Under these circumstances, the DMF underwent major changes. The main change occurred with
the expansion of the role of FIPAG, which began to play a much more active part in operations,
distorting the operating model, but reducing the negative impact of withdrawals from the private
sector, and solidifying the goals that will ultimately lead to sector reform, including:
a) Improving urban water supply, mainly by increasing access;
b) Creating tariffs that allow the recovery of supply costs;
c) Separating the roles of the main bodies within the sector; and
d) Ensuring that provision of supply services is carried out by independent and private entities.
Council of Ministers
CRA
Reporting
(CRA Regional Delegates
MOPHRH
Stakeholders Forum
DNAAS
FIPAG/AIAS
Performance Contract
Economic Regulation
Operator Operator Operator
DelegatedManagement Contracts
Supply Contracts
(Consumers)
Interim ReviewsDispute ResolutionResolution of Consumer ComplaintsALC’s
CORAL’s
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In order to understand the framework in question, it is important to highlight the initial scope of
the DMF, which was initially only focused on water supply, and not sanitation, and only focused on
large urban water supply systems. Decree 18/2009 expanded the scope of the DMF, which became
part of the wider public systems for water distribution and sanitation. Public systems started to be
structured in both urban (major and secondary) and rural areas. The Decree also established the
integration of the Board of Water and Sanitation Infrastructure (AIAS) as part of the DMF.
Decree No. 74/98 established CRA, within the creation of the DMF (Decree No. 72/98) and, in 2009,
Decree 18/2009 gave CRA an expanded mandate. As a result of Decree No. 23 on June 8, 2011, the
CRA designation was modified and a review of regulation tools was created, clarifying the
enforcement mechanisms of CRA's authority. In formal terms, the CRA has been administratively
and financially independent since the start.
CRA is responsible for matching the interests of consumers of public water supply with the
objectives of operators, ensuring a balance between quality of service, public interest, and
economic sustainability of water supply provision. Thus, the CRA is responsible for:
a) Economic regulation of urban drinking water supply.
b) Monitoring and advising on the design and implementation of delegated management
contracts for water supply systems, as well as the activity of the managing bodies.
CRA is also responsible for:
a) Promoting agreements of interests between the Lessor and Operator, acting as a pre-
arbitration conciliation forum;
b) Identifying development needs and potential expansion of services according to the needs of
current and future customers, and in particular ensuring, through the tariff system, the
economic sustainability that supports the extension and improvement of the quality of water
supply systems; and
c) Performing other tasks assigned to CRA in concession or management contracts and that fit
into its global goals.
The decree 18/2009 extends CRA's mandate to regulate all public water supply systems and
sanitation through configurations and regulatory systems adapted to technical conditions and
specific management systems.
The expansion of CRA's mandate, within the framework of the DMF, should be considered in two
dimensions:
Nature of the subject of the regulation: integration of sanitation; and
Target systems: all public systems of water supply and sanitation are to be regulated.
Generally, sanitation systems are less developed than water supply systems, making them less
attractive to private investors. Currently most, if not all, sanitation systems are potentially subject
to regulation but are not economically and financially sustainable. On the other hand, sanitation is
a sectoral area where inconsistencies, overlaps or omissions within the legal and regulatory
framework are particularly evident, especially when it comes to local authority and CRA powers.
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For CRA, sanitation is a new regulatory area. It requires the development of new models and
regulatory processes, new skills, acquisition of additional resources and even an adjustment of its
basic operating model. However, the biggest challenge may well be to obtain the necessary funding
for regulatory activity, considering the current framework of unsustainable economic and financial
operators.
As for water supply, the expansion of CRA’s mandate brings its own financial, personnel and
resource-related challenges, as well as potential difficulties at governance levels and within
operating models. The number of secondary systems that may be subject to regulation is large and
geographically widely spread. Policies and practical organizational processes will be required to
implement regulation. Additionally, the majority of secondary systems that are currently integrated
in the regulatory context, are systems in a precarious economic and financial condition. The
funding of regulatory activity will thus bring with it additional challenges.
A number of parties that were interviewed commented upon the future scope and direction of
regulation and the Regulator in the country:
a) The role of FIPAG as operator – considering that this reality results from a Government
pragmatic decision, it is largely accepted that such position should not last forever and FIPAG
should reduce or withdraw from operator role in benefit for the private sector. We were
informed that FIPAG is in process to separate its role as asset owner/lessor from operation
through the setup of additional 3 regional (North, Centre and South) utilities companies (apart
from AdeM) that will be operated by the private sector.
b) Other main concern was regarding the role of CRA in the regulation of sanitation where
Municipalities play a stronger role. It has been difficult to move forward with regulation in this
domain because the sanitation public service has not been defined yet and also because there
is a legislation conflict between the legal CRA mandate and Local Authorities powers.
2.1.2 Legislative
The performance of a public service market regulator largely depends on its independence, in
various different regards. Independence is an important characteristic of the Regulation framework
and its activity concerning public entities in the field (in this case the water supply and sanitation
sector). The Regulator acts within a given policy framework defined by Government policies. Thus,
the Government will legislate, set priorities and define sector policies.
The political and legal framework of the water supply and urban sanitation sector, and therefore
the performance of the CRA, is defined by four (4) main references:
a) Water Policy (Resolution n.º 46/2007);
b) National Strategy for Urban Water and Sanitation;
c) Water Tariff Policy; and
d) Five-Year Government Program 2015 – 2019
The Water Policy comprises a vision for the water subsector, whose aim is to provide good quality
and widely available water for future generations. This vision embraces the fundamental principles
of universality, equality, sustainability and inter-generational solidarity.
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Some of its main goals, aligned with the Millennium Development Goals, are:
Ensuring universal access to a safe and reliable water supply and increasing the quality of
service;
Establishing sanitation improvement as a critical tool for preventing waterborne diseases and
ensuring universal access to sanitation services.
The Water Policy is also important as it recognizes the economic value of water, beyond its social
and environmental value. It maintains that, in order to allow services to become financially viable,
the price of water should reflect its economic value.
It also emphasises that the role of Government is to define priorities, standards, regulations,
minimum levels of service, and to promote and channel investments and policy-making, including
the tariff policy, as well as to promote the provision of services by the private sector. This
promotion of the private sector role in public service provision explains the need for regulation and
a strong regulator.
In order to better present the operating model of the sector within this context, and the roles of
the various bodies within it, the Water Policy states that the water supply in urban and peri-urban
areas should be managed by independent institutions operating on commercial principles, and that
in those institutions, the private sector will be involved.
The legislation also highlights that the Government and Municipalities will always ensure the
independent management of water services.
As part of the Water Policy, the Government also defines its policy guidance for regulation. For
instance, it states that regulation should be developed according to the separation of roles,
establishing independent regulation for service providers, both private and public.
The Government also states that water tariffs should ensure the economic and financial
sustainability of all systems, including provision to renew and replace short-lived goods.
The Government is a primary source of funding for the rehabilitation and expansion of
infrastructure. In terms of operation, it also accepts the subsidization of tariffs to allow access to a
basic level of services in order to ensure the operational sustainability of the systems, always within
the model of independent management of water supply services.
In the sanitation subsector, the policy guidelines are very similar to those set out for water supply.
According to the policy framework, municipalities and local authorities hold the main responsibility
for decision-making regarding the provision of sanitation services, but the operation, maintenance
and management of sanitation systems in urban areas must be undertaken by independent entities
as a municipal service, either through a municipal company or through a management contract
with a private company, operating on commercial principles.
Similarly, the Water Policy states that the Government provides the main investment for
rehabilitation and expansion of infrastructure. Politically, the public service tariff should be
economically and financially sustainable, giving the option for the Government to subsidize if
necessary.
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In addition, the Government maintains that the water policy tariff must be guided by the following
principles:
User pays;
Polluter pays;
Sustainability;
Equality;
Efficient use of water;
Environmental conservation; and
Decentralization and participatory management.
The National Water and Urban Sanitation Strategy 2011 - 2025 (ENASU), defined within the
broader Water Policy, cements the policy’s political orientation, that water supply sustainability is
to be promoted through the involvement of independent entities, private operators or
independent municipal services, operating on a commercially orientated basis.
ENASU reinforces the political point of ensuring the separation of government roles from public
domain asset management, service provision, and regulation in order to reinforce their supervisory
activity and guarantee adequate service to citizens.
ENASU advocates decentralizing roles to local authorities as a Government priority, aiming to
ensure the provision of good quality public services, promote collective participation in decision-
making, and thus accountability, and increase responsibility levels of local agents.
Through the ENASU, the government restates its goal of ensuring a universal service of urban
water supply until 2025 and sets the minimum level of service to be guaranteed in urban areas at
access to at least 20 liters per person per day of drinking water, at a maximum distance of 250
metres and at a reasonable cost. To achieve this, the Government’s guidance is to ensure that the
tariff structure includes a social grade category to make sure that the cost of the service will not
reduce access to water supply.
ENASU also reinforces the political point of separating roles and the need to ensure collective
participation wherever possible in decision-making processes.
In terms of developing the service provision role, the ENASU considers the participation of the
private sector crucial in the management of water supply systems in small towns and villages,
based on commercial principles.
On the other hand, it also sets out a political strategy of protection of Delegated Management
contracts in order to ensure the compliance of contractual terms through the intervention of the
Regulator.
In terms of the urban sanitation sub-sector, the ENASU aims to achieve a universal service up to
2025, which currently appears potentially difficult to achieve. In order to succeed, the strategy is to
focus on the management of the urban sanitation process from wastewater and excreta deposit to
treatment and final disposal.
In terms of governance, the strategy defines the need to establish the capacity for urban sanitation
management by creating Independent Municipal Sanitation Services and developing a sanitation
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regulatory framework, considering the degree of independence of the service. The ENASU states
that the operation, maintenance and management of urban sanitation systems must be made by
independent entities as a municipal service, a municipal company or by a management contract
with a private company.
The Water Tariff Policy (Resolution No. 60/98) is another regulatory reference, as it defines
political guidelines for tariffs calculations. As part of the separation of roles, the Government posits
that its function is to set the tariff policy and not to define or approve the specific tariff of the
service of each system, for which the regulator takes responsibility.
The most recent policy guidance tool is the Five-Year Government Programme 2015 - 2019. In
Priority II: “Develop human and social capital”, the Government defines one of its strategic goals as
increasing access to and provision of water and sanitation services.
In order to achieve this objective, the Government states that the following priority actions are to
be developed:
Continuing to establish new piped household connections (taps in outdoor yards or indoors) in
urban areas;
Continuing to implement activity aiming to reduce losses in water supply systems; and
Increasing access to basic sanitation services to ensure good quality of life of citizens and
eradicate diseases;
Rehabilitating and expanding water supply systems in cities and towns, giving priority to
municipalities, namely those referred to in the Program; and
Mobilizing financial resources for building or expanding selected water supply systems.
Key Finding: It is a common perception in the sector that the current system of Decrees (though not
of the same status as an Act of Parliament) creates a sound basis/mandate for the Regulator,
particularly for water. The situation for sanitation is more ambiguous and creates some overlaps
and confusion. A key question is whether the legislative position can be strengthened by an Act
specifically addressing water services sector regulation (and by implication CRA).
2.1.3 Independence
The governance model of CRA segregates the deliberative and executive roles, which is perceived
by the leadership of the organization as an important difference to be emphasised for the Mission
of the regulator.
The deliberative body of CRA is a collegial body named Plenário, and is composed of the President
of the organization (on a full-time basis) and 2 members (on a part-time basis), who are appointed
by the Council of Ministers, on a joint proposal of the Ministers of Public Works and Housing as well
as Finance.
All members of the Plenário are appointed on the same time and for 3 years. The fact that all
members are appointed in the same time may impact on the continuity/stability of the organisation
in case of replacement of members.
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The Board does not elect its own Chair. In general terms this is not considered to be a best-practice
approach, though the fact that the position is appointed by the Prime Minister is positive. The
current Chairperson (President) has many years of experience and is held in high esteem in the
sector. This has resulted in some concerns about whether CRA will be able to be as effective, upon
his departure. This is highly complimentary towards the current incumbent but also poses some
questions with regard to succession planning.
The size of the board is small in comparison to other boards. It is an expertise based board, rather
than representing particular interests, which is a positive aspect. There is debate with respect to
the optimum size of a Board of this nature. Clearly small size can lead to increased effectiveness
and costs are reduced. It nevertheless has the potential to be suboptimal in terms of the range of
skills needed to fulfil the range of fiduciary responsibilities necessary. From a governance
perspective, it also does not really permit sub committees on aspects such as remuneration and
financial audit.
The financial independence of the Regulator depends on the regulation fee and the volumes of
water provision in the systems. The regulation levy is set at 2% of the gross annual revenues of the
water utilities according to the forecasted annual average revenue. 40% of the regulation fee is
remitted to the Ministry of Finance and the remaining 60% is to finance CRA. The revenues
generated by CRA depend on operators’ activity and feasibility (currently most of the systems are
not able to pay the regulation fee).
Key Findings: An aspect that could perhaps be reconsidered is that of the terms of Board members,
which are currently on a concurrent basis. This can lead to significant disruption when a new Board
is appointed. Experience with the other regulators and indeed with Boards of other organisations is
that sometimes it can take a while for new Board members to become fully acquainted with the
workings of the organisation. In practice therefore, a significant period of acclimatisation or
induction is often necessary. If staggered terms were introduced, then this potential disruption
would be reduced.
The fact that CRA reports direct to Cabinet means that it can play a high level and strategic advisory
role to the Mozambique Government with regard to the water sector. This was considered to be a
very positive function as it raises the profile of the Regulator as well as giving it the opportunity to
influence key government decisions related to the sector.
The fundamental premise when the regulation fee was set at 2% was that such a value was in line
with practice in Africa and also would be sufficient for CRA sustainability. The 40% of the fee that is
transferred to the Ministry of Finance was therefore not originally anticipated. If it were returned it
would help CRA to be financially independent in operational terms. Under the current regulatory
regime, the income secured is not sufficient to finance the operational costs of CRA.
Overall the independence of CRA was rated highly by stakeholders while at the same time
acknowledging that as it is a quasi-government organisation, it could never be fully independent.
14
2.1.4 Accountability
In terms of the system of appeals, the current process is not specifically covered in water related
legislation, it is rather addressed by civil and administrative justice procedures. The first level of
appeal is to the Plenário of CRA, thereafter matters of legality can be referred to the Administrative
Court, while civil disputes are handled by the Judicial Court. Having said this, there have been no
appeals of significance to date. The approach to dealing with appeals is something that can be
addressed when an Act specifically targeted at regulation in the water sector is addressed at some
point in the future (see later). The appeal process can then consider aspects such as the need for a
Tribunal or an Appeal Panel, consisting of industry experts.
As was noted earlier, CRA is diligent in developing a number of reports including a Sector Report,
Annual Report and Strategic Plan, and submitting these to Cabinet timeously. It was considered
that this enhances the accountability of the organisation. The CRA Annual Reports have to be made
public, by law, within 60 days of submission to Cabinet.
The Board does not approve its own remuneration. This is approved by the Cabinet.
The annual financial statements of CRA are audited externally. They are also reviewed/approved by
the Inspectorate of Finance/Administrative Court.
Key findings: There were complaints that the Sector Reports are not made available timeously to
the sector. Stakeholders were of the view that this was due to lengthy delays with their approval by
the Cabinet.7
2.1.5 Transparency and Participation
CRA is promoting transparency through the publication of an annual report that is well considered
in the sector. In this report, they disclose detailed information about the regulated sector, including
activities performed by CRA and also the performance of regulated entities. This annual report is
submitted to the Cabinet.
CRA also submits the Annual Account Report to the Administrative Court on an annual basis. This is
audited by external auditors and also by the Administrative Court or the Ministry of Finance. Most
of the people interviewed in the Peer Review process raised concerns about the delays in
publication of the Annual Report.
The principle of transparency is also promoted by the benchmarking covering all systems under the
CRA regulation and focusing on quality of service.
Some of the entities interviewed considered that, even though the benchmarking process has been
improving, the grouping criteria adopted is not the best, that is, comparison among similar sized
entities. Most of those interviewed had high regard for the value of the report but expressed
concern about time relevance in terms of the delays in publication, which sometimes is only made
7 CRA however have indicated that it is more due to technical reasons, such as the long period that the regulated entiies take to submit performance reports to CRA, particularly the audited report. Thereafter analysis and compilation by CRA and printing procedures take place. All of this currently makes it impossible to have the report available before the end of July.
15
available to the public more than one year later. Some stakeholders called for increased
verification of submitted data by CRA through field visits.
Consumer participation is one of the areas that would appear to need some improvement. Thus far
it would seem that CRA have been primarily concerned with lessors’ and operators’ participation in
decision making processes and less with consumers. It has perhaps been assumed that consumer
interests are protected by CRA and other authorities. The Peer Review Team (PRT) were informed
that even though some local authorities are involved in the initial process of tariff setting, a proper
or extensive consumer participation process has not been adopted. Some participants mentioned
that the public participatory processes in the country are still in the emerging stage and as such,
this kind of process does not trigger public participation.
In addition to the above comments, at the formal institutional level there is not any consultative
body or liaison body that includes representatives from consumer groups.
To assess the need and expectation of consumers, CRA performs Beneficiary Assessments and
Assessment of Consumer satisfaction surveys.
On the other hand, the ALCs and CORALs appear to be good instruments for CRA to reach
consumers, considering their local presence and proximity. Interviews with stakeholders revealed
that these instruments have been involved in the consumer complaints processes. It would appear
however that their role only covers a limited scope with respect to regulation.
Key findings: To some extent, participatory models are developing as a result of the evolution and
development of societies, a characteristic that will continue to grow in coming years. The challenge
for the CRA is to take advantage of this trend and strengthen its credibility with consumers and
regulated entities without compromising the effectiveness and efficiency of its processes.
2.1.6 Predictability
In general, there were few complaints from stakeholders with regards to the predictability of CRA’s
deliberations and decisions, except for the area of annual tariff increases. In this regard it is
apparent that the problem is not with the process that CRA undertakes to arrive at tariff increases.
This would appear to be understood and accepted by stakeholders. The determination is for a
period of five years, so that also provides good levels of predictability for utilities and the sector as
a whole. In terms of CRA’s mandate annual tariff increases are nevertheless submitted to the
Cabinet. In theory this is only for information however in practice this can result in political
interference in the process. To be fair, this does not always occur but can lead to problems at
sensitive times such as, for instance, when elections are soon to be held.
Key finding: It is clear that ideally the tariff approval process should be designed so that the chance
of political interference is minimised.
2.1.7 Proportionality
It was generally considered that the Regulator’s actions are proportional with no complaints made
by stakeholders with respect to this issue.
16
2.1.8 Internal Governance
As was noted earlier, the governance model of CRA segregates the deliberative and executive
roles.
The executive body is comprised of 2 main levels:
a) The Executive Secretary;
b) The Operational areas, including the Department of Operations, the Department of Studies and
Projects, Planning and Control Cabinet and the Department of Administration and Finance.
Under the executive body there are 2 consultation bodies, namely:
a) The Technical Counsel, coordinated by the Planning and Control Cabinet and which also takes
part in the Department of Operations and the Department of Studies and Projects; and
b) The Management Collective, led by the Executive Secretary and which also includes the
coordinators of Department of Operations, Department of Studies and Projects, Planning and
Control Cabinet and Department of Admin and Finance – and depending on the agenda to be
discussed, may include technicians and/or the President of CRA.
The Executive Secretary is appointed by the Plenary after a publicly advertised recruitment process.
The competence of the Executive Secretary is in general to ensure administrative, financial and
technical management of CRA, especially to:
a) Implement CRA’s activities; aimed at the integral achievement of its purposes, attributions and
competence;
b) Elaborate and submit to Plenary the performance, budgets and respective accounts reports;
c) Perform the routine acts necessary for the regular functioning of CRA;
d) Represents CRA from a legal perspective
The Decree 23/2011, includes provision for the creation of an Advisory Council. This has not been
implemented so far because CRA are waiting for the approval of the Statute Review.
CRA has developed some innovative strategies to regionalize and delegate. This leads to improved
subsidiarity and allows CRA to get closer to customers. For a country the size of Mozambique, this
approach is almost essential. The CORAL/ALC model is an interesting one that could have potential
for use in other countries.
The organisational design of CRA is illustrated in Figure 5 below. The quality of staff are highly
regarded in the sector.
More presence (visits) of the head office in/to the regions has been suggested in some quarters.
17
Figure 5: Organisational Structure of CRA
3
10 3 21
14+18
TotalStaff39Engineers(9)Economist(3)Lawyer(3),Accountant(5)Others(19); 1
1
(1/2)
18
2.2 Regulatory Substance
2.2.1 Context
In line with the principle of separation enshrined in the DMF, the water sector in Mozambique is
structured such that asset holders are separated from operators. In practice however this
philosophy has evolved slightly differently from what was originally intended. A key part of the
original thinking behind the DMF is that the private sector would be the operator. The experience
of implementing this proved however to be problematic. The start of this was the original
concession addressing Maputo and four other towns/cities in 1999 (see Figure 6 below), which was
won by a consortium consisting of the French company SAUR, a Portuguese water company and
local partners. This was beset by problems from a fairly early stage, ultimately leading to the
collapse of the original concession. Ultimately SAUR withdrew from the contract and at a later
stage, so did the other international players. The problems encountered cannot be elaborated
upon in any detail, however many related to imperfect understanding of the status of the system at
the outset and lack of knowledge of local conditions by the international companies.
Figure 6. Growth of Systems8
Though Mozambique remains committed to the original tenets enshrined in the DMF (including
private sector participation), the initial crisis with Agua de Mozambique necessitated a major
rethink. Part of this resulted in the realisation that capital expenditure would need to primarily be
the responsibility of the public sector, albeit supplemented by support from International
Cooperating Partners (ICPs). In addition, it forced the asset owner in some cases to become
involved in operational matters as otherwise there would be a vacuum in this area. In spite of the
challenges, Figure 6 highlights that the growth in systems has been impressive.
An expansion of the regulator’s mandate led to CRA reconsidering its operating model so as to
deliver regulation for all types of systems and geographic areas. It needed to find a regulatory
model that minimized the constraints arising from the inability of secondary systems to support the
8 “Brochura Institucional”, CRA, 2016
19
regulation levy on the one hand, and economic and financial sustainability of the regulator, on the
other.
In order to achieve decentralization of regulation enforcement, in the context of the main systems
with delegated management or independent services, the direct regulation is carried out by local
regional delegates and CRA local agents, known as ALC.
For secondary systems, the creation of Local Regulatory Commissions (CORALs) was the mechanism
found to be best suited to local needs and budgets. In this case, CRA’s role is to define the
principles and regulatory rules that are implemented locally by the CORAL. It is thus indirect
regulation.
Changes to the regulatory model are also addressing the water supply and sanitation services
provided by municipalities of non-independent services. In this case, the issued standards are
applied by the Local Government or Municipality, after consultation with CRA, where appropriate.
Thus, it is advisory and shared regulation.
Thus, the currently regulatory regimes are as illustrated in Figure 8 below:
Figure 7. Regulatory Regimes
The main regulatory tools are as follows:
a) The Regulatory Agreement established between the CRA and the Owner Entity or Lessor,
which takes shape through the Delegated Management Framework;
b) The Regulatory Framework whenever there is no delegation, and when the owner entity
controls the services independently. The RF is embedded in the management contract if
delegated to a private operator. Where management is public, the RF works, regardless of the
contract.
Direct regulation(15 main systems)
Indirect regulation
(130 secondary systems, gradually
covered)
Consulting regulation
(Non-independent
services)
20
The two major asset holders that are regulated by CRA are known as FIPAG and AIAS. These only
operate in urban areas and there is no regulation in the rural areas (see Figure 7 below). FIPAG only
operates in major urban areas such as Maputo, Beira, Pemba and Nampula and it only addresses
water, not sewerage. In Maputo, the operator is a separate company called Agua da Região de
Maputo however FIPAG is the majority shareholder. In theory this is treated as an arms-length
arrangement though in practice this may prove to be difficult. FIPAG is the operator in all of the
cities other than Maputo in which they own the assets. FIPAG also operates some of the assets of
AIAS.
The mandate of AIAS is significantly different from FIPAG. With respect to water it is active in the
secondary cities. With respect to sewerage however it is active in both primary and secondary
cities. It does not operate any infrastructure. It is worth noting that sewerage is something of a
contested area in the sense that municipalities also see this as an area of their jurisdiction. The
state of sewerage infrastructure generally in Mozambique is very poor.
21
Figure 8. Map of the Areas Covered by the Water and Sanitation Utilities in Mozambique
22
2.2.2 Licencing
In Mozambique there is currently no formal licensing process and therefore CRA does not have the
mandate to license operators. The license is instead “implicit” in the contract signed between the
asset owner (FIPAG/AIAS) and the operator with a “no objection” input from CRA. This appears to
work satisfactorily.
There are 2 (two) main ways to implement “operations” under the regulatory framework:
a) The asset owner delegates operations (service delegation). In this case a DMF contract is
signed.
b) The asset owner also operates the system. If it operates the system through an “Autonomous
Service” it is signed as a “Regulatory Agreement”. If it operates under a “Non-Autonomous
Service” CRA only acts under consultative regulation9.
The Regulator is not part of the contract between the asset owner and the operator. CRA only gives
a “no objection” input on regulatory related matters.
Also under the broader subject of licences is the issue of access to water resources. In this regard it
is noted that there are significant water resource constraints impacting upon a number of the
utilities. This is obviously a matter of some importance, with Maputo being of particular concern.
Under the current regulatory environment in Mozambique, CRA appears to have limited recourse
to penalties and sanctions. Even those that it has appear to be rarely applied. It also does not make
use of formal directives. It rather achieves its objectives through negotiation, influence and
persuasion. Its high standing in the sector contributes to the fact that this approach has proved to
be effective.
When it comes to inspection, the Regulator makes use of a number of strategies. Regular and ad
hoc inspections are carried out by their Regional Offices. These are supplemented by work carried
out by the ALCs. The ALCs are part time positions located in the main urban centres. Their work is
primarily focussed on addressing customer complaints that are not resolved by the utilities (see
section 2.4). This strategy allows regulatory costs to be controlled and also enhances CRA’s capacity
in regional locations, an important consideration in a country as large as Mozambique.
Key findings: CRA makes very good use of guidelines and has also revised these, when necessary.
These are widely regarded as useful documents. Several stakeholders regarded this as a particular
strength of CRA, which have contributed significantly to best practice in the water sector in the
country.
CRA has to-date not defined detailed penalties for non-compliance. Compliance is largely enforced
through the Regulatory Framework (RF) with sanctions being limited to tariff approvals. This raises
concern regarding the ‘teeth’ of the regulator.
2.2.3 Tariffs and Pricing
The Water Tariff Policy (Resolution No. 60/98) is certainly one of the key regulatory references in
Mozambique, as it defines the political guidelines to calculate tariffs. As part of the separation of
roles, the Government has the function to set the tariff policy and not to define or approve the
9 Thus far however there has been no actual example of this.
23
specific tariff or the service requirements of each system, for which the Regulator takes
responsibility. During the PRT visit it was apparent that during the recent past this was not the case
because the process was impacted upon by political interference. Ideally a consensus should be
reached with all parties, including the Government itself, that such a situation should be eliminated
for the benefit of consumers, operators and society in general.
The Water Tariff Policy (PTA) identifies the following tariff systems for water supply and sanitation
services:
a) Water: drinking water in urban areas, and drinking water in rural areas.
b) Sanitation: conventional sanitation, and low cost sanitation.
The fundamental principles of the PTA are:
There are currently two (2) important tools for economic regulation of tariffs:
a) The tariff model, and
b) The tariff structure.
• Water is a resource with economic value and must be paid for by those who use it according to the cost of provision.
User pays and polluter pays
• Water is a social resource thanks to its obvious importance to the health and welfare of humans. Thus, tariffs should be established to ensure access to basic services of water and sanitation for all citizens.
Equality
•Rational use of water resources and control of water-polluting activities help to protect the environment. Tariffs must reflect the social cost of water use, encourage conservation, promote its rational use and impose penalties on waste.
Environmental conservation and efficient use of water
•Tariffs shall be established to ensure that companies and entities that provide services are sustainable or seek to improve their economic and financial sustainability levels, by covering operating costs, maintenance and management, while ensuring political, social and environmental feasibility.
Sustainability
•Tariffs are set so that the provision of service matches the demand and the user’s willingness to pay. The Government encourages collective participation, nevertheless considering the operational independence of managers.
Decentralization and participatory management
24
The current tariff model, where cost and coverage are based on operator efficiency, aims to ensure
the economic and financial feasibility of the regulated bodies.
The tariff model is based on blocks of water consumed. The rate for standpipes and the first block
for domestic consumers is determined based primarily on social responsibility factors, though there
are several doubts if this objective is actually achieved in practice. The tariffs blocks for
commercial, manufacturing and public sector are significantly higher, which effectively cross-
subsidizes domestic consumers (see Table 1 below).
Table 1. Schedule of Tariffs
The current tariff structure, is aligned with the policy direction of the Government through the
Tariff Policy, considers different types of water use and adopts cross-subsidization mechanisms to
ensure the principles of equality, sustainability, environmental protection and efficient use of the
resource.
The tariff structure includes two components:
a) The tariff to the operator in order to recover OPEX that represents 2/3 of the Public Tariff to
the Consumer; and
b) Yield to asset owner in order to cover service debt and replacement of assets.
In the case of the primary systems, and based on their Business Plan, FIPAG agrees with the
Regulator a Regulatory Framework that includes a tariff planning forecast for 5 years. Before CRA
approves this forecast, the Regulator submits for this for assessment/approval to the Minister of
OPHRH and consequently to the Cabinet of Ministries. After this approval, ordinarily on an annual
basis, FIPAG may submit a request for tariff adjustment to CRA, based on the system financial and
operational performance and parameters agreed in the regulatory framework. The regulator has
full power to assess the request and decide on the annual tariffs adjustments. As was noted above
Block 1 Block 2 Block 3 Block 2
(Minimum
water
consumption 5
m3/month)
(5 m3 -
10 m3)
(Above
10 m3)
(Comercial and
Public -
minimum water
consumption
25 m3/month)
(Industry -
minimum
water
consumptio
n 50
m3/month)
(consumptions
above the
minimumr
consumption)
MT /
m3MT / month MT / month MT / m3
MT /
m3
MT /
m3MT / month MT / month MT / m3
Maputo, Matola and Boane 10,00 60,00 73,00 22,60 35,85 14,60 987,50 1.975,00 39,50
Chokwe city and district 10,00 55,00 50,00 16,80 25,00 10,00 637,50 1.275,00 25,50
Xai - Xai 10,00 55,00 50,00 16,68 24,64 10,00 650,00 1.300,00 26,00
Inhambane 10,00 55,00 55,00 17,50 24,75 11,00 676,58 1.353,17 27,06
Maxixe 10,00 55,00 70,00 20,10 26,32 14,00 722,71 1.445,43 28,91
Beira, Dondo and Mafambisse 10,00 55,00 70,00 20,00 25,00 14,00 667,50 1.335,00 26,70
Chimoio 10,00 55,00 50,00 16,68 22,02 10,00 591,25 1.182,50 23,65
Manica 10,00 55,00 50,00 16,68 22,02 10,00 591,25 1.182,50 23,65
Gôndola 10,00 55,00 50,00 16,68 22,02 10,00 591,25 1.182,50 23,65
Tete 10,00 55,00 50,00 16,68 21,25 10,00 591,25 1.182,50 23,65
Moatize 10,00 55,00 50,00 16,68 21,25 10,00 591,25 1.182,50 23,65
Quelimane, Nicoadala 10,00 55,00 70,00 20,20 24,42 14,00 659,84 1.319,67 26,39
Nampula 10,00 55,00 70,00 20,90 24,00 14,00 654,00 1.308,00 26,16
Nacala 10,00 55,00 50,00 16,68 22,50 10,00 666,25 1.332,50 26,65
Angoche 10,00 55,00 50,00 16,68 21,78 10,00 591,25 1.182,50 23,65
Pemba, Morrébue, Metuge 10,00 55,00 70,00 21,47 26,00 14,00 683,96 1.367,93 27,36
Lichinga 10,00 55,00 50,00 16,68 22,00 10,00 591,25 1.182,50 23,65
Cuamba 10,00 55,00 50,00 16,50 20,50 10,00 537,50 1.075,00 21,50
Water Utility
Stan
dpip
e
Domestic
Mun
icip
alit
ies
General (comercial, public, industry)
Fixed tariff
Block 1
25
however, this was not the case in the recent past and this has affected the financial and
operational performance of the operator and the asset owner. In the tariff determination process,
CRA make use of the concept of a Service Level Agreement (SLA) concept incorporating targets for
a range of key indicators. This implies that if the asset owner does not achieve its targets it may not
get the tariff increase it desires.
Tariffs and revenue collection have been increasing significantly however these are not at a full
viability level yet. Overall there is an important need to move towards fully cost reflective tariffs if
the sector is to become more sustainable.
From a strategic perspective there is clearly a need over the course of time for both the asset
owners and the operators to become fully sustainable and bankable organisations. It was noted in
this regard that this is a process that will take some time to achieve and the differing situational
aspects impacting on the utilities, and their relative strengths and weaknesses, imply that different
utilities will take different time periods to achieve this. In this regard, it is understood that FIPAG is
close to being a bankable organisation. They have been able to secure significant funding support
from the World Bank although this has required guarantees from the Mozambique government. To
what extent this is due to governance, corporate structure issues or financial limitations, is unclear.
It is nevertheless a significant accomplishment when one considers the history of the sector in
Mozambique.
Aguas de Maputo have not been able to cover their operating costs up until recently but
apparently have reached the stage whereby they are able to pay the operating fee to FIPAG for the
first time. This is encouraging and is hopefully a trend that will continue to strengthen.
A major constraint in terms of financial issues is the availability of capex funding and this is
particularly relevant in a developing country such as Mozambique that has many challenges in
terms of access to services and the need to expand service delivery. Only one or two of the utilities
are in a position to fund capex internally and/or access loan funding, and even then, only partially.
This means that they are almost completely reliant on grant funding either from the Government
or from International Cooperating Partners (ICPs). This is a major constraint for the sector and the
country as a whole. This also emphasises the importance of trying to achieve financial sustainability
for the utilities as soon as possible as thereafter they will become much more independent in
terms of accessing funding. This will benefit not only the utilities but also the sector as a whole.
Some stakeholders that the PRT met emphasized the need to promote further studies to validate
the actual benefit for poor families under the tariff first block. It was also proposed to introduce
the exemption of VAT for water services provision while retaining the current level of the tariff.
This would allow the operator to recover costs with minor impact on the consumer.
In view of the lack of progress on sanitation, a ring fenced sanitation surcharge could be considered.
This strategy has been used in Zambia with some good results.
2.2.4 Reliability, Quality and Customer Service
CRA produces technical standards and guidelines for coverage and continuity of service, water
quality and customer care. The standards set are regarded as “mandatory” by CRA and the sector.
26
In terms of coverage, the indicators include number of standpipes, house connections, commercial
connections and numbers of people served. The overall coverage target (acceptable threshold) is
set at 60%, which is relatively low. This is perhaps indicative of how big the challenges were in the
water sector in Mozambique when CRA came in to existence.
Continuity of supply has been an important and high-focus indicator for CRA. It is also apparent
that substantial gains have been made over the years with regard to this indicator. In spite of this
much still needs to be done and it clearly needs to be a continued area of focus in the country. An
acceptable target threshold of 16 hours is set.
An area that may need further consideration is the degree of variation that is “hidden” by the
average figures that are quoted in the Sector Report. Experience in other countries has shown that
there can be dramatic differences in reliability of supply between say, upmarket areas and peri-
urban areas. This is obviously a particular concern since people in these areas are much more
vulnerable due to poverty considerations. In addition, because the volumes applied tend to be
higher in industrial areas and formal residential areas, there is even more potential for problems in
peri-urban areas to be “hidden”. It is believed therefore that a more sophisticated continuity
indicator that incorporates a range of values should be considered in the future.
In terms of water quality this is again a major focus of the Regulator and much has been achieved
over the years. There are a range of applicable water quality determinands set. CRA sets two levels
of performance threshold in this regard, at 80% and 100%.
In the area of customer service, the focus is primarily on times to respond to complaints and
delivery of customer services. The broader area of customer service is, in general, not a strength of
public sector organisations and is thus a potential growth area in future. It is an area where, over
the course of time, sophisticated monitoring systems and KPIs can be introduced that are linked to
call centres, for instance.
2.2.5 Pro-Poor Regulation
Historically the poor have been supplied by community standpipes. The extent of people supplied
by this method is reducing due a number of problems in areas such as costs and customer service.
It nevertheless remains a key strategy as an interim supply strategy for the poor.
Another pro-poor measure is that of the lifeline tariff. This is effectively cross-subsidised by the
more expensive tariffs that are applicable for higher consumption levels in the stepped tariff. This
does not however apply for individual connections due to the system of relatively high fixed
charges that is used in Mozambique (see further discussion under section 2.3.4).
The subsidy and promotion of individual connections is something that has been promoted in the
past in Mozambique and it is understood that this will continue in the future since it benefits both
the customer and the utilities. For the customer it provides a higher level of service and private
connections are much easier to administer than community standpipes or kiosks.
The issue of how the poor can access the Regulator is a difficult issue, which is a challenge in many
countries. It was considered that this is perhaps an aspect that bears further research in
27
Mozambique to try and come up with proposals to improve this. This research should also possibly
look at other measures that can be considered to assist the poor.
As a rule, the provision of services to the poor, is not commercially viable in the conventional
sense. This means that it nearly always requires a capital subsidy. This effectively means funding via
loans to the asset owner(s) or by external sources such as the government or ICPs. In terms of
capital expenditure in the water sector in Mozambique currently, it is heavily dependent on ICP
funding.
2.2.6 Environment/Water Demand Management
The figures for non-revenue water have been a high priority for the Regulator. In this regard, CRA
sets a maximum threshold of 35%. A key issue with regard to NRW is the ability to measure it
accurately but it is not clear to what extent the figures presented by the operators are audited by
the Regulator. Sometimes the figures for NRW increase when measurement is more
accurate/diligent because it becomes better understood.
In the experience of the author, non-revenue water is not an easy issue to address and, in addition,
it tends not to be particularly interesting or appealing to policy makers. This is because it requires a
multiplicity of actions, tactics and strategies conducted over a sustained period (e.g. 10 years) if it is
to make a difference. It therefore requires a long-term major commitment from all players in the
industry. An effective NRW strategy will require a combination of activities covering maintenance
activities, capital maintenance and capital projects. In the Mozambique context, this will require
that the asset owner and the operator work in close cooperation as this could easily result in areas
of overlapping responsibility. While the Regulator will focus on the asset owner, the asset owner
must ensure that the operator is highly motivated in this arena.
It is apparent that the state of wastewater treatment works is extremely poor both in terms of the
condition of infrastructure and their performance. It would appear that to date this has not been a
key area of focus for the sector in Mozambique, with the emphasis being primarily on water supply.
This is also probably due to the fact that the commercial aspects of sewerage systems are more
challenging and hence there is less funding available to carry out the necessary work.
In view of the major environmental impacts, the area of on-site sanitation is another potential
growth area for CRA though it would appear that this will only be addressed at some stage in the
future.
2.3 Regulatory Impact
2.3.1 Context
In terms of assessing overall sector performance (and hence, by inference, impact) CRA drafts an
annual Sector Report. This speaks directly to the Regulator’s critical roles in terms of publishing key
sector information and trends, revealing performance, benchmarking and performance based
regulation. An overview of the results for 2014 for the main systems (run by FIPAG) is shown in
Table 210 below. These highlight the most critical performance indicators that are monitored by
CRA. This table illustrates that most systems are meeting the threshold targets set for them.
10 Powerpoint Presentation on Quality of Service, CRA, 2016
28
Notable exceptions include response to customer complaints and water quality compliance.
Performance with respect to operational cost coverage is also mediocre.
29
Table 2. Summary of the Regulatory Performance of Primary Systems
AGREED SERVICE LEVELS
30
2.3.2 Access and Consumption
Access is obviously a critical issue in the context of a developing country with significant service
delivery backlogs and this indicator has showed a steady improvement over time. As of 2015, it was
reported that 81% of the urban population had access to an “improved” water supply and 63% in
the rural context11. This definition includes both access to water more generally, for instance via
community standpipes and individual connections. This has resulted in a very significant increase in
water consumption.
The trend with respect to water supply access is illustrated in Figure 9 below, which highlights the
progress achieved for the period from 2009 to 201412. This shows that while there was a dramatic
improvement between 2010 and 2012, this has plateaued in recent years. Apparently this is largely
due to the fact that the bulk capacity of the systems in the major cities has now been exhausted. As
a result, high priority is now being given to increasing the capacity of the bulk systems in places like
Maputo. It is also possible that consumption has stabilised due to the fact that there has been an
increase in metering and billing.
Figure 9. Water Service Coverage
Unfortunately progress on sanitation has been much less. Access to “improved” sanitation was
reported to be 42% in the urban areas and 10% in the rural areas in 2015. It is apparent that the
primary focus of the water services sector in Mozambique in the last 10 to 15 years has been on
improving water supply and not sanitation. The increased pressures of urbanisation, together with
the environmental impacts and public health risks associated with poor sanitation, are likely to
provide increased pressure to focus on sanitation in the years ahead.
11 Powerpoint Presentation by CRA (CEO – Part 1), 2016 12 “Brochura Institucional”, CRA, 2016
31
2.3.3 Safety and Continuity
As was noted earlier, the capacity of the bulk systems in the large urban areas is under stress. As
well as impacting upon coverage, this has also affected reliability of the service. This applies
particularly in Maputo but is also a problem in Nampula and possibly other cities/towns as well.
This has led to “plateauing” in terms of reliability of the service – see Figure 10 below. It should also
be noted that the performance shown in Figure 10 is against the target set by CRA of 16 hours/day,
implying that performance in this area can still be enhanced significantly.
Figure 10. Reliability of Supply13
As was noted earlier, there is a possible concern regarding continuity of supply, where averages
can mask significant variations. The implication of this is that a more analytical and sophisticated
approach should be applied to this in the future.
The performance trend with respect to potable water quality is shown in Figure 11 below. This
appears to show a somewhat contradictory trend with the overall compliance of samples dropping
over this five-year period, whereas performance against the number of parameters is improving.
Cleary the former trend is concerning however the latter trend tends to imply that the overall
performance on water quality is more nuanced than what it would first appear. The Review Team
were not able to interrogate this adequately during the Peer Review process.
There are also concerns with respect to the performance of wastewater treatment works. The
results of this were not presented to the Review Team however it was reported anecdotally that
these are performing very poorly indeed. While the Review Team acknowledged that there were
huge challenges with addressing the enormous sanitation backlogs, it was considered that the
13 “Brochura Institucional”, CRA, 2016
32
existing waterborne systems should be an initial area of focus to try and achieve improved
performance. In this regard, CRA highlighted that the institutional arrangements with respect to
sanitation are complex with responsibility being contested between municipalities and the utilities.
This has almost certainly contributed to the lack of progress on sanitation.
Figure 11. Water Quality Compliance14
2.3.4 Pricing trend for water tariffs
The structure of water tariffs in Mozambique includes aspects such as a lifeline tariff, and tiered
tariffs, based on consumption, which are accepted best practice approaches. The tariff structure
also includes fixed elements, in conjunction with the variable charges, which is not uncommon.
What is slightly unusual is that the fixed elements are quite large in comparison to the variable
elements. Apparently this structure was adopted deliberately so as to ensure a reliable level of
income to the operators and asset owners. There is nothing wrong with this per se however in
some cases it can lead to distortions. In this regard, CRA quoted the example of relatively low-
income customers with private connections. Because of their low consumption, it ends up in a
situation whereby they pay more for water than affluent households. This is why ultimately pure
volume based tariffs are the most equitable.
Another important indicator is that of O and M coverage. This is defined as the income necessary
to cover O and M costs and is measured against the collections of the utilities. It speaks to the long
term sustainability of the utilities (and hence the sector as a whole). CRA has reported that 7 of the
15 FIPAG systems achieved a figure in excess of 1,15, while a further 3 were close to achieving this,
which is laudable. A figure well in excess of 1,00 is desirable so as to cover aspects such
depreciation, servicing debt and accumulating surpluses. The performance of the AIAS areas were
not made available to the Review Team.
14 “Brochura Institucional”, CRA, 2016
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2.3.5 Financial Performance
The financial performance of the regulated sector can be analyzed considering the asset owner and
the operator. This analysis should consider the revenues stream and costs/efficiency stream. The
costs/efficiency stream analysis demonstrates that there is a large space for improvement,
considering the current level of non-revenue water (technical and commercial losses) in all
regulated systems. It affects the financial performance of all of the above players.
The revenue stream is mainly determined by the level of tariff. The level of tariff during the recent
past was not increased at the appropriate times and quantum and this has affected the capacity to
recover operational costs in most of the systems. The one exception to this is AdeM that has
improved its financial position. Projections of costs and tariffs for 2019 are depicted in Table 3
below. This shows that most systems are projected to under recover, and in some cases the extent
of this is large.
Table 3. Projected Costs and Tariffs for Major Systems
There has been a steady increase in revenue collection and in billing recovery, which has had a
major positive impact on improved sustainability of the utilities. For the 2015 year, CRA reported
that the invoice collection ratio exceeded 85% in 10 of the 15 FIPAG cities. There is however scope
for improvement here as the ultimate target should be close to 100%.
The viability of the asset owners and operators has improved significantly over the years but none
are yet fully viable/bankable organisations. O and M coverage has improved but if one includes
additional aspects such as depreciation, interest payments and accumulating surpluses, much still
needs to be done. This is particularly the case for AIAS though admittedly this is a younger
organization, operating in smaller urban areas with weaker economies of scale. There is also the
potential to phase in additional financial ratios as indicators (such as ROI) over the course of time
so as to develop a more nuanced view of the financial performance of the utilities.
1 Maputo/Matola/Boane 36.10 39.98
2 Xai-Xai 32.24 31.66
3 Chókwè 41.40 34.98
4 Inhambane 35.16 35.16
5 Maxixe 43.01 35.47
6 Beira/Dondo 35.07 35.07
7 Quelimane 48.15 32.94
8 Tete/Moatize 24.25 32.06
9 Chimoio/Manica/Gondola 35.11 33.32
10 Nampula 32.75 33.50
11 Nacala 35.50 34.70
12 Angoche 47.40 32.12
13 Pemba 41.86 34.31
14 Lichinga 39.23 32.24
15 Cuamba 46.06 30.51
Target average tariff
(2019)
Forecated average
costs (2019)# Systems
34
In terms of the operators, it is understood that the contracts let so far by AIAS have been successful
in terms of the recovery of operational costs however the Review Team were not presented with
any specific results in this regard. Aguas de Maputo reported that they have now reached the point
for the first time whereby they are able to pay the contract fee to FIPAG. This is an encouraging
development.
As was noted earlier, FIPAG has been able to secure loan funding in the past that has allowed it to
fund significant capex. Unfortunately this loan funding was dollar denominated and resulted in a
funding crisis, due to the rapid depreciation of the Mozambican currency in recent times. This was
unfortunate but the principle of using loan funding capex is nevertheless sound. AIAS is currently
not able to fund any capex itself and is not yet strong enough financially to be able to borrow
funds.
Key finding: The sector is still highly dependent on the support of ICPs. Ideally the share provided by
the Government of Mozambique should increase significantly in future years. The same principle
should also apply to funding provided by the asset owners themselves, particularly for commercially
viable projects. This would allow government to focus on funding projects that have an emphasis on
supplying services to the poor. This should be regarded as the best practice way forward though it
will clearly take some time to achieve.
2.3.6 Efficiency
In terms of staffing levels, CRA reports that currently 12 of the FIPAG systems are achieving the
target of less than 10 staff/1000 connections and 2 are close to achieving this. This is a very positive
achievement. Enhanced use of technology in future can result in higher levels of productivity
though it is up to the commercial utilities to pursue this. This approach will also need to balance
against the need to employ people in a country with high levels of unemployment.
In terms of non-revenue water, CRA has reported that 11 of the 15 systems run by FIPAG are
achieving the target of less than 35%. This implies that much can still be done in this area.
Nevertheless, if these figures are credible, in the author’s experience is that this performance is as
good, if not better, than most countries in Southern Africa.
2.3.7 Capacity, Investment and Maintenance
This heading relates particularly to effective and efficient management of the assets of the utilities.
In industries such as the water sector, which is highly capital intensive, this is a critical area of
concern. The comments made earlier regarding the increased O and M coverage and the
challenges of capital expenditure are also relevant here.
In terms of maintenance of the assets, it would appear that there is probably not yet a strong
emphasis on planned maintenance, though FIPAG is probably more advanced in this regard than
AIAS. This implies that the work that is currently being carried out is primarily in response to
problems and crises that occur. In the course of time, planned maintenance is definitely an area
that should be pursued as it will lead to a more systematic approach and ultimately will result in
the reduction in the crises and problems that are currently occurring. In a similar vein, a number of
35
stakeholders commented on the poor condition of infrastructure generally and this implies that
there is inadequate expenditure on O and M and capital maintenance. To some extent the latter
issue relates to the issue of depreciation as this can assist to build reserves, which can be utilised to
undertake this type of work. These are all aspects that can be considered for monitoring and
regulation in the future.
Looking at all of these issues collectively, it speaks to the broad subject of asset management,
which is another potential growth area for the water sector in Mozambique in future. The utilities
should ideally be moving towards the development of comprehensive asset management plans.
The starting point for this is adequate asset registers but this should go well beyond what is needed
purely for financial purposes to address engineering requirements. In most cases this also implies
infrastructure surveys and condition assessments.
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3. Recommendations
The recommendations emanating from the Peer Review are summarised below. This focuses on
the major policy and strategy concerns and not necessarily all of the detail. These are structured
primarily around the 3 categories that inform the Peer Review Process; Governance, Substance and
Impact. In practice however these categories tend to be systemic in nature and thus a number of
the issues could easily fit into more than one category.
3.1 Regulatory Governance
Overall it was considered that the legislative framework for regulation in Mozambique works
effectively, even though there is no specific Act that addresses the regulatory function. CRA also
rates highly in important best practice areas such as independence, accountability, predictability
and proportionality. It would nevertheless appear that some aspects of independence,
transparency and participation could be improved. Relevant recommendations are as follows:
Efforts to increase the income level of CRA to a sustainable level need to be continued.
Consideration for direct regulation of operators should be considered, as long as these do
not jeopardise the core principles enshrined in the DMF.
Consideration should be given to increasing the size of the Board (Plenario) but only on the
basis that this enhances its current core strengths.
The creative efforts undertaken to regionalise regulatory capacity are laudable and should
be continued.
Continue to strengthen and improve the competencies and role of ALCs and CORALs in
order to cover other important areas of regulation.
The continued efforts to increase the involvement of the private sector in the operation of
water services are laudable and should be continued.
Increase the voice of consumers at all levels of the regulated system. To facilitate
interaction with CRA (national), the implementation of an Advisory board that includes
consumers, lessors and operators should be considered.
Accelerate the process of development of the Annual Report so that it can be finalized in
the first quarter of the following year in order to have the appropriate impact.15
To improve the legislation in order to clarify and strength the Regulator role in the
sanitation subsector. It is important that the CRA keeps the full extent of the regulation
within its mandate, to prevent some of the regulation or regulated market of the water and
sanitation sector being transferred to other existing or new institutions. The lack of
uniformity of regulatory processes and tools will only introduce constraints at the sector’s
operating level and create inequalities throughout the country or even reducing the sector
attractiveness for private sector.
At some stage the development of an Act that specifically addresses the issue of water
services regulation should be considered. When this is done, the following aspects should
receive particular attention:
o Staggered terms for Board members
o The optimum size of the Board to satisfy governance and fiduciary requirements
o Clarifying the roles of all of the sector players. 15 Dissemination of the reasons for delays to stakeholders may also be necessary.
37
o Clarifying responsibility for the sanitation function in urban areas
o Formalisation of the regulatory appeal process
o Depoliticisation of the annual tariff approval process
o Formalisation of a system of sanctions and remedies that can be applied by the
Regulator. This should also consider the use of directives.
o Formalising the process of representation from customers, possibly via some
statutory representative body
o Introduction of a formal licensing process for regulated entities
Further to the last point, it is important that CRA keeps the full extent of regulation within
its mandate, to prevent some of the regulation or regulated market of the water and
sanitation sector being transferred to other existing or new institutions. The lack of
uniformity of regulatory processes and tools will only introduce constraints at the sector’s
operating level and create inequalities throughout the country or even reduce the sector’s
attractiveness for the private sector.
3.2 Regulatory Substance
Overall it was considered that the Regulator uses a range of tools and strategies very effectively
and these have produced good results both for utilities and the end consumers. In spite of this,
there should probably be increased emphasis in future in areas such as customer participation,
sanitation and financial management. Relevant recommendations are as follows:
More customer participation should be considered in tariff review processes.
A consumer education initiative may be needed to accompany this.
The rationale for tariff determinations in each case should be published and made available
to the general public.
Consideration should be given to resuscitation of the Sanitation Platform.
Consideration should be given to CRA becoming more involved in assessing/facilitating
investment decisions, as long as this does not result in the Regulator becoming conflicted
in its role.
There has been very good work undertaken on benchmarking and if possible this should be
broadened and deepened.
CRA should increase field inspections and data verifications for sector reporting.
When assessing the viability of CUs the focus in future should be more holistic in nature i.e.
incorporating depreciation, the cost of servicing loans and net profit to build reserves.
Consideration should be given, in consultation with the Ministry and the asset owners, to
setting specific target dates by which time the asset owners will become fully “bankable”
organisations. This should take into account the situational factors impacting upon each
asset owner and thus will vary for each.
There are serious water resource capacity constraints affecting a number of the urban
areas supplied by the CUs. CRA should consider working closely with other key players, to
assist in developing strategies to address these problems.
The Government should accelerate the proposed FIPAG reform (into four systems) allowing
it to resume its original role under the DMF and thereby to transfer operation to the
private sector in a sustainable manner.
38
Planned maintenance programmes should be undertaken by the CUs
An indicator to start measuring refurbishment (capital maintenance) spend should be
considered.16
3.3 Regulatory Impact
There is no doubt that much has been achieved in the sector across a wide range of indicators. In
spite of this, enhanced efforts will be required in the areas of sanitation, coverage, reliability and
asset management. Relevant recommendations are as follows:
There needs to be continued focus on increasing supply coverage and, by extension,
facilitating efforts to address issues with respect to constraint with bulk systems.
The same principle applies with respect to reliability of supply.
To study if the current block structure of tariffs promotes a fair access to water provision.
To exempt from VAT all water provision services but keeping the current level of tariffs.
Efforts on NRW have been good and this should be continued and strengthened
The use of averages for some of the performance indicators is masking serious variations in
performance within CU areas. An example that was highlighted was that of water supply
reliability but this phenomena could quite possibly apply to other areas such as water
pressure, customer service response and perhaps even water quality. Of particular concern
is that the worst performances is likely to be in the areas the poor are resident. CRA should
therefore consider moving towards assessing the range of performance within urban areas
(where applicable to the indicator) and not just the average.
There needs to be more emphasis on measuring, facilitating and enhancing the provision of
sanitation services.
As a starting point, regulation of wastewater works should be targeted.
There could be consideration for some kind of ring fenced sewerage surcharge to boost
investment in this area.
16 A detailed discussion of this matter is not possible here however the purpose ultimately is to be able to determine what is actually spent on maintenance and capital maintenance. These numbers are sometimes not immediately apparent in an indice such as O and M coverage because it includes a multitude of items. More detailed analysis also requires sound definitions of terms like “capital maintenance”. The difference between this and pure capex is often subtle however generally capital maintenance is work of a maintenance nature, which very substantially increases the life of an item of infrastructure. A good example would be something like relining a pipeline or resurfacing a road. A significant and ongoing annual capital maintenance budget is often an indication of a well run utility.
39
4. Conclusions
The Mozambican water sector has made great strides and improvements across a wide range of
indicators in the last 15 years. The water sector as a whole in Mozambique deserves a lot of credit
for this and CRA in particular has played a key role. This is widely recognised and acknowledged by
stakeholders. Certain aspects of the institutional design, and other characteristics, provide
evidence that CRA can be regarded as a “transitional regulatory model”17 however this is entirely
appropriate in an environment of widespread sector reform as has been in place in Mozambique in
the last 15 years. It is apparent that CRA has had to face some major challenges over the years but
has been innovative in its responses. In the areas of private sector participation and
decentralisation of regulation, CRA is a leader with important lessons for other regulators in
Southern Africa.
It is apparent that CRA is still evolving and the pressures and challenges highlighted in Section 3.4
provide some indication of the possible future direction in terms of mandate. CRA has just
completed a major strategic review and the inputs of this Peer Review process will provide a
further valuable input in this regard.
CRA were extremely cooperative, open and participative in submitting themselves to the Peer
Review process. This was greatly appreciated by the Review Team. The additional work required in
terms of dealing with language issues should not be underestimated. It should also be
acknowledged that all of the logistical arrangements around the Peer Review were very
professionally handled.
17 Brown, Stern and Tennenbaum with Gencer. “Evaluating Infrastructure Regulatory Systems”. The World Bank
40
Annexure 1 – Participants
Names and Associations of Mozambique Peer Review Team
Name Position Institution Country
1 Kelvin Chitumbo Director NWASCO Zambia
2 Kasenga Hara Senior Inspector - Technical NWASCO Zambia
3 Yvonne Magawa Executive Secretary ESAWAS Zambia
4 Peter Njaggah Director - Technical Services WASREB Kenya
5 Herbert Kassamani Director- Consumer Affairs WASREB Kenya
6 Thuso Ntlama Acting Chief Executive Officer LEWA Lesotho
7 Falla Frank Seboko Manager- Technical Regulation LEWA Lesotho
8 Exaudi Fatael Manager- Water & Sanitation EWURA Tanzania
9 Jacques Nzitonda Director of Water and Sanitation Regulation RURA Rwanda
10 Clement Ndungutse Water Officer RURA Rwanda
11 Benjamin Rutimirwa Acting Director of Economic Regulation RURA Rwanda
12 Donat Niyonzima Director General AREEM Burundi
13 Adrian Wilson Consultant South Africa
14 Manuel Dias Consultant Mozambique
41
Annexure 2 – Programme for Peer Review of Water Regulation in
Mozambique
EAST AND SOUTHERN AFRICAN WATER AND SANITATION REGULATORS ASSOCIATION
PEER REVIEW OF WATER REGULATION IN MOZAMBIQUE
22nd – 26th AUGUST 2016 PROGRAMME
Date/Time Activity Responsibility Participants Location
Saturday 20th of August 2016
14:00 – 18:00 Arrival Delegates
Sunday 21st of August 2016
14:30 – 16:00 Workshop ESAWAS Secretariat
Peer Review delegates and CRA Management
CRA Offices, Technical and Information Unit´s Conference Room
16:00 – 17:00 Welcome cocktail
Monday 22nd of August 2016
08:30 – 09:30 Presentation and discussion on CRA Regulatory Framework and Governance
CRA Board Chairman
Peer Review delegates, CRA Board and Management
CRA Offices, Technical and Information Unit´s Conference Room
09:30 – 10:30 Presentation and discussion on: Country Water Services Sector
CRA CEO Peer Review delegates, CRA Board and Management
CRA Offices, Technical and Information Unit´s Conference Room
10:30 – 11:00 Refreshment Break
42
11:00 – 12:00 Presentation on Governance – Internal Arrangements
CRA CEO Peer Review delegates and CRA Management
CRA Offices, Technical and Information Unit´s Conference Room
12:00 – 12:45 Presentation on Substance – Licencing and Monitoring Arrangements
GPC Peer Review delegates and CRA Management
CRA Offices, Technical and Information Unit´s Conference Room
12:45 – 13:45 Buffet Lunch
14:00 – 15:00 Meeting with Minister of Public Works, Housing and Water Resources
MPWHWR Peer Review delegates
Ministry of Public Works, Housing and Water Resources
15:00 – 15:30 Refreshment Break
15:45 – 16:45 Meeting with WSUP, WSP, WaterAid
ESAWAS Secretariat
Peer Review delegates
CRA Offices, Technical and Information Unit´s Conference Room
Date/Time Activity Responsibility Participants Location
Tuesday, 23rd of August 2016
08:30 – 09:30 Presentation on Substance – Tariffs Setting
DEP Peer Review delegates and CRA Management
CRA Offices, Technical and Information Unit´s Conference Room
09:30 – 10:15 Presentation on Substance – Quality of Supply and Service
DO Peer Review delegates and CRA Management
CRA Offices, Technical and Information Unit´s Conference Room
10:15 – 10:30 Refreshment break
11:00 12:00 Meeting with AdeM CEO to discuss Governance, Substance & Impact
ESAWAS Secretariat
Peer Review Delegates
AdeM Offices
12:30 – 13:30 Lunch break
14:00 – 15:00 Meeting with AIAS CEO to discuss Governance, Substance & Impact
ESAWAS Secretariat
Peer Review delegates and CRA Management
AIAS Conference Room
43
15:30 – 17:00 Meeting with FIPAG DG to discuss Governance, Substance & Impact
ESAWAS Secretariat
Peer Review Delegates
FIPAG Offices
17:20 – 18:30 Review of Key Findings
ESAWAS Secretariat
Consultants CRA Offices, Technical and Information Unit´s Conference Room
Date/Time Activity Responsibility Participants Location
Wednesday 24th of August 2016
05:00 – 05:20 Leave hotel and transfer to airport for flight to Nampula
Administration Peer Review Delegates
-
06:30 – 08:00 flight to Nampula
08:45– 12:30 Meeting with FIPAG Northern Regional Director to Discuss Governance, Substance & Impact
ESAWAS Secretariat
Peer Review Delegates
FIPAG Regional Offices in Nampula
12:45 – 14:00 Lunch Break
14:45 – 16:45 Travel to Island of Mozambique
Administration Peer Review Delegates
-
17:00 – 18:30 Ride through the Island´s
ESAWAS Secretariat
Peer Review Delegates
-
19:30 – 21:30 Dinner
Thursday 25th of August 2016
08:00 – 10:30 Meeting with Water Services Provider
ESAWAS Secretariat
Peer Review Delegates
Operator´s Offices
10:45 – 12:30 Leave Island and travel to Nampula Airport
Administration Peer Review Delegates
-
11:30 – 13:00 Finger Lunch break
13:30 – 15:30 Travel to Maputo by Air
Administration Peer Review Delegates
-
44
17:00 – 18:45 VC Meeting with Task Team Leader -Development Partners in the Water Sector to discuss Governance, Substance & Impact
ESAWAS Secretariat
Peer Review Delegates
Maputo World Bank Office
18:50 – 20:00 Review of week´s findings and Preparation of Feedback Presentation
ESAWAS Secretariat
Consultants CRA Offices, Technical and Information Unit´s Conference Room
Date/Time Activity Responsibility Participants Location
Friday 26th of August 2016
08:30 – 10:00 Review of week´s findings and Preparation of Feedback Presentation
ESAWAS Secretariat
Consultants CRA Offices, Technical and Information Unity Conference Room
10:00 – 10:30 Break
10:30 – 12:30 Feedback to CRA ESAWAS Secretariat
Peer Review delegates, CRA Board and Management
CRA Offices, Technical and Information Unity Conference Room
12:30 – 13:30 Debriefing Session for Peer Learning Network
ESAWAS Secretariat
Consultants CRA Offices, Technical and Information Unity Conference Room
13:30 – 18:00 Free Afternoon
18:30 – 21:00 CRA Sponsored Dinner
Administration Peer Review delegates and CRA Management
TBD
Saturday 27th of August 2016
06:00 – 15:00 Departure of Delegates
45
Annexure 3 – Peer Review Process Preparation for visit The host regulator (CRA), in consultation with the facilitator, prepared for the visit by:
Identifying key sector stakeholders and arranging meetings with stakeholders
Briefing key sector stakeholders on the purpose of the review, preparation for the meeting and get their assent to meet with the Review Team.
Make logistical arrangements for the visit.
Preparing a draft program;
Collating materials for the briefing pack. Preparatory workshop
The assessment methodology was presented and discussed;
The briefing materials were made available and reviewed;
The protocols for the week were agreed;
The programme for the week was reviewed;
The Review Team shared their perspectives on the anticipated regulatory challenges. Meetings held during the Peer Review Meetings were held with the CRA Board, CRA senior management, CRA Regional Office, the Minister of Public Works, Housing and Water Resources, Asset Owners, Operators, International Cooperating Partners, Civil Society and the an ALC. In order to facilitate candid discussion, meetings with external stakeholders were conducted without the presence of CRA staff. Logistics The logistics were arranged by the ESAWAS Executive Secretary and CRA. This involved:
Arrangement of travel and accommodation
Arrangement of conferencing during the review
Compilation and printing of resource materials for the review Review materials An electronic data file was prepared. Data requested included: 1. Sector overview reports. 2. Relevant existing and proposed policies, laws, and decrees that govern the operation of the water regulator and regulation of the water sector. 3. Licenses or comparable documents for major operators in the sector.
46
4. All major regulations (existing and draft), guidelines and procedures issued by the regulator or other government entities with regulatory authority in the past three years. 5. Statements, press releases, and other documents that explain the current objectives and strategies of the regulatory entity. 6. Annual reports and annual management plans of the regulator for the past few years. 7. Annual reports and financial statements for major participants in the sector for the past few years. 8. Organisational chart for the regulatory entity. 9. Previous assessments of the water sector or regulatory system. 10. Recent public statements or position papers on regulation and sector reform of major industry participants, associations, and the government. 11. Macro--‐economic data and water sector statistics and performance (ten years): 12. Existing data on tariffs, subsidies and analysis of subsidies. 13. Other relevant data such as any customer surveys undertaken etc. Much, but not all of this, data was made available to the Peer Review Team electronically. The role of the consultant The Peer Review was conducted by the CEOs themselves, with support and facilitation by the consultant. The consultant was responsible for the content of the Peer Review and for preparation of a draft findings/recommendations presentation and report.
