análise das práticas e do quadro regulatório - cra.org.mz regulatory governance_english.pdf ·...

Este relatório, desenvolvido pela RPG, tem por base a informação disponibilizada pelo CRA

e demais informação recolhida. Desta forma, não deve ser imputado à Consultora

quaisquer responsabilidades pela qualidade, veracidade e exactidão da informação contida

no presente documento.

18 de Março de 2016

Elaborado pelo consultor RPG, Lda.

Análise das Práticas e do Quadro Regulatório

Review of Regulatory Framework and Practices

Manual de Governança e Substância Regulatórias

Manual of Regulatory Governance and Substance Legislation mentioned in this Manual can be consulted on the site of the CRA

Julho 2016 July 2016

Inglês | English

Manual of Regulatory Governance and Substance

P.027.15.R3 ii


P.027.15.R3 iii

This report, developed by RPG, is based on the information provided by the Water

Regulatory Council, by information gathered through interviews made to the staff of

this entity and to the remaining stakeholders of the water sector and on data

collected from the websites of the Mozambican governmental institutions. In this

way, the Consultant shall not be liable for the quality, veracity and accuracy of the

information contained in this document.


P.027.15.R3 iv


P.027.15.R3 v

Contents

1 INTRODUCTION ................................................................................................. 1

2 LEGAL AND REGULATORY FRAMEWORK ............................................... 4

2.1 Overview .................................................................................................................. 4

2.2 Legal Framework .................................................................................................. 4

2.3 Institutional Framework ................................................................................. 20

3 MARKET STRUCTURE AND WATER SECTOR PERFORMANCE IN

MOZAMBIQUE ................................................................................................ 28

3.1 Overview ............................................................................................................... 28

3.2 Market Structure ................................................................................................ 30

3.3 Performance of the Sector .............................................................................. 38

3.4 Challenges of the Water Sector of Mozambique .................................... 50

4 REGULATORY GOVERNANCE .................................................................... 54

4.1 Overview ............................................................................................................... 54

4.2 Regulatory Governance of CRA .................................................................... 54

4.3 Summary Table of Regulatory Governance of CRA .............................. 71

5 REGULATORY SUBSTANCE ........................................................................ 76

5.1 Overview ............................................................................................................... 76

5.2 Regulatory Substance of CRA ........................................................................ 78

6 REGULATORY IMPACT .............................................................................. 132

6.1 Overview ............................................................................................................. 132

6.2 Financial Sustentainability ........................................................................... 132

6.3 Social Sustainability ........................................................................................ 136

6.4 Technical Sustainability and Quality of Service ................................... 140

6.5 Regulatory Governance ................................................................................. 147

6.6 Conclusions ........................................................................................................ 149

7 CONCLUDING REMARKS AND MAIN CHALLENGES ...................... 151

7.1 Concluding Remarks ....................................................................................... 151

7.2 Main Challenges ................................................................................................ 152

BIBLIOGRAPHY ...................................................................................................... 157


P.027.15.R3 vi


P.027.15.R3 vii

Index of Figures

Figure 1 – Systems under FIPAG’s management (CRA, 2015) 32

Figure 2 – Evolution of the number of new private water supply providers (ÁguaGlobal, 2014)

37

Figure 3 – Water supply levels of service in Mozambique (based on CRA, 2015) 39

Figure 4 – Quality of service of FIPAG’s water supply systems (2014) 42

Figure 5 – Indicators of water supply services coverage (based on CRA, 2015) 44

Figure 6 – Continuity of supply and residential connections 45

Figure 7 – Non-revenue water volume evolution (CRA, 2015) 45

Figure 8 – Customer service evolution (CRA, 2015) 46

Figure 9 – Meter reading evolution (CRA, 2015) 47

Figure 10 – Evolution of the compliance of water quality parameters (CRA, 2015) 48

Figure 11 – Average level of customer satisfaction (CRA, 2015) 48

Figure 12 – Evolution of IDER and its components (based on CRA, 2015) 50

Figure 13 – Symbols adopted in CRA regulatory substance macro processes 77

Figure 14 – Flowchart of CRA direct regulation 80

Figure 15 – Flowchart of ALC procurement process 81

Figure 16 – Flowchart of secondary systems indirect regulation 82

Figure 17 – Flowchart of secondary systems indirect regulation (cont.) 83

Figure 18 – Flowchart of the sanitation services regulation in cities of primary systems 85

Figure 19 – Flowchart of the sanitation services regulation in cities of primary systems (cont.)

85

Figure 20 – Flowchart of non-autonomous systems consultative regulation 86

Figure 21 – Flowchart of AR setting between CRA and FIPAG 87

Figure 22 – Flowchart of AR setting between CRA and AIAS 88

Figure 23 – Flowchart of QR setting in the primary systems of FIPAG 90

Figure 24 – Flowchart of QR setting in the secondary systems of AIAS 90

Figure 25 – Flowchart of a delegated management contract procedure 92

Figure 26 – Flowchart of the periodic revision procedure 93

Figure 27 – Flowchart of the regulatory tax payment in primary systems 95

Figure 28 – Flowchart of the regulatory tax payment in secondary systems 95

Figure 29 –Flowchart of periodic information reporting by the operators 98

Figure 30 – Flowchart of periodic information reporting by the operators (cont.) 98

Figure 31 – Flowchart of periodic information reporting of secondary systems operators,

through the TIC–RECO system 100

Figure 32 – Flowchart of daily information collection among customers 101

Figure 33 – Flowchart of ALC periodic reporting process 103

Figure 34 – Flowchart of CORAL periodic reporting process 104

Figure 35 – Flowchart of periodic information reporting by CRA to the Government 106

Figure 36 – Flowchart of periodic information reporting by CRA to the Administrative Court 106

Figure 37 – Flowchart of the tariff setting procedure for the primary systems 111

Figure 38 – Flowchart of the tariff setting procedure for the secondary systems 113

Figure 39 – Flowchart of the tariff setting procedure for the secondary systems (cont.) 114

Figure 40 – Flowchart of quality of service regulation 120

Figure 41 – Flowchart of quality of service regulation (cont.) 120

Figure 42 – Flowchart of the quality of service regulation (definition of IDER) (Cont.) 121


P.027.15.R3 viii

Figure 43 – Flowchart of the complaints handling from primary systems customers, by ALC 126

Figure 44 – Flowchart of the complaints handling from primary systems customers, by ALC

(cont.) 127

Figure 45 – Flowchart of the complaints handling from secondary systems customers, by

CORAL 127

Figure 46 – Flowchart of the complaints handling from secondary systems customers, by

CORAL (cont.) 128

Figure 47 – Matters that are object of information to the customer of a good regulatory practice

130

Figure 48 – Average tariffs evolution of the systems regulated by CRA 135

Figure 49 – Coverage ratio variation of the operating costs of the regulated systems 135

Figure 50 – Population and water supply connections available in the system of Quelimane 139

Figure 51 – Distribution of weights of the indicators that form the IQS 141

Figure 52 – Quality of service evolution in the regulated systems (IQS) 142

Figure 53 – Variation of the percentage of answers given to customer complaints 144

Figure 54 – Variation in average response time 144

Figure 55 – Level of customer satisfaction about the systems performance (CRA, 2015) 146

Figure 56 – Parallelism between customer satisfaction and IDER of the systems (CRA, 2015) 147


P.027.15.R3 ix

Index of Tables

Table 1 – Main documents concerning the water sector legal framework of Mozambique 16

Table 2 – Available water resources in watershed by ARA 29

Table 3 – Entities responsible for the management of the water sector systems of Mozambique

30

Table 4 – Secondary water supply systems of AIAS 34

Table 5 – Sanitation systems of AIAS 35

Table 6 – Water services in Mozambique 37

Table 7 – Performance indicators for the quality of service overall assessment 41

Table 8 – FIPAG systems with best and worst quality of service evaluation (2014) 42

Table 9 – Set of performance indicators considered in IDER 49

Table 10 – Summary of the comments on regulatory governance of CRA 71

Table 11 – Report of information of the operators, established in AR and QR 96

Table 12 – Average tariff of systems regulated by CRA (primary systems) 134

Table 13 – Tariff structure of regulated systems 137

Table 14 – Coverage of primary water supply services 138

Table 15 – System performance concerning drinking water quality indicators 142


P.027.15.R3 x


P.027.15.R3 xi

List of Abbreviations

ADB – African Development Bank

AdeM – Águas de Mozambique/Maputo Region Waters

AdP – Águas de Portugal (publicly owned private water supply operator)

AFD – French Development Agency

AFORAMO – Water Suppliers Association of Mozambique

AIAS – Water and Sanitation Infrastructure Administration

AMATI – Private Groundwater Suppliers Association

AR – Regulatory Agreement

ARA – Regional Water Administration

ARA-Sul – South Waters Regional Administration

ARC – Competition Regulatory Authority

BoPInc – Base of the Pyramid Innovation Center

CAPEX – Capital costs

CE – Concessions

CHAEM – Centre of Environmental Hygiene and Medical Examinations

CIDA – Canadian International Development Agency

CNA – National Water Council

CPAS – Provincial Council of Water and Sanitation

CPLP – Community of Portuguese Language Speaking Countries

CRA – Water Supply Regulatory Council / Water Regulatory Council

DAS – Department of Water and Sanitation

DFID – Department for International Development

DNA – National Directorate of Water

DNAAS – National Directorate of Water Supply and Sanitation

DNGRH – National Directorate of Water Resources Management

DNS – National Directorate of Health

DPOPH – Provincial Directorate of Public Works and Housing

DSA – Department of Environmental Health

EIB – European Investment Bank

EU – European Union

FIPAG – Fund for Water Supply Investment and Assets

FPA – Private Water Suppliers

IFI – International Financial Institution

IIA – Water Research Institute

INGC – National Disasters Management Institute


P.027.15.R3 xii

IRD – International Relief & Development

ISF – Inginiería Sin Fronteras

IWA – International Water Association

JICA – Japan International Cooperation Agency

LNHAA – National Laboratory of Hygiene, Water and Food

MAE – Ministry of State Administration/Ministry of State Administration and Public Function

MCC – Millenium Challenge Corporation

MDGs – The Millennium Development Goals

MIC – Ministry of Industry and Trade

MICOA – Ministry for Coordination of Environmental Action

MINAG – Ministry of Agriculture and Fisheries/Ministry of Agriculture and Food Security

MINEC – Ministry of Foreign Affairs and Cooperation

MINED – Ministry of Education/Ministry of Education and Human Development

MIPAR – Implementation Guide of Rural Water Supply Projects

MIREME – Ministry of Natural Resources and Energy

MISAU – Ministry of Health

MOPH – Ministry of Public Works and Housing

MOPHRH – Ministry of Public Works, Housing and Water Resources

MZN – Mozambican Metical

NGO – Non-Governmental Organization

OPEX – Operation and Maintenance Costs

ORIO – Facility for Infrastructure Development

PAN-CSD – National Action Plan to Combat Drought and Desertification

PARP – Action Plan for Poverty Reduction

PARPA – Action Plan for the Reduction of Absolute Poverty

PENA-ASR – Strategic Plan for Water and Rural Sanitation

PGD – Large Projects

PNA – National Water Policy

PNDA – Water Development Program

POP – Small Private Operators

PPP – Public-Private Partnership

PRONASAR – National Program for Rural Water Supply and Sanitation

PSAA – Small water supply systems

PTA – Water Tariff Policy

QGD – Delegated Management Framework

QR – Regulatory Framework

SANTOLIC – Community-Led Total Sanitation

SAUR – Société d’Aménagement Urbain et Rural


P.027.15.R3 xiii

SDC – Swiss Agency for Development and Cooperation

SINAS – National Information System for Water and Sanitation

SNV – Dutch Organization of Cooperation

USA – United States of America

VEI – Vitens Evides International

WSUP – Water and Sanitation for the Urban Poor


P.027.15.R3 xiv


P.027.15.R3 1

1 INTRODUCTION

The progress and sustainable development of the water sector are held by the

Government of Mozambique as key pillars to guarantee the well-being and economic

and social cohesion of the population. For this purpose, the Government of

Mozambique has been developing, year after year, numerous efforts to endow the

Water Regulatory Council (CRA) with better capabilities and tools, to ensure an

adequate regulatory activity of the water sector in the country, focusing on the user

interests and on the sustainability of the water supply and sanitation systems. It is

in this context that the credit (No. IDA52900) of the project (No. P125120), of the

International Development Association (IDA) of the World Bank is used, with the

aim of financing the Water Supply Project of Great Maputo, whose D component is

relative to Technical Assistance.

This Manual of Regulatory Governance and Substance takes into account the three

key aspects of Regulation (governance, substance and regulatory impact) and

develops the diagnosis and evaluation of the regulatory model of the Mozambican

water sector, focusing, particularly, on the regulatory activity performed by CRA.

The Manual identifies the interconnections that exist between stakeholders in the

water sector in Mozambique, including the aspects of public policy, regulation and

the provision of water services.

The regulatory governance, i.e. the "how" of regulation, is directly related to the

legislation and the institutional framework associated with the regulatory system

and the decision-making processes. The regulatory substance, i.e. the "what" of the

regulation, is related to the intellectual and technical context of the regulator’s

decisions in areas of economic regulation (e.g. tariff review or regulatory

accountancy), quality of service (e.g. performance indicators and sunshine

regulation) and social regulation (e.g. social and gender considerations). Finally, the

regulatory impact is the result of the combination and the interaction between

regulatory governance and substance, and is associated with the outcome of

regulation itself (e.g. financial sustainability of the systems, reliability of

infrastructure). This Manual, in a first stage, was based on the review and analysis

of relevant documentation (e.g. legal documentation, reports, studies, among

others) for a first identification of CRA regulatory practices in the water sector in

Mozambique, taking into account the good practices of regulatory governance and

substance, as well as the description of the regulatory impact resulting from the

combination of both.


P.027.15.R3 2

The information collected was further complemented with a set of interviews with

the key personnel of the water sector in Mozambique and were made with the

support of CRA. The interviews were made to the Minister responsible for the sector

and all CRA directors, in addition to the main members of the National Directorate

of Water Supply and Sanitation (DNAAS) and the National Directorate of Water

Resources Management (DNGRH). This set of interviews included the key personnel

of South Waters Regional Administration (ARA-SUL), the Fund for Water Supply

Investment and Assets (FIPAG), the Water and Sanitation Infrastructure

Administration (AIAS), Vitens Evides International (VEI), COLLINS, Private Water

Suppliers Association (AFORAMO), WaterAid, Water and Sanitation for the Urban

Poor (WSUP), among others.

The aim of the interviews was to complement and deepen the knowledge about the

role of CRA and the performance of its functions. Thus, they enabled the

identification of CRA regulatory practices, a better understanding of the institutional

relations between the stakeholders involved in the water sector of Mozambique and

the current and potential role of CRA in promoting its sustainable development.

The information conveyed by the various stakeholders interviewed and the relevant

documentation provided and researched were the basis for the development and

production of this document, which was drawn up after the identification of gaps

and regulatory practices not documented by CRA.

The Manual of Regulatory Governance and Substance of CRA is directed to the

remaining stakeholders of the water sector of Mozambique and international

partners. Based on good regulatory practices and on the previous work developed

by the consultant, the Manual comprises seven chapters, including this introduction.

The second chapter focuses on the regulatory framework of the water sector in

Mozambique, which is directly related to the legal framework that sets out the goals

and objectives of the sector policies. It identifies the documents and legal

instruments which support CRA's activities in the Mozambican water sector, as well

as key stakeholders identified in this sector and their corresponding responsibilities

for its progress and sustainable development.

The third chapter, following the legal and institutional framework, develops a brief

characterization of the public water supply and sanitation market (hereafter, water

market or water sector) of Mozambique. This characterization focuses, in particular,

on the entities regulated by CRA, presenting some relevant statistical indicators to

understand the scale and role of the systems in the social cohesion promotion in

Mozambique.


P.027.15.R3 3

The fourth chapter deals with the regulatory governance of CRA, bearing in mind the

good regulatory practices identified and their implementation by CRA. This chapter

specifies 13 regulatory governance axes that are considered central to a good

regulatory practice, in general, and, in particular, to the water sector. In the

characterization of each one of the axis identified there is an introduction to what is

considered to be the good regulatory practice, followed by the identification of CRA’s

regulatory practices and how these contribute or how they can be improved to

ensure proper regulatory governance in the water sector in Mozambique.

The fifth chapter of the manual is relative to the regulatory substance of CRA and

addresses the quality and consistency of decisions, through the identification of

CRA’s regulatory practices that define the quality and robustness of the regulatory

decisions. This chapter also identifies CRA’s regulatory activities in the water sector,

describing the procedures and sequences of activities inherent to CRA's

performance in the various aspects of regulatory substance (e.g. quality of service

regulation, determination of tariff levels and complaints handling, among others).

As a consequence of the regulatory governance and substance of CRA, the sixth

chapter deals with the regulatory impact which focuses on the performance

evolution of the regulated entities in accordance with the regulatory procedures

adopted by CRA in the fulfillment of its regulatory duties in the sector and identified

in the previous chapters. This chapter describes the balance between the financial

sustainability of the regulated entities and the satisfaction of the water services

users, including the quality of service provided.

The seventh and last chapter of the Manual summarizes its main contributions and

details the regulatory procedures of CRA concerning governance and regulatory

impact. In addition, it covers the main challenges of the Manual and of CRA

regulation, aiming at the sustainable development of the water sector in

Mozambique.

The document also includes one independent annex, which is relative to the main

legislation and the documents that support the activity of CRA and the Mozambican

water sector and includes the most relevant documents of the regulatory practice of

CRA translated into the English language.


P.027.15.R3 4

2 LEGAL AND REGULATORY FRAMEWORK

2.1 OVERVIEW

This section of the Manual focuses on the regulatory framework of the water sector

in Mozambique, which is directly related to two aspects: the legal framework and

the institutional framework of the water sector.

The legal framework identifies the documents and legal instruments that fall under

the regulatory actions of CRA in the water sector in Mozambique. The water sector

is headed by the Water Law of 1991, in which the Government of Mozambique has

established for the first time the principles and rules for the management and use of

water, the result of a deep reflection on the challenges and importance of the sector

for the progress and sustainable development of the country. Then, the policies for

the sector associated with the implementation of the Delegated Management

Framework (QGD) and assignment of responsibilities and functions to the bodies

created within the QGD framework are identified.

The legal and regulatory framework identifies documents and legal instruments

associated with legislative packages issued by the Government in the context of the

political reforms carried out in various sectors which, somehow, have influence on

the regulation performed by CRA in the water sector (e.g. for reasons of coordination

with other entities or regulation of other uses of water) and that are relevant to the

current legal framework of the sector.

The institutional framework allows the identification and characterization of the

main stakeholders of the water sector in Mozambique. These stakeholders, with

distinct roles and responsibilities, are essential for the progress and sustainable

development of the water sector and also for the regulatory framework of CRA scope

of action and the understanding of the relationship between the regulatory authority

and other players of the water sector, particularly in the water supply and sanitation

services.

2.2 LEGAL FRAMEWORK

2.2.1 The Water Law and Delegated Management Framework

In Mozambique, until the end of the 1980s, the water infrastructure were in high

state of degradation, leading to a poor and unsustainable performance of the

services, both from an economic and financial point of view, by the water supply

operators. The difficulties in the country, due to the macroeconomic situation at the

time, as well as to the gap between users and service management, resulting from


P.027.15.R3 5

the centralized management policy of the sector, did not enable to increase coverage

and improve the quality of service.

In this sense, from the 1990s on, a set of diplomas was produced with the aim of

restructuring and implementing political, economic and social reforms in the water

sector in Mozambique, with high priority given to the decentralization of functions

and the recovery and improvement of water supply services and also of sanitation

and drainage. The proposed reforms were mostly aimed at increasing services

coverage in the country, ensuring access for the entire population to water supply

and sanitation services, with quality and at affordable prices, while guaranteeing the

sustainability of the systems by promoting appropriate tariff schemes.

The responsibility for the definition of the water sector national strategy in

Mozambique was assigned to the Ministry of Public Works and Housing (MOPH),

through the National Water Board (DNA), whose rules of procedure were approved

by Ministerial Diploma No. 78/2001, of 23 May, and later repealed when the new

Rules of Procedure of DNA were published in July 11, 2012. The MOPH was extinct

by Presidential Decree No. 1/2015, of 16 January, which assigned the responsibility

for the water sector to the Ministry of Public Works, Housing and Water Resources

(MOPHRH). The Organic Statute of the MOPHRH was approved by Resolution No.

19/2015, of 17 July, which divided and allocated DNA duties to the National

Directorate of Water Supply and Sanitation (DNAAS) and the National Directorate of

Water Resources Management (DNGRH).

The approval of the Water Law in 1991 (Law No. 16/91 of 3 August) started the

process of the water sector reforms undertaken by the Government of Mozambique.

The Water Law defined the principles of water use and management to be taken into

account in the water reforms implementation in the country, being a fundamental

instrument for the defense of the population interests in Mozambique. This law gave

particular attention to the environmental sustainability issue by setting the

principles of water resources use in the country and the rights and obligations of

water customers.

In the same year, the publishing of decrees no. 25/91 and 26/91, of 14 November,

made possible the first reforms of the sector provided for in the Water Law. The first

decree defined the organization of the National Water Council (CNA), laid down in

article 17 of the Water Law, while the second one established 5 Regional Water

Authorities (ARA) that became responsible for the water resources management in

different regions of Mozambique, as provided in article 18 of the same law.

The need for a better systematization of the Water Law lines of action, with the aim

of achieving the targets laid down for the recovery of the drinking water supply and


P.027.15.R3 6

sanitation in urban, peri-urban and rural areas, was completed with the publication

of the National Water Policy in 1995, approved by Resolution No. 7/95, of 23 August,

succeeding to the Water Law of 1991 and the democratic reforms carried out in the

country. The National Water Policy, which establishes the general principles

common to all water sub-sectors in the country (water supply, sanitation, drainage

and water resources), also promoted the introduction of private sector participation

in the provision of public services with the aim of improving the quality of service

by increasing the coverage and quality provided and by recovering the costs of

investment, and of operation and maintenance through revenues resulting from a

sustainable operation of the systems, and also of improving the capacity of

investment in the water sector.

Through a partnership with the World Bank, the Government of Mozambique

developed in 1997 a restructuring program for the water sector, integrated into the

public policies for the sector. The First National Water Development Program (PNDA

I) defined the strategy adopted for private sector integration and participation in the

water sector development in the following years, within the framework of the

reforms advocated by the Mozambican Government. Between 1998 and 1999, the

Second National Water Development Program (PNDA II) began to be prepared

aiming at the promotion of private sector participation through concession

contracts, operation or management contracts, thus consolidating the reforms in

progress of the Mozambican water services.

As recommended by the National Water Policy of Mozambique in 1995, Decree No.

72/98, of 23 December, established the institutionalization and the legal framework

of the water services QGD, which promoted the integration of private management

in the water sector in Mozambique, as a necessary condition for improving the

quality and efficiency of the water services. This Decree lays down the principles and

rules for the delegation of the operation and management of water supply systems

to private-law entities, according to the PNDA, having as a priority the protection of

public interests and the investment required for the development of the systems.

The institutional reforms adopted by the Government of Mozambique in the scope

of QGD resulted in establishment of two autonomous public entities which, since

then, have had a key role in the Mozambican water sector development, respectively

the Fund for Water Supply Investment and Assets (FIPAG) and the Water Supply

Regulatory Council (CRA).

Decree No. 73/98, of 23 December, established FIPAG as the principal owner of the

water supply systems of the large cities in the country and the one responsible for

asset management under the provisions of the National Water Policy. This entity


P.027.15.R3 7

was given a mandate by the Government for the management of the program for

public investments in water supply systems under its ownership.

Some revisions were made to that Decree, and the roles and responsibilities of the

entity have been redefined in two different moments. At the end of 2010, the Decree

63/2010, of 27 December, reviewed the Decree No. 73/98 and amended its article 4

by redefining the roles and responsibilities of FIPAG, assigning to this entity the

necessary competence to ensure the transitional management and operation of the

water supply systems not yet under concession or still under contract management.

Two years later, the Decree 7/2012, of 10 May, also assigned to FIPAG the

competence to propose the establishment of commercial companies, foundations or

associations whose object is the water service provision, and whose majority of the

shares are held by FIPAG. The same Decree removed the powers of water services

provision from FIPAG, as provided for in Decree No. 73/98, thus promoting the full

opening of the water sector to private participation. FIPAG, however, remains

responsible for the transitory management and operation provided for in Decree

63/2010. The decree 48/2012, of 28 December, approved the new Organic Statute

and operation of FIPAG, revoking the Organic Statute approved in 1998.

Also in the scope of the QGD legal framework, Decree No. 74/98, of 23 December,

established an independent regulatory authority for the water sector, the Water

Regulatory Council (CRA) since 2011. This body was established as the entity

responsible for ensuring the defense of customer interests and the economic

sustainability of the water utilities under its regulation, through the reconciliation

of interests of operators and their customers. This authority became responsible for

the publication of regulations specific to the water sector operation, particularly

concerning its economic, technical and social regulation. Ministerial Diploma No.

92/2002, of 12 October, approved the Rules of Procedure of CRA, as established and

provided for in Decree No. 74/98.

The National Water Policy was reviewed and updated about a decade later, at the

moment of the publication of resolution 46/2007, of 30 October. The revision of the

objectives and policies of the water sector was carried out taking into account the

water service evolution, as a result of the reforms implemented in the sector (in

particular the QGD and the creation of FIPAG and CRA), and the new global goals set

for the sustainable economic and social development. In particular, the revision of

2007 established medium (2015) and long term (2025) objectives to the water

sector, with a focus on efficient and responsible water resources management,

ensuring universal access to safe and reliable drinking water, and the improvement

and universal access to sanitation services. These objectives aim to achieve a

reduction in the number of people without access to water supply and sanitation to

50%, increase the coverage of water supply services to 70%, both in rural areas as


P.027.15.R3 8

in urban and peri-urban areas, and ensure minimal coverage of sanitation services

to 67% in urban areas and 60% in rural areas. The National Water Policy focuses

also on promoting environmental conservation and reducing the country's

vulnerability to floods and droughts, as well as on the establishment of

comprehensive and coordinated management agreements, for the promotion of

social and economic cohesion and the regional integration of Mozambique.

On 13 of May 2009, by Decree No. 18/2009, the QGD's field of activity has been

extended to public sanitation systems and to secondary systems. So, this Decree

called for the progressive expansion of the QGD aimed at the restructuring of

existing systems, in order to ensure their self-sustainability and the integration of

sanitation services. A classification of the systems was introduced for the first time

in Mozambique, according to their characteristics, distinguishing urban systems

from rural systems and primary systems from secondary systems. In the same

document the extension of CRA mandate for the regulation of all water supply and

sanitation systems was also provided for Decree No. 18/2009 also established the

Water and Sanitation Provincial Councils (CPAS), organs of consultation of

Provincial Governments, which aim at facilitating the involvement of the provincial

and local authorities in the development of secondary water supply and sanitation

systems.

The Water Supply and Sanitation Infrastructure Administration (AIAS) was

established by Decree No. 19/2009, of 13 May, simultaneously with the publication

of Decree No. 18/2009. AIAS is the body responsible for the management and

improvement of water supply and sanitation systems in the country, similarly to

FIPAG for the larger systems. The Organic Statute and Rules of Procedure that

govern the conduct of the entity were approved, respectively, by resolution No.

34/2009, of 31 December, and by the Ministerial Diploma No. 256/2011, of 14

November.

After the expansion of the QGD and the establishment of AIAS in 2009, published in

Boletim da República (BR), which is the official gazette of Mozambique, the Decree

No. 23/2011, of 8 June was enacted and amended the designation of CRA to its

current title as Regulatory Water Council. The Decree reviewed and clarified the

legal regulatory mechanisms and tools that provide legal support to the regulatory

authority, extending its regulatory powers to the regulation of all water supply and

sanitation systems, in regulatory regimes appropriate to the technical and specific

management conditions of the systems. The regulatory authority has been assigned

as responsible for ensuring the balance between the interests of the State and of

customers, ensuring, at the same time, the quality of service provided and the

operators’ economic sustainability which are key elements for the socio-economic

development and poverty reduction in the country.


P.027.15.R3 9

The same Decree provided for the creation of an Advisory Council as the organ of

consultation of CRA, with integration of several water sector stakeholders (including

members of the civil society) and assigned regulatory power to CRA for the

definition of Regulatory Agreements (AR) and Regulatory Frameworks (QR), which

are the base regulatory instruments. This Decree also introduced the regulatory

taxes distribution system between CRA and the State, as well as the possibility of

delegation of powers by CRA to third parties, excluding the exclusive powers of the

Board.

In January of 2012 it was published the National Strategy for Urban Water and

Sanitation 2011-2025, whose aim is to give continuity to the implementation of

effective water policy measures and strengthen the objectives and policies

established in the same scope. This strategy defined as short-term goals (2015) the

MDG, and as medium term (2025) the goals of universal coverage and sustainability

of drinking water supply and sanitation services in Mozambique. This publication,

in line with the National Water Policy, defined as fundamental for the sustainability

of the systems, the separation of functions within the water sector to work for its

sustainable growth and to guarantee the good quality of public services provision,

together with the stimulation of continuous investments required for the sector

growth.

The expansion of the QGD scope to public water systems is specified through

publications in BR. It took place through the publication of the Ministerial Diploma

No. 67/2004, of 21 April, which extended the QGD to the supply systems of the cities

of Xai-Xai, Chokwe, Inhambane and Maxixe and the responsibility for their

management was transferred from the local authorities to FIPAG. The same

happened later to the water supply systems of the cities of Tete, Moatize, Chimoio,

Manica, Gondola, Lichinga, Cuamba, Nacala and Angoche, which were also included

in the QGD since 2009, when the Ministerial Decrees 177/2009 and 178/2009, of 15

July were published. Ministerial Diploma No. 237/2010, of 27 December, provided

a table with the identification of the secondary water supply systems and the

sanitation systems whose management responsibility was transferred from the

local authorities to AIAS.

2.2.2 Policies and regulations of the water sector in Mozambique

Several legal instruments have been defined by the Government of Mozambique,

which support the regulatory activity of CRA and structure the activities of the

sector. The Water Tariff Policy (PTA), which was approved and published by the

Council of Ministers through Resolution No. 60/98, of 23 December, established the

fundamental principles to be considered in the definition of tariff systems, with

particular application to the different uses of water resources. The priorities set by


P.027.15.R3 10

the document concern the definition of socially and economically responsible tariffs

for each tariff scheme, with the aim of operation and maintenance (OPEX) cost

recovery in the short term and the recovery of investment costs (CAPEX) in the

medium-term.

In addition to the above, the document defines also the key principles to be observed

in tariff systems setting, promoting the adoption of socially responsible principles.

It identifies the user-pays and the polluter-pays principles, the principles of equity,

of environmental protection and the efficient use of water, while stimulating the

sustainable and participatory management of the systems through the progressive

decentralization of regulation and management powers to local authorities. In sum,

the document lays down the basis for tariff systems setting regarding raw water,

drinking water in urban and rural areas, conventional and low-cost sanitation and

water for irrigation.

It should be noted that in 1999 specific standards were promulgated through Decree

No. 80/99, of November 1 concerning the application of value added tax (VAT) to

drinking water supply services.

The resolutions issued by the regulatory authority on the tariffs of the primary

systems are published in the BR. For example, with the publication of Resolution No.

2/2006, of 14 June, CRA adopted the proposal submitted by FIPAG concerning

Indexing Formulas of Water tariffs. According to Law No. 6/2003, of 18 April,

referring to the period of Vacatio Legis, any decisions published in BR shall enter

into force fifteen days after publication, unless a specific date is set at the time of its

publication.

In 2010 three resolutions were published concerning the tariff system of FIPAG.

Resolution No. 1/2010, of 18 August, presented the average Reference Tariffs of the

primary water supply systems proposed by FIPAG, and approved by the Board of

CRA after assessment.

Resolution No. 2/2010, of 22 September, aimed at the implementation of specific

measures to ease the cost of living, through the adoption of a mechanism for cross-

subsidization and/or direct subsidy to the residential connection fee for FIPAG's

systems, in particular for lower income populations on the outskirts of cities.

Resolution No. 3/2010, of 27 October, introduced a mechanism of compensation for

the cost of new residential connections, generating additional revenue for operators

through the adoption of a special tariff for some specific consumption. The

additional revenue results from the difference between the general tariff and the

special tariff, thus raising extra revenues to water utilities. More recently, a new

proposal for adjustment of drinking water tariffs was approved by Resolution No.


P.027.15.R3 11

2/2015, of 10 August, setting new Reference Average Tariffs, specific to each system,

and fixed by categories and consumption blocks.

The Regulation of Public Water Distribution and Sanitation Systems updated the

existing regulations at the time, dating back to the late 1940s, which was

inconsistent with the reality and context of the country. The new regulations,

approved by Decree No. 30/2003, of 1 July, defined the technical conditions for the

public water systems to ensure a good overall operation and thus ensure the public

health and safety of all those involved in their operation/use.

The outdated regulations existing at the time and the political reforms promoted by

the Government of Mozambique resulted in the publication of Decree No. 15/2004,

of 15 July, which approved the new regulation for the Building Water Distribution

and Wastewater Collection Systems. These regulations redefined the technical

conditions required to ensure proper operation of distribution systems and

sanitation facilities for the preservation of safety, hygiene and comfort in buildings,

serving also as the basic criterion for licensing by the license grantor.

The Regulation of Water Licenses and Concessions, approved by Decree No.

43/2007, of October 30, was published following the adoption of the National

Strategy of Water Resources Management by the Council of Ministers, on 21 of

August of the same year. The normative document was published with the aim of

implementing effectively the proposed National Water Policy concerning the

promotion of regulation of water resources management, particularly through the

licensing or granting of rights of use and exploitation of inland waters to natural or

legal persons, either public or private, national or international that are authorized

to act in the water sector in Mozambique.

This normative instrument determined that the State is responsible for the water

sector management through the Ministry governing the sector, and assigned to local

governments the responsibility of establishing the priorities concerning the

development of strategic projects regarding water use. The same document

assigned to ARA the licensing or concession responsibility concerning the use of

water resources. Within the framework of the National Strategy of Water Resources

Management of Mozambique, this regulation also highlighted the principles of

equity and gender balance in the development and implementation of management

policies, thus promoting the strengthening of the role of women in decision-making,

planning, monitoring and management of the water supply systems operation and

maintenance.

The Model Contract for drinking water supply, approved by CRA through

Deliberation No. 1/2008 of 4 June, was introduced after a process of public


P.027.15.R3 12

consultation with customers. The document, called a membership agreement,

establishes the general conditions of the water supply contract, defining the

relationship between operators and customers in public water supply services. The

document is applied in the systems integrated in the QGD since the date of the

approval. In 2010 the MOPH published the Ministerial Diploma No. 7/2010, of 6

January, which approved the Licensing and Water Concessions Models in order to

standardize the mechanisms adopted by ARA in the licensing and assignment

concessions for the private use of water.

The Manual for the Implementation of Management Models in Small Water Supply

Systems (PSAA) was approved by Ministerial Degree No. 5/2006, of 17 January. This

manual was supported by the Manual of Implementation of Rural Water Supply

Projects (MIPAR), a normative and regulatory instrument for the implementation of

rural water supply projects published in Ministerial Diploma No. 23/2002, of 13

March, which puts into practice the operational principles set out in the National

Water Policy. As such, the 2006 manual was also established as an instrument for

the National Water Policy operationalization, with the aim of enabling the private

sector involvement in the management of PSAA and defining the operational

procedure for small water supply systems, taking into account the need for effective

control of the operators’ activities. The manual has encouraged the transition to new

autonomous management models in the rural PSAA.

Also concerning the water supply and sanitation systems in rural areas, the National

Program for Rural Water Supply and Sanitation (PRONASAR) was approved through

the Ministerial Diploma No. 258/2010 of 30 December. This document, whose main

purpose is to reduce the existing imbalance in coverage of services in the provinces

and districts of Mozambique, aims to increase the sustainable provision of water

supply and sanitation services through the implementation of the proposals

outlined in the Strategic Plan for Rural Water and Sanitation (PENA-ASR), in the

strategic pillars of the water sector defined by the Government in the five-year plans

and in the Human Capital of the action plan for the reduction of absolute poverty

(PARPA II, 2004 2011). The PRONASAR resulted from a joint effort between the

Government of Mozambique, the development partners, non-governmental

organizations (NGOs) acting in the country, as well as the members of the

community, the private sector and other stakeholders.

Similarly to the Action Plan for the Reduction of Absolute Poverty (PARPA),

approved on May 3, 2011 by the Council of Ministers, the Action Plan for Poverty

Reduction (2011-2014, PARP), focuses on fighting poverty and establishes

objectives of human and social development in which the provision of essential

services associated with the water sector are included. The objectives set out in the

document focus on the increase of availability and access to water supply and


P.027.15.R3 13

sanitation services in rural, urban and peri-urban areas, meeting the provisions set

in the 2007 revision of the National Water Policy.

2.2.3 Regulations and laws associated with the water sector

The Environmental law (Law No. 20/97, of 1 October) defined the measures and

legal basis for the management and proper use of environmental resources required

for the sustainable development of the country, applicable to all public or private

activities which may directly or indirectly influence the environment. The

Environment Law promotes the rational use and management of the environmental

components, reinforcing the role of water in the sustainable development of the

country. The same law also encouraged equality and gender equity in the access and

use of natural resources in Mozambique.

The Regulations on Environmental Quality Standards and Effluent Emissions,

approved by Decree No. 18/2004, of 2 June, assigned to the Ministry for the

Coordination of Environmental Action (MICOA) the responsibility for supervising

the allowable concentration of pollutants in wastewater to be discharged into water

courses. The document established the parameters of water quality assessment,

which vary according to the category of water use.

The Drinking Water Quality Regulations were established by the Ministry of Health

(MOH) through the Ministerial Diploma No. 180/2004 of 15 September, within the

framework of the Ministry's responsibilities in the strategic development and

implementation of policies of public hygiene in the water sector. The regulations aim

to ensure the minimum level of drinking water quality by defining water quality

parameters and the methods for carrying out appropriate control at different stages

of the water supply system, ranging from water abstraction to distribution.

The Government of Mozambique has approved the Regulations on the

environmental impact assessment procedure through Decree No. 45/2004, of 29

September. This regulation specifies the conditions for carrying out environmental

impact assessments, in particular in public or private activities with potential

negative influence on the environment, including projects with characteristics and

specific dimensions within the infrastructure, namely transport systems, aqueducts

and canals of water for human consumption or for industrial or other uses, including

wastewater treatment facilities.

Equally relevant for the water sector regulatory activity development by CRA, the

Regulations for the Prevention of Pollution and Protection of the Marine and Coastal

Environment were published in BR, by Decree No. 45/2006 of 30 November. This

document laid down the terms for the competent authorities’ performance towards


P.027.15.R3 14

prevention and mitigation of pollution arising from the discharge of illegal

substances.

Currently, under the tutelage of DNGRH, the National Disasters Management

Institute (INGC) was established by Decree No. 38/99, of 10 June, at the time under

the Ministry of Foreign Affairs and Cooperation (MINEC). In 2006 the Council of

Ministers approved the master plan for the prevention and mitigation of natural

disasters, prepared by the INGC. More recently, Law No. 15/2014, of 20 June,

established the legal framework of the disaster management, including prevention,

mitigation of effects, and development of relief and assistance actions, which

provides for the implementation of disaster management in a decentralized manner.

Among others, the law considers the management plans of natural disasters, such as

floods and droughts, which are directly related to the water sector.

The Water Research Institute (IIA) was created by Decree No. 41/2010, of 20

October, with the purpose of developing scientific research in the water field,

improving the country’s capability concerning the research level and scientific

investigation in the water sector and the development of technologies necessary for

the social and economic development of Mozambique in a sustainable way.

On 13th October 2015, the Council of Ministers, at its 36th ordinary session, passed a

Decree which, when published, will approve the Regulations for the Licensing of

Drinking Water Supply Services by private contractors. These regulations are the

result of the efforts that have been developed for the implementation of a legal

framework that considers Private Water Suppliers (FPA) and for ensuring the

harmonious coexistence of public and private services, to protect the user interests.

These regulations were published by Decree no. 51, of 31 of December 2015, and

entered into force in 28 of June 2016.

2.2.4 Other legal document with impact in the water sector

Other legislative packages were issued by the Government, in the context of other

political reforms initiated in the 1990s. Some of the laws published are indirectly

related to the water sector, but are relevant to its current legal framework.

Since 1994, the Mozambican Government began issuing various legislative packages

adopting the necessary legislation for the gradual decentralization of government

functions. With the publication of these laws, the municipalities acquired more

powers, including powers in the field of water supply and sanitation systems.

Law No. 3/94, of 13 September, set the institutional framework of the municipal

districts, granting them legal personality and autonomy. Law No. 9/96, of 28 August,

institutionalized the Local Power, promoting the local development and


P.027.15.R3 15

administrative decentralization, trying to involve citizens in solving problems of

local communities. A year later, the Mozambican Government set up Local

Authorities through Law No. 2/97, of 18 February, and of Laws 7, 8, 9 and 10/97, of

31 May, and proclaimed the competence of municipalities for investments in local

water supply and sanitation systems through Law No. 11/97, of 31 May (Law of

Local Finances).

These competences of the municipalities were later reinforced by Law No. 8/2003,

of 19 May, which established new principles and rules for the organization,

competence and operation of the local authorities, and by Law No. 1/2008, of 16

January, which defined the financial, budgetary and patrimonial regime of

municipalities, assigning them powers for public investment in the area of basic

sanitation, including local water supply and sanitation systems.

Law No. 11/99, of 8 July, was enacted in 1999. This law normalized, updated and

improved the existing legal framework in Mozambique concerning the resolution of

conflicts, strengthening the means of arbitration, conciliation and mediation as

alternative means to the traditional judicial system,

The Mozambican Government published by Decree No. 54/2005 of 13 December,

the Regulations for Public Works Contracting, Supply of Goods and Services to the

State. This regulation establishes the legal framework to be respected within the

public contracting rules, with the aim of comprising the supply of goods and services

to the State, including work, consultancy and concessions or other delegations. The

Decree No. 15/2010 of 24 May, reviewed the previous regulation aiming to make

the procurement procedures faster and more flexible. This decree was recently

repealed by Decree No. 5, of 8 March of 2016, in order to give greater transparency

and ensuring effective implementation of procurement procedures.

Two years later, the Competition Policy, adopted through Resolution No. 37/2007,

set out the Government's strategy for the regulation of competition in Mozambique.

As a result, the Competition Regulatory Authority (ARC) was established as an

independent entity, responsible for the implementation of the competition legal

regime in the country by Law No. 10/2013, of 11 April. The Organic Statute of ARC

was later approved by Decree No. 37/2014, granting it regulatory and supervisory

powers as well as the power to impose penalties in the competition market of

Mozambique. The Regulations for the Law of Competition of Mozambique entered

into force with the publication of Decree No. 97/2014, of 31 December, establishing

competition rules to be applied in the Mozambican market, and endowing ARC with

the necessary tools for the performance of its activity.


P.027.15.R3 16

The Laws aiming at a greater involvement of the private sector in large projects

(PGD), Business Concessions (EC) and public-private partnerships (PPP) also have

influence on the water sector activities framework. Law No. 15/2011, of 10 August,

laid down the guidelines for the hiring process, implementation and monitoring of

these types of contract, trying to ensure better quality, efficiency and effectiveness

in resource exploration and in the provision of goods and services to society. The

law was strengthened by Decree No. 16/2012, of 4 June, which approved the

Regulations of the law on PPPs, PGD and EC, proposed in Law No. 15/2011. It

detailed the responsibilities of the bodies involved in the processes of partnerships

with the private sector, particularly concerning the sector supervision and the

financial supervision of enterprises.

2.2.5 Main legislation to be considered

The table presented below summarizes all legislation considered and summarized

in this chapter, by category and chronological order of publication.

Table 1 – Main documents concerning the water sector legal framework of Mozambique

LEGAL DOCUMENT THEME

Law No. 16/91, of 3 August Water Law

Decree No. 25/91, of 14 November Composition and Functions of CNA

Decree No. 26/91, of 14 November Creation of ARA

Ministerial Diploma No. 134/93, of 17 November

Statutes of ARA-Sul

Law No. 3/94, of 13 September Institutional Framework of Municipal Districts

Resolution No. 7/95, of 23 August National Water Policy

Law No. 9/96, of 28 August Local Power Institutionalization

Law No. 2/97, of 18 February Local Authorities

Laws No. 7, 8, 9 and 10/97, of 31 May Competences of the Municipalities for the Water Sector

Law No. 11/97, of 31 May Law of Local Finances

Law No. 20/97, of 1 October Environment Law

Decree No. 72/98, of 23 December QGD Institutionalization

Decree No. 73/98, of 23 December Creation of FIPAG

Decree No. 74/98, of 23 December Creation of CRA

Resolução No. 60/98, of 23 December Water Tariff Policy


P.027.15.R3 17


Decree No. 38/99, of 10 June Creation of the National Institute for Disasters Management (INGC)

Law No. 11/99, of 8 July Arbitration, Conciliation and Mediation

Decree No. 80/99, of 1 November The Application of VAT to Drinking Water Supply

Ministerial Diploma No. 78/2001, of 23 May

Rules of Procedure of DNA

Ministerial Diploma No. 23/2002, of 13 May

Manual for the Implementation of Rural Water Supply Projects

Ministerial Diploma No. 92/2002, of 12 October

Rules of Procedure of CRA

Law No. 6/2003, of 18 April Period of Vacatio Legis

Law No. 8/2003, of 19 May Principles and Rules of the Organization, Competence and Operation of Local Authorities

Decree No. 30/2003, of 1 July Regulation for Public Water Distribution and Sanitation Systems

Ministerial Diploma No. 67/2004, of 21 April

Extension of the QGD: Transfer Systems of Xai-Xai, Chokwe, Inhambane and Maxixe to FIPAG

Decree No. 18/2004, of 2 June Regulations on Environmental Quality Standards and Emission of Effluents

Decree No. 15/2004, of 15 July Regulation for the Building of Water Distribution and Sanitation Systems

Ministerial Diploma No. 180/2004, of 15 September

Drinking Water Quality Regulations

Decree No. 45/2004, of 29 September Regulations on the Environmental Impact Assessment Process

Decree No. 54/2005, of 13 December Regulation of Public Works Contracting, Supply of Goods and Services to the State

Ministerial Diploma No. 5/2006, of 17 January

Regulation for the Small Systems/Manual for Implementation of the PSAA Management Models

Resolution No. 2/2006, of 14 June Approval of Water Tariffs Indexing Formulas (FIPAG)


P.027.15.R3 18


Decree No. 45/2006, of 30 November Regulation for the Prevention of Pollution and Protection of the Marine and Coastal Environment

Resolution No. 37/2007, of 12 November

Competition Policy of Mozambique

Resolution No. 43/2007, of 30 October Regulation of Water Licenses and Concessions

Resolution No. 46/2007, of 30 October Revision of the National Water Policy

Law No. 1/2008, of 16 January Financial, Patrimonial and Budgetary Regime of the Municipalities

Deliberation No. 1/2008, of 4 June General Conditions of the Water Supply Connection Contract

Decree No. 18/2009, of 13 May Extension of the QGD to the Water Supply in all Urban Centers and to the Sanitation Systems

Decree No. 19/2009, of 13 May Creation of AIAS

Ministerial Diploma No. 177/2009, of 15 July

Extension of the QGD: transfer of the systems of Tete, Moatize, Chimoio, Manica and Gondola to FIPAG

Ministerial Diploma No. 178/2009, of 15 July

Extension of the QGD: transfer of the Systems of Lichinga, Cuamba, Nacala and Angoche to FIPAG

Resolution No. 34/2009, of 31 December

Organic Statute of AIAS

Ministerial Diploma No. 7/2010, of 6 January

License and Water Concession Models

Decree No. 15/2010, of 24 May Review of the Procurement Regulation of Public Works, Goods and Services to the State

Resolution No. 1/2010, of 18 August Adjustment of Drinking Water Tariffs under the QGD

Resolution No. 2/2010, of 22 September

Revision of New Household Connection Rates for Drinking Water

Decree No. 41/2010, of 20 October Creation of the Water Research Institute

Resolution No. 3/2010, of 27 October Compensation Mechanism for the Cost of New Residential Connections Tax


P.027.15.R3 19


Decree No. 63/2010, of 27 December Amendment of Article 4 of Decree No. 73/98 of 23 December

Ministerial Diploma No. 237/2010, of 27 December

Identification of Secondary Water Supply Systems and of Sanitation Systems Transferred to AIAS

Ministerial Diploma No. 258/2010, of 30 December

National Program for Rural Water Supply and Sanitation (PRONASAR)

Decree No. 23/2011, of 8 June Renaming the Water Supply Regulatory Council (CRA) to Water Regulatory Council (CRA);

Law No. 15/2011, of 10 August Implementation of PPP, PGD and CE

Ministerial Diploma No. 256/2011, of 14 November Rules of Procedure of AIAS

Decree No. 7/2012, of 10 May Extension of FIPAG Competences

Decree No. 16/2012, of 4 June Regulations of the Law on PPP, PGD and CE

Ministerial Diploma No. 142/2012, of 11 July Revision of DNA Rules of Procedure

Decree No. 48/2012, of 28 December New Organic Statute and Operation of FIPAG

National strategy for Urban water and sanitation 2011-2025, of January 2012

Law No. 10/2013, of 11 April Creation of the Competition Regulatory Authority

Law No. 15/2014, of 20 June The Legal Framework for the Management of Natural Disasters

Decree No. 37/2014, of 1 August Organic Statute of ARC

Deliberation No. 6/2014, of 25 November

Review for the Extension of the Revised Concession Contract of the Maputo Water Supply Service

Decree No. 97/2014, of 31 December Regulation of the Competition Law of Mozambique

Presidential Decree No. 1/2015, of 16 January Extinction and Creation of Ministries

Resolution No. 19/2015, of 17 July Approval of the Organic Statute of the Ministry of Public Works, Housing and Water Resources

Resolution No. 2/2015, of 10 August Adjustment of Drinking Water Tariffs in the scope of QGD


P.027.15.R3 20


Decree No. 51/2015, of 31 December Regulations of Drinking Water Supply Licensing by Private Suppliers

Decree No. 5/2016, of 8 March Approves the Regulations for Public Works Contracting, Supply of Goods and Services Provision to the State

2.3 INSTITUTIONAL FRAMEWORK

2.3.1 Institutional actors of the water sector in Mozambique

As mentioned, MOPHRH is the Governmental agency with jurisdiction on the

application of public policies in the fields of public works, housing, urbanism,

construction industry and water resources of the country. DNAAS and DNGRH are

the organic structures of MOPHRH responsible for definition of political

management in the water sector, including the development of strategies and

investment mobilization for the management of water resources, water supply

systems and sanitation in both rural and urban areas. These entities are also

responsible for the coordination of the various actors in the sector, participating in

the development and production of legislation, regulation and technical standards

that promote the improvement of water supply services provided to the population,

the water resources better use and management, as well as the decentralization of

the sector activities.

DNAAS is, thus, the central government institution, governed by MOPHRH, to which

various functions related to the systems and water supply and sanitation services

are assigned. Among the eleven roles assigned to DNAAS, listed in the normative

diploma, for example, propose and ensure the implementation of policies, strategies,

rules, regulations and technical specifications for water supply and sanitation,

promoting investments to the construction, maintenance and expansion of

infrastructure, the development of drainage standards in urban and rural

settlements, the establishment and operation of national information systems on

water and sanitation, and the provision of technical and methodological support in

the field of water sector to local bodies of the State and local authorities.

DNGRH is defined as an agency of the Ministry with responsibility for the

formulation of proposals for policies and development strategies, conservation, use

and exploitation of water resources of the river basins of Mozambique, as well as in

the development of proposals for legislation and the regulatory framework on water

resources.


P.027.15.R3 21

Therefore, among other functions, this institution should ensure the availability of

water in quantity and quality for its different uses, ensuring the participation and

cooperation of the entities involved in water resources sharing, as well as in

monitoring and implementation of legislation and regulations. The strategic

planning for disaster situations (droughts or floods) is also under the responsibility

of DNGRH.

DNGRH is also responsible for the preparation, implementation and monitoring of

the Basin Plans, which focus on the planning of use and, conservation and

improvement of water resources of the river basins. The promotion of investments

needed to ensure the sustainable exploitation of water resources by building and

maintaining strategic means for management, storage, protection and water

transport, is also the responsibility of this institution, among other functions set out

in Resolution No. 19/2015, July 17.

Set in 1995, succeeding the Water Law of 1991 and the Decree No. 25/91 of 14

November that determined its creation, CNA is the consultative body of the Council

of Ministers and inter-ministerial coordination for the general water management

policy, being responsible for issuing opinions on relevant aspects of the sector

policy. At the beginning CNA comprised the MOHP, the Ministry of Agriculture and

Fisheries (now divided into the Ministry of Agriculture and Food Safety, and the

Ministry of the Sea, Inland Waters and Fisheries), the MINEC, the Ministry of

Industry and Trade (MIC), the Ministry of Energy and Mineral Resources (MIREME),

the Ministry of State Administration (now split into the Ministry of State

Administration and Public Services , MAE, and the Ministry of Land, Environment

and Rural Development), the MISAU and the Ministry for Environmental

Coordination and Action (MICOA, currently the Ministry of Land, Environment and

Rural Development).

ARA are public institutions endowed with legal personality, and were established as

the entities responsible for water resources management and administration,

organized on the basis of regional river basins. Under the supervision of MOPHRH,

through DNGRH, they are responsible for the operational management and

protection of water resources, including the management of the raw water quality

monitoring and of the available water resources in river basins.

The responsibilities assigned to ARA encompass the planning, assurance of the

availability and balanced distribution of water resources in the region, control of the

use and operation of water resources, environmental protection through effluents

discharge control, licensing and concession of use and operation of water resources

and implementation of taxes, or the cost-effectiveness of hydraulic infrastructure.


P.027.15.R3 22

The areas of jurisdiction of each of the five ARA (North, Center North, Zambezi,

Centre and South) are defined according to the borders and river basins of the

country. ARA-Sul, responsible for the water resources management of four river

basins of the southern region of the country (Umbéluzi River, Incomati, Limpopo

and Save) was the first of the five ARA to be established with the approval of its

statutes by the Ministerial Diploma No. 134/93, of 17 November.

The Provincial Directorates of Public Works and Housing (DPOPH), through the

Water and Sanitation Department (DAS), represent MOPHRH at the provincial level.

The local water sector planning is the responsibility of the provincial governments,

operating under the supervision of DPOPH, which own the systems of rural water

supply and sanitation. The consultation organs for the water sector of the Provincial

Governments are called provincial councils for water and sanitation (CPAS), created

within the establishment of AIAS to enable the involvement of the provincial and

local authorities in the activities of the sector.

2.3.2 Water supply and Sanitation Services

As already stated, two public institutions were created with distinct functions in the

scope of the QGD, established in 1998, respectively FIPAG and CRA,. Later, with the

extension of the QGD to all public water supply and sanitation systems, there was

the creation of AIAS as a public entity, with specific functions in the secondary water

supply and sanitation systems, while FIPAG was assigned with the responsibility for

the assets of the primary systems.

Initially established through Decree No. 73/98, of 23 December, FIPAG is the entity

responsible for attracting and managing investments for infrastructure

development of the main cities of Mozambique and for promoting a strong

partnership between public and private sectors. FIPAG’s main objective is to assure

the water supply systems economic sustainability by the monitoring and follow-up

of the fulfillment of the private operators’ contractual obligations in delegated water

supply services (e.g. concession contract), as it is in the case of water supply to the

area of Maputo, ensured by the Waters of Maputo Region (AdeM), former Waters of

Mozambique.

FIPAG is the main player of the water sector in Mozambique, with ownership of

fifteen major water supply systems which are under its management. These are

distributed in four regions, including the Northern Region (six systems - Nampula,

Nacala, Angoche, Lichinga, Cuamba and Pemba), Central Region (four systems -

Beira-Dondo, Manica, Tete and Moatize-Quelimane), the Southern Region (four

systems - Xai-Xai, Chokwe, Inhambane and Maxixe) and the region of Maputo, whose


P.027.15.R3 23

water supply system serving the cities of Maputo, Matola and Boane is the

responsibility of AdeM, through a concession contract.

Created in 2009 through Decree No. 19/2009, of 13 de May, AIAS has the role of

asset management and the responsibility for the program of public investment in

water supply and sanitation infrastructure in smaller cities, such as towns and

district headquarters out of FIPAG’s jurisdiction, and is responsible for the

sanitation services improvement. AIAS is responsible for promoting, by delegating

to private operators or other entities, the operational management, in an

autonomous, efficient and financially sustainable way of the public secondary

systems and sanitation systems under its ownership. In 2014 AIAS was liable for

132 secondary water supply systems. In contrast to the activity of FIPAG, AIAS scope

of action is carried out in systems whose investment is associated with a much

higher degree of economic risk.

Concerning the water sector regulation in Mozambique, CRA, originally created by

Decree No. 74/98, of December 23, and supported by the QGD, assumes the role of

independent regulatory authority of water supply and sanitation services in all

urban centers of Mozambique under the jurisdiction of FIPAG and AIAS, as later

established by Decree No. 23/2011, from 8 June. In its activity, CRA is responsible

for defending customer interests and for safeguarding the sustainability of private

operators, through the water services economic regulation concerning the tariff

regime, the level and quality of service, and the social regulation, including the

practices of good governance. Thus, CRA tries to balance the interests of all

stakeholders involved in the sector and promote a reliable, transparent, efficient and

fair service.

The main roles assigned to CRA are the water supply service economic regulation of

the, through QR definition and monitoring, which includes tariff setting and service

fees, as well as the quality of service provided, the promotion of conciliation of

interests between the owner and the operator, serving as a consultation forum, with

regulatory powers for the imposition of fines and other sanctions to regulated

entities for non-compliance in the scope of their functions. CRA’s roles also included

the identification of development and expansion needs, according to the existing and

future customers, ensuring the economic sustainability of the systems.

AdeM – Waters of the Region of Maputo is one of the main companies responsible

for the provision of water supply services in Mozambique, acting in the country since

1999, the year of its creation. AdeM was initially established as Waters of

Mozambique following the implementation of the water distribution QGD in

Mozambique. At first, AdeM was a corporate structure which included the French

consortium SAUR International (Société d’Aménagement Urbain et Rural) as majority


P.027.15.R3 24

shareholder, Águas de Portugal (AdP) and MAZI – Moçambique, an entity that

comprised a set of Mozambican companies. In 2002, AdP became the majority

shareholder, when SAUR left the consortium and after agreement with the

Government of Mozambique, with CRA and the World Bank. On 28 December 2010,

FIPAG signed the Purchase Agreement of AdP shares in AdeM, thus becoming a

company majority-owned by FIPAG and changing the name to the present one,

Waters of the Region of Maputo.

AdeM manages the water system that serves the metropolitan area of

Maputo/Matola/Boane, under the ownership of FIPAG, through a concession

contract, with commercial, financial and administrative functions associated with

the operation and maintenance of the system under the terms of the contract signed

with FIPAG. The system of Maputo/Matola is managed by AdeM since 1999, and the

village of Boane was included in the contract in 2011. The latest revision of the

contract held in 2014 (Deliberation No. 6/2014, of 25 November) extended the

concession contract of the system of Maputo/Matola/Boane until 2019. In 2015 it

was estimated that approximately 70% of the population of the metropolitan area

was served by AdeM.

FPA or Small Private Operators (POP) also have great relevance in the water supply

of the peri-urban population of Maputo, although they are not yet governed by CRA.

These small operators usually act in regions where the public investment in

infrastructure has not been enough to keep up with the growth of cities or to satisfy

the population needs. FPA are represented by associations of small operators such

as Private Water Suppliers of Mozambique Association (AFORAMO) or the

Association of Private Suppliers of Groundwater (AMATI) which, together, gather

more than 400 FPA. Some efforts have been developed in the recent past to provide

legal support to POP, in order to protect customer interests.

Similarly to AdeM, Vitens Evides International (VEI), which is a consortium between

the Dutch water supply companies Vitens and Evides Water Company, was

responsible for the provision of water supply services and management of water

supply infrastructure to four cities in the south of Mozambique (Xai-Xai, Chókwè,

Inhambane and Maxixe) from 2003 to 2008, to five cities in Central Mozambique

(Chimoio, Gondola, Manica, Tete and Moatize) between 2006 and 2009, and

extended the contract to eight cities (adding Dondo, Beira and Quelimane) until the

end of 2012, and two cities in the north of Mozambique (Nampula and Angoche)

between 2011 and 2015. It also provided technical assistance to FIPAG in the form

of a PPP, between 2012 and 2015.

Currently, as the main partner of a Dutch consortium between SNV (Dutch

Organization of Cooperation), and the World Waternet and BoPInc, VEI provides


P.027.15.R3 25

assistance to AIAS in improving access to water and sanitation services in fifteen

peri-urban areas. In January 2015, Vitens signed a new contract of 5 years with

FIPAG for the public services management of city of Beira.

2.3.3 Other Ministries with responsibilities on the water sector

In addition to MOPHRH, directly responsible for the progress and development of

the water sector in the country, other ministries of the Government of Mozambique,

in particular the MISAU, the Ministry of Land, Environment and Rural Development

(MICOA), the Ministry of Energy and Mineral Resources (MIREME), the Ministry of

Education and Human Development (MINED), and the MINAG (former Ministry of

Agriculture and Fisheries) also have responsibilities within the activities of the

water sector development in Mozambique.

The National Directorate of Health (DNS), under the supervision of MISAU is the

competent authority for the pursuit of the objectives outlined by Drinking Water

Quality regulations and sets the parameters of water quality for residential or

industrial purposes, including food production, from rivers and other water sources

to the post treatment. So, as stipulated by Ministerial Degree No. 180/2004 of 15

September, DNS is the authority responsible for assuring the water quality control.

The powers of the entity concerning the water quality monitoring through water

sources inspections and sampling collection are distributed by various departments,

being carried out by the Environmental Health Department (DSA) and the National

Laboratory of Water and Food Hygiene (LNHAA) at the central level, by the centers

of Environmental Hygiene and Medical Examinations (CHAEM) and Water

Provincial Laboratories at the provincial level, and by the local Health Centers, at

local level.

In addition, MISAU is also responsible for the strategic development and

implementation of public hygiene policies, particularly in water supply and

sanitation services in Mozambique.

The Ministry of Land, Environment and Rural Development is responsible for

monitoring the environmental quality and promoting the development and

sustainable use of natural resources, in particular through the implementation of the

Regulations on Environmental Quality Standards and Effluent Emissions, as well as

for the development and implementation of the National Action Plan to Fight

Drought and Desertification (PAN-CSD) of Mozambique, initiated by MICOA and in

which DNA was involved.

MIREME also performs an important role in water resources management, being

responsible for the renewable energies sector which includes hydropower. As to


P.027.15.R3 26

MINED, it manages the sanitation services of schools, while MINAG is responsible

for the water supply for agriculture irrigation.

The Administrative Court of Mozambique is responsible for the annual audit of CRA

accounts and activities.

2.3.4 International development partners

Several Bilateral Development Support Agencies play an important role in the fight

against poverty in Mozambique, in particular through the development of policies,

capacity building of institutions and support to the water supply and sanitation

infrastructure development. The main entities to support the development of the

water sector of Mozambique are Millennium Challenge Corporation (MCC), an

American independent agency of external aid, CIDA (Canadian International

Development Agency), DFID (Department for International Development) of the UK,

the Irish Aid, SDC (Swiss Agency for Development and Cooperation), ORIO (Facility

for Infrastructure Development), financed by the Ministry of Foreign Affairs of

Holland, JICA (Japan International Cooperation Agency), the Cooperation of the

Portuguese speaking countries (CPLP) and the French Agency of Development

(AFD).

The NGOs have also been actively involved in the supervision of government plans

and policies adopted in the water sector in Mozambique, as well as in the provision

of institutional technical assistance, with particular focus on the rural areas, being

important partners for the water sector sustainable development in this country.

Among the NGOs involved in the water sector of Mozambique there are amongst

others, organizations such as Magariro, from Mozambique, WaterAid, the largest

international organization working in the water sector in Mozambique, since 1995,

the Spanish ISF (Inginiería Sin Fronteras), IRD (International Relief & Development)

of the United States, and the WSUP (Water and Sanitation for the Urban Poor), which

have been playing a key role in the development of the sanitation service regulation.

The development of the water sector of Mozambique would not be possible without

the essential funding of multilateral cooperation with International Financial

Institutions (IFI). Multilateral cooperation with IFI represents business

opportunities and the water sector development as well as the possibility of

international partnerships for local businesses, boosting opportunities for financing

of investment projects, purchase of goods, works and services through contests, and

provision of advisory services and technical assistance, which are essential for the

water sector development in Mozambique.

The main IFI performing in the water sector of Mozambique are the World Bank, the

European Investment Bank (EIB) and the African Development Bank (ADB). They all


P.027.15.R3 27

have a significant impact on increasing access and use of the water supply and

sanitation services. The ones with a major contribution have been, without doubt,

the World Bank-related institutions. The European Union (EU) actively participates

in promoting the water sector development of Mozambique through the fund Water

Facility, which finances the Project for Water Supply to Maputo. It should be noted

that CRA has benefited a lot from the cooperation with the World Bank, and that its

accounts, because of this partnership, are subject to external audit, in addition to the

audit conducted by the Administrative Court of Mozambique.


P.027.15.R3 28

3 MARKET STRUCTURE AND WATER SECTOR PERFORMANCE IN

MOZAMBIQUE

3.1 OVERVIEW

According to the latest estimate by the National Institute of statistics (INE) of

Mozambique, the country has a population of about 26.5 million in 2016, although

there are estimates that point to a higher number. Considering the last census

conducted in 2007 (20.5 million), this means that the country had an average annual

growth of about 2.82% in the last decade. It is estimated that 68% of the

Mozambican population lives in rural areas, and the remaining is distributed by the

cities of the Mozambican territory, particularly in Maputo, Matola, Beira and

Nampula. According to INE, the average life expectancy at birth is 53.5 years.

Mozambique is considered a nation of low development, and is in the “top-10” of the

poorest countries in the world, occupying the 180th position in the Human

Development Index (HDI) ranking of the United Nations, in 187 countries. There has

been a positive growth in the gross domestic product (GDP) in the recent past, with

growth rates of around 7% per year, due to the strong influence of large projects

running on various sectors of the country that have supported the country's

economic growth. The strong potential of the country in the mining sector, due to

the availability of mineral resources such as coal and natural gas, can also contribute

positively to the country's economic growth in the coming years.

However, and despite the strong economic growth and the implementation of

programs to fight poverty, more than half of the Mozambican population continues

to live below the poverty line, on less than 1 dollar a day. More than 80% of poor

families inhabit rural regions of the country.

The territory of the Republic of Mozambique comprises 799,380 km2, of which only

about 1.6% corresponds to inland waters, equivalent to approximately 13,000 km2.

The geographic location of Mozambique, facing the Indian Ocean, exposes the

country to a tropical climate, characterized by periods of monsoon and dry periods

throughout the year. The large extension of the territory from North to South (the

country extends for over 2,500 km) together with its location in an intertropical

zone, causes climatic differences from region to region. So, while the dry tropical

climate periods extend between four to six months in the Central and Northern

regions of the country, the dry weather extends up to nine months in the South, often

putting at risk the availability of water for human consumption in some regions.

The orography of the country, characterized by mountain ranges on land borders

(27% of the territory has altitudes above 1000 meters), coupled with an extensive


P.027.15.R3 29

coastline with altitudes of less than 200 meters (44% of the total area of

Mozambique) and the tropical climate that characterizes the country, generates

several rivers, distributed by 15 major watersheds.

More than half of the available water resources in Mozambique have origin in

neighboring countries (54%). The availability of water resources, taking into

account the weather conditions and the territory orography, varies from region to

region, estimating a total superficial runoff of about 216 km3/year, which is

equivalent to an availability of nearly 11,500 m3 per person per year, according to

the available studies (ÁguaGlobal, 2014).

The average annual rainfall in Mozambique is approximately 1000 mm/year, with a

wide variation in the values recorded in different years. Rainfall distribution by the

country is variable from region to region, influenced also by the duration of the

periods of drought, reaching values between 1000 and 2000 mm/year in the North

and between 500 and 1000 mm/year in the southern region. The driest region of the

country, the Limpopo Valley, in the southern region, has an average annual variable

precipitation between 300 and 500 mm/year.

The management and planning of water resources use, by the five ARA, are

fundamental to assure the availability of the raw water required for the different

types of water resource usage in the country. The following table summarizes the

water sources and availability annual averages, as well as the storage capacity of

each of the administrations responsible for the management of raw water in

Mozambique.

Table 2 – Available water resources in watershed by ARA


P.027.15.R3 30

AVERAGE ANNUAL RUNOFF STORAGE CAPACITY

Total

Origin: Mozambique (Useful volume)

Origin: Upstream

ARA Sul

20,8 km3 3,8 km3 (18%)

4,07 km3 19,6% 17 km3 (82%)

ARA Centro

19,6 km3 18,4 km3 (94%)

1,88 km3 9,6% 1,2 km3 (6%)

ARA Zambeze

106 km3 18 km3 (17%)

39,2 km3 40,0% 88 km3 (83%)

ARA Centro-Norte

35,2 km3

35,2 km3 (100%)

0,059 km3 0,17%

0 km3 (0%)

ARA Norte

34,9 km3 24,9 km3 (71%)

0,026 km3 0,07% 10 km3 (29%)

TOTAL 216,5 km3

100,3 km3 (46%) 45,2 km3 20,9%

116,2 km3 (54%)

3.2 MARKET STRUCTURE

Despite the water sector policy guidelines of Mozambique for the increased private

sector participation, reinforced under the QGD, the ownership, management and

operation of water supply and sanitation services in the country remain

predominantly provided by the public sector, even if it has not always been this way.

In the water sector development in Mozambique, the participation of FIPAG and,

more recently, of AIAS, stand out due to their size and importance in the sector. In

short, the water sector market structure in Mozambique is distributed primarily by

the entities identified in the following table.

Table 3 – Entities responsible for the management of the water sector systems of Mozambique

FIPAG The holder and the responsible entity for managing the assets of the primary water supply systems. In addition, it provides water


P.027.15.R3 31

supply services to major cities, with the exception of the cities of Maputo, Matola and Boane, whose management is the responsibility of AdeM by means of an operation, despite being also a shareholder of this company.

AIAS

The holder and the responsible entity for managing the assets of the secondary water supply systems. In the scope of QGD expansion, also AIAS holds the responsibility for the sanitation systems and for the delegation of water supply services to private operators in small cities and towns.

Local Communities

Locais

They are the support of water supply and sanitation services in rural areas (e.g. Community-led Total Sanitation initiative - SANTOLIC).

FPA and PSAA

Operating mainly in peri-urban (FPA) and rural (PSAA) areas. They are more than 1300 (about 500 and 800 FPA PSAA)1 and serve more than 20% of the Mozambican population.

3.2.1 FIPAG

As already mentioned, FIPAG is the main player in the water sector in Mozambique.

FIPAG owns and has under its management 15 water supply systems, spread over

four regions (Great Maputo, Southern region, Central region and Northern region)

that have been integrated into the framework of the QGD at different moments, with

a potential population served of around 5.5 million inhabitants, as detailed below.

The region of Great Maputo includes the cities of Maputo, Matola and Boane, which

are supplied by the Waters of Maputo Region, S.A. – AdeM, a water system under

private management (even though a public company) under the terms of the

Concession Contract signed with FIPAG, since 1999.

FIPAG is responsible for the management of the water supply systems of the

remaining regions and comprises four water supply systems in the Southern region

(in the cities of Xai-Xai, Chókwè, Inhambane and Maxixe), as well as the systems in

the Central region of the country (Beira and Dondo, Moatize and Quelimane, Manica

and Tete) and six systems in the Northern region (Nampula, Nacala, Angoche,

Lichinga, Cuamba and Pemba).

The following figure provides the location and the years when the water supply

systems started to be a responsibility of FIPAG under the terms of QGD.

1ÁguaGlobal, 2014.


P.027.15.R3 32

Figure 1 – Systems under FIPAG’s management (CRA, 2015)

In the scope of the QGD, the systems currently under FIPAG’s responsibility should

be under the private sector management. However, reality shows that this is not the

case in most of these systems. FIPAG is the only shareholder of the companies that

operate in the North, Centre and South of the country, and is also responsible for the

water supply services operation. In these systems, FIPAG establishes contracts

based on results with its staff with the aim of improving the systems and services

performance.

In the region of Maputo, the operation is performed through a concession contract

with a private operator (AdeM operates the main system and five small private

operators run services in sixteen small systems), although AdeM still has public

ownership whose majority shareholder is FIPAG itself. AdeM signed contracts with

two private operators for the operation management of the supply systems in the

neighborhoods of Maputo region. In particular, EMA is responsible for the

management of Bairro da Liberdade systems, and Machava is responsible for the

management of Boane system.


P.027.15.R3 33

FIPAG is responsible for the assets management of the primary water supply

systems, and the private operators are in charge of the services operation for a

specific time through the allocation of operation contracts of the systems by FIPAG,

whenever they prove to have the capabilities required to manage the system

efficiently and according to the terms laid down in the contract. In these cases,

private operators are responsible for the development of secondary and tertiary

networks needed for the population supply, respecting the minimum technical

standards of existing regulations, as well as the quality of service parameters set

forth in the contract.

3.2.2 AIAS

The creation of AIAS took place in the scope of the QGD expansion (beginning in

2009) and in the effort of the Government to transpose to this entity, similarly to

what happened in FIPAG, the ability to raise and manage funds for public investment

in water supply systems of small cities and towns and in the sanitation services in

order to expand and improve the provision of these services.

The Ministerial Diploma No. 237/2010, of 2 December, identifies the (secondary)

water supply systems and the sanitation systems that will be transferred to AIAS in

the scope of the QGD and provided for the gradual transference of these systems.

Until now (June 2016) the systems of Mocímboa da Praia (in the Province of Cabo

Delgado), Island of Mozambique, Ribaué, Nametil (in the Province of Nampula),

Mocuba, Mopeia (Province of Zambézia), Ulónguè (Province of Tete), Caia and

Nhamatanda (Province of Sofala) and Chibuto and Praia do Bilene (Província of

Gaza) and Moamba (in the Province of Maputo) were transferred to AIAS ownership.

It is estimated that, in the aforementioned systems, there is a potential market of

about 305 thousand inhabitants. In 2015 these systems still had very low coverage

levels, ranging from the 44% in Moamba and 5% in Nhamatanda.

The table below shows the 132 secondary systems to be transferred to AIAS. To date

(June 2016), only 3 water supply systems signed their QR, two of which have already

been signed by the end of 2011, particularly the island of Mozambique and of

Mocímboa da Praia, whereas the system of Moamba was signed in early 2016. From

these systems, only the Island of Mozambique and Moamba systems have an

operator (FIPAG on the island of Mozambique, since 2012, and Collins in Moamba,

since 2016). However, the entry of private operators into the operation of AIAS

systems is already supposed to start after signing the QR between AIAS and CRA for

these systems, many of which are already operating (e.g., Mocuba, Mopeia and

Ulónguè).


P.027.15.R3 34

Table 4 – Secondary water supply systems of AIAS

PROVINCES CITIES TOWNS

Niassa

Metangula; Marrupa; Mandimba; Insaca; Unango; Chimbonila; Malanga; Maúa; Mavago; Metarica; Mecula; Muembe; Massangulo; Nipepe

Cabo Delgado

Montepuez

Mocímboa da Praia; Chiúre; Ibo; Macomia; Mueda; Ancuambe; Balama; Mecúfi; Meluco; Muidumbe; Namuno; Palma; Nangade; Metuge; Quissanga

Nampula Island of Mozambique

Monapo; Ribaué; Namapa; Malema; Mutuali; Meconta; Namialo; Nametil; Moma; Mossuril; Murrupula; Nacala-a-Velha; Rapale; Nacarôa; Lalaua; Mecuburi; Memba; Liupo; Muecate

Zambézia Mocuba; Gurue

Alto Molócuè; Milange; Chinde; Luabo; Maganja da Costa; Morrumbala; Namacurra; Pebane; Gilé; Ile; Inhamssunge; Lugela; Mopeia; Namarroi; Nicoadala

Tete Ulónguè; Songo; Namayabue; Luenha; Chifunde; Furancungo; Fíngoe; Tsangamo; Zumbo; Manje; Mphende

Manica Catandica; Machipanda; Messica; Guro; Chitobe; Macossa; Espungabera; Sussundenga; Nhacolo

Sofala Gorongosa; Marromeu; Buzi; Caia; Inhaminga; Nhamatanga; Chemba; Chibabava; Machanga; Marringué; Muanza

Inhambane

Massinga; Vilankulo; Nova Mambone; Homoíne; Inharrime; Inhassoro; Morrumbene; Quissico; Funhalouro; Jangamo; Panda; Mabote

Gaza Chibuto

Bilene Macia; Mandlakazi; Praia do Bilene; Eduardo; Mondlane; Chilembene; Caniçado; Chigubo; Mabalane; Massagena; Manssingir; Chongoene

Maputo Namaacha; Manhiça; Magude; Xinavane; Marracuene; Bela-Vista; Moamba; Ressano Garcia

The following table presents the sanitation systems whose management, in the

future, will also be transferred to AIAS ownership, given the context of the expansion


P.027.15.R3 35

of the QGD for these systems. Note that the sanitation systems of the cities of Beira

and Quelimane are already under AIAS ownership and CRA regulation (but still with

reduced information available).

Table 5 – Sanitation systems of AIAS


Niassa Lichinga; Cuamba

Metangula; Marrupa; Mandimba; Insaca; Unango; Chimbonila; Malanga; Maúa; Mavago; Metarica; Mecula; Muembe; Massangulo; Nipepe

Cabo Delgado

Pemba; Montepuez

Mocímboa da Praia; Chiúre; Ibo; Macomia; Mueda; Ancuambe; Balama; Mecúfi; Meluco; Muidumbe; Namuno; Palma; Metuge; Quissanga

Nampula Nampula; Nacala; Angoche; Ilha de Moçambique

Monapo; Ribaué; Namapa; Malema; Mutuali; Meconta; Namialo; Nametil; Moma; Mossuril; Murrupula; Nacala-a-Velha; Rapale; Nacarôa; Lalaua; Mecuburi; Memba; Liupo; Muecate

Zambézia Quelimane; Mocuba; Gurue

Alto Molócuè; Milange; Chinde; Luabo; Maganja da Costa; Morrumbala; Namacurra; Pebane; Gilé; Ile; Inhamssunge; Lugela; Mopeia; Namarroi; Nicoadala

Tete Tete Ulónguè; Songo; Namayabue; Moatize; Luenha; Chifunde; Furancungo; Fíngoe; Tsangamo; Zumbo; Manje; Mphende

Manica Chimoio; Manica Catandica; Gondola; Machipanda; Messica; Guro; Chitobe; Macossa; Espungabera; Sussundenga; Nhacolo

Sofala Beira; Dondo Gorongosa; Marromeu; Buzi; Caia; Inhaminga; Nhamatanda; Chemba; Chibabava; Machanga; Marringué; Muanza

Inhambane Inhambane; Maxixe

Massinga; Vilankulo; Nova Mambone; Homoíne; Inharrime; Inhassoro; Morrumbene; Quissico; Funhalouro; Jangamo; Panda; Mabote

Gaza Xai-Xai; Chókwè; Chibuto

Bilene Macia; Mandlakazi; Praia do Bilene; Eduardo; Mondlane; Chilembene; Caniçado;


P.027.15.R3 36


Chigubo; Mabalane; Massagena; Manssingir; Chongoene

Maputo Maputo; Matola; Boane

Manhiça; Magude; Xinavane; Marracuene; Bela-Vista; Moamba; Ressano Garcia

3.2.3 Small private operators

In addition to the private management of the water supply systems (major cities,

small towns and villages), provided for under the QGD, at present, there are several

private operators, typically of small size, providing water supply services in various

regions of Mozambique, particularly in peri-urban and rural areas.

The growth of the activity of these small private operators in the drinking water

supply services is due to the disparity between public investment in the country and

the evolution of demand for these services, especially considering the strong

population growth in the cities in recent years, and the consequent lack (of capacity)

of service provision by the public authorities of Mozambique.

On the other hand, as a general rule, the water supply services only provide the

centers of large cities, while the network coverage in peri-urban (and rural) is quite

lower. Private water suppliers in Mozambique on the outskirts of the major cities

are, for the most part, of small size, and it is estimated that there are more than 500

operators in Mozambique of this kind (ÁguaGlobal, 2014), without counting the

individual operators (e.g. water truck) whose number is still much higher.

The small private operators ensure piped water, for the most part, equipped with

meters. The systems operated by such service providers have a number of

connections between the 200 and 2500, while the networks operated by these

operators have, on average, about 3 km and 1500 connections.

The following figure illustrates the appearance of new operators of this typology in

Mozambique over time. It is possible to observe that the growth of private operators

is more significant from 1998 onwards, coincident with the implementation of the

sector reforms, including the implementation of the water sector QGD.


P.027.15.R3 37

Figure 2 – Evolution of the number of new private water supply providers (ÁguaGlobal, 2014)

Considering the small private operators, together with more than 800 PSAA

distributed all over the country in rural areas, they stand for the water supply to

about 600 thousand inhabitants, through more than 190 thousand residential

connections existing in the entire Mozambican territory. Despite the dispersion that

occurs in this type of operators, and some uncertainty in the statistics provided,

there is a strong concentration in this market, where the six largest water supply

operators control about 20 percent of the market.

Vitens is a Dutch water supply company that operates in Mozambique since 2004,

when the first contract was signed with FIPAG to provide support for the systems

management of four cities in the south of Mozambique, Xai-Xai, Chókwè, Inhambane

and Maxixe. Since then, Vitens has been aiding FIPAG, providing technical assistance

in the water supply systems development in other cities, as provided in the water

sector institutional framework. Recently, also AIAS has performed this role in the

scope of the water supply and sanitation services of fifteen peri-urban areas. Note,

however, that Vitens is not an operator strictus sensus.

In rural areas (which are not yet directly regulated by CRA), the water service is

often provided by using scattered water sources such as boreholes, wells and

springs, and small water supply systems. In many cases, the existing infrastructure

is in poor conditions and is not at all prepared to meet the population water needs,

both concerning quantity and quality.

The table below shows the water supply systems in urban areas by operator.

Table 6 – Water services in Mozambique

OPERATORS SYSTEMS

(NO.) TERRITORY

FIPAG 15 18 cities + 3 towns

AIAS 132 5 cities + 127 towns


P.027.15.R3 38

OPERATORS SYSTEMS

(NO.) TERRITORY

Private operators of Maputo (2011) >450

Private operators of towns (2007) 7

DNA companies (2007) 6

Municipal companies (2007) 13

District companies (2007) 52

(Source: FIPAG and Proposal for the Urban Water Supply and Sanitation Strategy)

3.3 PERFORMANCE OF THE SECTOR

Despite the progress that has taken place since the beginning of the implementation

of reforms in the sector in the 1990s and the evolution in recent years, the water

sector in Mozambique still lacks major developments concerning the access to water

supply services, and especially to sanitation services. The need for development of

the water sector in rural areas is even more imperative as CRA does not have a direct

action in local water services regulation. Also for this reason, the information

available on access and quality of service in systems outside the scope of action of

FIPAG is very sparse and diffuse, and does not have the level of treatment that is

guaranteed and provided by CRA in the systems of FIPAG (it should be noted that

the quality of service regulation of the systems under AIAS responsibility is not yet

addressed similarly to FIPAG’s systems, denoting little information available).

3.3.1 Coverage of water supply services

The regions in which the water supply systems are under FIPAG's ownership, cover

a population estimated at around 5.4 million people, where the region of Maputo is

the most representative, with approximately of 2.1 million inhabitants. The least

representative system of FIPAG is the water supply system of Cuamba, which is

located in a region with about 107 thousand inhabitants. The population served by

FIPAG relative to the water supply service done through a piped network,

corresponds to more than 2.5 million people.

It is estimated that the water supply service by standpipe provides about of 1.1

million inhabitants, which is quite representative. As it would be expected, the

largest water supply network is the one of Maputo region, with about of 1.4 million

inhabitants served (although with only 66% of coverage) and the system with the

largest population served by standpipes is the system of Beira and Dondo, providing

more than 284 thousand inhabitants. The total population served by FIPAG’s

systems, taking into account both types of service, is more than 3.6 million. Still,


P.027.15.R3 39

about 1.8 million people have to resort to alternative sources of water supply,

including the POP.

The following figure provides an estimate of the population level of access to the

water supply systems in the areas under FIPAG's management.

Figure 3 – Water supply levels of service in Mozambique (based on CRA, 2015)

It should be also noted that, in 2014, the water supply systems under FIPAG's

management comprised a water supply network exceeding 5.4 thousand km, where,

once again, the system in the region of Maputo was (and is) the most representative,

with a total length of more than 1500 km. The smallest system is Cuamba system,

with a total length of approximately 35 km. The water supply service by standpipe

continues to be quite expressive, especially, taking into account the inability of the

piped network to answer the population needs and demand for water, reaching, in

2014, more than 2,2 standpipes in the systems of FIPAG. The system of the region of

Maputo is, once again, the most significant, with more than 380 standpipes in

operation, while the system of Cuamba had the lowest number of standpipes by

territory, alongside the system of Inhambane, both featuring 23 standpipes.


P.027.15.R3 40

3.3.2 Revenue and non-revenue water volume

As a whole, the water supply systems of FIPAG considered represent a volume of

more than 86 million m3 of water sold, which shows a per capita consumption daily

average of about 65 liters per inhabitant per day. Although the system of the region

of Maputo is the most relevant concerning revenue water volume, reaching a value

of more than 41 million m3, Inhambane is the system that highlights the largest value

per capita consumption, estimated at around 89 liters per inhabitant per day. On the

contrary, the system of Cuamba is the system that comprises the smallest revenue

water volume, with about of 274 thousand m3, while the Angoche system is the one

with the lowest per capita consumption value among FIPAG’s systems, with an

average of 25 liters per inhabitant and per day recorded in 2014.

The system of the region of Maputo, for the reasons already presented, is also the

system with greater water requirements, recording about 76 million m3 of water

entering the system in 2014. In contrast, the system of Cuamba presented a value of

384 thousand m3 of water entering the system. Given the values highlighted, the

system of the region of Maputo, along with the Nacala system, corresponds to the

system with the highest level of water losses, more than the 46%, whereas the

Chókwè system is the one that presents the lowest non-revenue water volume, close

to 19%. Note that not knowing the reliability of these values makes the potential of

non-revenue water volume to be greater than the values presented, given that the

systems are not pressurized for 24 hours a day.

3.3.3 Turnover

In financial terms, FIPAG’s systems represented in 2014 a turnover of 2.3 thousand

million MZN (including VAT), for a total of operating costs slightly exceeding 2 000

million MZN. This condition represents a recovery of operating costs average of 1.17.

The system with better financial results this year was the system of Tete and

Moatize, whose Average Reference Tariff, approved in Resolution No. 2/2015, 10 of

August, is 20.89 MZN/ m3, which showed a recovery of operating costs of a value

close to 1.6, while the worst result was registered in Cuamba, whose Average

Reference Tariff is of 20.03 MZN/m3 with the value of 0.64 for the cost recovery.

3.3.4 Quality of Service

In its regulatory practice, CRA regulates the quality of service of water supply

systems through a set of performance indicators, structured according to different

categories of performance targets. In particular, CRA evaluates the performance of

operators in relation to the levels of access to services, the sustainability of

companies, the level of service provided and the level of drinking water quality. The

following table summarizes the indicators considered by the regulatory authority to


P.027.15.R3 41

evaluate the operators’ performance. It also indicates the reference values for each

performance indicator.

Table 7 – Performance indicators for the quality of service overall assessment

INDICATORS REFERENCE VALUES UNIT

ACCESS TO THE SERVICE

Coverage ≥60 %

Continuity ≥16 hours/day

SUSTAINABILITY OF THE COMPANIES

Non revenue water ≤35 %

Total billing rate ≤35 %

Workers by 1000 connections ≤10 (No./1000)

Operational cost coverage ratio >1,15 -

CUSTOMER SERVICE

Complaints answered ≥100 %

Average time to answering complaints ≤14 days

Billing based on actual readings ≥85 %

DRINKING WATER QUALITY

Tested parameters ≥80 %

Compliance of parameters =100 %

The following figure presents the aggregate results of FIPAG systems relative to

some of the performance indicators considered in the quality of service

measurement. The values presented correspond to the average performance of the

primary systems of FIPAG regulated by CRA in 2014.


P.027.15.R3 42

Figure 4 – Quality of service of FIPAG’s water supply systems (2014)

The data presented in the table below show, for the same performance indicators

considered in the previous figure, FIPAG’s systems with the best and the worst

performance, respectively, in the year 2014.

Table 8 – FIPAG systems with best and worst quality of service evaluation (2014)

INDICATORS BEST PERFORMANCE

WORST

PERFORMANCE

ACCESS TO THE SERVICE

Coverage 100%

(Xai-Xai, Chókwè, Inhambane)

18% (Cuamba)

Continuity 24 h/day

(Xai-Xai, Chókwè, Inhambane, Maxixe)

12 h/day (Nacala)

SUSTAINABILITY OF THE COMPANIES

Non revenue water 19%

(Chókwè) 47%

(Nacala)

Workers per 1000 connections 3

(Maputo) 17

(Cuamba)

Cost coverage ratio 1,60

(Tete and Moatize) 0,64

(Cuamba)

CUSTOMER SERVICE

Complaints answered 100% 29%


P.027.15.R3 43

INDICATORS BEST PERFORMANCE

WORST

PERFORMANCE (Xai-Xai, Inhambane,

Maxixe, Manica, Angoche) (Chókwè)

Billing based on actual readings

100% (Xai-Xai, Chókwè,

Inhambane, Maxixe, Manica, Angoche,

Lichinga)

76% (Maputo)

WATER QUALITY

Compliance of parameters 100%

(Maputo, Xai-Xai, Chókwè, Maxixe)

12% (Cuamba)

Generally, and to the context of Mozambique, the water supply services under

FIPAG's management present an acceptable quality of service, although they need

improvements concerning non-revenue water volumes, answers to complaints and

compliance of the analyses to drinking water quality parameters.

While the last two indicators reflect the potential of improvement concerning the

protection of customer interests, the indicator relative to non-revenue water

regards the operational efficiency of the systems. Therefore, the potential for

improvement of the systems on this matter will have consequences both on a better

reliability of the systems (greater continuity) and on significant financial resource

savings (energy and reagents, among others).

3.3.5 Evolution over time of the systems performance

The analysis of the temporal evolution of some of the performance indicators

referred to in the period between 2009 and 2014, allows to observe the impact of

regulation on the water supply services in the country, under the responsibility of

FIPAG.

a) Access to the service

Despite the growing trend observed in the evolution of total coverage until 2012, as

a result of FIPAG’s investments to increase production capacity and extension

(expansion) of the networks, there was a slight setback in this indicator over the

next few years. The evolution of the indicator, as the following figure shows, was

mainly due to the significant increase in the number of residential connections that

took place until 2012 onwards. From then on the progress stagnated. At the same

time, there has been a downward trend in standpipe coverage from 2011, as a result

of that increase in residential connections. Given that the population of Mozambique


P.027.15.R3 44

continued to increase significantly, there was a slight decrease in the performance

for this indicator.

The indicator standpipe coverage here considered is determined on the basis of an

estimate of the population served by standpipe, which may interfere with the

analysis of the total coverage indicator. In fact, estimating the standpipe coverage

from the revenue water volume, corresponding to the total coverage rate, the rate

decreases to about 50% instead of the almost 70% presented in the following figure.

Figure 5 – Indicators of water supply services coverage (based on CRA, 2015)

The performance indicator on the number of hours of water supply per day

(continuity) has also been presenting a negative trend and reached the minimum

peak in the year 2014. In that year the average number of hours of water supply in

residential connections, based on a weighted average of the performance indicators

of FIPAG’s water supply systems, was around 19.4 hours, above the reference value

of 16 hours.

Regarding the network service coverage, as already mentioned, there was a very

considerable growth between 2009 and 2012, having stagnated in recent years,

according to the capacity of public investment. The figure below shows the evolution

of the indicators of residential connections coverage and continuity between 2009

and 2014.

0%

20%

40%

60%

80%

100%

2009 2010 2011 2012 2013 2014

Serv

ice

co

vera

ge Full coverage

Coverage by householdconnections

Coverage by standpipes


P.027.15.R3 45

Figure 6 – Continuity of supply and residential connections

b) Sustainability of the companies

The non-revenue water volume shows an improving trend over the period of

analysis. The only exception is the system of Beira which had an increase of over

100% compared to the values of 2013. Anyway, the results for the country still need

attention, reaching values above 40% of non-revenue water (total losses) in 2014.

The figure below illustrates the evolution of the performance indicator relative to

the non-revenue water volume between 2009 and 2014.

Figure 7 – Non-revenue water volume evolution (CRA, 2015)


P.027.15.R3 46

c) Customer service

Concerning the performance indicators relative to customer service quality, there

has been a certain irregularity in the values presented, as illustrated in the following

figure. The percentage of complaints answered, despite the good performances in

the years 2009 and 2011, has been frequently under 80%, with a negative trend

from 2012 onwards. In opposition, the number of days without response to the

customer presents an improvement from 2012, compared to the results of previous

years, taking, on average, 5 days to answer the complaints.

Figure 8 – Customer service evolution (CRA, 2015)

The number of invoices issued based on actual meter readings has had a growing

trend over time, but an unequal evolution from system to system. While the system

of Beira presents stable values of around 95%, the indicators of the systems of

Maputo and Nampula have displayed conflicting behaviors, as the following figure

shows.

The Nampula system presented a noticeable growth in the percentage of issued

invoices based on actual readings to nearly 100% in 2014, while the system of

Maputo, despite a slight growth between 2009 and 2010, had a significant decrease

in 2011 and 2012 and then recovered a little in the years 2013 and 2014.


P.027.15.R3 47

Figure 9 – Meter reading evolution (CRA, 2015)

d) Drinking water quality

The drinking water quality provided to the population is evaluated according to the

provisions of QR for each system. Thus, the number of parameters to be evaluated,

defined as minimum requirements, varies from system to system. As the following

figure shows, the evolution of the compliance of the samples collected in the water

supply systems of FIPAG has shown a decreasing trend, thus representing a

considerable break on the drinking water quality provided to the population, and a

negative scenario in the promotion of the population health.

In contrast, the percentage of tested parameters has been growing since 2011 to

over 80% in 2014. The indicator restored its performance after the decrease

observed from 2010 to 2011.


P.027.15.R3 48

Figure 10 – Evolution of the compliance of water quality parameters (CRA, 2015)

Overall, the improvement of the water supply quality of service in Mozambique is

perceived by its customers, being reflected in the assessment of the level of customer

satisfaction with the quality of service provided by operators, and whose main

findings are presented in the figure below.

Figure 11 – Average level of customer satisfaction (CRA, 2015)

e) Weighted Performance Index of Regulated Entities (IDER)

CRA introduced in 2013 an integrated performance evaluation method of regulated

entities based on an indicator composed of a total of 12 performance indicators. The

indicators considered by IDER are aggregated and standardized with the


P.027.15.R3 49

participation of the operators, ensuring a selection of indicators by consensus, in

accordance with the opinion of the main stakeholders evaluated (FIPAG and AdeM).

The coordination of contributions provided by stakeholders in the process of IDER

composition is accomplished through an additive aggregation formula, into three

main groups of indicators: the ISEF (Sustainability and Financial Index), ISO

(Operational sustainability Index) and the IQS (Quality of Service Index), which in

turn is composed of criteria associated with different drinking water quality

parameters. The following table presents the performance indicators integrated into

each of the indexes that finally form the IDER.

Table 9 – Set of performance indicators considered in IDER

INDICATOR UNIT

ISEF

Billing rate %

Coverage of operating costs %

ISSO

Workers per 1000 connections (no./1000 conn)

Non-revenue water (total losses) %

IQS

CUSTOMER SERVICE

Total coverage %

Employees per 1000 connections (no./1000 conn)

Continuity hours/day

WATER QUALITY

Tested parameters %

Compliance of tested parameters %

CUSTOMER SERVICE

Average time of response to complaints days

Complaints per connection (no. of complaints/100

connections)

Complaints answered %

The analysis to IDER evolution enables to observe that, despite a decrease in the

overall performance of the regulated systems as a result of the introduction of the

systems of Nacala, Angoche, Lichinga and Cuamba, the regulation of water supply


P.027.15.R3 50

services led to a relative increase in the period between 2010 and 2012, driven

mainly by the improvement of ISO during the same period. This is the component of

IDER on which FIPAG’s systems feature better performance. In contrast, there is a

sharp drop in the quality of service from 2012. The increased financial sustainability

represents one of the main challenges of the water sector in Mozambique, since this

is the index that presents the most negative results, due to the decrease in the past

few years in the recovery of the systems operating. The figure below shows the

evolution of integrated performance evaluation of the entities regulated by CRA.

Figure 12 – Evolution of IDER and its components (based on CRA, 2015)

3.4 CHALLENGES OF THE WATER SECTOR OF MOZAMBIQUE

The water sector in Mozambique has shown a remarkable development in recent

years, particularly the progress in the increased coverage and access to water supply

and sanitation services, the systems efficiency gains, the quality of service

improvement and a greater financial sustainability of the entities, among other

relevant developments.

The political and institutional reforms that have occurred in the water sector mainly

contributed to the widespread improvement in the performance of the water sector

in Mozambique, particularly after the publication of the Water Law and the

subsequent implementation of the QGD. However, and even if the analysis is focused

0%

20%

40%

60%

80%

100%

2009 2010 2011 2012 2013 2014

ISEF

ISO

IQS

IDER


P.027.15.R3 51

on the use of drinking water, the water sector still faces several important challenges

to improve and consolidate the services provided and to assure an adequate

progress and sustainable development.

a) Universal services

The Government of Mozambique needs to build the necessary infrastructure to

overcome the gap between the population needs and the existing infrastructure, in

particular regarding the high inequalities among systems in urban, peri-urban and

rural areas, and between the provision of water supply and sanitation services. In

this sense, the access to universal services continues to be the priority topic and

continues to generate great discussion in the water sector at the level of such urban,

peri-urban and rural areas and concerning the sanitation service.

b) Financing of the sector

To ensure a greater equity of the services in urban, peri-urban and rural areas, both

concerning water supply and sanitation services, it is necessary to promote more

and better investment in the sector. It is, therefore, a challenge to select the best

option to ensure their funding (Government, private sector, customers, multilateral

support entities, among others).

The ability to attract funding, in particular from the private sector, is another of the

major challenges of the water sector in Mozambique. The financing of the sector is

therefore, a point of great relevance, where the private sector plays an important

role. Finding alternative ways of funding for the progress and sustainable

development of the sector is a challenge that must be met.

Although the issues of attractiveness for the private sector almost always exceed the

sector dimension and are associated with the risk that the country itself involves, its

success depends on a diverse set of factors and reasons, among which the credibility

and stability of the regulatory framework. So, the size of investments needed makes

it unlikely that the water sector of Mozambique can achieve the desired performance

levels without resorting to the private sector, not only for investments, but also for

the management and operation of the water supply and sanitation services, no

matter how this is done.

The increase of investment in the sector is absolutely necessary to improve the

coverage and access to services, along with the level of quality of service, including,

for example, the need to improve the continuity of the service, which requires more

investments to increase capacity, robustness and resilience of infrastructure and


P.027.15.R3 52

equipment. Investments are needed to build new infrastructure but also to

refurbish, rehabilitate and expand the ones that are in poor conditions as a result of

an inadequate asset management performed over time.

c) Drinking water quality

Also the water availability (production of safe water) and quality, among other

aspects that significantly affect the well-being of citizens and the economic and

social cohesion of the country, require significant investments. Concerning the water

quality, for example, further efforts are required to ensure the protection of water

supply sources and identify new sources of safe water. The lack of wastewater

collection and treatment is also fundamental for this challenge of water sector

development.

d) Operational efficiency

Another aspect to highlight is the need to increase operational efficiency in water

supply services in not only in urban areas, but also in peri-urban and rural areas,

particularly, concerning the water losses of the systems. The non-revenue water

volume is related, among other aspects, to the operation and maintenance of

infrastructure and equipment, and also to the financial capacity to refurbish the

existing water supply networks and replace meters.

This factor is also associated with the lack of training of the operators’ staff, in

particular for the systems operation and maintenance, which is reflected not only in

the water losses indicator but also in other relevant aspects, such as energy

efficiency and non-existent or inadequate asset management that leads to the

general collapse of the infrastructure and hydraulic equipment in the country.

e) Financial sustainability

The financial sustainability of the systems is also an aspect to highlight. At first, by

analyzing the willingness-to-pay of the population for the services provided, with

impact on the levels of satisfaction of the customers and also on their capacity to pay

for the use of services provided (based on their net income), the systems in urban

areas have characteristics that allow setting higher tariffs than those applied in peri-

urban and rural areas. In this sense, the access to the service of low-income

customers must be guaranteed. In fact, the potential of cross-subsidization in urban

systems is much larger and more effective than in peri-urban and rural systems. This

subject, necessarily, implies the restructuring of the tariff system presently adopted

in the country, and requires the implementation of more efficient and more effective


P.027.15.R3 53

subsidization mechanisms and the universalization of the regulation for these

systems.

f) Effective QGD implementation

In institutional terms, there are also many challenges, particularly the need to

continue the legal and institutional reform underway, and expand the powers of CRA

to all water supply and sanitation systems covered by QGD, including the secondary

systems. It is recognized, however, that this condition imposes a strong expansion

of CRA's financial and human resources.

The challenges associated with the effective QGD implementation are also related to

the aforementioned need to create more attractive conditions (with less risk) for the

private sector participation in investments and in the management and operation of

services, whether in urban, peri-urban and rural areas.

g) Quality of information and human resources capacity building

The attractiveness of the water sector will be the greater, the higher the degree of

knowledge about the water supply and sanitation systems. In this sense, there is still

the need to establish mechanisms that ensure the existence and quality of the

information reported. For example, it should be noted that a system will hardly

accomplish 100% of service coverage, or will hardly reach levels of few water losses,

without a thorough knowledge of the infrastructure. The operationalization of the

National Information System for Water and Sanitation (SINS) will constitute a very

important challenge which, if successful, will have very positive externalities in the

whole water sector.

The challenges listed will not be possible to be achieved unless there is a

strengthening, qualification and training of human resources, including operators,

the regulatory authority and other institutions related to the water sector in

Mozambique.


P.027.15.R3 54

4 REGULATORY GOVERNANCE

4.1 OVERVIEW

Regulatory governance corresponds to the "how" of regulation, and refers to the

legal and institutional framework of the regulatory system as well as to the

framework from which the processes and procedures that determine the regulatory

decisions are carried out. In short, regulatory governance defines the regulation

effectiveness and efficiency, determines the entities, actions and parameters that are

regulated, and involves considerations on independence, decision-making

autonomy and accountability of the regulatory authority.

Governmental entities that have participation in regulatory decisions, the

transparency of regulatory processes, the predictability of the decision-making

processes and the resources and information available are factors that are also

considered in regulatory governance. Within the framework of the good practices of

regulatory governance, a total of thirteen areas are considered for the

characterization of the regulatory activity of CRA in the water sector in Mozambique.

This chapter discusses each of these areas, characterizing CRA's practice and

identifying the points to improve regulatory governance based on the best practices

for the water sector regulation.

4.2 REGULATORY GOVERNANCE OF CRA

4.2.1 Scope of regulation

The scope of regulation must be clearly defined and within the legal and institutional

framework to ensure clarity of the objectives, powers, functions and regulatory

responsibilities assigned to the regulatory authority, concerning its own

performance and the remaining stakeholders. This allows reducing the potential

existence of conflicts and incompatibilities between actors, detrimental to the

proper functioning of the water sector.

The legal framework of the regulatory authority should specify clearly the purpose

for its existence and discriminate and explain clearly the goals to be achieved. The

degree of objectivity of its purposes has influence on the accountability,

transparency and predictability of regulation, as well as on the definition of

priorities (and their context) by the regulator. In the presence of unclear objectives,

their subjective interpretation can create uncertainties and ambiguities with regard

to the priorities of the regulatory activity, fostering instability scenarios in the

regulated sector.


P.027.15.R3 55

CRA legal and institutional framework is set within the water sector reforms

initiated by the Water Law of 1991 and the QGD, implemented in 1998. However,

due to the water sector challenges and even to the socio economic development of

Mozambique, many stakeholders consider that the water supply services regulation

should extend beyond the public systems currently and effectively regulated (public

water and sanitation services of the country), and also regulate the systems located

in peri-urban and rural areas similarly to what happens in other countries in the

region.

The improvement of public services in peri-urban and rural regions, and, in

particular, the regulation of FPA performance, aiming at the harmonious coexistence

of public and private services and compliance with the minimum technical and

quality levels, might include the expansion of CRA’s regulatory activity to these

companies. However, for this to be possible, the first step is to ensure sufficient

qualified staff and the financial balance of the regulatory authority so that it can

implement an effective regulation to all systems under its responsibility.

Despite the large developments that have taken place, the regulatory activity of CRA

in AIAS systems still shows a potential for progress, particularly in the sanitation

systems. The development of this aspect in the scope of regulation is one of the

strategic priorities of the entity in the short term. In this area it will also be necessary

to ensure the combination of public and private interests, as well as a better

definition of the roles of local authorities and of the regulatory authority in

sanitation services, as well as the combination of community management with

professional management in rural areas.

The regulation of secondary systems also lacks a (clear and crosswise)

methodological definition for tariff setting suitable to every water supply system.

Currently, there are great disparities in the definition of the different regulated tariff

systems, especially regarding operating costs recovery. Moreover, an issue that lacks

consistency is the mandatory reporting of information in AIAS systems. Likewise,

the information reporting and monitoring process of the regulated entities is not yet

well defined (and implemented).

Regulation of the sanitation service, although considered in the scope of CRA

regulation since 2011, still needs planning and effective implementation of an

appropriate institutional framework to clarify the competences of the municipalities

in the management of these systems and to encourage the implementation of the

regulatory practice.

In short, although the scope of regulation of CRA is legally defined, in practice, it has

not yet been properly implemented on the whole or fully clarified, and still has a long


P.027.15.R3 56

way to go to ensure the proper functioning of the sub-sectors of water supply and

sanitation services. Only when the priorities of the regulatory activity of CRA are

clearly defined, along with its powers, functions and responsibilities in the primary

and secondary (and other) systems currently under its jurisdiction, can the scope of

regulation of this entity be extended to rural and peri-urban areas. However, it is not

expected that the regulation of the sanitation services can be implemented in the

short term.

4.2.2 Organizational structure

The organizational model adopted by a regulatory authority is related to the nature

of the functions and of the regulated sector. Although the operation of an

organizational structure is heavily dependent on various factors like the country's

context (including the legal, institutional and economic framework), in the

regulation of the water sector, a model based on the existence of a board of directors

where all members may or may not have executive functions is usually adopted. This

body is responsible for the regulatory authority strategic orientation and

development of policies.

The organizational structure of the regulatory authority must be defined in its Rules

of Procedure, through a legal document, which should also clearly indicate its

competencies. The regulatory authority must incorporate credible members of

public reputation whose contracts must cover exclusivity, impediments and

incompatibilities with the position performed. The choice of members of the

regulatory authority must, therefore, respond to given criteria (e.g. technical) and

include the presentation and public audience of the nominees.

Another good regulatory practice is the existence of an Audit Committee with

internal oversight functions, responsible for overseeing compliance with the law

and the statutes, and for issuing opinions on budgets, activity and account reports of

the regulatory authority. The same applies to the existence of an Advisory Board on

the organizational structure, to ensure the existence of regular processes of public

consultation in the decision-making process.

The Board of CRA is the deliberative body and maximum authority in the

organizational structure of the water sector regulatory agency in Mozambique.

Accordingly, the Board of CRA is always responsible for issuing the final opinion in

the regulatory decision-making processes, and the final deliberation before the

publication of the decision or information to the Minister responsible for the sector.

Note that CRA is under supervision of the Minister directly and not of the Ministry.

The Board of CRA is expected to hold monthly meetings to discuss the regulatory

activities of the regulatory authority, and if necessary, extraordinary meetings might


P.027.15.R3 57

take place. The Executive Secretary of CRA participates in the Board meetings, but

with no right to vote.

However, although the existence of an organ of consultation for the Board of CRA

(see Decree 23/2011, June 8) is provided for in the legislation, comprising

representatives of the various interests affected by the water sector regulation

(including civil society), the Advisory Board is not yet part of the organizational

structure of the regulatory authority. In fact, five years have gone since the binding

instruction was issued by the Council of Ministers and the Advisory Council has not

yet been appointed by the Board. In practice, this means that the regulatory

governance of CRA in this field does not match the legal framework assumptions.

The legislation in force does not consider the existence of an Audit Committee Board

or of a similar body for the organizational structure of the regulatory authority.

Therefore, the lack of a body responsible for the internal audit of activities and

accounts does not correspond to the good practices of regulatory governance.

4.2.3 Principles

The principles governing the performance of the regulatory authority should be

linked to the objectives of regulation. The latter indicates the values governing the

activity of the regulatory authority in the pursuit of the objectives set.

Three fundamental principles must be considered in the good practice of regulatory

governance, without which the regulatory system can never be effective and

sustainable. The principle of credibility should be ensured to promote confidence in

the water sector investors, regarding the fulfillment of commitments. The principle

of legitimacy must also be ensured, so that customers and other stakeholders can

trust the regulatory authority role to defend their interests. Finally, the third

fundamental principle stands as the basic pillar for the previous two, i.e. the

regulatory system must strive for transparency, so that all stakeholders can

understand and trust it.

The regulatory activity of CRA, among other things, focuses on the promotion of a

universal service with quality and at a fair price which guarantees the operators’

sustainability. According to the values and principles defended by CRA, its

regulatory activity is based on participation and pragmatism, as well as on

consistency and reliability, accountability and transparency. The fundamental

principles of good regulatory practice are, therefore, implicit in the values and

principles of the regulatory authority of the Mozambican water sector.

Although public participation is specified in the values and principles defended by

CRA and in the diplomas that guide its activity, it is observed that the regulatory


P.027.15.R3 58

authority does not implement measures for this purpose. For example, it seems that

customers (or other stakeholders) do not yet have the opportunity to comment or

give opinion on the regulatory processes of tariff setting since CRA does not promote

public hearings for the submission of comments and adversarial arguments about

the decision-making.

The focus of the activity of CRA sometimes seems too dispersed, which is contrary

to the principle of pragmatism promoted by the entity itself. This observation

derives from the fact that some key themes of regulatory intervention, as the

definition of principles and rules of financing, licensing, quality of service

monitoring or the establishment of models for (a better) inclusion of the low-

income populations, are not apparently a priority in the regulatory practice of CRA,

which sometimes is translated into reduced practical impacts on the development

and cohesion of the water sector.

Conversely, the proximity between customers and the regulatory authority that has

been observed in recent years, in particular due to the decentralization of functions

through local agents (ALC or CORAL) has contributed to increase the customers’

confidence in the work done by the regulatory authority. The promotion of the

customer interests is a central axis of the objectives of CRA regulation, which results

from the consistency and credibility of the regulatory authority.

The accountability and transparency of the regulatory authority is ensured, in

particular, through supervision of the Administrative Court and the Minister

responsible for the sector, and consequently, of the Government of Mozambique.

However, there are some gaps in CRA’s regulatory procedures relative to the

principle of transparency, particularly concerning the public release and

dissemination of relevant content to the other stakeholders. The promotion and

effective implementation of this principle of regulation is also vital to improve,

significantly, the accountability and legitimacy of the regulatory authority.

At this point also a gap associated with the regulatory governance of CRA is

identified, particularly the absence of a code of ethics or conduct that establishes the

set of principles and values of professional ethics to be observed by the employees

of CRA, and to support the credibility and legitimacy of the entity in the regulation

of the sector.

4.2.4 Transparency

The transparency of the regulatory process is essential to ensure the credibility and

legitimacy of the regulatory system implemented by the regulatory authority. The

accessibility of all relevant regulatory information, through the dissemination of up-

to-date documentation on the website of the regulatory authority, endows the


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stakeholders with the necessary tools to confirm and understand the decision-

making processes that regulate the water sector.

Therefore, no document produced by the regulatory authority should be taken from

the outset as confidential, unless its content is legally considered as such. The

regulatory authority itself must, therefore, disclose, in advance, the criteria and rules

considered in the decision of non-disclosure of certain information. The place and

manner of document consultation must also be public, as well as the frequency and

the moment of providing information.

From the factors inherent to the transparency of the regulatory process, the key

points to be considered, among others, are transparency in the provision of financial

information concerning the activity of the regulatory body, the disclosure of the

minutes of the Board of Directors meetings, the publication of information on the

staff of the regulatory body and the preparation and dissemination of strategic

development plans and other plans or studies that have been developed about the

regulatory activity. In the scope of good regulatory practices, the regulatory

authority must also disclose, in a place adequate to public consultation, information

and legislation on the sector relevant to the stakeholders, as well as all the

information relative to the activity of monitoring and supervision of the sector

(procedures and outcomes) concerning the economic, social and quality of service

regulation.

Thus, all relevant documentation about the decision-making process must be made

accessible to the general public. The transparency of the regulatory authority about

the policies and rules of the water sector contributes to the smooth operation of the

regulatory system and sensitizes both regulated entities and customers for the

understanding of their rights and obligations concerning their participation, control

and evaluation of the regulatory activity.

Transparency is one of its basic principles of CRA regulation. However, although the

relevant legislation of the water sector is known and annual reports concerning the

performance of regulated entities with the results of the regulatory activity are

publicly disclosed, the majority of the information related to the decision-making

processes of CRA is still kept inaccessible to the general public. The criteria and rules

used in the definition of policies to regulate the water sector are not available (e.g.

tariff setting and QR), which contributes to the non-existence of adversarial

proceedings associated with public participation or the review of regulatory

decisions. For example, it was observed that the reference values of performance

indicators agreed between CRA and the operators responsible for service provision,

which are of common interest, are not publicly available.


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It was also observed that CRA does not provide several other relevant elements that

contribute to the transparency of a regulatory authority and to the good regulatory

practice, in particular account reports and the results of external audits, drafts on

decisions of the Board, performance evaluations or information relating to the

qualifications and competence of its members. Conversely, CRA is concerned to

disclose information and legislation relative to the water sector, both on its website

and annual reports. However, the unavailability of CRA strategic plan makes it

impossible for the stakeholders to access other information that may also be

relevant for their activities, thus reducing the transparency of the regulatory

practices.

According to the mentioned above, if the information is not disclosed for reasons of

confidentiality, this option should be justified and disclosed to the public, something

that is not yet present in the regulatory practice of CRA (neither is it a common

practice of other regulators in the region). However, CRA could provide partial

information (the one less sensitive) that would make the regulatory process more

inclusive and transparent.

4.2.5 Predictability

The predictability of the regulatory process is synonymous with greater stability

and security in the regulated sector and ensures greater solidity and confidence to

investments made by private entities, substantially reducing the regulatory risk. The

regulatory framework must therefore assure the solidity and stability over time in

relation to the principles and rules governing the water sector, i.e. ensure

consistency between the different regulatory decisions taken.

Thus, and according to the good regulatory practice, regulatory changes to the "rules

of the game" should occur only after extensive and scheduled public consultation, in

which stakeholders have the opportunity to participate effectively in the decision-

making process before the implementation of the amendment proposed. Such

changes, if approved, should be implemented progressively and without

jeopardizing any rights guaranteed or acquired, thus preventing the water sector

destabilization and ensuring the balance of interests of different stakeholders.

The regulatory practice of CRA does not consider consultation procedures or public

hearing. In case of necessity or amendment to the "rules of the game" the procedures

and their corresponding scheduling are not defined by CRA in the scope of the good

regulatory practice. In addition, CRA has not yet established regulatory deadlines

associated with many regulatory procedures, except, partially, in tariff setting, in the

development of the annual report and its availability to the Government and in the

handling of customer complaints, although they often exist internally.


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Anyway, it is observed that CRA has ensured greater stability to the regulatory cycles

with the implementation of AR and QR, under the Decree 23/2011, June 8, defining,

from the start, the main terms and conditions for the water services regulation. In

particular, the definition of matters that should be regulated and the responsibilities

of the parties involved are perfectly defined in these documents, ensuring more

stability and safety of the regulatory process and also contributing to a greater

solidity and confidence of stakeholders.

4.2.6 Consistency and proportionality

The regulatory activity should be developed ensuring consistency with regard to the

objectives to accomplish over time, and the proportionality of the regulatory

authority intervention concerning its obligations. The regulatory authority should,

therefore, be restricted to the least intervention necessary to ensure the functioning

and balanced and sustainable development of the water sector, in line with the goals

set for its activity.

The regulatory practice of the regulatory authority should be proportional to the

needs and, consequently, the regulatory activity should be subject to public

consultation and discussion for periodic review of the activities performed and

methods used. The regulatory authority framework and performance should also be

subject to audits by competent authorities aimed at the identification of possible

needs for amending the legal instruments in force, and corresponding publication of

conclusions and recommendations resulting from the analyses carried out within

the scope of the audit.

The regulatory authority should accurately identify all the costs associated with

regulatory activity to ensure their minimization, both for its own interest and that

of the regulated entities. Therefore, in justified cases, the regulatory activity could

be delegated to other institutions or regional/local entities, under the terms of the

existing regulatory framework, while the regulatory authority is ultimately

responsible for the regulated companies’ performance.

CRA implements different types of regulatory regimes depending on the size and

characteristics of the regulated systems (direct regulation in the primary water

supply systems of FIPAG, indirect regulation in the secondary water supply and

sanitation systems of AIAS, and consultative regulation in the non-autonomous

sanitation systems). The regulatory authority intervention in the water sector of

Mozambique is, therefore, proportional to the size of the systems, promoting, when

justified, also the participation of local authorities, more aware of the different

realities and local needs. The signing of AR and QR with the operators also

contributes to the consistency of CRA regulatory practice in the regulated systems


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over time, by setting responsibilities and conditions of the relationship between the

different entities as well as matters subject to regulation for every regulatory cycle.

The introduction of regulatory power decentralization through the creation of local

agents and the signing of agreements (Cooperation agreements) with the local

authorities, have contributed positively to the minimization of regulatory costs as

well as to an increased level of participation of those involved and monitoring of the

services provided by the operators of these systems. The approximation of the

regulatory activity to local realities has also led to a greater intervention of local

authorities and customers in monitoring the quality of services provided by

regulated entities, being consulted by local regulatory agents about the operators’

performance.

However, it was deemed necessary to ensure greater consistency in periodic

reporting procedures for local staff in the secondary systems of AIAS (CORAL), since

the reporting of information to CRA is not yet mandatory, in contrast to what occurs

in the case of ALC which act in the primary systems of FIPAG.

4.2.7 Integrity

The good regulatory practice dictates that both the entities responsible for the

practice of regulation, and their regulatory activity, must be ethical, honest and

straight. Thus, the rules associated with the definition of values and methods

adopted in the regulatory procedures of a regulatory body must be explained and

ensure the professionalism, accuracy, impartiality, honesty and rectitude with which

this entity should carry its activity.

The integrity in regulatory practice also concerns the demonstration of

respectability by the members of the regulatory authority, and, in particular, of the

Board of Directors. In this context, integrity must also be ensured through the

monitoring of expenditure and of the attendance the Board of Directors members.

CRA does not provide information concerning the integrity of its employees, of the

members of the different departments or of the members of the Board. It would be

desirable that the qualifications and relevant experience that validate the capability

and suitability of the employees of this body should be available (especially the

members of the Board), also enhancing the transparency of the regulatory authority.

It is also observed that CRA does not publicly provide information on the costs of its

activity and so there is no evidence of the control of expenses in the various

departments, including the Board.

The absence of a Code of Ethics and Conduct also contributes to the existence of gaps

in this axis of regulatory governance of CRA. However, and despite the non-existence


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of this code, CRA develops some effort to ensure the integrity of its employees, at

least at the level of local regulatory agents, in particular through the establishment

of "Terms of Reference for the Hiring of ALC" and "Eligibility Requirements and

Incompatibilities for the Member of CORAL", where personal and professional

requirements are specified for the candidates to be considered eligible to perform

functions in CRA.

In the interest of a good regulatory practice, training and qualification of CRA staff

about ethics and deontology should also be promoted periodically, in order to

ensure the integrity, professionalism and rigor required to the performance of the

regulatory activity. Another way to ensure greater integrity in CRA regulatory

practice can include the publication of statements of interest of employees in order

to demonstrate publicly the lack of possible conflicts of interest in the performance

of their functions.

4.2.8 Clarity of rules

The legal and institutional framework that underpins the current regulatory process

in the regulated sector must be clear and specific about the allocation of roles and

responsibilities to the various entities involved. Thus, the clarity of the “rules of the

game" in which stakeholders are involved, ranging from the principles and

methodologies adopted in tariff setting or the quality of service regulation, to

incentives or sanctions applied in the water sector, should be provided through the

timely publication of documents.

The principles, objectives, responsibilities, rights, expectations and consequences to

which stakeholders are subject should be explicit and understandable, ensuring

greater predictability to the development of the sector and promoting the

confidence of the parties involved.

The Decree 74/98, of 23 December created the water sector regulatory authority of

Mozambique with its responsibilities and specific regulatory powers, in order to

ensure the balance between the quality of service provided, the user interests and

the sustainable economic development of water supply systems. Later, the

expansion of the regulatory activity of CRA to sanitation systems, by Decree No.

23/2011, of 8 June, set new regulatory objectives and responsibilities. However, the

legal and institutional framework of the water sector of Mozambique presents some

gaps concerning the activity of CRA in the scope of its regulatory and sanctioning

powers, and also as to the responsibilities and interaction with local authorities in

the sanitation services.

The principles and methodologies adopted in CRA regulatory activity should also be

reviewed and clarified, particularly the tariffs setting of the secondary water and


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sanitation systems. This would enable to assure that tariffs are adequate to the

assumptions underlying their definition, which are very often seen as dubious or

unsuitable by the stakeholders.

To improve this regulatory governance aspect, it is also necessary to review the

sanitation legal and institutional framework, so that the sanitation services can be

defined and considered by the legislation of the country.

The regulatory and sanctioning powers assigned to CRA should also be defined,

aiming at a stricter control on the (non-) fulfillment of the regulatory authority

mandate as well as on the assumptions set out in the QR or other similar normative

documents, by the regulated operators.

4.2.9 Regulatory coordination

The regulatory system of a country is often constituted by entities with different

areas of regulation, which can act on the same sector, but with distinct regulatory

responsibilities. As an example, it is possible the coexistence of regulatory

authorities in the areas of competition, customer protection, the environment, or of

water resources, which also act (or may act) in the water sector, whose purposes are

different from those of the economic regulator but that can affect or influence its

activity.

The proper functioning of a given sector depends on its legal and institutional

framework and on the coordination of functions between the different entities

involved. Stakeholders must clearly understand their responsibilities, in order to

avoid duplication of functions or conflicts between the various entities.

Compatibility between different entities and preventing the duplication of roles and

legal responsibilities must be ensured through legal mechanisms and coordinated

regulatory instruments that safeguard the harmony and coordination between

regulators and remaining entities.

In the water sector of Mozambique, particularly regarding the sanitation services,

similar or overlapping responsibilities are assigned both to local authorities and

CRA. The lack of clarity and coordination among these entities has not contributed

to the standardization of the regulatory activity, having a negative impact on the

development of these services.

There are also some constraints between CRA and FIPAG, which increased when the

latter started to hold responsibilities in the water supply systems operation, in

addition to asset management. The conflict of interests resulting from the

duplication of functions of FIPAG, both as owner and operator, has led to failures at


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the level of information sharing between regulated entities and CRA, putting at risk

the efficiency of CRA regulatory procedures.

Therefore, it is necessary to review the periodic reporting procedures so as to avoid

possible misunderstandings concerning the responsibilities of those involved in the

water sector regulation, thus contributing to the optimization and assurance of the

regulatory quality of the water supply and sanitation services.

With this purpose, Cooperation Agreements have been established between CRA

and the local authorities within the framework of regulatory powers

decentralization concerning the water supply services. These agreements establish

coordination and inter-institutional cooperation between both parties, for the

creation of regulatory local agents. This instrument is a positive example of a

practice of CRA in the promotion of regulatory coordination, setting the legal

responsibilities of those involved in the regulation and supervision of the water

supply and sanitation services and also contributes to greater clarity of the

regulator's role in safeguarding customer consumers and improving public services.

The water sector of Mozambique also needs to ensure greater coordination between

the entities responsible to guarantee the water resources availability, especially in

times of crisis or natural disasters (e.g. droughts). The integration of CRA in the

decision-making process about the water resources management of the country

could be a possible solution to the problem. CRA would become an active part in

finding preventive solutions and solving problems related to raw water availability,

rather than just participating in the process when problems occur in the water

supply systems of the entities it regulates, as it happens at present.

Although the competition law of Mozambique had been approved in 2007, by means

of Resolution No. 37/2007 and the ARC created in 2013, no reference is found as to

regulatory coordination between the two regulatory authorities acting in

Mozambique. Until now, there are also no examples of coordination between

consumer associations and CRA.

4.2.10 Powers

According to the good regulatory practice, the regulatory authority powers must be

defined in a clear way so as to attain the goals set in the regulated sector. Hence, the

regulatory authorities should be assigned with vast powers, including normative,

executive and sanctioning powers.

In the scope of those powers the regulatory authority must be able to define the tariff

system, to establish, change and supervise the market and quality of service rules

adopted in the regulated systems, and to address adequately market needs and


P.027.15.R3 66

problems. It must also be assigned with powers that allow the exercise of

administrative functions, as well as investigate, judge or mediate complaints from

customers and provide means for solving conflicts between operators. The

regulatory authority should also own police powers and the necessary authority to

require the provision of information and data by the regulated companies, as well as

to implement and monitor the accomplishment of its regulatory decisions, or, when

necessary, apply penalties to solve existing problems.

In the context of the water supply systems regulation, the executive powers of CRA

are relatively well defined and they are in line with what is considered to be the good

regulatory practice, although there is a lack of clarification and definition with

regard to its regulatory and sanctioning powers.

However, concerning the sanitation services, there is a lack of clarification of the

regulatory powers assigned to CRA as it can be observed through some

incompatibilities between the municipalities and CRA. This is due to the lack of

legislation regarding the compulsory regulation of all non-autonomous services,

which leads to the need of improving the sanitation services QR for the progress and

sustainable development of this segment of the water sector.

4.2.11 Autonomy

The good regulatory practices of the water sector are directly linked to the legal and

institutional characteristics that support the regulatory authority performance and

its independence in the fulfillment of its activities. The level of independence

assigned to the regulatory authority, that is, the degree of financial, organic and

functional autonomy determine the level of independence of the decision making

process in the water sector, avoiding the unpredictability of the regulatory

processes and increasing the credibility and acceptability of the regulatory systems

by stakeholders. The autonomy of decisions by the regulatory authority is also

essential for a good regulatory practice.

The financial autonomy of a regulatory authority is directly related to the

independence of its financing, providing it with budget autonomy and enough

revenues to cover the costs. Usually, financial autonomy is ensured through taxes

(e.g. regulatory taxes) charged to the operators which may or not directly reflect on

customers.

At present, the degree of financial autonomy of CRA is regarded as one of the

weaknesses of its regulatory governance. There are several reasons for this

condition, in particular the introduction of a withholding tax of 40% in favor of the

State over the regulatory taxes revenues which, until 2011, did not exist,

simultaneously with the expansion of the regulatory responsibilities of CRA to the


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secondary water supply and sanitation systems, which often do not have the

financial capacity to pay the fee.

The fact that CRA does have regulation for the application of fines and sanctions to

regulated entities, granted by Decree 23/2011, of 8 June, contributes negatively to

the possible deficit reduction of the regulatory tax. Therefore, it is vital for the

financial autonomy recovery of CRA to develop Regulations to clarify its rights over

the operators in case they fail to pay the regulatory taxes by the deadline stipulated,

or create a subsidization system between entities in order to ensure CRA’s

sustainability and equity among operators.

The organic autonomy of an institution separates the organizational structure of the

regulatory authority from the power and influence of the State. The independence

and credibility of the organic framework of the institution must be ensured through

open, transparent and fair appointment processes, for long periods and not

consistent with political cycles, alternating with each other. In addition, the organic

framework should be protected in the event of dismissals without just cause, by

arbitrary government entities’ will, or other organisms.

Although it does not have full organic autonomy, since the members of the Board are

appointed by the Council of Ministers for three year terms, renewable, CRA will

eventually hold some structural autonomy. It holds the responsibility for hiring and

managing employees, according to the human resources needs and the funds

available to carry on an adequate performance. It should be noted that the

Government has no power to dismiss the members of the Board, except in the event

of any proven misconduct committed by any member while performing his/her

duties or any other obligations associated with that position. After leaving the Board,

the members have a cooling-off period of two years to avoid the existence of conflicts

of interest in the water sector.

The functional autonomy of a regulatory body must be ensured through the absence

of governmental guidelines or policy oversight of the regulatory activity, which

means that the entity shall be subject only to a system of supervision of legality and

never of merit, and must not be subject to supervision. On the one hand, the absence

of tutelage of merit means that the directors of the regulatory authority cannot be

dismissed if their decisions or the regulation results do not please the Government.

On the other hand, the lack of supervision means that the regulatory authority

directors are not compelled to follow the instructions or guidelines from the

Government or from the Minister responsible for the sector.

An independent regulatory authority or with decision-making autonomy should not,

therefore, be subject to external political pressure and the approval of governmental


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entities should not be required for the implementation and pursuit of regulatory

decisions. This also applies to external interests on regulatory decisions.

The Board of CRA is the body responsible for the final deliberation on the regulatory

decision-making procedures by the regulatory authority. The Board deliberations

can be subject to formal or tacit approval of the Minister responsible for the water

sector or even of the Council of Ministers of Mozambique. Therefore, CRA is subject

to a regime of tutelage by the Government with reduced participation, which is done

through the notification of deliberative decisions of the Board to the Minister or

through the sharing of information to the Council of Ministers for assessment of the

regulation results.

4.2.12 Public participation

Public participation in the regulatory activity is essential for a good regulatory

practice and promotes customers and operators’ confidence in the regulator's

activities. The exchange of information in a transparent way, subjecting the

regulatory proposals and decisions to the possibility of adversarial proceedings,

suggestions, comments and criticisms raises the credibility of the regulator, as well

as the transparency of the process and the accountability of those involved,

including the acceptance of regulatory decisions, by regulated companies.

The best regulatory practices consider the establishment of mechanisms for the

promotion of public participation in the processes of decision-making, so as to

ensure all stakeholders participation. Accordingly, besides the effective

participation of stakeholders, measures to prevent the capture of the regulation or

avoid the conflicts of interest must also be guaranteed.

In this context, different forms of public participation can be adopted (e.g. formal or

informal consultation processes). In particular, one can mention formal consultation

processes, such as audiences or public consultations which in a good regulatory

practice must have a central role in the whole regulatory process, thus contributing

for the reduction of opposition to regulation and to increase public knowledge about

the water sector and its development objectives. The level and kind of public

involvement in the regulatory process will depend on its purpose. That is, the public

should have more active participation in strategic decisions or concerning the

quality of service provided, than in regulatory decisions.

Regardless of the mechanisms and tools used for the promotion of public

participation, they should always be institutionally structured to ensure the

necessary basis for public involvement in the regulatory process. Public

participation transparency must be ensured, i.e. the processes must be inclusive and

against the favoring of particular interests. Consultation documents shall be drawn


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up and published to inform stakeholders concerning their responsibilities and

regulatory process deadlines. This ensures enough time for consultation processes

and guarantees a platform for the expression of doubts, opinions and comments

from stakeholders. Thus, all the documentation regarding public consultation

procedures must be accessible to the public, ensuring greater transparency and

stakeholder’s confidence in the regulatory process.

The existence of an advisory and participatory body, representing the stakeholders

legally established (e.g. Advisory Council), is also an example of good regulatory

practice in the scope of public participation. The existence of such organ allows for

public participation in the discussion, approval and decision-making of matters

submitted for the appraisal of the Board of Directors.

The public consultation of the decision-making processes is not yet a common

practice in the regulatory activity of CRA under the circumstances and context of the

country. This is identified as a potential opportunity for CRA to become pioneer in

Mozambique, if it promotes public participation in regulatory processes and

activities of the water sector in parallel with a greater dissemination and publicizing

of the regulatory processes and activities.

The promotion of public participation in the water sector regulatory activity of

Mozambique, as mentioned, must be ensured by CRA, since it plays a key role in the

good practice of regulatory governance. The involvement of stakeholders in

regulatory decision-making processes (although provided for in the legislation, the

Advisory Council has not been implemented yet), both in tariff setting, in the

definition of performance indicators and/or values associated with the assumptions

and parameters set under the QR, must have deadlines defined, published and

disseminated, to ensure their timely knowledge about their responsibilities and

rights and can and must include the right to response.

An important component in the promotion of public participation in the regulatory

activity is the creation of groups of volunteers at the local level to monitor the

services. It fosters the involvement of customers in the regulatory process and the

sharing of information, contributing to improve response capacity to the needs of

the water sector customers. In this sense, the project TIC-RECO of CRA can also

become an important step for the promotion of public participation in the water and

sanitation services regulation in Mozambique.

4.2.13 Accountability

The activity of the regulatory authority aims to pursue strategic objectives of public

interest defined by the Government. The responsibilities assigned to the regulatory

authority should be clear and objective and the existence of a system of


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accountability is required to define how the regulator should be held accountable

for their actions.

Accountability mechanisms and dispute of decisions contribute to the supervision

of the regulatory activities. Under the scope of its duties, the regulatory authority

should report to the Government, and submit periodically its performance to

external audits. The regulatory authority accountability concerning the

stakeholders should also be promoted through the existence of legal mechanisms

which allow control of their actions, either by organs of appeal, such as the Court of

Law, or through the financial and budgetary control by the Court of Auditors.

The existence of tools and mechanisms for the dispute of decisions (right of appeal),

which allow the stakeholders, if it is the case, to apply to independent external

entities, as well as the existence of an Advisory Council and of ethical and procedural

obligations, also contributes to the regulatory authority accountability and ensures

greater efficiency, effectiveness and credibility to regulatory governance. The

participation of external entities in performance assessment (or in reviewing the

regulatory authority decisions) works also as a measure of accountability and

accounts reporting, with a positive contribution to improve the quality of the

decision-making processes.

Regulatory authorities shall also carry out internal performance assessments (self-

assessments) focused on efficiency and effectiveness of the processes and

procedures adopted in the regulatory activity. In the same context, regulatory

authorities shall also carry out regular analyses of the practices and the regulatory

framework in force, after review or implementation of new regulatory measures.

The system of accountability of CRA requires the preparation of an Accounts Report

that provides context for the resources used annually by the entity in the system of

financial reporting to the Administrative Court. Regulatory governance in terms of

accountability also requires the establishment and spread of accountability

mechanisms and public contestation of decisions, that complement the financial

audits of the Administrative Court (or external auditors) currently performed. It

should be noted that, with regard to the latter, the appointment of the Advisory

Board referred to in Decree No. 23/2011, of 8 June, and the opening to external

entities for reviewing the regulatory authority performance, may contribute to the

development of regulatory governance concerning accountability.

It was observed that CRA carries out internal performance assessments, in

particular, relating to the performance of its employees, at the horizontal and

vertical levels, which is a positive contribution to the performance of the regulatory

authority in this axis of regulatory governance. Performance assessments consider


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several criteria, such as staff attendance, ability to work and fulfillment of goals

while allowing the performance assessment of the staff in leading positions by their

subordinates and the assessment among staff of the same category. The

performance assessment results, following the application of this assessment model,

governs the progression in the career of CRA’s staff, as the promotions depend

directly on the evaluation obtained according to the defined scale.

4.3 SUMMARY TABLE OF REGULATORY GOVERNANCE OF CRA

The following table summarizes the comments made throughout this chapter,

concerning the regulatory governance of CRA.

Table 10 – Summary of the comments on regulatory governance of CRA

Scope of Regulation

Although legally defined and supported, the regulation of CRA has not yet been completely implemented and it still has an important way to go to ensure the full functioning of the water supply and sanitation services. Only later will the scope of regulation of CRA be able to be extended to rural and peri-urban areas.

Organizational

structure

The Board of CRA is the deliberative body and maximum authority in the organizational structure of CRA, responsible for issuing the final opinion in regulatory decision-making, and for issuing the final deliberation before the publication of the decision or information to the Minister responsible for the sector. Although provided for in legislation, the Advisory Board (which includes representatives of the various interests affected by the water sector regulation, including members of civil society) has not yet been appointed by the Board. No Audit Committee or similar organ is considered in the organizational structure of CRA, which does not meet the assumptions of a good regulatory practice.

Principles

The fundamental principles of good regulatory practice (credibility, legitimacy and transparency) are implicit in CRA values and principles as its regulatory activity is based on participation and pragmatism, as well as in consistency and reliability, accountability and transparency. However, it is observed that the regulatory authority does not yet implement measures aimed at an effective public participation. There are also some gaps in the regulatory procedures of CRA as far as the principle of transparency is concerned, particularly contents that may be relevant to the remaining stakeholders are not publicly available nor publicized.


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Transparency

The results of regulatory activity (operators’ performance) are publicly disclosed in the form of annual reports, which also disseminate other relevant information about the sector. Legislation on the water sector is available at the website of CRA. However, the criteria and rules used in the definition of regulatory measures are not available (e.g. tariff setting and QR), and there are no adversarial proceedings associated with public participation or the review of regulatory decisions. CRA does not provide other relevant components of this axis (e.g. Account Reports, results of external audits, minutes of decisions, evaluation of its own performance or information about the members of the organizational structure).

Predictability

The definition of matters subject to regulation and the stakeholder responsibilities are perfectly defined in AR and QR, and ensure greater stability and safety to the regulatory process. However, CRA has not yet defined procedures and schedules for the consultation/public hearing of amendments to the "rules of the game". Similarly, there are no regulatory deadlines associated with many regulatory procedures, except partially in tariff setting, production and disclosure of the annual report to the Government and in complaints handling, although they often exist internally.

Consistency and Proportionality

CRA implements different types of regulatory regimes depending on the size and characteristics of the regulated systems, and, therefore, its involvement in the water sector of Mozambique is proportional to the size of the systems. AR and QR also contribute to the consistency of the regulatory practice of CRA over time by setting responsibilities and conditions of the relationship between the different entities for every regulatory cycle as well as the matters subject to regulation. The decentralization of the regulatory power makes a positive contribution to the minimization of regulatory costs and to increase the level of participation of those involved and to the monitoring of regulated services.

Integrity

The absence of a Code of Ethics and Conduct of CRA contributes to the existence of gaps in the current regulatory governance of this entity. However, CRA develops some effort to ensure the integrity of its employees, specifying the personal and professional requirements they must meet in order to perform functions in CRA. However, CRA does not provide public information concerning the integrity of its collaborators, nor does it demonstrate the existence of control on the expenditure of its departments, including the Board. The publication of declarations of interest of CRA’s


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collaborators can be a measure to ensure a better regulatory governance in the axis of integrity.

Clarity of rules

The existing legislation granted CRA responsibilities and specific regulatory powers for the purpose of ensuring the balance between the quality of service provided, the customer interests and the sustainable economic development of water supply systems. However, the legal and institutional framework of the water sector of Mozambique presents some gaps concerning the actions of CRA, in particular with regard to the regulatory and sanctioning powers and, in particular, in the sanitation sub-sector as to its responsibilities and interaction with local authorities.

Regulatory Coordination

Although ARC was created in 2013 in the scope of the Competition Law of Mozambique, no reference was found concerning the regulatory coordination between CRA and ARC, and also with the associations for consumer protection. Since there is no environmental regulatory authority, the water sector of Mozambique also needs to ensure a greater coordination between the entities responsible for assuring the availability of water resources, particularly in periods of crisis or natural catastrophes (e.g. drought periods), with CRA participation in decision-making about the water resources management in the country. The Collaboration Agreement between CRA and the local authorities define the legal responsibilities of those involved in the regulation and supervision of the water services, being a positive example of regulatory coordination in the sector.

Powers

The executive powers of CRA are relatively well defined and in accordance with what is considered to be the good regulatory practice (e.g. tariff system setting, establishment and monitoring of market rules and quality of service, regular administrative functions, research, trial, mediation, conflict resolution between regulated entities, authority to require information and data). There is, however, lack of clarification and definition with regard to regulatory and sanctioning powers of the regulatory authority, mainly concerning the sanitation services.

Autonomy

The degree of financial autonomy of CRA is regarded as one of the weaknesses of its regulatory governance, much due to the 40% withholding tax on the regulation revenues paid to the State, since 2011. This does not allow for the financial sustainability of CRA and therefore makes the progress and development of the sector unfeasible. CRA holds some organic autonomy and manages the human resources according to its needs. However, it does not have full organic autonomy as the members of Board are appointed by the Council of Ministers,


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for three year terms, renewable. They cannot be dismissed by the Government, except in the event of any proven misconduct committed by the member while performing his/her duties. After leaving the Board, the members have a cooling-off period of two years to avoid the existence of conflicts of interest in the water sector. The Board of CRA is the body responsible for the final deliberation on the regulatory decision-making processes by the regulatory authority. The deliberations of the Board can be subject to formal or tacit approval of the Minister responsible for the sector or even of the Council of Ministers of Mozambique.

Public participation

The public consultation and hearing of the decision-making processes is not yet a common practice in the regulatory activity of CRA which may become a pioneer in this area in Mozambique. The stakeholders’ participation in the decision-making processes (e.g., consultation/Advisory Council public hearing), both in tariff setting and in the definition of performance indicators and/or the reference values should have deadlines defined, published and disseminated. This will ensure timely knowledge of the various stakeholders about their responsibilities and rights provided for in the context of public participation in water sector regulation that can and should include the right to reply.

Accountability

The system of account reporting of CRA requires the publication of an accounts and activities report that supports and sets the context of the information submitted annually to the Administrative Court. Regulatory governance also requires the establishment and spreading of accountability mechanisms and public contestation of decisions that complement the current financial audits of the Administrative Court (or external auditors). For the latter, the appointment of the Advisory Board and the opening to the participation of external entities for reviewing the regulatory authority performance, may contribute to the development of regulatory governance responsibility. The accomplishment of internal performance assessments by CRA, at the horizontal and vertical levels, is a positive contribution in this axis of regulatory governance.


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5 REGULATORY SUBSTANCE

5.1 OVERVIEW

Regulatory substance corresponds to the contents of regulation, the "what" of

regulation, that is, the intellectual and technical context of regulatory decisions. It

regards, therefore, the rational that justifies decisions taken by regulators, more or

less explicitly, and which gives quality and robustness to regulatory decisions, when

facing or subject to independent review. Typically, substance is associated with the

regulatory decisions concerning structure and tariff levels, quality of service

standards, processing of complaints, reporting and dissemination of information,

among other matters.

This chapter discusses each of the nine axes of regulatory substance considered

relevant to characterize the regulatory practice of CRA, bearing in mind the good

regulatory practices. Hence, and in this scope, this chapter addresses the regulatory

activities, the structure and tariff levels setting, the regulator’s role in the approval

of new investments, conflict resolution and customer complaints handling, the

quality of service regulation, the social considerations of the regulatory authority in

its regulatory activity and the dissemination of public information. The regulatory

procedures and practices that characterize the quality and robustness of CRA’s

regulatory decisions are described through flowcharts, whose purpose is to

illustrate, schematically, the substance of this regulatory body that is responsible for

regulating the water sector in Mozambique.

In the presentation of the processes associated with the regulatory substance of

CRA, they are represented by three additional bodies, including the Board, the

Executive Secretariat and the Regional Technical Units (UTR). This division enables

a better understanding of the interaction between the organic units of the regulatory

authority in the procedures analyzed. The Board of CRA is the maximum deliberative

organ of the regulatory authority, consisting of a Chairman and two members. This

organ has powers for the adoption of legislative acts, formulation of policies along

with the other entities involved in the QGD, as well as supervisory functions and

overall management of CRA.

The Executive Secretariat is responsible for managing the actions of CRA necessary

to ensure the implementation of the Board resolutions and decisions. The Executive

Secretariat is led by the Executive Secretary of CRA, and consists of four organic

units, namely: the Coordination, Planning and Management Control office, the

Department of Studies, Market and Collaboration, the Department of Operations and

the Department of General Services. CRA's Executive Secretariat is responsible for


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the previous preparation of all processes, preliminary draft and matters to be

analyzed by the Board, for the coordination of implementation of CRA's activities

and for the preparation and publication of decisions of the Board, among other

duties.

UTR are the regional offices of the Department of Operations of CRA, to whom ALC

and CORAL report periodically. UTR allows CRA to monitor and closely follow the

operators’ performance in a decentralized way, having resources distributed across

the country for a better management of available resources.

The flowcharts presented throughout the chapter are composed of a sequence of

different processes that represent the steps covered in the decision-making process

of the regulatory activity, headlined by the various entities involved, as shown in the

following figure.

Figure 13 – Symbols adopted in CRA regulatory substance macro processes

Each flowchart presents as "Entrance" the procedures or needs that motivate/justify

the process rolled out, and as "Exit" the final results of the procedure, whether the

production of documents or the achievement of regulatory objectives. It considers

as "Decision" all activities that require validation or approval by a stakeholder, so

that the process can continue to the next stage. "Interaction" corresponds to

situations where the process involves the possibility of readjustments in a specific

activity, through inputs or opinions of the corresponding entities, to obtain

validation or approval of the entity responsible for it. A "Positive Sequence”


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corresponds to a positive outcome resulting from a particular activity (e.g.

resolution of conflict) while a "Negative Sequence” corresponds to the non-

conclusion of an activity, which results in a distinct activity (it is necessary to go

through an intermediate step in the regulatory process).

5.2 REGULATORY SUBSTANCE OF CRA

5.2.1 Activities

The regulatory activities carried out by the regulatory authority must be

characterized in legal terms, defining in a transparent way the responsibilities and

powers of the regulatory authority in the water sector regulatory system. Under the

QGD implemented in 1998, as a result of the water sector reforms initiated by the

Government of Mozambique with the 1991 Water Law and the Decree No. 23/2011,

of 8 June, the mandate of CRA was extended to the regulation of all public water

distribution and sanitation systems. The expansion and strengthening of the powers

of CRA presumed the establishment of regulatory regimes suitable to the technical

and management conditions specific to each system.

The activities of regulation, implementation and supervision, as well as the

sanctioning activity, and the mediation and resolution of conflicts between

stakeholders are typically associated with a good regulatory practice. The regulatory

activity corresponds to the development of normative instruments, which enable to

define the rules of the sector (e.g. tariff setting, quality of service or the relationship

between stakeholders). Thus, the regulatory authority must be legally able to

produce and publish regulatory documents that govern the way the regulated

system works.

Executive instruments are associated with the activity of implementation and

supervision of the rules established (e.g. price control or performance monitoring).

These instruments should be associated with executive powers that allow the

accomplishment of research and inspection activities, under the supervision of the

application of standards set, called police power. The sanctioning activity is

associated with the regulatory authority sanctioning instruments which are

essential for the prevention and punishment of misconduct through the application

of penalties or fines (or, prizes if otherwise), depending on the performance or

behavior of the stakeholders involved in the regulated sector. The regulatory

authority should be able to, for example, impose fines or suspend licenses, according

to the administrative procedures defined legally.


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The executive and regulatory instruments that govern the regulatory activity of CRA

in the regulated systems define clearly the functions and powers of the regulatory

authority and its employees to accomplish the implementation of rules and the

activities of research and supervision in the monitoring of the compliance with the

preconditions defined for public water supply systems. In particular, CRA

responsibilities and the competences it delegates, within the framework of the

decentralization of the regulatory power, are set out in each of the regulatory

schemes implemented in different systems, while the powers of each of the parties

are set out in the AR, QR and Collaboration Agreements.

The activities relating to the implementation of sanctions by CRA to the regulated

entities lack appropriate instruments to support the power to impose penalties.

The different types of regulatory regimes through which CRA carries out the

regulatory activity in the water sector are described below. This description also

includes sequences of activities associated with the definition of instruments and

documents that establish the framework that defines the matters that are subject to

regulation by the regulated systems of CRA, as well as the relationship between the

holders of the systems and the regulated entity itself. In addition, other activities

carried out by CRA under the scope of the water sector regulation in Mozambique,

with impact on its performance, in particular on the relationship between the

various entities involved in the activities of water supply and sanitation systems in

the country are also referred to.

a) Direct Regulation

In the case of the primary systems with delegated management or with autonomous

services whose asset management and investment is under the responsibility of

FIPAG, CRA has implemented a direct regulatory regime. In this method of

regulation, and as shown in the following flowcharts, CRA is responsible for the

development of the AR and the QR taking into account the legislation, with the local

support of ALC. The AR and QR signed between CRA and FIPAG identify the aspects

to be regulated in these systems, whose fulfillment shall be ensured by FIPAG

through contracts with the operators.


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Figure 14 – Flowchart of CRA direct regulation

Compliance with regulatory standards set by CRA is monitored locally by ALC, which

have the responsibility to carry out routine visits to systems, get periodic

information about the scenario and the conditions of service provision among the

operators and customers and solve conflicts between customers and operators. The

delegation of regulatory powers to ALC is initiated by the signing of a collaboration

agreement between CRA and the local authority where the system is located, which

establishes a partnership between both parties for the implementation of a local

regulatory regime in order to safeguard the customer interests and to improve the

public service.

The hiring of local staff is a responsibility of CRA done by means of a list of

candidates proposed by the municipality. The candidate selected shall sign a

contract for the provision of services, under free schedule, lasting for two years.

After capacity building provided by CRA for the fulfillment of his/her duties and

obligations, the local agent is assigned to the municipality where the system is

located to perform his/her duties. The current regulatory regime in the primary

systems requires the evaluation of the quality of service and of the operators’

performance at the local level by ALC, and at the central level by CRA headquarters.

The following flowcharts show the procurement process of ALC.


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Figure 15 – Flowchart of ALC procurement process

A ceremony to give awards to the operators of the primary systems is held since

2013 and rewards the operators with the best annual performance, based on the

periodic reporting of the operators to FIPAG and on reports of ALC to CRA. Under

this regulatory scheme, currently there are 15 primary systems under FIPAG’s

ownership.

However, in this kind of regulatory regime, ALC does not yet perform deep

inspections to the operators for the identification of failures in the provision of

public services and their prevention, acting before (mostly) in a reactive way, in the

search for immediate resolution of the issues that motivate complaints by

customers.

b) Indirect Regulation

Also within the QGD, the Decree No. 19/2009, of 13 May, created AIAS as the entity

responsible for managing the assets and investment of the secondary water systems

and in sanitation systems. The extension of the powers of CRA to these systems led

to the adoption of an indirect regulatory regime to carry out its regulatory activities.

The regulatory power decentralization, through a system of indirect regulation, was

the result of an assessment by CRA about the adequate regulatory governance model

to the scenario of Mozambique, taking into account the specific technical and

management conditions of each system and the financial limitations of the

regulatory authority itself.

Thus, CRA ensures the water services regulation, at controlled costs, with the

participation of local governments. In this way, in the regulated secondary water

systems of AIAS the regulatory standards, through AR and QR, are issued by CRA and


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enforced at the local level by CORAL who are appointed by the local authorities. The

AR and QR set for AIAS systems (which, in this case, have a minimum duration of 3

years, rather than 5 years of the primary systems QR) are always attached to the

Specifications of the Procurement Documents of the operators for secondary

systems. The regulatory activities performed by CRA, under this regulatory regime,

are illustrated schematically in the following flowcharts.

Figure 16 – Flowchart of secondary systems indirect regulation


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Figure 17 – Flowchart of secondary systems indirect regulation (cont.)

Monitoring the quality of service and the operators’ performance is provided locally

by CORAL whose hiring process for the delegation of powers by CRA starts with the

Collaboration Agreements between CRA and the local authorities. Unlike major

FIPAG’s systems, Collaborative Agreements stipulate that the Local Government has

the authority to appoint the members that will be part of CORAL which will ensure

the implementation of an appropriate regulatory regime to the needs of the local

reality. The appointment of three individuals who are part of CORAL depends on

validation by CRA, prior to contract signing.

Other regulatory activity that differs between the primary and secondary systems

regulated by CRA is related to tariff setting for water supply services. In fact,

currently CRA defines the same "Normative Initial Tariff", for all secondary systems

of AIAS, which is reviewed for the setting of a base tariff for each system, after six

months of operation with the pre-established conditions in QR during which the

operators are responsible for the collection of management information, so that the

tariff fits with costs and specificities of each operation system.

The indirect regulation of secondary systems is still at an early stage and, therefore,

the reporting system is not as robust as in the primary systems. Currently, the

operators of secondary systems are not yet subjected to incentive measures, since

there are only three systems indirectly regulated by CRA (Island of Mozambique,


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Mocímboa da Praia and Moamba) although several others are at an initial stage of

regulation (June 2016).

Following the extension of regulation to all urban public water distribution and

sanitation systems, CRA also regulates the autonomous sanitation systems, although

this process is still at an early stage. The indirect regulation mechanism adopted in

these systems, in particular by means of decentralised regulation by ALC/CORAL, is

also established by QR signed with AIAS and with the local authority where the

systems are located.

These QR, supported by AR between CRA and AIAS, establish the conditions for the

implementation of the regulatory regime governing the services provided by the

entity responsible for sanitation services to local populations. Accordingly, the

issuing of standards is the responsibility of CRA, and the local authority (with the

support of AIAS) is responsible for their implementation through the operator. The

fulfillment of performance indicators is monitored by CRA through the CORAL which

have direct responsibilities in the monitoring of the regulated entity performance,

as agreed in the Collaboration Agreement between CRA and the corresponding local

authority. The payment of sanitation fees by the customers is accomplished by

applying a percentage of the water supply service invoice issued by the operator of

this service that transfers to the sanitation operator the value corresponding to the

sanitation services at the end of each month.

The combination of the information submitted by the local authority about the

operator’s activities, in a periodic basis defined in the QR, with the reporting of

information by ALC, allows CRA to monitor and evaluate the performance of

sanitation regulated services, ensuring their conformity with the provisions in the

QR. At the end of every regulatory cycle (three years), the levels of performance

demonstrated by the regulated entities are considered in the updating of the QR, in

particular in the definition of reference values and tariffs for each regulated system.

According to the terms defined in the QR and the performance of the operators, CRA

may determine incentives or penalties to be applied.

The regulatory activity of CRA provided in sanitation services (currently only

applied in the sanitation systems of the cities of Beira and Quelimane, being the

implementation of the same kind of regime in Matola and Maputo systems under

study) is summarized schematically by the following figures.


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Figure 18 – Flowchart of the sanitation services regulation in cities of primary systems

Figure 19 – Flowchart of the sanitation services regulation in cities of primary systems (cont.)


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c) Consultative regulation

The consultative regulation regime applies in cases where the Local Government is

the main holder and does not have autonomous water utilities (i.e. non- autonomous

or integrated services). In this case, the development of regulatory standards, if they

exist, is the responsibility of the Local Authority, and CRA only intervene in the

regulation of the systems if requested by the Local Government (although its

participation may not be requested). In short, CRA's activity in the regulation of

these systems is merely advisory and non-binding, and the standards are issued and

enforced locally, though there is no legal obligation of regulation. The schematic

illustration of this regulatory regime is provided by the following figure.

Figure 20 – Flowchart of non-autonomous systems consultative regulation

d) Regulatory Agreement

AR is defined as the instrument which is the basis for regulation, from which the QR

is defined for each specific water supply, primary or secondary, or sanitation system.

It defines the main terms, conditions and responsibilities for the regulation of CRA,

including regulatory matters to be included in contracts with the operators, as well

as the regulatory obligations of CRA and the holders.

The AR between FIPAG and CRA was signed by the parties within the legal

framework established by Decree No. 73/98, of 23 December, and Decree No.

23/2011, of 8 June. The Executive Secretariat of CRA is responsible for developing a

proposal for the AR, which is submitted for the appraisal of FIPAG. Considering the

contribution of FIPAG, the Executive Secretariat shall draw up a proposal for a AR

and submit the document for approval by the Board. After approval of the AR by the

Board, the document returns to the Executive Secretary for the preparation of the

final AR, which shall enter into force on the signing date. The AR signing is conducted

by the Executive Secretary of CRA and by the Executive Director of FIPAG. The AR

approval AR is published in BR.


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The general AR between CRA and AIAS differs in terms of the legal framework. In

this case, the AR is set by Decree No. 19/2009, of 13 May, which created AIAS, and

no. 23/2011, of 23 December, which widened the scope of CRA regulatory activities

The term of AR validity has an indefinite period. However, it can be reviewed during

the period covered, on presentation of a draft review by any of the parties involved.

In case of interest to review the AR, submission of amendments must be made with

an advance notice of six months with regard to the requested date for entry into

force of the new AR. The procedures for the approval of the proposed revision shall

be equal to the sequence of the initial AR procedures.

The following figures represent the sequences of activities and procedures

associated with the definition of the AR for the primary systems of FIPAG and for the

secondary and sanitation systems under the responsibility of AIAS.

Figure 21 – Flowchart of AR setting between CRA and FIPAG


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Figure 22 – Flowchart of AR setting between CRA and AIAS

e) Regulatory Frameworks

The AR sets general rules, terms and conditions of the regulation of the systems and

defines the issues to be considered in the establishment of the QR for each of the

regulated systems. In turn, QR defines specifically the regulatory matters to

consider, particularly concerning the quality of service, efficiency and operators’

performance, tariff setting, tariffs and charges for services, the customer protection

and the provision of information. To sum up, QR are instrumental documents

outlined specifically for each system, in which the definitions and basic guidelines of

issues covered by CRA regulation are established.

The QR of the primary systems of FIPAG have a minimum duration of five years from

the time it is signed. The QR proposal is presented to CRA by FIPAG, after the AR has

been signed. It should be noted that in the preparation of proposals for the QR, FIPAG

may request the opinion of the local authority for the definition of the service

objectives, investment plan and the level of performance of the services. However,

the request of opinion to local authorities has no compulsory nature.

The QR proposed by FIPAG is analyzed by the Executive Secretariat, which, in turn,

submits its QR proposal for consideration and final approval by the Board. The

Board of CRA is responsible for notifying the Minister responsible for the sector

about the QR approval, who transmits the endorsement to the Executive Secretariat

for the preparation of the QR final version of the system considered.


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The QR becomes binding from the moment it is signed by the Executive Secretary of

CRA and the Executive Director of FIPAG. Ultimately, FIPAG, as the systems holder,

is responsible for enforcing the AR and QR on each system. As local representatives

of CRA that contribute to monitor the quality of service and the operators’

performance, ALC are always informed about the operating conditions defined in

their systems QR.

During QR implementation, the operators have the right to request the review of QR

governing their activity, after a minimum of six months of operation under the

conditions initially laid down. The review request by operators is justified only in

case of large variations given the assumptions defined in the QR (i.e. performance

indicators, benchmarks, annual targets of quality of service or water quality

requirements).

Also any party, either FIPAG or CRA, may request a review of the existing QR, under

written notification to the other party at the end of the second year of duration of

the QR. The request for review must be prepared and presented to the other party

within a period of three months (90 days), after the celebration of the second

anniversary of QR implementation. The evaluation of any QR proposed revision

follows the same procedure adopted in the definition of the initial QR.

In the case of secondary water supply and sanitation system under the ownership of

AIAS, although the sequence of procedures for QR implementation in each system is

similar to that of the major systems, local authorities are necessarily considered in

the process. As such, the initial proposal of QR is drawn up with consultation of local

authorities, with the focus on the definition of the expected service quality levels,

investment plans and performance of the systems.

The following figures represent the sequence of activities associated with the QR

definition and establishment of FIPAG’s primary systems and with QR applied in

each set of systems of AIAS.


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Figure 23 – Flowchart of QR setting in the primary systems of FIPAG

Figure 24 – Flowchart of QR setting in the secondary systems of AIAS


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f) Approval of contracts of delegated management

As the regulatory authority for the water sector in Mozambique, CRA is responsible

for approving the contracts for the water supply systems operation by private

operators. As a rule, they must comply with the conditions laid down in the scope of

the systems QR.

FIPAG, as the holder of the water supply infrastructure of Mozambique's primary

systems, manages the public investment program of water supply systems under its

ownership. In accordance with the economic and social development priorities set

in the five-year government program, concerning the search for new solutions to

meet the challenges of the water sector development, the main holder of the system

is responsible for the identification of opportunities of service delegation, for

example, through contracts with private operators.

Therefore, FIPAG is responsible for starting the procurement process with the

preparation, planning and clear definition of the contract object, in a participatory

and focused way and with the advice and cooperation of the Board of CRA and the

local authorities where the systems are located.

The project of concession contract, or other model of delegation, particularly the

bidding process and the terms of the delegation, is submitted by FIPAG for analysis

and validation of CRA's Executive Secretariat, which, in turn, is responsible for the

preparation of the contract prior agreement and its submission to the Board for

approval. After validation of the contract terms with FIPAG, the Board will examine

the proposed agreement. After approval of the proposal by the Board, the Executive

Secretary of CRA formalizes the QR terms to be introduced in the contract

agreement.

After public tender for the private operator selection, the delegated management

contract is signed, FIPAG and the private operator selected after CRA approval. Then,

the Ministry approves the contract. At the end of the hiring process, it is the duty of

CRA to inform the corresponding municipality about the result of the process of the

delegated management contract for the operation of the local water supply system.

The flowchart of the following figure represents the macro process of a delegated

management contract of a system under CRA regulation.


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Figure 25 – Flowchart of a delegated management contract procedure

Periodically, after each regulatory cycle, CRA reviews the terms of the contract, if

both regulated entities (FIPAG and operator) wish to do so, according to the

flowchart of the following figure, specific to the company Águas de Maputo. All the

process is supervised by CRA which will approve the periodic review by an

independent auditor. The process starts with the compilation of the information by

a private operator and its submission to the owner which analyzes and defines

strategic guidelines for the managing entity. The private operator develops a

preliminary report which is submitted to FIPAG for analysis which then will

originate a proposal for the final report which is again sent to FIPAG and to the

Executive Secretariat for validation and then sent to the Board of CRA for approval.

FIPAG and the Independent Auditor issue opinions on the final report proposal so

that the Executive Secretary can help in its validation.


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Figure 26 – Flowchart of the periodic revision procedure

g) Payment of the regulatory tax

The Decree 23/2011, of 8 June, subjected the regulated entities to payment of a

regulatory tax to CRA, which contributes to the recovery of costs associated with the

regulatory activity provided in fact the regulatory taxes were originally imposed by

Decree 74/98, of 23 December). It is the responsibility of CRA to ensure the payment

of the respective tax.

The operators, as is the case of AdeM, in the system of the region of Maputo, are

subject to the payment of a rent to FIPAG, which corresponds to the value stipulated

in the operation contract for which the entity can use and exploit the system of the

owner are the ones responsible for the regulatory tax payment.

FIPAG (as the operator of primary systems) must pay until the 5th day of each month

an amount equivalent to 2% of its gross annual revenues on each system. However,

if there is no enough data to estimate the regulatory tax applicable at the beginning

of the operation of a given system, the regulatory tax is set based on the expected

average annual revenue. Depending on the evolution of the annual gross revenue,

the regulatory tax is updated every two years, given that the actual revenue is higher

than the expected annual average revenue. Therefore, the amount paid by FIPAG to

CRA is not equal to all systems, varying according to the size and technical conditions

of each system, which determines the level of revenues of each one.

The same applies to companies that operate in the secondary systems of AIAS, as

provided in AR and QR, and in the provisions of the contract with AIAS for the


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operation of the water services. The operators of these systems are responsible for

the payment of the regulatory tax directly to CRA, starting at the end of the first

semester of operation. Similarly to the operators of FIPAG, the operators of these

systems must pay a regulatory tax equivalent to 2% of their gross income, until the

5th day of each month.

If CRA finds that the regulated entity has not made the payment within the deadline,

the Executive Secretary shall send a letter to the entity concerned requesting

payment of the debt. At this point, a deadline is given for the regulated entity to make

the payment (usually up to 30 days after the date of payment), which, in case the

non-payment of the regulatory tax persists, receives a final notification by CRA for

the payment of the debt. In any of the situations, the Board of CRA is always informed

by the Secretary about the non-compliance of the regulated entity.

If the regulated entity does not pay the regulatory tax within the deadline stipulated

in the final notice, the Board of CRA has the right to apply a fine to the entity that, in

accordance with the Decree no. 23/2011, which will be equivalent to 0.5% of the

weekly average revenue for each seven days of delay after the period for payment

expires. In the case of the primary systems of FIPAG, the Board of CRA can appeal to

the Chairman of FIPAG to regularize the situation by drawing up a memorandum

about the missing payments.

Regardless of the time elapsed until the payment of the regulatory tax invoice, CRA

is always obliged to yield 40% of the amount actually charged to the Government of

Mozambique until the tenth day of each month, as stipulated by article 11 of Decree

No. 23/2011, of 8 June.

The following figures illustrate the sequence of processes and entities involved in

the billing process of regulatory taxes payment by regulated entities.


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Figure 27 – Flowchart of the regulatory tax payment in primary systems

Figure 28 – Flowchart of the regulatory tax payment in secondary systems

h) Periodic reporting of regulated entities

The periodic reporting of information by the operators is regarded as one of the key

regulatory activities for the good practice of regulation. Accordingly, the AR and QR

define the reporting periodicity on quality of service standards. The AR also

establishes the obligations of FIPAG and AIAS in regulatory issues with particular

emphasis on the periodic reporting of information and the delivery of performance

reports to CRA.


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The table below identifies the reporting obligations of FIPAG and AIAS to CRA as set

out in the 10th clause of their AR, which lays down the regulatory obligations of

these, and in the Appendix of the QR regarding procedures and reporting format. It

should be noted, however, that the information contained in this table is not yet a

common practice of CRA, although it is established in the AR and QR. For the sake of

the current good regulatory practice of CRA, compliance with the stipulated in these

documents would be desirable.

Table 11 – Report of information of the operators, established in AR and QR

The operators are responsible for the compilation of relevant information about

their operation activities concerning complaints by the customers, water quality and

quality of service indicators and operating costs. The information sent to the owners

is also directly sent by operators to the local representatives of CRA, ALC or CORAL,

under the terms of Collaboration Agreements between CRA and the local authorities.

ALC or CORAL, depending on the water supply system, are responsible for analyzing

the information received and to submit their opinion to operators, owners and CRA’s

office. The opinion of the local agent is taken into account by CRA in the validation

Annual - Operator’s Activity Report AR - Business Plan QR

- Balance Sheet and Income Statement - Investment Plan QR

Monthly - Operator’s Activity Report AR - Performance Indicators QR - Water Quality QR - Tariff projection, taxes and other charges per Supplementary Services to Water Supply QR

Regulatory Cycle - Summary Report about the Investment expected during the Duration of the QR AR - Summary Report about the Implementation and Conclusion of Investments AR

By occurrence - Interruption for more than 12 hours a day QR

Annual - Summary Report about Investments AR - Summary Report about Implementation and Conclusion of the Investments Program AR - Summary Report about Operation AR - Business Plan QR - Balance Sheet and Income Statement QR - Investment Plan QR

Quarterly - Operator’s Activity Report AR

Montly - Performance Indicators QR - Operating Costs QR

FIPAG

AIAS

QR


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of the information reporting provided by the operators. However, it should be noted

that the regulation of secondary systems is at an early stage so that there is not much

consistency of regulatory procedures in these systems.

After receiving the information, FIPAG or AIAS, are responsible for reviewing the

operating report submitted by the operators and validate the information received.

By taking into account the opinion of the local regulatory agents, the owners have

until the end of March to submit the annual report to CRA. After a first review of the

information, the Executive Secretary submits the information received to the UTR

on which the analyzed operators review and validate the information submitted.

The UTR coordinators check and validate the information, before the Department of

Studies and Projects of CRA proceeds with the calculation of the performance

indicators of the systems under its regulation.

Prior to the submission of information for consideration and approval by the Board,

the operators are notified about the results of the analysis and discussion, being

entitled to a two-week period for presentation of adversarial proceedings. In case of

adversarial proceedings, the Executive Secretariat analyzes the response before

compiling the reports by regulated systems in each region, and presents and

discusses the reports with CRA. The Board is responsible for making a final analysis

to the reports, before approving and concluding the final report. The report is

finalized within the deadline of June 30, the date on which the Board of CRA should

send the report to the Minister.

In the period of 60 days between the submission of the report to the Minister and its

publication on the website of CRA, the Minister responsible for the sector

appreciates and submits the report to the Council of Ministers. It should be noted

that the Council of Ministers only comments on the report content in extraordinary

cases.

In the case of AdeM, which is responsible for the water supply services in the region

of Maputo, there is no local agent responsible for monitoring the activities of the

regulatory authority, being this activity directly performed at CRA headquarters.

Thus, FIPAG also holds the responsibility for the initial validation of the information

submitted by the concessionaire before the subsequent submission of data to the

Executive Secretariat of CRA, for the analysis of the quality of services provided to

the customers of Maputo region by AdeM.

The figures presented below represent the flow of processes associated with the

periodic mandatory reporting by the regulated entities, as stipulated by CRA under

the terms of the AR and QR.


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Figure 29 –Flowchart of periodic information reporting by the operators

Figure 30 – Flowchart of periodic information reporting by the operators (cont.)

i) Implementation of a TIC system for periodic reporting of information


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CRA has developed a new system based on information and communication

technologies (TIC) for the periodic reporting of information in order to facilitate the

implementation of this activity, particularly in secondary water supply systems. CRA

expects this method to make the processing of information faster. The draft TIC-

RECO is currently in pilot-project phase and consists of two sub-systems (the

systems “O" and "C"), which complement each other in terms of information, but

whose reporting targets are distinct. While the first is dedicated to the reporting of

information by the operators, the second is directed to the reporting by some

specific customers (municipal offices, restaurants, etc.).

The set of information collected by the system allows CRA to verify the operators’

performance on a more effective and regular basis, by crossing up-to-date

information. Furthermore, the crossing of information submitted in both sub-

systems enables CRA to check the reliability and quality of data submitted

concerning the operation of the systems.

The system “O" is based on two systems of reporting with different periods: a weekly

system, based on the exchange of messages via SMS with the TIC system, and a

monthly one, consisting of filling out a form of an application for smart phones,

specifically designed for the reporting of routine operational data. In parallel to the

electronic submission of information, operators continue to have the obligation to

submit periodic reports in physical form.

The system sends an SMS to the operator, weekly, instructing him to answer. The

operator must match the template described in the instructions, which presumes

the submission of eight records relating to the reporting of complaints and the

system operation data (e.g. volume of water produced, occurrence of interruptions

in supply and water quality tests, among others). After the submission of

information via SMS, operators receive an automated response confirming the

submission until thirty minutes after sending it. However, it may occur that the

information submitted is not noticeable to the system. In this case, the operator may

be required to proceed with a new data submission, or, ultimately, the regional

center of CRA comes into contact with the operator, within two business days.

After checking that the data submitted matches the template created for that

purpose, a report summary is returned to the operator, and an e-mail message is

generated and automatically sent to the regional delegation of CRA. Monthly (every

four weeks), the Executive Secretariat receives a summary of the weekly reports,

submitted by the UTR of the Operations Department.

Every month, the operator also receives an SMS that alerts him to the duty to fill and

send the monthly report also relative to operational data, but more detailed. The


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operator must then proceed by filling in the form on the smart phone, especially

created for that purpose.

Information submitted through the forms is processed automatically by the system,

which produces a summary report of the data submitted. Confirmation of the

operation success is sent by SMS to the operator, together with the report, which is

sent by email. A report summary is also sent to the regional delegation of CRA and

to the Headquarters in Maputo. This information collection system operates

continuously and if the operator does not submit some data in a given month, it will

be requested the following month.

The successful filling in of the monthly form with the system operational data allows

the operator to request the monthly code to CRA via SMS. If the submission of data

by the operator is confirmed, CRA generates the code which is sent by SMS to the

operator, which then allows him to proceed to the billing of the services provided.

The following figure illustrates the sequence of activities associated with the

periodic reporting of information by the operators through the TIC-RECO system.

Figure 31 – Flowchart of periodic information reporting of secondary systems operators, through the TIC–RECO system

The reporting of information in the TIC-RECO system is complemented with the

collection of daily information among customers, which makes more effective the

validation of the information submitted by the operators. The information collected


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by the System "C" is transmitted to local regulators, as well as to CRA’s regional

office.

An SMS message, automatically generated, is sent to the system customers with

instructions regarding the submission of the information required. Customers

report basic information relative to the quality of service, particularly the

occurrence of interruptions in water supply. In response to the SMS, the customer

receives a confirmation SMS thanking for the information reported, which is sent to

CORAL and to the regional office of CRA. From the information collected, the UTR

compares the results with the information reported by the secondary systems

operators.

The figure below shows schematically the sequence of processes associated with the

collection of information from customers through the system "C" of the TIC-RECO

system, for comparison with the information submitted by operators.

Figure 32 – Flowchart of daily information collection among customers

j) Periodic information reporting by ALC and CORAL

Within the scope of the expansion of CRA responsibilities and decentralization of its

activities, CRA has adopted the solution of local regulatory agents (ALC in FIPAG's

systems, and CORAL in AIAS’s systems). The delegation of powers adopted,

decentralizing part of the regulatory activity, aimed at minimizing the regulation

costs, simultaneously with the dissemination of the regulatory action in systems

where CRA is not physically represented, promoting a more effective regulation, at

lower costs.

ALC are the local representatives of CRA who perform activities locally, in

coordination with the UTR of CRA and directed by CRA headquarters. Thus, in

accordance with the terms in the contract with the ALC and the Collaboration


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Agreements with local authorities, ALC have the responsibility to follow up and

monitor the activities prescribed in the systems QR, in addition to providing the

necessary support for the protection of the local customer interests.

According to the functions and duties assigned to ALC, the local agents meet with

operators which act on the sites under their responsibility with a monthly

frequency. ALC must monitor, at least once a month, the quality of service in these

systems and, for this purpose, they can make visits to the systems and monitor the

analyses made by the operator to the water quality. Local authorities and customers

are also involved in the process to validate the information collected from the

operators, especially regarding the quality of service (interruptions, water pressure,

etc.).

The compiled information is submitted to the UTR of CRA via monthly activity

reports, which contain the records of activities performed in that month, as well as

recommendations that they might have to promote the improvement of services

provided by the operator. As defined in the Collaboration Agreement, the local

authority also receives a simple monthly report to be informed of the findings and

activities of the ALC.

The UTR coordinators are responsible for the analysis and validation of the

information received from all ALC, and for the quarterly submission to CRA

headquarters of a report that includes all relevant information received. In case of

doubts or ambiguities in the information analyzed, the Executive Secretariat of CRA

can return the report to the UTR, so that the information submitted can be reviewed

and resubmitted. Note that although the submission of information by the UTR to

CRA is expected to be done with quarterly frequency, in practice, this is taking place

every month.

The new regulatory framework adopted by CRA for the secondary systems of AIAS

is based on an indirect regulation method. For these systems, CRA sets out the

principles and regulatory standards that are implemented locally by the CORAL.

CORAL act as an instrument of decentralization which promotes an effective

partnership between CRA and the local authorities, contributing to greater local

empowerment and a greater impact on the development of services in these

locations. However, the regulatory procedures in secondary systems are not as

consistent as in primary systems since the reporting procedures of CORAL are not

yet adequately consolidated.

Similarly to ALC, the CORAL reports monthly to CRA regional office the record of

regulatory activities carried out, including the findings and recommendations

resulting from the monitoring of the operator’s performance. In addition to being


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submitted to the regional offices of CRA, the monthly reports of CORAL’s activities

are also sent to the local authorities, in accordance with the established in the

Collaboration Agreements made with CRA.

Once the information is received, CRA’s UTR analyzes and validates the information

before compiling and submitting a quarterly report to the Department of Operations

of the Executive Secretariat of CRA on the regulatory activities carried out by the

local regulatory bodies. However, currently, performance evaluation of the

operators of secondary systems is not effectively carried out.

The sequences of activities inherent to the periodic reporting of information by the

ALC in FIPAG’s systems and by CORAL in AIAS’s systems, as established in

Collaboration Agreements, are presented, respectively, in the following figures.

Figure 33 – Flowchart of ALC periodic reporting process


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Figure 34 – Flowchart of CORAL periodic reporting process

k) CRA periodic reporting of information

The periodic reporting of information, by the regulatory authority, is part of the good

practices of regulation, promoting accountability and account reporting, as well as

greater transparency in the activities of the regulator. As established within the QGD

framework, one of the mechanisms of account reporting of CRA is the submission to

the Government of an annual report, where the strategic objectives and main

accomplishments of the annual period elapsed should be described, as well as a

summary with costs and revenues of CRA regulatory activities. The annual reports

also include a summary of the regulated entities performance for that year,

according to the indicators estimated in the analysis of the quality of service of the

systems. Periodic reporting of CRA to the Government is available to the public,

which makes it possible to ensure greater confidence of public service customers in

the water sector.

CRA also has the obligation to submit annually its Managerial Accounts to the

Administrative Court which may decide to carry out a financial audit in order to

check the accuracy of the values reported by CRA. The audit may corroborate the

results presented and work as a reinforcement for the transparency and credibility

of the regulatory authority and the water sector to the eyes of the other

stakeholders. As an option of CRA, the annual financial results are not publicly

available.

The procedure of information reporting of CRA to the Government begins with the

submission of information relative to the operation of the systems by the operators


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to de owners. As it will be described in the quality of service macro process, the

owners must undertake a first review and validation of the information submitted.

Their deadline for data submission is the month of March and from March on the

UTR shall check the information received.

With the support of the regional heads of the Department, the Department of

Operations of CRA shall draw up the annual report, which, after completion, is

delivered to the Executive Secretary to discuss the work with the Board. After

approval of the draft Report by the Board of CRA, in late April, the operators are

notified about the beginning of a two-week period for presentation of adversarial

proceedings to CRA. After the end of this period, the Executive Secretariat analyzes

the adversarial arguments submitted and the Board of CRA approves the

preparation of the final report. The Executive Secretary must draw and submit it

until the end of June for assessment by the Board before submitting it to the Minister

responsible for the sector during the months of July and August.

The Minister sends the document to the Council of Ministers which, except in

extraordinary situations, is silent about the document. The final document is

published by the Executive Secretariat and made available to the public at CRA’s

website, within a deadline of two months after submission of the document to the

Government.

The procedure concerning the reporting of annual accounts is made within the

Medium-Term Fiscal Scenario of CRA, prepared for quarterly periods, between the

months of April and June. Every six months, there is a balance of the plan of fiscal

and budget scenario, which includes the estimates of costs and revenues of CRA

during the 3 year period considered, in order to carry out the necessary corrective

measures to the budget of the following year.

It should be noted that the financial information is not compiled in a specific

document, since CRA does not draw up annual activity reports yet. Only the

Managerial Accounts are submitted through a layout established for that purpose by

the Government, according to the information required by the Administrative Court.

However, the flowchart presented in this section also considers the existence of an

Accounts Report, together with the Managerial Accounts, as a measure of promoting

transparency and accountability to be adopted in the regulatory activities of CRA, in

accordance with the regulatory best practices.

The process of reporting to the Administrative Court is started when the Executive

Secretariat, particularly the Department of Administration and Finance, organizes

and compiles the information needed for the preparation and presentation of CRA

Managerial Accounts, at the end of the fiscal year.


P.027.15.R3 106

CRA accounts are also subject to external audit, in accordance with the financial

support agreements signed with the World Bank. Therefore, the information

submitted to the Administrative Court is also sent to the external auditors

appointed. In the event of audit, the results will be assessed by the Board for reasons

of adversarial proceedings, and will be taken into account in the preparation of the

new budget and Fiscal Scenario of CRA.

The following figures reflect the activities carried out by CRA and other entities

involved in the processes of periodic compulsory reporting of information by CRA

to the Government and Administrative Court of Mozambique.

Figure 35 – Flowchart of periodic information reporting by CRA to the Government

Figure 36 – Flowchart of periodic information reporting by CRA to the Administrative Court


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5.2.2 Tariff Structure

The economic regulation is one of the central purposes of the activity of the

regulatory authorities in the water sector. Therefore, they should be responsible for

the definition of a set of rules that identify the principles for tariff setting that will

allow the recovery of costs associated with the operation of the regulated systems.

Accordingly, the regulatory procedure for tariff setting for water supply and

sanitation services is a fundamental part of the economic regulation carried out by

CRA.

The tariff structure describes the way in which the costs of water supply and

sanitation services are charged to their various customers. The principles associated

with tariff setting should seek social welfare maximization and send the correct

signals to the market, allowing financial, social and environmental sustainability.

According to the good practice of regulation, the regulatory authority shall also be

responsible for making public the current tariff structure.

The tariff structure may consider fixed and variable components, depending on the

volume of water consumed, as well as on the different types of service customers. In

particular, tariff setting should consider volumetric criteria for the definition of

blocks according to the type of customer considered (residential, industrial,

commercial, etc.) and reflect the levels of service provided, as well as consumption

patterns and consumption taxation.

The consideration of different types of water services customers is necessary to

ensure equitable and fair rates, without the imposition of additional costs to certain

categories. In order to maximize the social welfare, regulatory authorities shall have

the other powers, among others points of relevance, to deal with issues relating to

subsidies whose purpose is the protection of low-income customers and maximize

the universal access, and which allows the supply at appropriate prices or special

services, simultaneously covering the operating costs of the systems.

The tariff model in force in the drinking water supply service in Mozambique aims

to ensure the economic and financial sustainability of the systems, trying to

guarantee the coverage of operating costs of the regulated entities according to their

efficiency. The Government is responsible for setting the tariff policy in force, while

the regulator is responsible for approval of tariffs and specific taxes to each system.

Therefore, CRA must justify the tariffs and taxes approved to the stakeholders and

that they are in line with the tariff programming approved by the Government.

In CRA tariff structure, the tariff value that the customer pays aims to recover an

amount corresponding to the sum of two distinct parts. One corresponds to a value

which aims to cover all operating costs of the operator and the other is a component


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concerning the debt service of the system holders, whose purpose is to support the

obligation of these entities to invest in infrastructure, in order to make viable the

business framework of the operator.

The customer tariff in Mozambique is scaled and differentiated according to social

classes and categories of customers, depending on the type of customer considered,

if residential or general (commercial, industrial or public). The tariff structure

established by CRA also tries to protect lower income customers, including social

classes that benefit from a cross-subsidy which aims at the reduction of their invoice

value.

Due to the changes in the patterns of consumption, mainly as a result of the

extension of the network to peri-urban neighborhoods, along with the increased

weights of social blocks in the water sector, the effectiveness of the subsidy in tariffs

is being questioned. For this reason, the issue of cross-subsidization should be

reviewed, and CRA currently has an ongoing consultancy for this purpose. The

classes of customers considered in the structuring of tariffs may also be reviewed

and improved in the light of the changes in the patterns of consumption that have

been taking place.

5.2.3 Tariff levels

The good regulatory practice dictates that regulators must have the skills required

for the development or approval of tariffs, while safeguarding the interests of

customers and of the operators. Thus, the regulator is typically responsible for the

definition of tariff calculation methodology, which should seek to ensure the

financial sustainability of the operators responsible for the provision of services in

the water sector simultaneously with the social cohesion of the population.

An effective regulation in the control of tariffs charged requires more than the

publication of a methodology for price and tariff setting. It is also necessary to

develop a coherent and economically viable business plan, based on an investment

plan suited to the needs and that supports the system of tariff setting which must

consider mechanisms of tariff subsidization when needed. Above all, it is necessary

to safeguard the sustainability of regulated entities and that all stakeholders

involved are familiar with the methods used in the establishment of the current tariff

levels, in order to ensure the confidence of the water sector players in the regulatory

system.

The regulator must also define the regulatory period during which the tariffs set are

in place. Similarly, the regulatory authority must also lay down the conditions under

which both the regulator and the operators may request the revision of tariff levels.


P.027.15.R3 109

CRA is responsible for the approval of the tariff levels adopted by the operators,

based on the information of the operational costs and the opinion of the Ministry

responsible for the sector. The regulatory process of tariff setting changes according

to the type of system considered. However, in opposition to what is deemed a good

regulatory practice, CRA does not promote the public participation through public

consultations or public hearings during the process of tariff levels definition.

Next, the sequences of activities and procedures associated with the process of tariff

setting in the water supply and sanitation systems regulated by CRA are described.

a) Tariff setting in FIPAG’s water supply systems

The process of defining tariff levels in the water services of primary systems begins

with the definition of the Multiannual Tariff Program, corresponding to a five-year

regulatory cycle, as established by the QR of these systems. Before the start of a new

regulatory cycle, in coordination with the Government to take into account the

existing policies for the sector, the information relating to the operating costs of the

systems and their financial model and business plan, FIPAG submits to CRA a Project

of Tariff Programming until the end of July.

After receiving the proposal, the Department of Studies and Projects of the Executive

Secretariat of CRA reviews and validates FIPAG's proposal during the month of

August. The Executive Secretariat’s opinion is submitted for approval by the Board,

prior to the submission of the proposal to the Minister, usually in December, for the

approval of basic criteria and adjustment scenarios considered.

The Minister responsible for the sector has about two months to carry out the

assessment of the proposal submitted in line with the sector policies. If necessary,

the Minister may ask for advice to the Advisory Council of the current MOPHRH.

After the proposal assessment, the Minister submits his opinion for a detailed

analysis of the proposal by the Council of Ministers for approval. The process of

analysis by government organs takes place over about three to four months, with a

maximum deadline by the end of June.

The opinions resulting from the assessment of the Government organs are

transmitted to CRA, whose Board, within the framework of the duties it has been

granted by the QGD and other legislation of the sector, has the responsibility to

examine the contributions received and send the final deliberation about the

Multiannual Tariff Program. Therefore, the Board can approve the Tariff Program

until October 15, which shall remain in force during the new regulatory cycle. The

main players, FIPAG and operators are informed about the results of deliberation on


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the proposal and, after publication in BR, the new tariff program is implemented,

and is one of the tools that governs the tariff value throughout the regulatory cycle.

Tariff Programming for FIPAG’s systems considers annual adjustments of tariffs,

under the terms of primary systems AR and QR of, which occur annually throughout

the regulatory cycle. The tariff adjustment is based on the update of the assumptions

of tariff setting (e.g. exchange fluctuation and energy costs) and the Accounts

Reports of the operators of the previous fiscal year. This means that these Accounts

Reports are the basis for the justification of the need for an adjustment of tariffs in a

given year.

The tariff adjustment process begins with the submission of the operators’ Accounts

Reports to FIPAG, between the months of June and July each year. After receiving

and analyzing the Accounts Reports and after prior coordination with the MOPHRH,

FIPAG develops an initial proposal for Tariff Adjustment, which should be submitted

for assessment of CRA until the end of October.

The Department of Studies and Projects of CRA’s Executive Secretariat is responsible

for reviewing the annual adjustment proposal submitted by FIPAG and transmit its

opinion to the Board, which holds the deliberative power on the matter. If the

Executive Secretary does not validate the proposal of FIPAG, this entity is requested

to present adversarial arguments, in an iterative process that ends with the

validation of the proposal by the Executive Secretary. After validation of the

proposed Tariff Adjustment, the Board analyzes the assumptions of the proposal

validated by the Executive Secretariat and, upon final approval of the proposed tariff

system, the Minister is notified about this adjustment decision. If the tariff

adjustment approved raises questions, the Minister may request clarifications to the

Executive Secretariat to support the decision.

Finally, the Board authorizes the Executive Secretary to proceed with the

publication of the new Tariff Adjustment, which is published in BR between the

months of December and January. The tariff adjustment is finally implemented by

FIPAG in the primary systems, 15 days after the publication in the BR, in accordance

with law No. 6/2003, establishing the Vacatio Legis period. CRA has a responsibility

to advertise the new tariffs among customers, through the posting of information in

placards in FIPAG’s stores.

The cycle described for the tariff adjustment is repeated annually throughout the

regulatory cycle, with new evaluations of the operators’ Accounts Report between

June and August by FIPAG. After five years, at the end of every regulatory cycle, a

new revision of the Multiannual Tariff Program must take place to be applied in the


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following regulatory cycle, taking into account the policies of the sector and the

accounts reports of the previous regulatory cycle.

The figure below represents schematically the sequence of processes associated

with tariff setting in FIPAG’s primary systems.

Figure 37 – Flowchart of the tariff setting procedure for the primary systems

b) Tariff setting in water supply systems of AIAS

Tariff setting for the systems of AIAS is made for each system separately which

means that there is no transversal tariff programming in these systems, unlike what

happens in the primary systems of FIPAG.

AIAS is responsible for managing the assets of the systems under its jurisdiction, so

that once the investment works have finished in the systems, the entity must launch

a public tender for hiring an operator, a process which takes place over a period of

60 days, under the terms of the regulations on public contracts of Decree No.

15/2010, 24 May.

The QR corresponding to the system considered is attached to the specifications of

the contracting process. The QR establishes the minimum services that the operator

will have to respect, as well as the Initial Standard Tariff, transversal to all secondary

systems regulated by CRA, and applicable during the first six months of operation.


P.027.15.R3 112

This base tariff is proposed by AIAS and adopted by the Board of CRA, which takes

into account the opinion issued by the Department of Studies and Projects of the

Executive Secretary. Currently, the Initial Standard Tariff has the value 18 MZN/m3,

set and approved by the President of the Board.

After launching the public tender for the operator’s selection, AIAS negotiates a

contract with the best candidate and notifies CRA to validate it. The Executive

Secretariat is responsible for analyzing the contract negotiated between the owner

and the operator, before submitting it to final validation by the Board. After

validation of the contract, the Ministry responsible for the sector must approve the

contract for the provision of services in the corresponding system of AIAS.

The operator hired by AIAS is responsible for recording the information necessary

for the review of the Management Information concerning the operating costs of the

system during the first six months of activity. Upon expiry of this period, the

management information collected by the operator is subjected to the analysis of

AIAS that, based on the validity of the data, is responsible for the preparation of a

proposal for a tariff adjustment to that water supply system. The operator’s

Accounts Reports submitted monthly to AIAS are also taken into account in the

preparation of the proposal for tariff adjustment.

The preparation of the proposed Reference Average Tariff adjustment and the Tariff

Structure of each system is a full responsibility of AIAS. However, before the

submission of the proposed QR addendum to the regulator, AIAS must coordinate

the process of tariff adjustment proposal with the Ministry, Provincial Governments

and local authorities with knowledge of the local realities, in order to ensure the

harmonization of visions for the development of the water sector in the various

municipalities.

The Executive Secretariat of CRA, particularly the Department of Studies and

projects, is responsible for analyzing the proposal submitted by AIAS before

presenting its opinion for final approval of the proposal by the Board of CRA. Once

approved, the proposal is returned to AIAS for the QR addendum, signed by CRA and

AIAS, to be incorporated in the contract with the operator, with the adjusted tariff

included. At this stage, the Ministry and the Provincial Government are informed by

AIAS on the result of deliberation of CRA, as are the respective operator and the local

regulatory commission (CORAL). Subsequently, the rates are also published in a

public newspaper with the purpose of informing customers.

The tariff system of the secondary water supply systems of AIAS is not published in

BR yet because there is no consensus about what should be published, if only the

new tariffs, or the QR itself. However, should they be published in BR, as it happens


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with the tariffs of the primary systems, they should be effective 15 days after

publication. Currently, tariff charging is implemented within 60 days after the QR

has been signed. The operator is compelled to register and compile all relevant

information on the system operation for monthly submission to AIAS so that they

can find justifications to open a new process of tariff readjustment for the following

year.

Annual adjustments to the tariffs adopted in the water supply systems of AIAS are

carried out in accordance with the adjustment formula. This is based on the

variation of the Consumer Price Index (CPI), and may also consider a factor related

to energy costs reported in the annual Accounts Reports of the operators.

The flowchart presented in the following figures represents the process of tariff

setting in the secondary water supply systems under the management of AIAS.

Figure 38 – Flowchart of the tariff setting procedure for the secondary systems


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Figure 39 – Flowchart of the tariff setting procedure for the secondary systems (cont.)

The criterion adopted by CRA in the definition of the sanitation tariff considers the

application of a tax of a fixed percent value, on the value of water consumption.

Regulation of the sanitation services is still at a very early stage. Note that in 2014

the tariffs applied to sanitation services were in force in only two cities, still in a

transition phase. The process of tariff setting for the sanitation services still lacks

clarification regarding the role of AIAS and the municipalities.

The process of tariff setting for sanitation, charged by applying a surcharge to the

water bills is defined in the sanitation QR. The process is initiated by the submission

of a proposal by AIAS of a tax to apply on the value of the invoicing of the water

supply systems, as an addendum to the QR. The proposal submitted to CRA is a result

of coordination of this entity with the Ministry responsible for the sector and the

local authorities responsible for the sanitation service in the municipalities.

Similarly to the tariffs of secondary water systems, the tariffs in the sanitation

systems are also defined for each system.

The taxes corresponding to the collection of sanitation services in the municipalities

are defined based on two distinct categories of customers, defined in QR. The

category "A" corresponds to the applicable surcharge to all customers inhabiting

areas served by sewers, while the category "B", of lower value, is applicable to

customers of areas not served by those sewers. Under the terms of the QR, tariffs are


P.027.15.R3 115

subdivided in four blocks, trying to promote equity in the various municipalities.

These different levels are equivalent to residential customers whose monthly water

consumption is greater than or less than 10 m3, to industrial customers or public or

commercial customers.

The final proposal of AIAS is subjected to analysis in the Department of Studies and

Projects of CRA. Again, similarly to the procedure of tariff setting for water supply

services in the secondary systems, sanitation tariff is only subjected to assessment

of CRA after validation and opinion issuing on the proposal by the Executive

Secretary. The result of the deliberations of the Board is finally transmitted to the

Executive Secretary who, in case the proposal needs readjustment, makes the

necessary changes and submits it again for final assessment of the Board.

Upon final approval of the proposed sanitation tariff, the Board informs the Ministry

of the decision and grants approval to the tariffs defined in the sanitation services

QR, signed by the Executive Secretary, Executive Director of AIAS and President of

the Municipal Council to which the service belongs. Finally, the tariffs set for the

regulatory cycle are implemented by local authorities, through the Autonomous

Municipal sanitation services, entering into force 60 days after the formal signing of

the QR. The disclosure of the tariffs charged to customers is the responsibility of the

local authorities. Whenever a tariff updating takes place during the regulatory cycle,

there is an addendum to the QR.

5.2.4 New investments

The infrastructure sector investments typically reflect very high costs, long-lasting

and unrecoverable (sunk costs). The risk associated with such investments is

consequently very high, resulting from uncertainties about demand, operating costs

or technological evolution, which in turn acts as barrier to entry of private investors

in the water sector.

The regulatory activity must therefore be associated with the control and approval

of investments of operators (and private investors) in new or existing infrastructure

in order to ensure the safety of the investments and the sustainable development of

the water sector.

It should be noted that the financial resources are scarce so that making investments

in a given location will prevent others from being made in other locations and as the

investment will always be paid off, hopefully by customers, its definition should be

made cautiously, i.e. investments should be 'used' and 'useful'.

The regulatory practice of CRA denotes some shortcomings concerning the

definition of who has the responsibility of investments execution or of their


P.027.15.R3 116

management in the water sector of Mozambique which has been generating some

conflicts. Although the obligation of issuing opinions and recommendations on the

planning of investments in the water supply systems is provided for in AR, in fact,

CRA does not perform, completely, the desired formal verification of the need for

investment in the systems. In fact, only AdeM submits the investment plan under

the scope of its obligations set in the concession contract.

As a result, CRA's responsibilities associated with the control and approval of new

investments under the AR and QR terms are still limited and, sometimes, imprecise

for the regulated entities. CRA must clarify stakeholders about whether it is actually

responsible or not for the approval of the operators’ investment and business plans.

5.2.5 Quality of service

The quality of service regulation is one of the main focus of the regulatory activity,

with the aim of supervising and improving the quality of service provided to the end

user. The quality of service, particularly, in the case of the water sector, not only

concerns the quantity, quality or pressure of water supplied, but also the

relationship of the operators with the customers and their performance before the

society (for example, the number of connections) and the environment (e.g.

pollution).

The regulator's action is essential to ensure a balanced relationship between

price/quality. If it wasn't, the demand for reduced prices, in parallel with the

opening of the market to private investors, and, therefore, a greater competition in

the water sector, could lead to carelessness regarding the quality of service

provided. In opposition, the higher the quality of service, the higher the prices tend

to be, although they may threaten the customers ' ability to pay. Thus, on the one

hand, it is a function of the regulator to ensure the necessary balance to the universal

service with suitable quality to protect the customers, and, on the other hand, the

necessary balance for sustainable development and management of systems must

be ensured in the protection of the operators’ interests and the promotion of the

water sector development, in general.

As a good practice, in this context, the regulatory authority should be responsible

for the definition of minimum standards of quality of service to which the customers

are entitled and which the operators must comply with in carrying out their duties,

at the risk of financial losses, penalties or loss of license. The establishment of

minimum performance levels prevents the reduction of the quality of service

provided to customers which may happen due to the fact that operators try to

reduce the operating costs in order to increase their profits.


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Quality of service regulation usually adopts two methods in the water sector. The

direct method consists in the inclusion of a representative parameter of the quality

of service in the formulae of economic regulation. In this case, this parameter, or

quality index, is considered in pricing calculation formulas. Consequently, the

operator has freedom in managing the quality of service provided, if the minimum

thresholds set are guaranteed, taking into account its interaction with the prices and

the price cap set.

The indirect method, regarded as one of the most effective regulatory forms for the

promotion and incentive to the increase in the quality of service (even without

coercive power), the regulatory entity must assure the formal publication of rules

and guidelines of service levels to ensure their public knowledge, as well as the

periodic and systematic publication of reports on the performance of the regulated

entities and eventually their advertising and public discussion. The publication of

information on the regulated entities performance also promotes the quality of

service by enabling the performance comparison between companies. The regulator

must also promote the improvement of performance quality, through the

acknowledgment of the good performance of the regulated entities, in particular by

using performance incentives, for example, through awards. The establishment of

quantifiable performance indicators is one of the solutions to monitor the evolution

of regulated entities ' activity and an incentive for the promotion of their improved

performance when the results are reflected in tariff benefits.

The rules defined for quality of service regulation should be public. They should not

only include the minimum quality standards of service expected, but also the

periodicity of reviewing them, how to monitor the quality of service, and the

sanctions imposed by the regulatory authority in the event of non-compliance with

the agreements, among other aspects of relevance. Public information must also

allow customers to establish the grounds for the formulation and submission of

complaints to the regulatory authority.

The indirect method mentioned above is adopted by CRA in the quality of service

regulation. According to QR, the operators must make the periodic report of

information to CRA during the regulatory cycle. The information received by CRA is

subsequently subjected to a review whose purpose is to encourage the operators’

performance improvement concerning the quality of service, through the

identification of strengths and weaknesses of each regulated system. This is

accomplished through the calculation of a set of indicators defined for this purpose.

However, CRA does not yet share the rational considered in the definition of

indicators and/or their reference values, which does not correspond to what is

considered to be the best regulatory practices.


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The process of quality of service regulation begins after the signing of the QR specific

to each system which, in the AR context, establishes the agreement between CRA

and the owner concerning matters covered by regulation. In the primary systems,

FIPAG is required to submit monthly reports of the operators’ activity, as well as an

annual report, in March. However, AIAS, in the secondary systems, presents only a

summary report of the activity, since there is no organized and efficient procedure

established for the reporting of information concerning the quality of service of

secondary systems under indirect regulation.

It is observed (in July 2016) that only the secondary system of the Island of

Mozambique has a quality of service regulation similar to that of primary systems,

because it is operated by FIPAG. This is due to an agreement established between

AIAS and FIPAG, as a result of the touristic interest of the Island, which led to the

need to find an experienced operator to take over and ensure the proper

management of that system.

The data on the performance indicators defined by CRA are collected and sent by

operators to the owners who, in the first instance, in a data validation process, check

the need for quality adjustments. Note that, in the case of systems whose

management is still under the responsibility of FIPAG or AIAS, the entity itself is

liable for a self-evaluation of the data collected.

The services provided and the water systems quality are also monitored by the local

agents of CRA, who have the right to receive directly the information submitted by

the operators to FIPAG to make comparisons. In turn, the local authority also has the

right to be informed on a monthly basis by ALC or CORAL on the performance of

public services. Note that despite their involvement in quality of service regulation,

local authorities and the ALC/CORAL are not represented in the flowcharts

presented below, but rather in the periodic reporting of information macro

processes provided further on.

FIPAG's regional departments are responsible for the collection, validation and

compilation of the data sent by the systems operators under their jurisdiction,

before sending the information to CRA's headquarters, annually. It is important to

note that this has been a point of disagreement between these two entities, which

has been causing some entropy in the water sector. It has been noticed that the

information submitted by FIPAG does not often match the data reported by

operators. Changes and discrepancies have led the operators not to review the data

collected. CRA, as the regulatory authority, wants the operators to transmit the

information concerning the systems operation directly, considering that there is no

need for the flow of information going first through FIPAG’s headquarters.


P.027.15.R3 119

After checking and validating the information, the Executive Secretariat of CRA

carries out the performance indicators calculation with a view to the classification

and interpretation of the strengths and weaknesses of each regulated system, as well

as the analysis of its evolution. This assessment involves the processing of data and

the interpretation of results for each system. After the adversarial proceedings

period of management companies, the data collected and analysis performed, which

result in the performance indicators of the systems, are, finally, consolidated. The

results of the evaluation of the data submitted are then agglomerated, published and

disseminated annually, under the format of Quality of Service Assessment Bulletins

(BAQS).

It should be noted that at this point, in particular, some conflicts between the two

entities have taken place, as a result of discrepancies between the data of the

operators and the information transmitted by FIPAG. Sometimes, after the first

analysis and data treatment by CRA, FIPAG submits data that does not correspond

to the above during the period of adversarial proceedings, which requires further

analysis of the information by CRA, making the process little efficient.

The Board of CRA is responsible for the final approval of the performance

assessment results of the regulated entities before the report final preparation by

the Executive Secretary. The final document of the Annual Government Report is

sent by the Board to the Minister by the end of June. The Minister shares the report

with the Council of Ministers for Government information about the water sector

annual performance and after consideration of the document it may request any

information related to the document to CRA. 60 days after the submission of the

report to the Government, the Executive Secretary makes the document publicly

available to the other water sector stakeholders at the regulatory authority website.

Since 2013, through CRA initiative, in addition to the publication of the results

obtained through the analysis of data concerning the service quality standards,

awards are granted to the regulated entities with better performance. Through the

analysis of the annual results of the operators’ performance, the Executive Secretary

submits a proposal to be Board justifying the reward to the operators. The Board of

CRA is responsible for organizing the "Annual Awards Ceremony of the Water

Supply Operators". The ceremony aims to encourage the operators’ performance

improvement, both in the management of the systems and in the quality of service

provided. The Minister responsible for the water sector is invited to attend the prize

award ceremony.

However, the effectiveness of the benchmarking method encouraged by CRA for

comparison of operators, and used as a promoter of their quality of performance can


P.027.15.R3 120

be improved, given that the regulated entities being evaluated are under the

responsibility of the same entity (FIPAG).

The flowcharts shown in the following figures summarize CRA's activity on the

quality of service in the scope of the regulatory substance.

Figure 40 – Flowchart of quality of service regulation

Figure 41 – Flowchart of quality of service regulation (cont.)


P.027.15.R3 121

The selection and initial definition of the performance indicators used in the design

of the composite indicator to undertake an integrated performance analysis and

evolution of the sector (IDER), are under the responsibility of the Executive

Secretariat of CRA. For a consensual selection of indicators, CRA promotes the

involvement of the regulated entities in the definition of the composite indicator,

namely FIPAG and AdeM.

After the selection of relevant performance indicators, the Executive Secretariat

normalizes the indicators through the technique of normalization "Min-Max" (based

on the use of minimum and maximum values) and in accordance with the

performance goals set out in the regulated entities QR. The contribution of FIPAG

and AdeM is also considered when assigning weights of indicators by weighting and

aggregation of the relative amounts of the performance indicators selected

according to the opinions of experts of each entity. Through an additive aggregation

formula, the contributions given by FIPAG and AdeM to CRA are harmonized by

creating three groups of composite indicators.

The three sets of base indicators established are relative to the economic and

financial sustainability (ISEF), operational sustainability of companies (ISO), and

service quality (IQS). Weighted integration of these three groups of indicators, also

by additive aggregation, establishes the performance Index of Regulated Entities

(IDER). The Board of CRA is responsible for validating and approving the base

indicators developed for the integrated analysis of the operators’ performance at the

end of the whole process, shown in the figure below. Later, this approval is

communicated to FIPAG and AdeM.

Figure 42 – Flowchart of the quality of service regulation (definition of IDER) (Cont.)

It should be noted that, in parallel with the analysis of data collected by the operators

of each system, CRA also conducts periodic evaluations about the level of customer


P.027.15.R3 122

satisfaction with regard to the quality of service provided by operators, biannually.

This non-compulsory initiative intends to identify and meet the current and future

needs of customers concerning the public services provided.

This analysis aims to evaluate the satisfaction of public water services customers

regarding the drinking water quality, the continuity, the water pressure, the

customer service and the general perception of customers about the quality of

service. This approach of quality of service evaluation also allows making a

parallelism between the subjective perception of customers and the level of quality

of service provided by the operators, as measured by performance indicators.

5.2.6 Conflict resolution

The regulatory authority should have the power to act in conflict resolution between

stakeholders through mechanisms of conciliation, mediation or arbitration, and

even having the power to take binding decisions, without possibility of appealing to

external entities.

Note, however, that the use of alternative conflict resolution, without appeal to the

judicial system, is only valid in cases of trade disputes in which third-party interests

(e.g. customers) are not involved. In conflicts concerning directly or indirectly public

policies in which the State is necessarily involved, conflict resolution mechanisms of

the regulatory authorities are not supposed to be used. Such cases should be

explained clearly in the law, in order to prevent conflicts over jurisdiction between

courts and the regulatory authority.

CRA effectively holds no deliberative responsibilities in the resolution of conflicts

between the owners and the operators, through a model of alternative dispute

resolution based on arbitration, supported by Decree No. 11/99, of July 8. However,

no references were found concerning this aspect of the regulatory substance that

allow supporting or assessing CRA's activity in this area, although the dispute

resolution is provided for under the AR.

In AR, in particular, it is established that the integral parts of the agreement shall

seek the resolution of any conflict resulting from different interpretations or (non)

compliance with AR terms by friendly settlement or according to the applicable

arbitration legislation. Both in the case of FIPAG or AIAS systems, any results of the

conflict resolution processes are communicated to the Ministry responsible, the

MOPHRH.

The role of CRA as a mediator in conflict resolution is also reflected in the entity's

Organic Statute, which states that CRA has the power to serve as a mediator in the


P.027.15.R3 123

search for solutions to promote the reconciliation of interests between the owners

and operators, whenever requested by both parties.

However, to ensure the good regulatory practice, CRA should explain publicly, the

procedures to be followed by either party in the event of a conflict of interest and

possibly regulate their operating procedure.

5.2.7 Complaints

Although a priori it is expected that the regulated entities solve by themselves the

possible complaints by customers, in many cases the regulator itself is called upon

to intervene in complaints handling. As one of the central objectives of the

regulation, the protection of customer interests assumes the existence of complaint

procedures of public services customers.

The regulatory authority participation in the resolution of conflicts between

customers and regulated entities is fundamental to ensure customer interests,

because, otherwise, the use of judicial means by customers would lead them to give

up due to the high costs of legal procedures. The good practice of regulation

recommends the easy access of customers to platforms for complaint presentation,

being the regulatory authority's duty to act as an intermediary in the process.

The regulatory authority should also keep a historical record of complaints, by type

of complaint (e.g. billing errors, service interruptions, etc.) and compare their

records of complaints with the ones of regulated entities, with periodic publication

of the results, thus contributing to the promotion of transparency and credibility of

the system. Even when the complaints are unfounded, this record is positive because

it helps identify areas of potential improvement of operation.

CRA, as the regulatory authority, and in line with the regulatory substance best

practices, has the duty to deal with the complaints, acting as mediator in the

settlement of disputes between operators and customers. Consequently, the

efficiency and effectiveness of complaints handling results in increased customer

confidence in the regulator and in the water sector in general.

Among others, indicators such as the number of complaints received, the number of

complaints handled or the average response time to complaints can be the basis for

the quality of service evaluation by the regulatory authority. The speed of the

complaints handling process is essential to the adequate functioning of the water

sector since it contributes to increase customer confidence in the public services

provided by the operators and in the regulatory authority.


P.027.15.R3 124

The regulatory procedure adopted by CRA dictates that, in case of dissatisfaction

with the service provided by the operators of regulated water utilities, the

customers must submit their complaint directly to service providers. Regulated

entities are thus required to provide contacts for this purpose. After submission of

complaint, operators should notify the customer within a maximum period of 48

hours about whether or not they will make the necessary arrangements for settling

the conflict.

If the operator complies with the user request within that period, there is a

maximum of 14 days to answer the complaint. If the operator does not meet the

request of the user within the deadline, then the customer has the right to appeal to

the regulatory authority to proceed with the presentation of the claim.

The submission of appeal to CRA by customers requires proof of prior submission

of claims, as well as a proof of failure to obtain satisfactory response from the

operator. In practice, the procedure for submission of complaints to CRA by

customers varies depending on whether the system is primary, secondary or

belonging to AdeM, in Maputo. This is due to the greater proximity of the local

delegates of CRA (ALC or CORAL) to the primary or secondary systems, than to that

of Maputo, where the headquarters of CRA are located.

CRA offers customers four alternative forms for appealing. Thus, a dissatisfied

customer can resort to the ALC or CORAL support for help in the drafting of the

complaint and its formal claim, he can address a letter directly to CRA’s

headquarters, make an appeal via email, or fill out a complaint form available on the

regulatory authority website.

In the case of primary and secondary water supply systems, firstly customers make

appeal to CRA, through its local representatives. ALC are responsible for the

mediation of complaint resolution with the operator, keeping the complainant

informed about the procedures adopted. If necessary, ALC or CORAL have the

possibility to appeal to their UTR for issuing an opinion and clarification of doubts

in the process of mediation in conflict resolution. However, this procedure is

optional, and ALC/CORAL can solve the conflict without the UTR opinion. In this

situation, ALC/CORAL must only inform the UTR on the decision taken in the process

resolution.

If it is immediately assumed that the customer is right, the process ends after

submission of instructions to the operator to take the necessary measures to solve

the problem. Both the ALC and the CORAL should notify their UTR on their

deliberation. On the other hand, if there are reasons for the existence of a conflict


P.027.15.R3 125

between the parties which requires consensus, the ALC or CORAL shall continue

with the mediation process with the operators.

An example of a situation in which CRA assumes that the process of complaint

handling is over without mediation, is when, due to the absence of readings by the

operator, the customer is invoiced a high value because the consumption blocks

were disregarded in the total consumption. In this situation, it becomes evident to

CRA that the conflict should be exclusively the responsibility of the operator and,

therefore, the customer has the right to pay for the volume of water consumed,

according to the current tariff table. Accordingly, CRA instructs the operator to

proceed to the invoicing of monthly volume consumed per block, as it should have

occurred at first.

Once the regulator considers it necessary to proceed to mediation, the service

provider is required to submit a formal position and present a reasonable solution

within a maximum of 5 days. If the operator reports within the deadline, the results

of the local agent mediation, they are transmitted to the customer within a week (5-

7 days). If in the regulator’s deliberation the operator's response is considered

satisfactory, the process is closed and the result recorded by the operator and the

local agent of CRA. The latter has the duty to inform headquarters of CRA about the

results of the process in its periodic reporting.

In the case of primary and secondary systems, if the customer is not satisfied with

the solution, he can submit the matter to the Executive Secretariat of CRA, so that

they can act in accordance with the request. The Executive Secretariat of CRA can

also be asked to participate in the process, if ALC or CORAL considers that the

operator has not taken the necessary measures to discuss and respond to the

request within the deadline set.

If after deliberation on the formal position submitted by the operator the regulatory

authority has not yet reached a satisfactory solution in the customer’s opinion, CRA

should settle a field visit with the customer within 48 hours, notifying the operator

about the visit 5 days in advance. Finally, after collecting the necessary information

for the deliberations in the course of the visit to the operator, CRA has a period of 5

days to review the complaint circumstances and take a position regarding the

resolution of the conflict between the customer and the operator.

The final deliberation result of the conflict mediation is finally indicated both to the

customer and the operator. The end result is registered by CRA and the information

gathered will be used for future evaluation of the operator’s performance

concerning customer service. If there is no consensus on resolving the conflict

between operator and customer, the latter has the right to ultimately proceed to


P.027.15.R3 126

forward the complaint to judicial authorities, and to seek the resolution of the

dispute on trial in the courts.

For the sake of the good regulatory practice, CRA should maintain and make public

the historical record of complaints handling, including the outcome of the mediation

process and the motivation of customers to submit complaints. This would

contribute to the prevention and mitigation of major causes, also contributing to the

transparency and credibility of the regulatory activity vis-à-vis stakeholders.

Although the regulated entities have specific deadlines for the performance of

certain activities associated with the resolution of complaints, this is not true for

CRA. Therefore, CRA should complement the dissemination of procedures for

complaints handling on its website with the dissemination of the periods laid down

for the performance of certain activities associated with complaints, thus

contributing to a more quickly complaint handling processes, essential for the water

sector adequate functioning.

The following figures present schematically the regulatory procedures of complaints

handling, both for the customers of the primary and secondary systems and those of

AdeM. Note that, as mentioned, the periods presented for action by CRA are not yet

implemented, although they are supported by the study on the regulatory

framework for urban primary and secondary systems, prepared by Nathan

Associates & AustralCOWI partnership for CRA, in 2011.

Figure 43 – Flowchart of the complaints handling from primary systems customers, by ALC


P.027.15.R3 127

Figure 44 – Flowchart of the complaints handling from primary systems customers, by ALC (cont.)

Figure 45 – Flowchart of the complaints handling from secondary systems customers, by CORAL


P.027.15.R3 128

Figure 46 – Flowchart of the complaints handling from secondary systems customers, by CORAL (cont.)

5.2.8 Social

The good practice of regulation should take into account the needs of the poorest

population. This may be done, for example, through the promotion of universal and

equitable access, and the pricing of services adequate to all customers (up to a

certain level). Essentially, it is important for good regulatory practice to take into

account the ability and willingness of customers to pay for the services provided,

including the low-income population.

Therefore, and although the issues relating to subsidies or cross-subsidization are

the Government responsibility, the regulatory authority must play an active role in

the protection of the most disadvantaged population. Its actions, in this sense, can

be performed, for example, through the definition of progressive tariffs, different

consumption blocks and types of customers, to ensure the efficiency of the

subsidization system in force and to promote universal access to the water and

sanitation services.

In this way, CRA works also in partnership with some NGOs in order to define

regulatory models to protect the lower income population interests, including

subsidization mechanisms tailored to the realities of the country. The current tariff

blocks in the water sector consider special tariffs for lower-income customers.

However, the categorization of customers can still be optimized and the cross-


P.027.15.R3 129

subsidization system needs to be reviewed due to the changes in consumption

patterns that have been taking place in the regulated systems.

5.2.9 Dissemination of public information

The dissemination of public information on the digital platform of the regulatory

authority should be carried out periodically and systematically, according to the

principles of accountability and transparency. Consequently, the entity will ensure

the promotion of customer interests. The sharing of relevant information on the

regulated sector performance is also essential to increase credibility and

competition by comparison, and contributes positively to enhance customers

confidence and the quality of service provided.

The increased public participation in the decision-making processes is also

positively influenced by the dissemination of information, being the regulator's duty

to timely inform the stakeholders on the issues and decisions under discussion. In

this context, the public disclosure of the procedures and scheduling of decision-

making processes must also be ensured. The information provided can be the basis

for the presentation of adversarial proceedings concerning the regulatory decisions

and at the same time legitimizes the regulatory process and reduces the customer

exposure to possible asymmetries of information relative to the operators’

performance and results. Thus, all documents relevant to the regulatory system

operation, prepared by the regulatory authority, and as long as they are not

protected by confidentiality arrangements (as defined by law), should be made

available for public consultation.

This axis of regulatory substance of CRA can further improve, particularly

concerning the dissemination of information related to the processes of decision-

making. The communication to the customer increases the transparency and

credibility of the regulatory authority and the water sector, contributing to an

environment of trust in the water supply and sanitation services and sense of

accountability of the operators. Also the regulatory process predictability is

positively influenced by the provision of information to the public, ensuring greater

stability and safety of investments in the water sector.

The improvement of CRA performance in this area of regulatory substance is also

dependent on the development of regulatory governance aspects, including the

promotion of public participation in the discussion and decision-making. Only when

the regulatory governance of the entity includes the effective public participation in

regulatory procedures, can the dissemination of information also include disclosure

and consultation procedures as well as public hearing periods and adversarial

proceedings presentation by the stakeholder who will be able to participate in the


P.027.15.R3 130

regulatory process concerning the tariff setting for water supply and sanitation

services.

The following figure shows schematically the information that CRA already makes

available publicly on its website, as well as the information that is suggested to be

made available in the future, as a result of the review of the regulatory practices of

other regulatory authorities of the sector, for the sake of the of the water sector

progress and development and improvement of CRA’s regulatory substance and

transparency (regulatory governance).

Figure 47 – Matters that are object of information to the customer of a good regulatory practice

• Legislation in force• Economic regulation (characteristics and principles of the tariffs)

• Simulation of calculation of the value for water consumption

• Rights and duties of customers

• Procedures for the submission and handling of complaints

• Education about the rational use of water

• Environmental education

MATTERS THAT

ARE OBJECT OF

INFORMATION

TO

CUSTOMERS

• Justification of the decision-making/deliberations of CRA

• Minutes of meetings

• Sector regulations and schedule for dissemination of information

• Public consultation mechanisms of regulatory procedures

• Codes of Ethics and Conduct

• Procedures of monitorization and inspection to the operators

• QR (reference values of performance indicators)

• Accounts reports

• Management information/accounting information

• (...)

MATERS THAT

ARE LIKELY TO

BE OBJECT OF

INFORMATION

TO CUSTOMERS


P.027.15.R3 131


P.027.15.R3 132

6 REGULATORY IMPACT

6.1 OVERVIEW

The regulatory impact corresponds to the results obtained by the combination of

regulatory governance and substance of the regulatory authority. The regulatory

impact should reflect the balance of stakeholders’ interests, both operators and

customers, focusing in particular on the level of service coverage, operational

efficiency, tariffs charged, economic and social cohesion, cost recovery efficiency,

fulfillment of contracts or development of the sector. In short, the regulatory impact

is directly associated with the operators’ financial sustainability, the social

sustainability of the services and the quality of service provided.

Next, a set of metrics and performance indicators that aim to reflect the regulatory

impact of CRA's activity in the water sector of Mozambique in its various

dimensions, social and technical, financial and service quality, are presented.

However, it should be noted that although the regulatory activity also acts upon the

systems of AIAS, and it is believed that the regulatory impact is relevant in this

segment (especially in secondary cities), due to the lack of information available, it

was not possible to analyze the AIAS systems performance in the same way and,

therefore, the regulatory impact in this segment, according to the metrics and

performance indicators developed by CRA. For this reason, the results concerning

the regulatory impact are analyzed mainly for the primary systems under FIPAG’s

ownership.

6.2 FINANCIAL SUSTENTAINABILITY

6.2.1 Tariff structure

The principles associated with the definition of the tariff structure of the water

utilities regulated by CRA tries not only to maximize the social welfare, but also to

ensure the financial sustainability of the regulated entities, by sending the right

message to the market (customers). The fixed and variable components, as well as

the different categories of customers should reflect and take into account the

elasticity of consumption and the levels of service made available and also

consumption patterns and rates of service utilization by customers.


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The tariff structure currently in force in Mozambique, despite trying to ensure the

financial sustainability of the systems, does not allow for the optimization of

revenues and, therefore, does not encourage the progress and the development of

services provided by the lack of ability of the operators, in financial terms, to ensure

the operating expenses and the level of investment required. The non-optimization

of the revenues, through a more appropriate tariff structure, also has a negative

impact on the water sector attractiveness to private investment, thus reducing the

capacity of investment available.

6.2.2 Tariff level

The average values evolution, resulting from tariff adjustments approved by CRA in

the tariffs charged to customers, has contributed positively to the increase of

revenues from regulated entities, and has also reflected in the improvement of the

indicator of cost recovery aiming at promoting the operators’ financial

sustainability.

By analyzing the average tariff the evolution of regulated systems with historical

records of water supply services, in particular concerning the volumes and values

invoiced, it is observed that CRA regulatory practice has allowed a gradual evolution

of tariffs. This evolution of the average tariff in the systems becomes particularly

evident by looking at the percentage variation that occurred between 2009 and

2014, as shown in the following table, at current prices.

Figure 48 shows the increase in the average tariff rate of the systems by region over

time.

The increase in average tariff does not allow, by itself, to increase the operational

cost coverage ratio. Therefore, CRA also examines the Accounts Reports of the

regulated entities, and hence it is essential that they register the weights of the

different components of the operating system in the total cost of the water service

operation. The operating costs of the systems, among others, depend on the

production costs of drinking water, electric power and chemicals used in water

treatment and labor used in the systems management.


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Table 12 – Average tariff of systems regulated by CRA (primary systems)

REGION SYSTEM

AVERAGE TARIFF (MZN/m3) VARIATION

(%)

2009 2014 2009- 2014

South

Maputo 16,11 29,73 +84,5%

Xai-Xai 14,06 21,57 +53,4%

Chókwè 14,31 22,94 +60,3%

Inhambane 14,68 23,90 +62,9%

Maxixe 12,94 25,84 +99,7%

Centre

Beira e Dondo 16,90 28,41 +68,1%

Manica 17,09* 21,95 +28,5%

Tete e Moatize 16,35* 21,67 +32,5%

Quelimane 12,84 25,43 +98,1%

North

Nampula 15,09 25,40 +68,3%

Nacala 20,51* 22,55 +9,9%

Angoche 17,91* 19,30 +7,8%

Pemba 15,33 26,26 +71,3%

Lichinga 17,45* 22,77 +30,5%

Cuamba 16,51* 20,94 +26,9%

*2010 (first data available)


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Figure 48 – Average tariffs evolution of the systems regulated by CRA

The rates approved by CRA are intended (or at least tend) to ensure the financial

sustainability of the regulated entities, since their establishment is based

simultaneously on full coverage of operating costs and on the search for the water

supply universal service. However, and as the graphs presented in the figure below

show, the cost coverage ratio over the years is quite variable. However, from 2012

onwards, there has been an increase in the performance of regulated entities at the

level of cost recovery through the tariff system in most systems, which may be a

result of the incentives of CRA implemented in the QR of FIPAG's systems since 2012

and local monitoring of the systems operation by local regulatory agents.

Figure 49 – Coverage ratio variation of the operating costs of the regulated systems

6.2.3 Investments/insurance services

As mentioned, the systems of the Southern region are those which, on average, had

a greater variation of the water service average tariff. These systems correspond to

those with a higher rate of coverage of the water supply service, considering the

service coverage provided through residential connections and standpipes.

This may be explained by the fact that higher revenues allow the accomplishment of

new investments and, at the same time, the increase of service coverage, allowing

for more revenues and a greater capacity for new investments and so generating a

positive cycle. The achievement of new investment also enhances the increase in the

number of inhabitants with access to public water supply, with positive effects that


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are reflected in the increase of social cohesion and sustainability, as noted further

on.

6.3 SOCIAL SUSTAINABILITY

6.3.1 Tariff structure

The regulatory activity of CRA intends to ensure the water sector sustainable

development, with a view to achieving a universal service at an affordable price, fair

and inclusive. Therefore, the regulatory impact of CRA, regarding the level of the

current tariff structure in Mozambique, includes a mechanism of cross-subsidization

for the protection of lower income customers, as mentioned in the previous chapter.

The basic principles in for the tariff structure definition are set forth in the Water

Tariff Policy and the evolution of the customers' consumption patterns of the

different systems establish the basis for the definition of consumption blocks in the

current tariff structure.

The tariff structure defined by CRA suffered changes in 2009, when it adopted the

gradual elimination of the higher residential consumption blocks due to the increase

in the weight of the lower consumption blocks, considering the consumption profile.

In that tariff structure review, the minimum monthly consumption was adjusted

from 10 m3 to 5 m3, as a result of high representativeness of the low-income

population, which had a weight greater than 50% in the volume consumed, trying to

reach the largest number of customers possible with lower tariffs. This change all

made possible to increase the return without burdening the average charges for

water supply services customers.

Taking into account the changing patterns of water consumption, derived from the

demographic changes recorded in the recent past in peri-urban areas, classes and

customers categories currently considered in the two-part tariff structure (fixed and

variable tariff), identified in the following table, should be again revised and

improved to ensure the effectiveness of cross-subsidization in social classes.

Although the current tariff structure consider special tariffs for lower income

customers, it is observed that even the lowest-income populations are not entitled

to survival consumption or to free connections. The adoption of a system of cross-

subsidization that ensure a redistribution of resources to assure the protection of

the population below the poverty line, may result in a tariff structure which provides

water for almost for free to these populations, thereby ensuring increased

accessibility of public water services in Mozambique to the entire population. The

provision of public water services bearable by all customers will have an important

impact in the socio-economic development of the country.


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Table 13 – Tariff structure of regulated systems

CUSTOMER CATEGORY CHARACTERISTICS OF THE TARIFF STRUCTURE

Residential Consumption

Divided in consumption blocks (<5 m3, 5-10 m3, >10 m3)

- Fixed tariff common to the three blocks

- Variable tariff, growing with monthly consumption

Low-income Subsidized tariff (social) on the consumption in public standpipes

Commerce/Public

Minimum consumption of 25 m3 per month

- Fixed tariff

- Uniform variable tariff

Industrial

Minimum consumption of 50 m3 per month

- Fixed Tariff

- Uniform variable tariff

Also the costs of new connections in the regulated systems have maximum prices

set by CRA (4900 MZN/connection in systems of AIAS and 2000 MZN/connection in

the systems of FIPAG), which the customers may pay by installments with the aim

to encourage the connection to the systems, particularly in peri-urban areas.

6.3.2 Coverage

The coverage progress is something unstable and derives essentially from the

demographic variation and capacity of meeting (capacity of investment) the

population needs by the entity responsible for the system. The coverage variation of

the regulated systems is presented in the table below (the southern region that

contains systems with a coverage rate of around 100%).

For example, the system of Quelimane featured a coverage level of the water supply

service of 71% in 2009, having a positive evolution of the indicator until 2011, when

it reached an estimated coverage of 81%. However, due to the increasing population

in the system intervention area, which was not accompanied by a corresponding

increase in the number of network connections (including a decrease in the number

of connections in the past two years), the coverage rate recorded, in 2014, was

equivalent to that recorded five years earlier.

The situation described is illustrated in the following figure and highlights the need

for appropriate investment planning and, therefore, for the implementation of a

strategic plan for the Mozambican water sector, where the investment required are


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defined and prioritized to address, among other goals, the access and demographic

needs of the country (data on the number of connections in 2014 are not available).

Table 14 – Coverage of primary water supply services

REGION SYSTEM

TOTAL COVERAGE (%) VARIATION (%)

2009 2014 2009- 2014

South

Maputo 36% 66% +83,3%

Xai-Xai 75% 100% +33,3%

Chókwè 81% 100% +23,5%

Inhambane 100% 100% +0,0%

Maxixe 65% 87% +33,8%

Centre

Beira and Dondo 68% 90% +32,4%

Manica 21%* 66% +214,3%

Tete and Moatize 54%* 93% +72,2%

Quelimane 71% 71% 0,0%

North

Nampula 57% 50% +0,0%

Nacala 41%* 32% +9,9%

Angoche 33%* 38% +7,8%

Pemba 75% 84% +34,3%

Lichinga 23%* 29% +30,5%

Cuamba 16%* 18% +26,9%

*2010 (first data available)


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Figure 50 – Population and water supply connections available in the system of Quelimane

6.3.3 Coverage in peri-urban and rural areas

The water sector development in peri-urban and rural areas of Mozambique is one

of the objectives of the country trying to meet the MDGs. However, this is still one of

the main challenges, and a subject that needs more discussion among stakeholders.

CRA should have a relevant role in its development, but the constraints to regulatory

activity of CRA, due to the loss of financial autonomy, does not contribute to fulfill

the goals of MOPHRH. NGOs acting in the territory have been making relevant efforts

for the development of the services in these regions, by carrying out studies and

investments and encouraging community participation in the systems management.

At the outset, this will be one of the challenges to be taken into account in the

implementation of regulatory activity in peri-urban and rural areas. It will be

necessary to find appropriate means to combine community management with

professional management and, at the same time, ensure the definition of the role of

local authorities in these systems.

In short, to ensure the coexistence of public and private services, and the compliance

with minimum quality and technical levels in the systems located in peri-urban and

rural areas, it is necessary to guarantee the financial stability of the regulatory

authority and, at the same time, start the discussion on extending the regulation to

these systems with the involvement of relevant stakeholders, including local

communities.

6.3.4 Regulation of sanitation services

Despite being provided for in Decree No. 23/2011, of 8 June, in the scope of the

expansion of the functions and responsibilities of CRA, the sanitation services

regulation in Mozambique is still at an embryonic stage, lacking the proper planning

of an institutional framework. At the moment, there is no prediction for the existence

of effective regulation of these systems in the short term (five years).

The progress and development of the sanitation sub-sector still lacks high

investments until the population needs can be adequately addressed. The need for

high levels of investment for the development of the systems will certainly raise

problems in tariff setting so that the involvement of all relevant stakeholders will be

central to solve this problem.


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AIAS, as the entity responsible for secondary and sanitation systems, will have a

leading role in this area. Currently, the entity acts vaguely in the scope of sanitation,

but its activity should go beyond the installation of public toilets so as to create

conditions for monitoring and ensuring the compliance with hygiene criteria in

these systems

Despite the early stage of the regulation of sanitation, there is already a model of QR

defined for sanitation services. However, a new model should be studied in the near

future as a result of the complexity of the regulation of municipalities and the

existence of conflicts of interest derived from the autonomy that the municipalities

have in the provision of these services. Although there are some autonomous

sanitation services, they are not clearly defined in the legislation, which illustrates

the need for appropriate institutional framework of the sanitation subsector.

6.4 TECHNICAL SUSTAINABILITY AND QUALITY OF SERVICE

6.4.1 Quality of service

Despite having only entered into force as a regulatory practice of CRA from 2013,

the consideration of IDER and estimation of performance in this composite indicator

of the regulated systems in previous years is possible from the data collected in the

scope of the quality of service regulation carried out by CRA. One of the basic

indicators that make up the IDER is of particular relevance to the analysis of the

regulatory impact of CRA on the quality of service, the IQS.

The estimated IQS aggregates data also considered in BAQS, concerning the quality

of service to the customer. So, with regard to customer service, the IQS aggregates

the total service coverage in the region of the system, the average time of daily

distribution and the percentage of invoicing based on actual readings. The quality of

service indicators related to service provision are also considered, as to the number

of complaints per connection, average response time and the total percentage of

complaints answered. The water quality, another relevant factor as regards the

quality of service provided, is also considered, particularly the percentage of tested

parameters and the percentage of parameters complying with the stipulated in the

respective QR.

It should be noted that the composite indicator takes into account the different

weights assigned by CRA, FIPAG and AdeM, to the different indicators that compose

it. Among the performance indicators referred to and considered in IQS, the one

with greater weight is relative to the compliance of tested parameters in water

quality, which has a weight of more than 1/5 (22.8%) in the calculation of IDER. The


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relative weight of the indicators considered in IQS is presented in the following

figure.

Figure 51 – Distribution of weights of the indicators that form the IQS

It is observed that the regulated systems of the Southern region are those that

present, in general, better quality of service. It should be noted that the Maputo

region system has shown significant quality of service improvements from 2011

onwards. The systems located in the central region showed a significant decline of

the quality of service level in 2015, although they had presented good results in

2012, shortly after the entry into force of QR. In the regulated systems of the

northern region there is a general decrease in the quality of service level from 2012

on, except in Angoche, which is contrary to the trend observed in these systems. The

development trends of the systems concerning the IDER basis indicator are

presented in the following charts.


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Figure 52 – Quality of service evolution in the regulated systems (IQS) Table 15 – System performance concerning drinking water quality indicators

REGION SYSTEM

Tested Parameters (%)

Compliance with tested parameters (%)

2009 2010 2011 2012 2013 2014

Southern Region

Maputo 100% 78% 76% 90% 100% 100%

88% 92% 90% 92% 97% 100%

Xai-Xai 100% 100% 100% 100% 100% 100%

100% 100% 100% 100% 100% 100%

Chókwè 100% 100% 100% 100% 92% 100%

100% 100% 100% 100% 91% 100%

Inhambane 100% 100% 100% 100% 100% 100%

100% 100% 100% 100% 100% 99%

Maxixe 100% 100% 100% 100% 100% 100%

100% 100% 100% 98% 100% 100%

Central Region

Beira and Dondo

52% 52% 58% 71% 72% 80%

100% 99% 69% 93% 62% 67%

Manica - - 18% 100% 41% 80%

- 100% 70% 100% 11% 59%

Tete and Moatize

- - 18% 55% 66% 92%

- - 70% 100% 68% 87%

Quelimane 48% 70% 55% 64% 64% 72%

100% 100% 70% 100% 100% 60%

Northern

Region

Nampula 45% 39% 52% 82% 83% 88%

98% 99% 100% 56% 52% 74%

Nacala - - 17% 71% 56% 75%

- 100% 100% 96% 77% 75%

Angoche - - 17% 34% 92% 100%

- 100% 100% 92% 96% 99%

Pemba 21% 30% 52% 81% 64% 84%


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REGION SYSTEM

Tested Parameters (%)

Compliance with tested parameters (%)

2009 2010 2011 2012 2013 2014

100% 100% 100% 100% 65% 83%

Lichinga 17% 16% 33% 40%

100% 100% 100% 33% 40%

Cuamba 17% 17% 22% 26%

100% 100% 50% 22% 12%

As a result of the high weight of water quality indicators, with a total weight of about

3/5 in IQS, most systems that feature a reduced performance on water quality yield

poor performance regarding the percentage of tested quality parameters and, in

particular, as to the compliance of tested parameters within the scope of the QR. The

table above shows the percentage of tested parameters that comply with the

required water quality levels of the regulated systems.

6.4.2 Complaints

The percentage of complaints answered and solved by the regulated entities is one

of the performance indicators that reflects their performance level concerning the

service provided to water services customers. This indicator also shows large

fluctuations over the period analyzed, which demonstrate that CRA needs to

perform a more effective regulation near the operators.

The fact that complaints are not answered within the deadline justifies and implies,

therefore, the intervention of local agents of regulation to assure the defense of

customer interests, in order to pressure the operators to answer the complaints and

to act as mediators in the consequent process of conflict resolution. In 2014, from

the fifteen regulated systems analyzed, only four operators responded to all

complaints presented by customers of their services (Maxixe, Inhambane, Manica

and Angonche). However, the number of complaints submitted to the respective

operators is not available.


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Figure 53 – Variation of the percentage of answers given to customer complaints

The reference value for the customer to obtain the first response from the operator

to the complaint, and in accordance with the regulatory process for responding to

complaints, is fourteen (14) days. On average, all operators of regulated systems

respond to complainants within the time limit set for the procedure. However, in the

region of Maputo, this situation only started to happen after 2012.

Despite the improvement observed in this performance indicator, this situation is

also (directly) related to the reduction in the number of complaints answered from

that year onwards. The same is observed in the systems of the northern region,

which, in general, registered less average response times than the previous years.

The following figure demonstrates the evolution of the average response time

registered in regulated systems between 2009 and 2014.

Figure 54 – Variation in average response time


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6.4.3 Customer satisfaction in public water services

The defense of the sector of water customer interests is one of the main purposes of

CRA's activities in Mozambique. The customer perception about the quality of

service provided by regulated entities is, therefore, an important axis in the

regulatory impact assessment of CRA. Conducting surveys among customers is not

yet a common practice (nor is it mandatory) of CRA, although the entity has been

making a number of efforts to assess the degree of customer satisfaction in some

regulated systems.

The first assessment of the customer satisfaction degree was held in eight systems

of three regions: Maputo, Xai-Xai and Inhambane (region South), Beira and Dondo,

Moatize and Tete and Quelimane (Center) and Nampula and Pemba (Northern

region). In this evaluation 4347 customers of various systems were inquired and

some differences were found concerning their satisfaction in the systems analyzed.

The following figure that shows the degree of customer satisfaction, indicates that

in only three of the systems evaluated over 60% of the customers consider

themselves satisfied (classified as “good” service, at the minimum) with the level of

quality of service provided by the operators. Indeed, in two of the systems evaluated

(Nampula and Pemba), over half of the sample of the population surveyed does not

consider that the service provided is of "good" level. From the top to the base, the

figure sorts the systems according to the results of the degree of customer

satisfaction (up to the classification as “good”).


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Figure 55 – Level of customer satisfaction about the systems performance (CRA, 2015)

It can be argued that the level of customer satisfaction on the services provided by

regulated entities could be considered subjective. However, it appears that, in

general, the result of IDER, through the integrated analysis methodology with a

composite indicator, is similar to the customer satisfaction index, as shown in the

figure below.


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Figure 56 – Parallelism between customer satisfaction and IDER of the systems (CRA, 2015)

6.4.4 Secondary water supply systems and sanitation systems

Note that with the recent expansion of the regulatory activity of CRA to systems

under AIAS ownership, including secondary water supply and sanitation systems,

these systems have not yet been evaluated, due to lack of data. As already

mentioned, it is not possible to make a regulatory impact analysis in these systems,

although the regulation of CRA contributes to improve the sustainability of the

regulated entities and the customers interests, under the terms of the QR that define

matters subject to regulation.

In the water supply services and sanitation systems of AIAS the QR define minimum

levels of performance (or benchmarks) that their operators commit themselves to

fulfill when the contract is signed. However, unlike the water supply systems of

FIPAG, it is not possible to assess the performance indicators presented previously.

6.5 REGULATORY GOVERNANCE


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6.5.1 Transparency of the sector

In compliance with its mandate of regulating the water services of Mozambique, CRA

has been developing measures to promote the transparency of its own activities and

the ones of the regulated entities. These measures, which are expressed in the

publicly available annual reports, accessible at the regulatory authority website

since 2009, enable the interested parties to assess the regulatory impact of CRA in

the water sector and the quality of service evolution.

Although, as mentioned in the section concerning the dissemination of information,

much of the potentially relevant documentation about the regulatory practice of CRA

is not integrally provided, the Annual Reports are a means of disclosure about the

main actions of CRA in the water sector regulation in the previous year and explain

the regulatory authority plans for the development of the sector in the short term.

However, there is room for improvement in the regulatory practice of CRA, in

particular as regards the public availability of the AR and QR that define the matters

subject to regulation and which are, therefore, one of the main tools of CRA

regulation in the water sector in Mozambique.

6.5.2 Public participation

The absence of procedures for promotion of public participation in regulatory

decision making processes is considered one of the main weaknesses of the

regulatory practice of CRA. The existence of official consultation process or public

hearing that allow the adversarial proceedings of the interested parties, including

the customers, would be synonymous with greater transparency, credibility and

legitimacy of the water sector regulation performed by CRA in Mozambique.

The effective promotion of public participation requires, however, the breaking of

the inertia that exists in Mozambique in this scope. Greater disclosure and

publication regulatory processes and activities of CRA for the stakeholders’

knowledge, ranging from the establishment of tariffs to the definition of

performance indicators and benchmarks, are necessary to ensure that they are

aware of their rights and obligations so that they can take part in the decision-

making process of this sector.

Although public participation is not yet actually promoted, CRA has developed

jointly with other entities acting in the water sector (NGOs), hearing activities

among customers, with positive impact, to assess the willingness to pay for the use

of the services, whose results have direct impact on tariff setting.


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6.6 CONCLUSIONS

The regulatory activity of CRA has clearly had a positive impact on the development

of the water sector in Mozambique. The same can be observed in the development

of performance indicators, both on the financial sustainability of regulated entities,

and in the improvement of social sustainability, particularly at the level of service

coverage and quality of services.

However, it is observed that the regulatory framework of CRA, which constrains the

results of regulatory governance and substance of the regulatory authority, has

direct influence in its regulatory impact in the water sector. The loss of financial

autonomy with the introduction of the retention rate on revenues derived from the

regulatory tax, or the lack of definition about CRA's sanction powers have caused

some constraints to the water sector progress and sustainable development, as a

result of some inconsistency in CRA’s regulatory practice (e.g. lack of payment of the

regulatory tax by some regulated entities, together with the inability to impose

sanctions in the event of non-compliance).

The regulation of secondary water supply systems, and especially of the sanitation

systems, still needs great developments, ranging from the effective implementation

of QR to the monitoring of performance concerning the entities responsible for

providing the services.

Although the decentralization of regulatory powers of CRA has contributed

positively to the optimization of regulatory costs, it is necessary to have a greater

technical, economic and accounting training of the personnel responsible for the

water sector regulation, and to ensure a greater organization and greater volume of

data on regulated systems to enhance the quality of service. Customer participation

in data collection and the periodic report (weekly or monthly) that CRA is

developing (TIC-RECO system) will certainly bring benefits to the actors involved in

the water sector, and, in particular, to customers.

The water sector regulation in Mozambique will bring benefits for the development

of the sector if a greater coordination between stakeholders is assured to enable the

reduction of conflicts (e.g. municipalities and CRA in non-autonomous sanitation

systems) and greater coordination between the entities involved (e.g. transmission

of information between FIPAG and CRA). However, the political scenario of

Mozambique may hamper the implementation of new Base Laws concerning the

Framework for the Regulation of Public Services and Water Supply and Sanitation

Services, which will ensure a better relationship among the stakeholders and,

consequently, a better regulatory governance of CRA, with a certainly positive

regulatory impact on the sector.


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7 CONCLUDING REMARKS AND MAIN CHALLENGES

7.1 CONCLUDING REMARKS

The Manual of Regulatory Governance and Substance represents the main product

of the Review of the Framework and Regulatory Practices in the scope of the credit

(No. IDA52900) of the project (No. P125120) of IDA/World Bank, which funds the

Water Supply Project to Great Maputo.

This document intends to be a basic tool for the future improvement of the

regulatory procedures of CRA and of information for the other stakeholders in the

country, as well as for international partners. With the identification and description

of what is considered a good practice in the main axes of the regulatory governance

and substance, the Manual provides support to the identification of regulatory

practices of CRA and to the identification of points to improve, as well as to the

design and definition of targets to be achieved in the water sector in Mozambique.

The first step in the development of the Manual of Regulatory Governance and

Substance of CRA consisted in the preparation of a documentary review, which

focused on the regulatory framework of CRA, including the legal and institutional

framework.

The main documents and legal instruments governing activities in the water sector

of Mozambique were identified in the scope of legal framework, which focused, in

particular, on the laws of Mozambique within the regulatory practice of CRA,

including the water Law and the QGD, sector policies and regulations in the water

sector of Mozambique, as well as other legal documents of relevance that directly or

indirectly have influence on CRA regulatory activities.

The water sector institutional framework of Mozambique has identified the main

stakeholders and their roles in the development of the water sector, with emphasis

on the actual entities responsible for providing the drinking water supply and

sanitation services in the country, which includes the MOPHRH, CRA, FIPAG, AIAS,

the various donors, among others.

At the level of the market structure and water sector performance in Mozambique,

a brief account of the socio-economic reality as well as of the geographical and

territorial characteristics of the country, allowed the identification of the public

water services market structure, resulting from the QGD implementation since

1998. The overall performance of the water sector of Mozambique was also

addressed, thus enabling an overview of its operation through the key performance


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indicators in the country, with the identification of systems with best and worst

performances in them, in 2014, the last year with available data.

The analysis to the evolution of the regulated systems performance through time

preceded the identification of some of the main challenges the water sector of

Mozambique faces in the present and in the future, which require a greater

empowerment of the entities involved and a more efficient and effective regulation,

and the identification of aspects to be improved in CRA regulation, in order to fulfill

the goals set for the sector.

The identification of good regulatory practices and their comparison with the

regulatory practice of CRA allowed performing a "diagnosis" of the activity

performed by CRA concerning regulatory governance and substance. The

description of CRA regulatory practice in these two areas of regulation was based on

the interviews made to key personnel of the water sector of Mozambique and of CRA,

and on the existing documentation made available by the regulatory authority.

Concerning the regulatory substance, in particular the definition of sequences of

regulatory procedures and practices of CRA regulation, carried out in close

collaboration with key elements of this entity, allowed to set the necessary basis for

a better understanding by the remaining stakeholders of the current regulatory

system, as well as its motivations, goals and challenges.

The analysis to the regulatory impact of CRA's activity in the sector, resulting from

the combination of regulatory governance and substance of the regulatory authority

focused on the assessment and evolution of the financial, social and technical

sustainability, and quality of service provided by regulated entities including their

governance practices, that is, the effectiveness of regulation.

The public release of this document will make it possible to strengthen

transparency, accountability and credibility of the regulatory authority of the public

water service in Mozambique.

7.2 MAIN CHALLENGES

The Manual of Regulatory Governance and Substance is a tool available to all

stakeholders, in order to present the activities of CRA in the water sector regulation

in Mozambique, including good practices that have not yet been applied (but are a

goal) and future challenges, including the drinking water supply and sanitation

services.


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As described in the document, despite the valuable role of CRA in the water sector

of Mozambique, this entity still lacks relevant progress, particularly, to extend the

scope of regulation to the secondary water supply systems and, especially, to the

sanitation systems. In fact, many of the weaknesses identified through the

interviews and the review of the supporting documentation are linked to the (still)

low effectiveness of CRA regulation in these systems.

The lack of a legal framework in sanitation and the imprecision concerning the

responsibilities of the various stakeholders in the development of these services in

the country (e.g. local authorities and CRA) puts the regulation of these systems at a

very precarious phase, requiring great efforts of planning, financing and

development. Although a QR has been established for the autonomous sanitation

services, the high investments required for the development of this sub-sector may

lead to the necessity of reviewing the QR and the basic assumptions used in tariff

setting for these services.

Indirect regulation of AIAS secondary water supply systems needs better definition

for some of the regulatory procedures, especially regarding tariff setting (in

particular, the standard tariff), reporting and information analysis and performance

indicators. In fact, contrary to FIPAG’S systems, whose performance is evaluated

annually, AIAS systems are not yet subject to consistent performance evaluation by

CRA, also due to the lower ability of the operators to collect all the necessary

information and with minimum quality.

There is, however, the expectation that the effective implementation of the new TIC-

RECO system for the collection of operational data of the regulated systems can be

an important step towards a better reliability of the collected data in the systems.

The recent decentralization of monitoring functions to ALC/CORAL, though it still

needs improvements at the level of standardization of procedures and allocation of

resources, has also contributed to a higher efficiency of CRA regulation in water

systems.

Another factor identified for the improvement of CRA regulatory governance is

related to the effective promotion of public participation in decision-making

processes. Although provided for in the legislation, CRA has not yet appointed an

Advisory Council, which will comprise several stakeholders, including members of

the civil society. The necessary introduction of scheduled procedures for

consultation or public audience is identified as one of the key challenges to improve

the regulatory practice of CRA. It should be noted that the absence of a tradition of

public participation in the decision-making processes of CRA can cause constraints

on the effective implementation of the regulatory model.


P.027.15.R3 154

The recovery of the financial autonomy of CRA is also identified as one of the main

challenges for the regulatory activities development. The embarrassment caused by

the retention of 40% of the revenue from the regulatory tax by the State, together

with the expansion of the secondary water supply and sanitation systems, which

typically have no capacity to pay this tax, makes it clear that this situation needs to

be reviewed. The lack of definition of the existing regulations on the sanctioning

powers of CRA is also seen as a weakness of the current regulatory system.

Although it was shown that CRA is responsible for the final deliberation on the main

decision-making regulatory procedures, the fact that CRA is subject to the formal or

tacit approval of the Minister reduces the level of independence that a regulatory

body must be assigned. Greater decision-making autonomy of CRA would be

beneficial for its credibility and the regulatory risk would be less, because it would

reduce the level of political pressures put on CRA, especially in times of some

socioeconomic and political instability.

Another predominant factor for the regulatory practice improvement of CRA is the

importance of technical skills of CRA staff to ensure the greater integrity,

professionalism and accuracy that is required for an effective regulatory practice. In

fact, the highest qualification of employees of CRA and the exchange of experiences

between local actors (ALC/CORAL) can have a positive and decisive impact for the

development of water supply and sanitation services. The good regulatory practice

also presumes the existence of a Code of Ethics and Conduct that ensures the

integrity of the regulatory authority members, or the publication of statements of

interest to employees, to prevent the occurrence of conflicts in the performance of

functions in the sector.

Note also that the public availability of other relevant documentation on the water

sector regulation by CRA, along with this Manual, and in accordance with the best

regulatory practice, will greatly enhance the transparency of the regulatory activity

of CRA, and consequently its credibility and legitimacy for the stakeholders.

The increased reliability and attractiveness of the water sector could be a key factor

for the attraction of private sector investment, which is considered as absolutely

necessary for the attainment of the objectives defined for the sector not only by the

Water Law but also by the QGD that sustains the whole water sector of Mozambique.

The economic development of the country and, in particular, of the water sector,

sooner or later, will lead CRA to extend its regulatory activity to rural and peri-urban

systems. The inclusion of small private operators under CRA regulation will,

undoubtedly, increase CRA challenges for an effective regulation of the water sector.


P.027.15.R3 155

In the short/medium term CRA has the challenge of improving the regulatory

procedures related to good regulatory governance and substance, in order to ensure

compliance with the Strategic Plan 2015-2020 of CRA. In addition, the preparation

of a Master Plan of Development of (Medium) Long-term Regulation may represent

a contribution aiming at identifying solutions to be adopted to ensure compatibility

between the improvement of CRA regulatory procedures and the achievement of the

development goals of CRA itself and of the water sector in Mozambique.


P.027.15.R3 156


P.027.15.R3 157

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P.027.15.R3 163

Legislation consulted:

Law No. 16/91, of 3 August – Water Law;

Decree No. 25/91, of 14 November – Composition and functions of CNA;

Decree No. 26/91, 14 November – Creation of ARA;

Ministerial Diploma No. 134/93, of 17 November – Statutes of ARA-Sul;

Law No. 3/94, of 13 September – Institutional framework of municipal

districts;

Resolution No. 7/95, 23 August – National Water Policy;

Lei No. 9/96, of 28 August – Institutionalization of Local Power;

Law No. 2/97, of 18 February – Local Government;

Laws No. 7-10/97, of 31 May -Competences of the Municipalities for the

water sector;

Law No. 11/97, of 31 May – Law of Local Finances;

Law No. 20/97, of 1 October – Environment Law;

Decree No. 72/98, of 23 December – Institutionalization of the QGD;

Decree No. 73/98, of 23 December – Creation of FIPAG;

Decree No. 74/98, of 23 December – Creation of CRA;

Resolution No. 60/98, of 23 December – Water Tariff Policy;

Decree No. 38/99, of 10 June – Creation of the National Institute for

Disasters Management (INGC)

Law No. 11/99, of 8 July – Arbitration, conciliation and mediation;

Decree No. 80/99, of 1 November – The application of VAT to drinking

water supply;

Ministerial Diploma No. 78/2001, of 23 May – Rules of Procedure of DNA;

Ministerial Diploma No. 23/2002, of 13 May – Manual for the

Implementation of Rural Water Supply Projects;

Ministerial Diploma No. 92/2002, of 12 October – Rules of Procedure of

CRA;

Law No. 6/2003, of 18 April – Period of Vacatio Legis;

Law No. 8/2003, of 19 May – Principles and Rules of the Organization,

Powers and Functioning of Local Authorities;


P.027.15.R3 164

Decree No. 30/2003, of 1 July– Regulation for Public Water Distribution

Systems and Wastewater Collection;

Ministerial Diploma No. 67/2004, of 21 April – Extension of the QGD:

transfer of the systems of Xai-Xai, Chókwè, Inhambane and Maxixe to FIPAG;

Decree No. 18/2004, of 2 June – Regulation on Environmental Quality

Standards and Emission of Effluents;

Decree No. 15/2004, of 15 July – Regulation for the Building Water

Distribution and Wastewater Collection Systems;

Ministerial Diploma No. 180/2004, of 15 September – Regulation of Water

Quality For Human Consumption;

Decree No. 45/2004, of 29 September – Regulation on the Environmental

Impact Assessment Process;

Decree No. 54/2005, of 13 December – Regulation of Public Works

Contracting, Supply of Goods and Provision of Service to the State;

Ministerial Diploma No. 5/2006, of 17 January – Regulation for the small

systems/Manual for the implementation of the Modalities Applicable to the

PSAA Management;

Resolution No. 2/2006, of 14 June – Approval of the Formulae of Water

Tariffs Indexing (FIPAG);

Decree No. 45/2006, of 30 November – Regulation for the Prevention of

Pollution and Protection of the Marine and Coastal Environment;

Resolution No. 37/2007, of 12 November – Competition Policy of

Mozambique;

Resolution No. 43/2007, of 30 October – Regulation of Licenses and

concessions of Water;

Resolution No. 46/2007, of 30 October – Revision of the National Water

Policy;

Law No. 1/2008, of 16 January – Financial, Asset and Budgetary Regime of

the Municipalities;

Deliberation No. 1/2008, of 4 June – General Conditions of the Contract for

water supply;

Decree No. 18/2009, of 13 May – Extension of the QGD to the supply of

water in all urban centers and to sanitation;

Decree No. 19/2009, of 13 May – Creation of AIAS;


P.027.15.R3 165

Ministerial Diploma No. 177/2009, of 15 July – Extension of the QGD:

transfer of the systems of Tete, Moatize, Chimoio, Manica and Gondola to

FIPAG;

Ministerial Diploma No. 178/2009, of 15 de July – Extension of the QGD:

transfer of the systems of Cuamba, Lichinga, Nacala and Angoche to FIPAG;

Resolution No. 34/2009, of 31 December – Organic Statute of AIAS;

Ministerial Diploma No. 7/2010, of 6 January – Models of Water Licences

and Concessions;

Resolution No. 1/2010, of 18 August – Adjustment of Drinking Water Tariffs

under the QGD;

Resolution No. 2/2010, of 22 September – Revision of Tariffs for the New

Residential Connections of Drinking Water;

Decree No. 41/2010, of 20 October – Creation of the Institute for Water

Research;

Resolution No. 3/2010, of 27 October – Compensation Mechanism for the

Cost of Residential Connections Tariffs;

Decree No. 63/2010, of 27 December – Amendment of Article 4 of Decree

No. 73/98 of 23 December;

Ministerial Diploma No. 237/2010, of 27 December – Identification of

secondary water supply systems and public sanitation systems transferred

to AIAS;

Ministerial Diploma No. 258/2010, of 30 December – National Program of

Rural Water Supply and Sanitation (PRONASAR);

Decree No. 23/2011, of 8 June – Renaming of Water Supply Regulatory

Council (CRA) to Water Regulatory Council (CRA);

Law No. 15/2011, of 10 de Agosto – Implementation of PPP, PGD e CE;

Ministerial Diploma No. 256/2011, of 14 November – Rules of Procedure of

AIAS;

Decree No. 7/2012, of 10 May – Extension of the powers of FIPAG;

Decree No. 16/2012, of 4 June – Regulations on the PPP, PGD and CE Law;

Ministerial Diploma No. 142/2012, of 11 July – Revision of DNA Rules of

Procedure;

Decree No. 48/2012, of 28 December – New Organic and Operating Statute

of FIPAG;


P.027.15.R3 166

Law No. 10/2013, of 11 April – Creation of the Regulatory Competition

Authority;

Law No. 15/2014, of 20 June – The Legal Framework for Disaster

Management;

Decree No. 37/2014, of 1 August – Organic Statute of ARC;

Deliberation No. 6/2014, of 25 November – Revision for the Extension of

the Revised Concession Contract of the Water Supply Service in Maputo;

Decree No. 97/2014, of 31 December – Regulation of the Competition Law

of Mozambique;

Presidential Decree No. 1/2015, of 16 January – Extinction and Creation of

Ministries

Resolution No. 19/2015, of 17 July – Approval of the Organic Statute of the

Ministry of Public Works, Housing and Water Resources;

Resolution No. 2/2015, of 10 August – Adjustment of Drinking Water Tariffs

in the scope of the QGD;

National Strategy for Urban Water and Sanitation 2011-2025, of January

2012;

Decree No. 51/2015, of 31 December – Approves the Regulations for the

Licensing of Drinking Water Supply by Private Suppliers;.

Decree No. 5/2016, of 8 March -Approves the regulations for Contracting of

Public Works, Supply of Goods and Services to the State.


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