Urban water supply The privatization process in Mozambique Christophe Nothomb Barcelona, 21.11.08

Mozambique Population : about 20 million Urban population : 36% GNI per capita : ~310 USD Aid per capita : ~77 USD Population below poverty line : 54% Life expectancy at birth : ~42 years Mobile phone users : 15 per 100 hab. Inflation : ~8 to 10% Improved sanitation access : ~31%

INVESTMENTS + OPERATIONS + TARIFFS RATIONALE OF DELEGATED MANAGEMENT FRAMEWORK INVESTMENTS + OPERATIONS + TARIFFS SUSTAINABLE WATER SERVICES

Principles of the Delegated Management Framework Private Sector Participation (PSP): Increase efficiency Technical (reduction of water losses, of chemical consumption, energy, etc.) Commercial (improve customer relations, billing and collection, etc.) Training and development of HR Training Responsibilities Perspectives

Principles of the Delegated Management Framework Benefits for the consumers Service levels Cost of water Increase coverage GoM objectives and MDGs, via increase in n° of connections Sustainability of the sector reforms Debt service Capacity of attracting funding for investments

Institutional Framework Ministry of Public Works and Housing Council of Ministers DNA (National Water Directorate) Sets water and sanitation policy Supervises sector and draft investment plans Support to semi-urban and rural schemes ARA-Sul Issue water permits Monitor water resources Ministry of Health Set drinking water standards Monitor quality Performance contract FIPAG (Assets holding and investment company) Full investment responsibilities Local Authorities (Municipalities) Review investment plans Lease, Management or Technical Assistance contracts CRA Economic regulation Approval of tariffs Protection of customers Águas de Moçambique Vitens (NL) ??? Subscription contracts Customers (14 urban centres)

Urban Water Supply Reform Process Civil war up to 92 : very limited investment 1991 : Water law 1995 (revised 2007) : National water policy Principle of PSP 1998 : Tariff policy Water as a social but also economic good 1998 : Delegated Management Framework 1999 : Lease contract award to Águas de Moçambique (AdeM) for Maputo 2000 : Major floods 2001 : SAUR quits AdeM 2004 : Revised Lease Contract 2008 : Periodic Review Process

Urban Water Service Coverage MWSP TARGET 73% DELEGATED MANAGEMENT FRAMEWORK GOVERNMENT TARGET STATE OWNED UTILITIES 70% MDG 60% 40% 48% 35% 32% 1980 1990 2000 2007 2009 2015

Maputo case Total population: 1.8 Million Peri-urban area Expansion started in the year 2000 Population: 300.000 Growth rate: 6% to 10% Cement city Population: 800.000 Growth rate: 1% Peri-urban area Expansion started in the 80´s Population: 700.000 Growth rate: 2%

Official Maputo Water Supply System Maputo/Matola : 1 700 000 inhabitants, (1 250 000 in peri-urban areas) Conventional system in a delegated management framework : 15 years lease to private operator (Águas de Moçambique - AdeM, since 1999) from public asset holding company (FIPAG) with an independent regulator : CRA Main characteristics (2008): ~1000 km network, ~100 000 connections, 350 functioning standpipes, average distribution time : 12 hrs/day, 38% population coverage High level of UFW (55% losses) and low collection rate (~80%)

Water quality and quantity Quality improved Quantity

Key performance standards Non-revenue water 2000 : 44% 2002 : 53% 2004 : 58% 2008 : 55%

Collection rates 2000 : ~62% 2002 : ~68% 2004 : ~60% 2008 : ~85%

Nr of Customers 2000 : ~78 500 2002 : ~80 000 2004 : ~85 000 2008 : ~105 000

Tariffs

Cumulative Investment (Maputo) 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 180.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 USD (Millions)

Results – Evolution of key performance standards Quality of water Quantity of water Nr of connections Tariffs Investment Level of Service Customer Satisfaction

Maputo Water Supply

Maputo case- Water Supply SERVICE PROVIDERS Formal: AdeM -15 years lease contract Informal- 427 SSIP ADEM Manage the conventional network : All the historical centre Most part of the first expansion area FIPAG´s Investment SMALL SCALE INDEPENDENT PROVIDERS- SSIP Serves the two expansion areas with own networks (purely private investment) Operators N° of private connection N° of operational standpipes Access to water AdeM 100,000 300 38% SSIP´s 38000 20% Domestic water resale 26%

Maputo case- SSIP Water service: metered private connection, standpipes Water tariffs: 1$/m3, 100$ connection fee (all included) Water available for the consumers 20h/day (average)

Maputo case- SSIP Biggest SSIP´s Mr. Luís Faquene: 7 systems with 2100 PC Mr. Calmo Nualane: 2 systems with 2000PC, one with 1500 PC Mr. Arlindo Xavana: 2 systems with 1900 PC

Maputo case- Integration of SSIP PRINCIPLES Recognition of SSIP role Making profit of SSIP know how SSIP as potential partners in urban water sector CONSTRAINTS SSIP´s Low technical capacities Weak organization: 2 associations covering 50% of the SSIP Higher Number of different types of SSIP: Network overlaps VISION Build on the existing capacities to develop reliable Mozambican water distribution companies

Maputo case- Integration of SSIP CHALLENGES Enabling environment Security through licensing Opportunities for partnerships with water sector institutions and financial entities Capacity building through partnership On the job training to create national water companies FIPAG/SSIP contractual arrangement conducive to building capacity Maputo water market structuring Concentration of market : fewer and bigger SSIP Integration of SSIP´s infrastructure

Conclusions Privatization process Mixed evaluation – private operator Positive for consumers on water quality, quantity and reliability Negative for efficiency and customer services Negative for time spent in contract negotiations Neutral for tariffs Positive evaluation – government attitude Stability and strenghtening of institutions, open attitude Financiers confidence Negative for speed of investment implementation Specific context of small providers services Move towards « hybrid system » Challenges Regulation

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