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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
Manual of Regulatory Governance and Substance
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.
Manual of Regulatory Governance and Substance
P.027.15.R3 iv
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
P.027.15.R3 vi
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
P.027.15.R3 x
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
P.027.15.R3 xiv
Manual of Regulatory Governance and Substance
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.
Manual of Regulatory Governance and Substance
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.
Manual of Regulatory Governance and Substance
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.
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
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
Manual of Regulatory Governance and Substance
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.
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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
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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.
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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
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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
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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
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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
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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.
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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
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LEGAL DOCUMENT THEME
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)
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LEGAL DOCUMENT THEME
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
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LEGAL DOCUMENT THEME
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
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LEGAL DOCUMENT THEME
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.
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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.
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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.
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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.
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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).
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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
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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
PROVINCES CITIES TOWNS
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;
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PROVINCES CITIES TOWNS
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.
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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
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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,
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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.
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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
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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.
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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%
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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
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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
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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)
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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.
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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.
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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
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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
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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
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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
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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
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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.
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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.
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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
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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
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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
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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
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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.
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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.
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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.
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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
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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
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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.
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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
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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.)
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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
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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
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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.
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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
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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
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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
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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
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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-
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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
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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
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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.
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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.
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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.
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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;
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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;
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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;
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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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